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,
(INDEXDJX:.DJI) futures were up 1.03% at 15,469. Futures contracts
(INDEXSP:.INX) rose 1.03% to 1,699.40 and
(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
) was up 1.17% in the pre-market, and
) rose 1.5%.
) rose 2% today after JPMorgan Chase analysts recommended the drug
company as "overweight," up from "neutral."
Shares of paper products company
) jumped 26.71% today after it was announced that
Packaging Corp of America
) will purchase it for $1.99 billion, or $12.55 per share, a
significant premium over Boise's Friday closing price of $9.96