By Agency Reporter

Thursday, 23 Dec 2010

The advance that lifted the Standard & Poor‘s 500 Index above its level before the collapse of Lehman Brothers Holdings Incorporated in September 2008 is an encouraging sign for bulls, technical analysts have said.

Bloomberg News reported on Wednesday that the benchmark gauge for American stocks rose by 0.6 per cent to 1,254.6, surpassing its closing level of 1,251.70 on September 12, 2008, the last trading session before Lehman Brothers filed the world‘s biggest bankruptcy.

After closing within one per cent of the milestone on five of the six previous days, the index may now have room to rise, according to analysts who base forecasts on price charts.

”It‘s a psychological and technical victory for the market,” the lead technical analyst at New York-based Strategas Research Partners, Mr. Christopher Verrone, said, ”It strengthens the case that 2011 might be better than a lot of people expect.”

The United States Government and the Federal Reserve spending to stimulate the economy and 70 per cent of S&P 500 companies, beating profit estimates for a record six straight quarters, pushed the S&P 500 Index up by 85 per cent since March 2009.

The index will end 2011 at 1,374, according to the average projection of 11 strategists at Wall Street‘s biggest banks, producing the biggest three-year rally since 1997-1999.

Losses for the S&P 500 totaled 46 per cent between Lehman‘s failure and March 9, 2009, as the worst recession since the 1930s intensified. The index started to rebound three months before the contraction ended in June 2009, according to the National Bureau of Economic Research.

It has to climb 25 per cent to surpass its October 2007 record high of 1,565.15.

In the week of Lehman‘s bankruptcy, Bank of America Corporation took over Merrill Lynch & Company, as it teetered on collapse and the government seized American International Group Incorporated.

The S&P 500 surged in the final two days of that week, after the government announced a plan to purge banks of bad assets and crack down on short sellers.

”Lehman Brothers was really the starting gun for creating this sense of fear, and we still haven‘t fully overcome that fear, but we‘re in a healing process,” the President of Manning & Napier Advisors Incorporated in Fairport, Mr. Jeffrey Coons, said. ”The aggressive moves of the Fed right after Lehman and happenings today have been an important driver for the stabilisation of stock prices.”

The S&P 500, up 13 per cent in 2010, has advanced 6.3 per cent in December after losing 0.2 per cent in November and posting a combined gain of 13 per cent in September and October, the biggest increases during those months since 1998.

The measure has rallied 20 per cent since Fed Chairman, Mr. Ben Bernanke, suggested on August 27 that he was prepared to purchase bonds to spur economic growth.

 

Source: Punch