U.S. Stocks Seen Rising on Citi Bailout

Premarket futures were hinting at a higher open for U.S. stocks Monday, following an announcement that Citigroup (C Quote) had secured government aid that would help prevent a breakup of the enormous and troubled bank.

Futures for the S&P 500 were up 13 points at 805 and were 5.7 above fair value. Nasdaq futures were adding 11 points at 1102 and were 16 ahead of fair value.

On Friday, stocks fluctuated sharply throughout the day before staging a late rally that coincided with reports that President-elect Barack Obama would select New York Federal Reserve chief Tim Geithner to run the Treasury Department.

Over the weekend, the Treasury, the Fed and the Federal Deposit Insurance Corp. announced they would move to prop up Citigroup in part by investing $20 billion of the $700 billion Troubled Asset Relief Program in Citi shares. The large stake follows an earlier $25 billion TARP investment from the government. The government agencies also will guarantee against up to $306 billion in potential loan losses by the bank.

Shares of Citi had dropped 60% in the past week on concerns about its ability to survive the credit crunch intact. On Friday, Citi executives reportedly denied speculation that the bank would sell all or part of itself to raise capital.

Meanwhile, Bloomberg reported that General Motors (GM Quote), which along with Ford (F Quote) took large hits last week as they failed to secure a bailout from Congress, is trying to reduce its debt and delay a large payment to a union health fund. The report indicated that such a move is an effort to meet conditions that the automaker retool its business if it hopes to get government money.