Bailed-out US financial stocks surge

The shares of companies bailed out by the US government during the financial crisis surged on Tuesday.

The shares of companies bailed out by the US government during the financial crisis surged on Tuesday,fueled by speculation about money-making asset sales,cheap valuations and a recovery.

Citigroup Inc stock rose as much as 8.4 per cent after a prominent fund manager said the bank’s shares were underpriced. Citi shares closed 7.3 per cent higher.

Insurer American International Group Inc rose as much as 19.6 per cent before closing 12.6 per cent higher at $32.77.

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And government-owned mortgage companies Freddie Mac and Fannie Mae were up as much as 18.5 per cent and 15 per cent,respectively. Freddie Mac closed 7.6 per cent higher at $1.28 while Fannie Mae ended 5.9 per cent higher at $1.07

“The markets have that emotional resilience of ‘Hey,we’re one year out of the abyss.’ A lot of things have gone up just on the rising tide syndrome,” said Ken Grant,a Partner at Waterstone Private Wealth Management in Owasso,Oklahoma.

“It’s probably a little more optimistic than rational.”

Web information site optionMonster.com co-founder Jon Najarian said government-owned stocks such as Citigroup,AIG,Fannie Mae and Freddie Mac rallied in contrast with with Goldman Sachs Group Inc,JPMorgan Chase & Co and Morgan Stanley,which are not government-owned and closed lower.

The US Securities and Exchange Commission denied rumors it is considering curbing short sales on companies in which the government owns stakes,which some analysts cited as a reason for the rising stocks.

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AIG option volume was five times greater than normal,with about 223,000 calls and 98,000 puts traded,according to option analytics firm Trade Alert.