U.S. Stock Futures Soar as Summers Bows Out of Fed Race
MADRID (Sept 16) U.S. stock-market futures pointed to a sharply higher open for Monday after former Treasury Secretary Lawrence Summers dropped out of the running for the top Federal Reserve job. Gold also surged as the dollar fell.
Futures for the Dow Jones Industrial Average jumped 160 points, or 1.1%, to 15,471, while those for the Standard & Poor's 500 index jumped 17.2 points, or 1%, to 1,699.20. Futures for the Nasdaq 100 index surged 31.25 points, or 1%, to 3,202.75.
Summers called President Barack Obama on Sunday to say he was withdrawing his name for consideration for the Federal Reserve chairman job, saying he has "reluctantly concluded that any possible confirmation process for me would be acrimonious."
The exit of Summers, who faced wide opposition in the Fed race, could clear the path for Janet Yellen, the Fed's vice chairwoman. Yellen is seen as one who would favor a slower pace of tapering on Fed bond purchases, one reason behind the sharp gains for stock futures and a tumble for the dollar.
"Investors are of the belief that Yellen may not scale back QE as aggressively as her rival Summers would," said Max Cohen, financial sales trader at SpreadEx, in a note to investors.
The Federal Open Market Committee will conclude a two-day policy meeting on Wednesday and strategists say markets are now pricing in a decision for the Fed to begin scaling back its monthly $85 billion bond purchases. The consensus view is for the Fed to pare back that program by $15 billion a month, an amount that may allow markets to keep rallying.
Others say the meeting could surprise this week, pushing out a tapering to October or December.
Economic data on the calendar for Monday includes the September Empire state index at 8:30 a.m. EDT, and industrial production and capacity utilization for August at 9:15 a.m. EDT.
Up 3% on the week, the DJIA rose 75.42 points, or 0.5%, to 15,376.06 on Friday. Tallying a 2% weekly gain, the S&P 500 index gained 4.57 points, or 0.3%, at 1,687.99.
Among other markets, gold jumped on dollar weakness on the heels of 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.
Europe and Asia markets also rallied on news of Summers's exit.