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Rally of 1987 .... Part - 1 ( US )

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US post its biggest gain on 2 day since 1987 (termed as aftermath year)

Posted by Abhishek , on 21st Sept  2008 . @ 12.13 PM IST

American market posted its rally of 2 day since the crisis of 1987 as government introduced some plans to save world largest economy and market. This week financial dominated S&P 500 Index make the biggest loss in seven year. Financial shares in the S&P 500 plunged 13% in the first three days of the week as Lehman Brothers Holdings Inc. filed for bankruptcy, Merrill Lynch & Co. sold itself and the government seized American International Group Inc., sending the market to its steepest declines since the 2001 terrorist attacks. But during the last two trading day as Government decided to safe the market and retail stakeholder by adding more measures like 
 
* SEC imposes temporary ban on short sales on 799 stocks
* US Treasury to back money market mutual funds . 

US Market rallied to covering its losses that is made in the beginning of this week to close in FLAT to the extent. On Thursday ,Wall Street posted its biggest one-day percentage gain since October 2002 -- when the last bull market was born -- after a congressional aide said U.S. Treasury Secretary Henry Paulson has been circulating a proposal to lawmakers that would create an entity to deal with the billions of dollars of bad debt still clogging the financial system.


Biggest Bankruptcy of World

1) Lehman was the fourth-largest U.S. investment bank before it filed the biggest bankruptcy in U.S. history on Sept. 15, smashed to the sub prime-mortgage crisis that this financial gaint helped to create. The firm was forced into bankruptcy after Barclay Plc and Bank of America Corp. abandoned takeover talks and the company lost 94 percent of its market value this year.

2) Merrill Lynch agreed to be bought by Bank of America after its shares plunged 36 percent the prior week. Merrill led gains in the in the S&P 500, climbing 73 percent to $29.50.

3) Goldman Sachs Group Inc. and Morgan Stanley, the only remaining independent brokerages on Wall Street after Lehman's bankruptcy and Merrill's sale, climbed after earlier enduring their steepest one-day sell-offs ever as the nation's three largest pension funds stopped loaning shares to investors betting on the firms' declines. Goldman dropped 16 percent to $129.80 for the week and Morgan Stanley fell 27 percent to $27.21.

4) Washington Mutual - Financial stocks gained 7.4 percent overall. Washington Mutual Inc., the largest U.S. thrift, surged 56 percent to $4.25 on the government's rescue plans and reports four potential bidders may be interested in buying pieces of the company. . We got a report that CITI Financial is also intrested to buy this troubled firm.

5) AIG fell the most in the S&P 500, losing 68 percent to $3.84. The biggest U.S. insurance company was taken over by the government after mortgage-related losses led to credit-rating downgrades that drove the company to the brink of insolvency. The government said it will receive a 79.9 percent stake in return for an $85 billion loan that analysts said may be repaid by liquidating the company. Analyst believe that this amount of $85 billion is not enough and government is need to inject further money on this Insurance Gaint.

The Federal Reserve kept its benchmark interest rate at 2 percent on Sept. 16, citing risks to growth and inflation. The central bank agreed to the AIG loan hours after the decision. 

Please refer to our next Article of Rally of 1987 - Part -2 ( EUROPE )



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