US stocks jumped nearly 2 per cent today as a merger between two big banks in Greece suggested Europe was working through its financial problems and a rebound in consumer spending calmed fears about the US economy.
Insurance company shares were higher after property damage from Hurricane Irene was less than feared, according to early estimates. Travelers Cos rose 4.8 per cent to $50.61. Allstate Corp jumped 7 per cent to $25.91.
Wall Street was also relieved that damage in New York City, especially in lower Manhattan, from Irene was not as bad as feared. The New York Stock Exchange and the Nasdaq opened on schedule, but volumes were expected to be thin.
Many Wall Street workers were stuck at home as many commuter rail and bus lines were crippled, while the New York City subway system slowly returned to service early today after a systemwide shutdown.
Financial stocks rallied on news that EFG Eurobank and Alpha Bank will unveil a merger deal, Reuters reported, with Qatar, the second biggest shareholder in Alpha Bank, set to add more capital to the combination.
The S&P financial index was up 2.7 per cent and the KBW Banks index nearly 3 per cent.
"Hurricane Irene was not nearly as devastating as people had anticipated. In addition, people are talking about a bank merger in Greece, which is giving investors hope that this is part of the repair process to the sovereign debt problem in Europe," said Paul Nolte, managing director at Dearborn Partners in Chicago.
"It doesn't reduce risk, but it does allow for a consolidation, which could allow core capital ratios to be better than separately."
The Dow Jones industrial average jumped 184.06 points, or 1.63 per cent, at 11,468.60. The Standard and Poor's 500 Index was up 20.70 points, or 1.76 per cent, at 1,197.50. The Nasdaq Composite Index put on 46.09 points, or 1.86 per cent, at 2,525.94.
Greek stocks rose more than 11 per cent, with local banks jumping 30 per cent. US-listed shares of National Bank of Greece soared 33 per cent to $1.11. European shares rose 2.5 per cent.
US consumer spending posted its largest increase in five months in July, data showed, supporting views the economy was not falling back into recession.
Also, July pending home sales fell 1.3 per cent, matching forecasts, but remained higher than year-ago levels.
Reuters
