- Summers withdrawal boosts stocks
- Apple drops on China subsidy reports
- Shooting at Navy Yard in Washington
Dow Jones: 1.05%
S&P 500: 0.83%
US markets started the week in an exuberant mood ahead of the all-important Federal Reserve policy meeting as stocks reacted positively to the news that Larry Summers has dropped out of the race to take over Ben Bernanke's position as Fed Chairman.
Wall Street benchmarks opened strongly with the Dow Jones and S&P 500
rising as much as 1% early on, though upside on the tech-heavy Nasdaq was limited by falls by Apple.
Meanwhile, initial gains across the board were trimmed slightly by mid-morning on reports of a shooting at a Navy Yard in Washington DC. A gunman is said to have shot several people and was still on the loose, causing delays to flights from the nearby Reagen National Airport.
Summers withdraws; Fed in focus
Stocks across the globe were performing well after former Treasury Secretary Summers withdrew from the race to replace Bernanke as head of the US central bank when he steps down in January. The removal of Summers - widely viewed as a hawkish candidate in the running - prompted a positive reaction on the back of hopes that current Fed Vice Chair and well-known dove Janet Yellen may now be the firm favourite. She is expected to favour a slower reduction of stimulus than Summers.
The Federal Open Market Committee's two-day meeting is due to come to a close on Wednesday and will likely be one of the most closely-watched policy decisions in recent years, given rising expectations that the Fed will begin to scale back its quantitative easing (QE) programme.
According to analysts at Barclays Research, the Fed is likely to taper monthly asset purchases from $85bn to $70bn this week. However, they note that the announcement of tapering by $10-15bn in itself is unlikely to move the market.
Empire State index disappoints
The Federal Reserve Bank of New York´s regional manufacturing gauge fell back in August to a reading of 6.29 from 8.24 in the month before. Analysts were expecting a small rise to 9.10.
US industrial production increased by 0.4% from July to August, in line with the consensus forecast. Manufacturing production meanwhile rose by 0.7%, ahead of the 0.5% increase expected.
Apple slumps on China reports
Tech giant Apple, which underwhelmed analysts with the release of two new iPhone models last week, was under the weather again on Monday after The Wall Street Journal said that China Telecom was reducing its subsidies for the popular smartphone.
Packaging products group Boise surged by as much as a quarter after being bought by larger rival Packaging Corp of America for $1.28bn.
JPMorgan has raised its recommendation on Bristol-Myers Squibb to 'overweight' from 'neutral', causing the stock to advance after the bell. The bank said the move came after a pull-back in the shares
over the past several months and ahead of "a number of important catalysts over the next 12-18 months, particularly for the company's immunotherapy platform".
Financial stocks were performing well on Monday on the back of the news that Summers is no longer running for the position of Fed Chair - Morgan Stanley, Goldman Sachs, JPMorgan Chase, Bank of America and Citigroup were all making gains.