Stocks and Treasuries rose today as Larry Summers bowed out of the race to succeed Ben Bernanke as Federal Reserve Chairman.
Summers was the favorite of President Barack Obama. Summers served as Secretary of the Treasury under Bill Clinton, where he championed deregulation of the securities industry. Later, he became Obama's economic advisor. He was, however, a lightning rod for liberal and moderate Democrats in Congress who blame his policies for leading to the housing market bust and financial crisis. His confirmation would have been an contentious one.
“Any possible confirmation process for me would be acrimonious and would not serve the interests of the Federal Reserve, the administration, or ultimately, the interests of the nation’s ongoing recovery.” Summers said.
This makes Janet Yellen, the only other leading candidate, as a shoo-in for chairperson, though Obama has also considered Donald Kohn, a former Fed Vice Chairman. Yellen is very popular with mainstream economists, and she is widely seen as a "dove" who will mostly continue Bernanke's easy-money policies. Summers was more hawkish, questioning the wisdom of current monetary policy. He was likely to cut it off sooner than later.
Stocks rose, the dollar fell, and Treasuries rose this morning. Before the opening bell, Dow
(INDEXDJX:.DJI) futures were up 1.03% at 15,469. Futures contracts on the S&P 500
(INDEXSP:.INX) rose 1.03% to 1,699.40 and Nasdaq
(INDEXNASDAQ:.IXIC) futures gained 0.99% to 3,202.75.
The dollar weakened to 98.86 yen and $1.336 euros. US Treasury yields fell dramatically as the market expects the Fed to keep buying. The 10-year yield fell eight basis points to 2.81% today. European and Asian shares are also up strongly on the news.
Markets are also celebrating the diplomatic breakthrough on Syria. The US and Russia agreed that Syria would give up its chemical weapons through mid-2014, but the US will maintain a military option if the Middle Eastern country doesn't comply.
The New York Federal Reserve Board released worse-than-expected data on manufacturing in New York State. The Empire State Manufacturing survey's general business conditions index fell to 6.29 from 9 in September. Still to come this morning is an indicator on US industrial production, which is likely to have risen 0.5% in August.
Financial shares were also up strongly today. Bank of America
(NYSE:BAC) was up 1.17% in the pre-market, and JPMorgan Chase
(NYSE:JPM) rose 1.5%.
(NYSE:BMY) rose 2% today after JPMorgan Chase analysts recommended the drug company as "overweight," up from "neutral."
Shares of paper products company Boise Inc
(NYSE:BZ) jumped 26.71% today after it was announced that Packaging Corp of America
(NYSE:PKG) will purchase it for $1.99 billion, or $12.55 per share, a significant premium over Boise's Friday closing price of $9.96
No positions in stocks mentioned.
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