Stocks End Near Session Highs, Led by Banks

Stocks closed near session highs Monday, fueled by a merger between two big Greek banks, a better-than-expected personal spending report and as the damage from Hurricane Irene over the weekend was less than feared.

The Dow Jones Industrial Average soared 254.71 points, or 2.26 percent, to finish at 11,539.25. BofA and Hewlett-Packard led the blue-chip gainers, while Home Depot was the only laggard on the index.

The S&P 500 surged 33.28 points, or 2.83 percent, to end at 1,210.08, above the critical 1,207-level that traders closely track.

“[When the S&P finishes above 1,207], some people make a case that it opens up a threshold to a new higher level," Art Cashin, director of floor operations at UBS Financial Services told CNBC.

The Nasdaq jumped 82.26 points, or 3.32 percent, to close at 2,562.11.

Despite the day's strong rally, all three major indexes are still on track for their biggest monthly declines since May 2010.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 33.

All 10 S&P sectors ended higher, led by techs and financials.

Trading volume was lighter than usual with the consolidated tape of the NYSE at 3.47 billion shares, while 912 million shares changed hands on the floor ahead of a holiday weekend and as some commuters in the New York City area faced difficulties getting to work.

“We’re going into a holiday week and after all we’ve experienced last week, people are just going to look to unwind positions,” Matt Cheslock, managing director at Cohen Capital Group told CNBC. “People take risk off the table where they can—There’s no reason why you wouldn’t do that today especially in the face of all the momentum we’ve seen to the upside.”

Financials rallied across the board following news of a merger between two banks: Eurobank and Alpha Bank. The deal is expected to trigger more M&A activity to shore up the sector hammered by a severe debt crisis. European stocks closed higher, with Greek banks rallying sharply. The London Stock Exchange is closed for a bank holiday.

Bank of America gained after the firm sold 5.2 percent of its stake in China Construction Bank in a deal valued roughly at $8 billion. Rivals Morgan Stanley and Citigroup were also higher.

Insurers are likely to be watched carefullyas the damages caused by Hurricane Irene over the weekend was not as bad as initially feared. Morgan Stanley said they estimate total losses at below $10 billion, while Barclays estimate is $2 to $8 billion.

Shares of Allstate , Hartford and Travelers soared to lead the S&P gainers.

Airlines including JetBlue and Delta saw a relief rally as major airports on the East Coast reopened.

On the tech front, chipmakers surged. Micron Tech surged almost 7 percent amid a rise in memory chip prices. Other semiconductor firms also gained including AMD and STMicroelectronics .

Bristol-Myers and Pfizer climbed after a new blood thinner co-developed by the two companies significantly outperformed in a study.

Meanwhile, gold prices declinedas investors were lured out of the safe-haven play to purchase riskier assets.

On the economic front, consumer spending rebounded strongly by 0.8 percent in July to post the largest increase in five months according to the Commerce Department. Economists expected spending to rise 0.5 percent, according to a Reuters poll.

Meanwhile, pending home sales slipped in July according to the National Association of Realtors. The Pending Home Sales Index was down 1.3 percent to 89.7 in July from 90.9 in June.

President Obama said he has chosen Princeton University labor economist Alan Krueger to become the top White House economist, succeeding Austan Goolsbee. The decision comes ahead of Obama's jobs package speech, planned for shortly after the Labor Day holiday.

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Coming Up This Week:

TUESDAY: S&P Case-Shiller home price index, consumer confidence, Fed's Kocherlakota speaks, FOMC minutes
WEDNESDAY: Weekly mortgage apps, Challenger job-cut report, ADP employment report, Chicago PMI, factory orders, oil inventories, USDA's agricultural trade outlook
THURSDAY: Weekly jobless claims, productivity and costs, ISM Mfg index, construction spending, chain store sales, auto sales
FRIDAY: Non-farm payroll

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