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Midday Market Update

Stocks Higher With Fed Eyed

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U.S. Market    
Stocks opened the week higher following an announcement late Sunday that former Treasury Secretary and White House economic advisor Larry Summers has withdrawn his name from potential candidates to succeed Fed chairman Ben Bernanke. Summers faced political opposition from the two major parties and also was perceived to likely be more aggressive than Bernanke in rolling back the Fed's asset-purchase program. The news led to a rise in Treasuries

In addition to the Summers announcement, global markets will be closely watching the Federal Open Market Committee's statement Wednesday, which many economists believe will include a concrete time frame for the beginning of the asset-purchase tapering. 

Meanwhile, U.S. industrial output increased by 0.4%, seasonally adjusted in August, while capacity utilization rose by 0.2% during the same time. Each reading met economists' expectations, with manufacturing output showing the largest gain. However, utilities output declined. 

Separately, the Fed Bank of New York reported that business conditions have slowed this month, with an Empire State manufacturing index reading of 6.29 compared with the August reading of 8.24. Although the index still showed expanding activity, it was several points lower than the expected 8.5 reading. 

The Dow was 1.1% higher at midday. The S&P 500 was up by 1.0%, and the Nasdaq was 0.4% higher. 

Stocks on the Move
 Packaging Corporation of America (PKG) announced plans to acquire Boise for $1.995 billion in an all-cash offer. The purchase would increase PCA's packaging mill capacity by an estimated 1,100 tons, or 42%, and significantly increase PCA's presence on the West Coast.  Morningstar analysts believe this is a transformative deal for PCA. If the deal is completed, PCA will remain the fourth-largest North American containerboard producer by capacity but will increase its market share from about 6.7% to 8.6%. PCA shares jumped by 7.4% on the news. 

Chinese online firm (SOHU) saw its shares gain 6.8% by midday after Tencent Holdings (TCEHY) announced a $448 million all-cash purchase of a 36.6% stake in Sohu's search engine, Sogou, though Sogou operates independently. Tencent will now have improved competitive advantages to the fast-growing Chinese Internet-search market. Tencent's ADR shares were up by 2.4% at midday. 

Foreign Markets
Stocks in Europe were higher following the Summers news. The FTSE 100 gained 0.6%. The Paris CAC was 0.9% higher, and the DAX rose by 1.2%. 

Asian markets were mixed, with the Shanghai Composite losing 0.2% and the Hang Seng rising 1.5%. Japanese markets were closed.  

Kevin O'Shaughnessy does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.