Citigroup shares gain nearly 8 percent

NEW YORK — Shares of Citigroup Inc. rose nearly 8 percent Wednesday, outpacing gains among other financial stocks, amid a brighter outlook on the economy from the Federal Reserve.

Shares rose 29 cents, or 7.9 percent, to close regular trading at $3.98 — the stock’s highest close in three months.

The rise in Citigroup shares and other financial stocks helped lead the stock market higher Wednesday as investors welcomed a slightly more upbeat tone from the Fed on the economy. The central bank said the economy appears to be “leveling out.” Previously, the Fed said the economy’s decline was slowing.

The change in the Fed’s language was enough to reassure investors that their improving sentiments on the economy have been well-founded.

Citigroup shares have jumped 54 percent in the last month as investors bet big banks will see better business as the economy improves. The stock has more than quadrupled since it slid below $1 in early March on fears that the bank might crumble under the weight of rising loan losses and soured investments.

Also likely helping to boost Citigroup’s shares are recent moves by several executives to increase their stakes in the company. Investors see this as a vote of confidence in the bank, said Anton Schutz, portfolio manager of Burnham Financial Industries Fund and Burnham Financial Services Fund.

“Insider buying is always a good thing,” Schutz said.

On Monday, Chairman Richard Parsons disclosed in a regulatory filing that he recently purchased nearly 16,000 shares. That followed purchases by newly appointed Citibank CEO Eugene McQuade and Manuel Medina-Mora, the head of Citi’s Latin American and Mexican operations.

According to filings with the Securities and Exchange Commission, both McQuade and Medina-Mora bought 1 million shares last week at prices ranging from $3.19 to $3.61 apiece.

Citigroup brought in McQuade, a veteran bank executive, to lead its main banking group in July.

Earlier this week, Citi said it approved $6 billion in new lending initiatives during the second quarter as part of its programs supported by government bailout funds.

Citigroup has received $45 billion in TARP money since last October. A portion of that money was recently converted into a 34 percent ownership stake for the government.