S&P 500 Soars 3% on Spending Data and a Bank Merger in Greece

Bikram Pandey
29 Aug, 2011
New York City

The largest increase in consumer spending in five months and the much needed consolidation between two Greek banks lifted the market sentiment. The financial stocks led market rally was also bolstered after insurance companies estimated less than expected losses from the Hurricane Irene.

[R]4:10 PM New York – The largest increase in consumer spending in five months and the much needed consolidation between two Greek banks lifted the market sentiment. The financial stocks led market rally was also bolstered after insurance companies estimated less than expected losses from the Hurricane Irene. Metals declined crude oil gained 2%.[/R]

U.S. indexes traded higher after personal income rose 0.3% and spending soared 0.8% in July. The consumer spending increased the most in five months and a merger between two Greek banks revived market confidence. Insurance companies also traded higher after Hurricane Irene related losses were less than expected.

Allstate ((ALL)) jumped more than 7% and The Travelers Companies ((TRV)) gained nearly 5%. Chubb, CAN Financial and Berkshire added more than 4% in the session today after Hurricane Irene related losses were less than expected.

Analysts estimated between $7 billion and $10 billion of losses for insurance companies mostly in the New York and New Jersey states.

European indexes edged higher with the Greek benchmark index soaring 14%, it best one day performance in two decades after second largest Alpha Bank agreed to acquire the third largest EFG Eurobank Ergasias SA.

The combined bank will have 3.9 billion euros of capital of which 1.2 billion euros will be funded by a rights offering and a Qatar based fund will invest 500 million euros in a convertible note.

The merger announcement lifted the market indexes in Europe and banking stocks in general in the region. The Athens based ASE index is the worst performing market in the euro zone for the year and is still down 29% in the year.

Spain reached an accord on public deficit limit. Home prices in the UK declined in August. Nordea planned to slash 2,000 jobs by 2012.

Spanish mortgage approvals dropped in June. Swedish retail sales eased in July. Greek producer price index increased in July. Italian consumer confidence weakened in August. Norwegian factory wages climbed in the second quarter.

Stocks in Tokyo traded higher for the third day in a row. Japan selected its sixth prime minister in five years. Finance Minister Yoshihiko Noda is expected to win vote tomorrow in the lower house of the parliament.

The Australian benchmark index gained and commodities linked stocks and bank led the advance. QR National swung to a profit but fell short of its outlook. Centro Properties warned that the company has no alternative but to merge with Centro Retail.

Commodities, Bonds and Currencies

The 10-year U.S. bond yield increased to 2.27% and 30-year U.S. bond rose to 3.62%.

The U.S. dollar decreased at $1.451 to one euro and closed higher against the Japanese yen to 76.84 yen.

Immediate delivery futures of Texas crude oil increased $2.05 to $87.42 a barrel and futures of natural gas decreased 0.07 cents to $3.85 per mbtu and gasoline price decreased 2.16 cents to 291.3 cents a gallon.

In metals trading, copper decreased 0.35 cents to $4.114 per pound, gold decreased $8.60 to $1,788.70 per ounce and silver declined $0.21 to $40.78.