Stocks, bonds jump after Summers drops Fed bid
By Ryan Vlastelica
NEW YORK (Reuters) - Stocks and bonds on major markets rose on Monday after former U.S. Treasury Secretary Lawrence Summers withdrew from consideration to be the next chairman of the Federal Reserve, leading investors to believe U.S. monetary policy might stay looser for longer.
Signs of progress in reducing tensions in the Middle East, after a Russia-brokered deal on Syria's chemical weapons also helped to support stocks.
Summers' surprise decision on Sunday came just ahead of the Fed's policy meeting on Tuesday and Wednesday, when the U.S. central bank is expected to begin to scale back its asset purchases from the current pace of $85 billion a month.
With the withdrawal of Summers, investors wagered that U.S. monetary policy would stay easier for longer if the other leading candidate for Fed chair, Janet Yellen, the Fed's current vice chair, should get the job. Ben Bernanke's term as Fed chairman expires in January.
The Dow Jones industrial average .DJI was up 117.88 points, or 0.77 percent, at 15,493.94. The Standard & Poor's 500 Index .SPX was up 9.62 points, or 0.57 percent, at 1,697.61. The Nasdaq Composite Index .IXIC was down 4.34 points, or 0.12 percent, at 3,717.85.
The Nasdaq stock index rose for much of the session, but turned negative in afternoon trading, pressured by a 3.2 percent decline in Apple Inc (AAPL.O: Quote) shares. The Dow and S&P500 also ended off their highs of the session after President Barack Obama stood firm in warning Republicans in Congress he will not negotiate over an extension of the U.S. debt ceiling as part of a budget fight.
"We are still riding positively on the Summers announcement, however with the debt ceiling deadline less than a couple of weeks away, there will be heightened sensitivity to it," said Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey.
"We are still up and the market is still riding a wave higher and until there is something tangible to create a sense of fear, the trend remains solid." Continued...