Wall St cheered by Summers exit

United States stocks closed higher and the Dow industrials made a triple-digit advance on news that Lawrence Summers bowed out of the running to lead the Federal Reserve.

The Dow Jones Industrial Average climbed 118.72 points, or 0.8%, to 15494.78. On Friday, the Dow rose 75 points, or 0.5%, to cap the blue-chip index's best weekly performance since the week ended Jan. 4.

The S&P 500 index gained 9.61 points, or 0.6%, to 1697.60. The index is 0.7% below its all-time high of 1709.67.

The Nasdaq Composite Index slipped 4.34 points, or 0.1%, to 3717.85.

Mr Summers's withdrawal also stoked a rise in Treasurys and gold prices, a decline in the dollar and gains in European stocks.

Stocks retreated from the heights of their early rally in afternoon trading as investor enthusiasm about the news faded, and as Treasury yields and the dollar edged up from their morning lows. At its session highs, the Dow industrials were up as many as 174 points.

The drift lower also came as several US stock-options exchanges stopped trading because of a problem with a data feed providing options prices to traders. Still, stocks remained broadly higher for the session. They already have posted strong gains for September, up 3.9% for the month.

Stock investors saw losses in August--the S&P 500 declined 3.1% that month--so those who bet on continued losses have been getting squeezed, said A.C. Morgan, head of US equity sales trading at UBS AG.

Because of that, "the panicky [buying] we saw in the first 15 days of the month might not necessarily" continue, he said.

Trading volumes were higher than August's slow summer levels, traders said. They added that a broad range of investors were active.

"We're seeing all types participating in the rally today," Bank of America Merrill Lynch managing director in cash equities Doug Crofton said. He saw "a slight uptick in investor buying across the board."

The S&P 500 is up 19% in the year to date. But corporate earnings growth has been slowing. Investors and strategists say gains have been supported by easy-money policies from the Fed, which have kept yields low and pushed investors into riskier assets to find returns.

Now, the Fed is preparing to roll back some of its stimulus efforts. Stock and bond markets have made sharp moves as central-bank officials spoke about their expectations for paring bond-buying programs, so the choice of a successor to current Fed chairman Ben Bernanke is seen as particularly important for markets.

"You see on days like today that people are watching the Fed and what they're doing more than what the fundamentals look like," said John Kvantas, who helps manage $US16 billion as executive director at USAA.

Investors believed Mr Summers, a former Treasury secretary who has been one of president Barack Obama's top advisers, could have reduced stimulus at a faster pace than other top candidates, such as current Fed vice chairman Janet Yellen. They also fretted that Mr Summers would make for a controversial and outspoken Fed chairman, which could spark market volatility.

"Summers has been a lightning rod," said Alan Gayle, senior investment strategist at Ridgeworth Investments.

"The bigger risk was him sticking his foot in his mouth."

Mr Gayle added that continued negotiations on Syria have given investors the perception of more stability in the region, which helped set a bullish tone.

"You have to give a portion of the rally to the Syria stabilization," he said. Between Summers's withdrawal and the weekend agreement between the US and Russia to dismantle Syria's chemical-weapons stockpile, "the pressure has been relieved."

Investors now will be looking ahead to the Federal Reserve's two-day policy committee meeting ending Wednesday, after which most economists surveyed by The Wall Street Journal expect the central bank to announce it will start reducing its $85 billion-a-month bond-purchase programs.

"They've got an opening where the market is ready for" a reduction, said Bill Stone, chief investment strategist at PNC Asset Management.

"They're likely to take that opening, rather than surprise the market."

In fact, a delayed pullback could raise concerns that the economic recovery isn't as strong as previously thought, he said. Mr Stone expects the Fed to cut back on its monthly Treasury bond-buying efforts by between $10 billion and $15 billion, and said that in that case, market reaction could be muted.

"I'm hoping for a yawn," he said. "There's been nonstop buildup to this, and it took so much time to get our heads around it."

In morning trading, the yield on the 10-year Treasury note fell to its lowest levels for this month on the news, but it recovered from some of that decline later in the day. It settled at 2.875%, down from 2.896% late Friday. Gold futures gained 0.7% to $1,317.90 a troy ounce. The dollar weakened against the euro and the yen.

The Fed news eclipsed a worse-than-expected reading on manufacturing activity in the New York region. The New York Federal Reserve's September Empire State index fell to 6.29 from 8.24 in August. It was expected to tick up to 8.5. Industrial production rose 0.4% in August, in line with expectations, and capacity utilization increased slightly to 77.8%, also in line with forecasts.

Meanwhile, crude-oil futures lost 1.5% to settle at $106.59 a barrel on the news from Syria.

In corporate news, Boise jumped 26% after the packaging-product maker agreed to be acquired by Packaging Corp. in a $1.3 billion deal. Packaging Corp. tacked on 11%.