* Summers in surprise withdrawal from Fed chair
* Fed to meet this week for decision on stimulus' future
* Housing-related stocks rally on mortgage rates bets
* Indexes: Dow up 0.8 pct, S&P up 0.7 pct, Nasdaq flat
By Rodrigo Campos
NEW YORK, Sept 16 U.S. stocks rallied on Monday,
with the S&P 500 at a six-week high, after former Treasury
Secretary Lawrence Summers withdrew as a candidate for Federal
Reserve chairman, removing market uncertainty about a long
confirmation process that already had plenty of opposition.
The move means a path for the next Fed chief is likely to be
easier, 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.
Investors flocked to housing-related stocks on bets of
downward pressure on mortgage rates. The PHLX housing index
jumped 2 percent. Among individual stocks, D.R. Horton
jumped 5 percent to $20.09.
Summers "was increasingly bringing uncertainty to a very
important post for markets," said Doug Cote, chief market
strategist at ING U.S. Investment Management in New York.
"With him stepping aside, markets are now taking off the
'Larry Summers' discount, so this (gain) is sustainable and
where the market should be."
The Dow Jones industrial average rose 127.52 points
or 0.83 percent, to 15,503.58, the S&P 500 gained 10.91
points or 0.65 percent, to 1,698.9 and the Nasdaq Composite
added 0.585 points or 0.02 percent, to 3,722.769.
The S&P traded above 1,700 for the first time since early
August and the Dow was on track to post its largest daily gain
in at least two months.
The Nasdaq Composite was weighed by a drop in Apple
shares. Apple fell 2.1 percent to $454.95 and is down more than
10 percent in the last five sessions, after investors were
disappointed by the new products and prices introduced last
The day's gains come after the Dow Jones industrial average
on Friday registered its best weekly gain since January, though
trading was subdued before the Fed's meeting, which has been
expected to result in the start of tapering.
Yellen, the leading candidate to succeed Ben Bernanke in
January, is likely to continue the Fed's cautious approach to
winding down the current stimulus.
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.
Yellen's "probability has increased and she's one of
moderation and continued support to the economy," said ING's
Cote. "It is really good news for the market."
The United States, France and Britain stepped up pressure on
Syrian President Bashar al-Assad to stick to a deal under which
Syria must give up its chemical weapons, and warned he would
suffer consequences if Damascus did not comply. Russia
immediately cautioned against imposing tough penalties on the
Both Brent and U.S. crude prices fell more
than 1 percent as supply concerns stemming from a possible
U.S.-led attack on Syria eased.
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 6.6 percent to $58.15 and Boise rallied 26.5 percent to
Industrial toolmaker Kennametal said it would buy
Allegheny Technologies' tungsten materials business for
$605 million to expand in aerospace and energy markets.
Kennametal shares added 1.2 percent to $46.56 after hitting a
record intraday high of $47.93. Allegheny jumped 9.9 percent to
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
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.