Bulls Trample Credit Fears

The credit crunch is history, as far as Wall Street's concerned. But it's early yet to close the books on this summer's debt-market disturbance.

The Dow Jones Industrial Average soared 191 points Monday to close at 14,088, breezing by its July 19 high-water mark of 14,000. Citigroup(C Quote) led the Dow, rising 2% even after the bank said third-quarter earnings would be hit by more than $3 billion in charges tied to this summer's debt market mess.

Monday's record-setting rally shows investors are eager to write off this summer's credit crunch as a one-time event with few implications for the future. Citi chief Charles Prince said so himself in Monday's earnings release. Despite a huge third-quarter earnings shortfall, Prince noted the New York bank expects "to return to a normal earnings environment in the fourth quarter."

Prince isn't the only bull on that count. Execs at Lehman Brothers (LEH Quote) and Goldman Sachs (GS Quote) said last month they expect that they've seen the worst of the crisis that laid low the markets for mortgage securities, leveraged-buyout loans and other riskier debt. As a result many observers appear ready to sound the all-clear for financial stocks, which have swooned since the subprime mess surfaced this past spring.

"The bad news is in at a lot of these financials," says Todd Leone, trader at Cowen & Co.