9-16-13 10:49 AM EDT | Email Article
 

By William L. Watts and Barbara Kollmeyer, MarketWatch

 

NEW YORK (MarketWatch) -- U.S. stock futures surged Monday, joining a global equities rally after former Treasury Secretary Lawrence Summers withdrew from consideration for the top job at the Federal Reserve.

 

Stock-index futures held gains after the Federal Reserve Bank of New York reported manufacturing in the New York region improved at a slower pace in September from the month before. The decline was not expected.

 

Futures for the Dow Jones Industrial Average (DJZ3) jumped 149 points, or 1%, to 15,460, while S&P 500 index futures (SPZ3) jumped 16.30 points, or 1%, to 1,698.30. Nasdaq 100 index futures (NDZ3) surged 23.50 points, or 0.7%, to 3,195.

 

Summers called President Barack Obama on Sunday to say he was withdrawing his name for consideration for Federal Reserve chairman, saying he has "reluctantly concluded that any possible confirmation process for me would be acrimonious." Read also: Death of 1,000 cuts for Summers.

 

Summers's withdrawal boosted equity markets and other so-called risk assets around the world due to expectations that Summers would have been less likely to maintain an easy stance on monetary policy than current Fed Vice Chair Janet Yellen, who is now the top contender to succeed Ben Bernanke.

 

In a tweet, Pimco's Bill Gross, the manager of the world's largest bond fund, wrote: "Summers's exit makes Monday a huge day for curve/risk on trades. Treasury 5/30 curve may steepen by 10. Stocks should do very well."

 

Simon Smith, chief economist at FxPro in London, said Summers was seen as more concerned about the unintended consequences of quantitative easing than Bernanke and Yellen.

 

"So the Fed was seen reducing QE and raising rates earlier with him [Summers] at the helm," said Smith. "The second reason why it matters is that the Fed is so influential in supporting asset markets, such as stocks, gold and emerging markets with its [quantitative-easing] policies."

 

U.S. Treasurys rallied, sending yields lower. The yield on 10-year notes (10_YEAR) fell 8 basis points to 2.811%.

 

The Federal Open Market Committee will conclude a two-day policy meeting on Wednesday and strategists expect the Fed to begin scaling back its monthly $85 billion in bond purchases. The consensus view is for the Fed to pare back bond buys by around $10 billion a month, an amount that may allow markets to keep rallying.

 

Others say the meeting could deliver a surprise, pushing out a tapering to October or December. Read: Besides the taper, 5 things to watch at the Fed

 

Economic data on the calendar for Monday include industrial production and capacity utilization for August, due at 9:15 a.m. Eastern.

 

In corporate news, shares of Boise Inc. (BZ) jumped 27% in premarket action after Packaging Corp. of America (PKG) said it had agreed to acquire Boise for $12.55 a share. Shares of Packaging Corp. rose nearly 13% in premarket action.

 

The Dow Jones Industrial Average (DJI) rose 75.42 points, or 0.5%, to 15,376.06 on Friday, capping a weekly gain of 3%. Tallying a 2% weekly gain, the S&P 500 (SPX) gained 4.57 points, or 0.3%, on Friday to 1,687.99.

 

Gold prices edged higher on dollar weakness following the Summers news, while crude-oil prices fell after the U.S. and Russia announced a deal Saturday for Syria to destroy its chemical-weapons stockpile by mid-2014. European stocks and most Asia markets also rallied.

-William L. Watts; 415-439-6400; AskNewswires@dowjones.com

 

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


(END) Dow Jones Newswires

09-16-13 1049ET

Copyright (c) 2013 Dow Jones & Company, Inc.
Copyright 2014 MarketWatch
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Morningstar - - UPDATE: Stock futures soar as Summers bows out of Fed race
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