Stocks Close Sharply Higher On Upbeat News - U.S. Commentary

8/29/2011 4:23 PM ET

(RTTNews) - Stocks showed a substantial upward move over the course of the trading day on Monday, adding to the strong gains posted last week. Upbeat consumer spending data contributed to the strength in the markets along with signs that the impact of Hurricane Irene was not as bad as feared.

The major averages saw further upside going into the close, ending the day just off their highs for the session. The Dow surged up 254.71 points or 2.3 percent to 11,539.25, the Nasdaq jumped 82.26 points or 3.3 percent to 2,562.11 and the S&P 500 soared 33.28 points or 2.8 percent to 1,210.08.

The rally on Wall Street was partly due to the release of a report from the Commerce Department showing stronger than expected consumer spending growth in the month of July.

The report showed that personal spending rose by 0.8 percent in July following a revised 0.1 percent decrease in June. Economists had expected spending to increase by about 0.5 percent compared to the 0.2 percent drop that had been reported for the previous month.

Additionally, the Commerce Department said that personal income increased by 0.3 percent in July after rising by 0.2 percent in June. The increase in income came in line with economist estimates.

Paul Dales, Senior U.S. Economist at Capital Economics, said, "July's U.S. personal income and spending figures significantly alter the outlook for third-quarter GDP growth."

"Annualized growth may now come in around 2.5%, if not a little bit higher, compared with our previous expectation of around 1.5%," he added.

The markets also benefitted from early reports regarding the level of damage caused by Hurricane Irene, which swept up the east coast over the weekend.

While the storm is reportedly responsible for at least 35 deaths and has caused billions of dollars in damage, forecasters overestimated the strength of the hurricane and it seems to have caused less damage than some had feared.

Buying interest was also generated by news of a merger agreement between two of Greece's largest banks, Alpha Bank and Eurobank EFG. Alpha Bank said the combined company will be among the top 25 largest Eurozone banking groups with 146 billion euros in pro forma total assets.

Additionally, Bank of America (BAC) rose by 8.1 percent on news that it has agreed to sell about half of its shares of China Construction Bank in order to raise capital.

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