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The Greek bank deal, lower than expected damage from hurricane Irene, and an encouraging consumer spending report, combined together to push the benchmarks significantly higher on Monday. However, volumes remained low as Irene kept the traders away from the Street. It was the insurers that led the gains after Irene caused less damage than what was feared.
The Dow Jones Industrial Average (DJIA) jumped 2.3% and settled at 11,539.25. The Standard & Poor 500 (S&P 500) gained 2.8% and closed the day at 1,210.08. The Nasdaq Composite Index surged 3.3% and wrapped up at 2,562.11. The fear-gauge CBOE Volatility Index (VIX) plunged 9.3%. The day was marred by low volumes as commuters failed to travel to trading stations as the tropical storm Irene kept them away from work. On the New York Stock Exchange, consolidated volumes were 3.6 billion, significantly lower than this year’s average of 4.4 billion. This was also the lowest level recorded since July 26.
Though Irene disrupted public transport and left Wall Street understaffed, the hurricane failed to hit the markets as the damage was lesser than what had been previously expected. Consulting firm Kinetic Analysis Corp reduced its estimate of the damage caused by the storm to $7 billion late Sunday from the previously expected $20 billion. Accordingly, insurers will now have to cover up $3 billion, which is far lesser than what they had to shell out in 2003 in the wake of Hurricane Isabel.
Meanwhile, insurers got a breather when it became clear that they would have to pay smaller amounts as cover charges post hurricane Irene. Among the gainers for this sector were The Allstate Corporation (NYSE:ALL), Hartford Financial Services Group Inc. (NYSE:HIG), The Travelers Companies, Inc. (NYSE:TRV), American International Group, Inc. (NYSE:AIG), Selective Insurance Group Inc. (NYSE:SIGI), Hallmark Financial Services Inc. (NASDAQ:HALL) and CNA Financial Corporation (NYSE:CNA), and they surged 8.5%, 12.9%, 5.1%, 7.5%, 7.5%, 8.5% and 5.0%, respectively. Insurance and banking stocks also registered the highest increase among the 10 industry groups in the S&P 500, gaining 4.2%.
The bank deal in
The consumer spending report also added to the cheer after data released by the Bureau of Economic Analysis revealed personal spending had recorded its largest increase in five months in July. Personal consumption expenditures (PCE) or consumer spending climbed 0.8%, ahead of the consensus expectation of a rise of 0.6%. Additionally, “Personal income increased $42.4 billion, or 0.3 percent, and disposable personal income (DPI) increased $32.5 billion, or 0.3 percent, in July
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