Stocks rally as consumers spend freely

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The stock market is rallying today thanks to U.S. consumers.

The Dow Jones industrial average rose more than 200 points as better-than-expected consumer spending raised hopes that the U.S. economy isn’t about to slide into a new recession.

The market also got an unintended boost as Hurricane Irene proved less damaging that initially feared, pushing up the stocks of insurance companies that will have to foot part of the bill for cleanup and rebuilding. Hartford Financial Services Group Inc. jumped 12.2% and Genworth Financial Inc. rose 7.2%

Investors were buoyed by Commerce Department data showing consumer spending rising 0.8% in July, the biggest jump since February. With personal income increasing 0.3%, the data indicated that consumers cut into their savings to fund their purchases.

Overseas stocks rallied as the announced merger of two Greek banks raised prospects that consolidation can help the country’s battered financial system weather the European debt crisis.

As of 11:59 a.m. PST, the Dow was up 227.69 points, or 2%, to 11,512.23.

The gain helped bring the Dow within 1% of break-even for the year. The Standard & Poor’s 500 index and the Nasdaq composite index each are down about 4% for the year.

But trading volume is very light today. Some people on the East Coast had difficulty getting to work, and activity normally is thin the week before Labor Day.

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-- Walter Hamilton