US STOCKS-Wall Street up on Summers' withdrawal; Obama curbs gains
* Summers in surprise withdrawal from Fed chair consideration
* Fed to meet this week for decision on stimulus' future
* Obama says he will not negotiate on debt ceiling
* Options trading halted due to systems glitch
* Indexes: Dow up 0.77 pct, S&P up 0.57 pct, Nasdaq off 0.12 pct
NEW YORK, Sept 16 (Reuters) - U.S. stocks advanced on Monday after former Treasury Secretary Lawrence Summers withdrew as a candidate for Federal Reserve chairman, lifting some market uncertainty about what was heading towards a contentious confirmation process.
Early enthusiasm faded, however, 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."
Adding to investor angst, options trading on several major exchanges, including the Nasdaq OMX PHLX and CBOE Holdings was halted in the early afternoon due to system issues at the centralized Options Price Reporting Authority, the latest prominent disruption to the operations of U.S. markets.
Investors cheered Summers' decision, as the move likely means an easier path for the eventual nominee for Fed chief, and it also has added to expectations that the Fed will continue its current accommodative path.
Summers was seen as more prone to wind down stimulus than the new front-runner, Fed Vice Chairwoman Janet Yellen.
Summers' surprise decision on Sunday came just days before the U.S. central bank will meet to decide when, and by how much, to scale back its bond purchases, or quantitative easing.
Housing stocks climbed as investors bet on downward pressure on mortgage rates. The PHLX housing index climbed 1.4 percent. Among individual stocks, D.R. Horton rose 3.7 percent to $19.85.
The Dow Jones industrial average rose 118.72 points or 0.77 percent, to 15,494.78, the S&P 500 gained 9.61 points or 0.57 percent, to 1,697.6, and the Nasdaq Composite dropped 4.338 points or 0.12 percent, to 3,717.846.
The earlier gains helped briefly push the S&P back above the 1,700 level for the first time since early August.
The Nasdaq Composite was weighed down by a drop in Apple shares. Apple fell 3.2 percent to $450.12, and is down more than 11 percent in the last five sessions, after investors were disappointed by the new products and prices introduced last week.
Summers was regarded as more eager to scale back the Fed's $85 billion a month bond buying. Yellen is perceived as favoring a more gradual easing of stimulus and emphasizing the need to lower the unemployment rate.
Packaging Corp of America said it would acquire smaller rival Boise Inc for about $1.28 billion to boost its container board capacity. Packaging Corp of America shares jumped 10.8 percent to $60.43 and Boise rallied 26.1 percent to $12.56.
U.S. industrial production rose in August as a bounce-back in motor vehicle assembly lifted manufacturing output, a hopeful sign for the economy after growth got off to a slow start in the third quarter.
A separate report for September showed the pace of growth in New York state's manufacturing sector unexpectedly slowed this month, but firms' outlook brightened.
Volume was light with about 5.63 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, below the daily average of 6.24 billion.
Advancing stocks outnumbered declining ones on the NYSE by 2,027 to 951, while on the Nasdaq, advancers beat decliners 1,372 to 1,135.
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