News of Summers’ surprise decision on Sunday afternoon came before the U.S. central bank meets on Tuesday and Wednesday to decide when and by how much to scale back its asset purchases from the current pace of $85 billion a month.
S&P 500 futures rose 17.8 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures rose 167 points, and Nasdaq 100 futures added 35.3 points.
Of the two perceived leading candidates for the Fed chairmanship, Summers was widely regarded as more eager to taper the Fed’s $85 million a month bond-buying program. Janet Yellen, the Fed’s current vice chair and the other candidate seen as a leading contender, has been more widely perceived by investors as favoring a more gradual easing of stimulus.
“With (Timothy) Geithner showing no signs to fill Summers’ post, it seems likely that President Obama will choose Yellen, which is good in terms of the prospects of the Fed staying on hold for some time,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
“Of course, there are always chances that the Fed may begin to announce the trimming on Wednesday, but that’s already been baked in the market.”
The gains in futures come after the Dow Jones industrial average .DJI on Friday registered its best weekly gain since January though trading was subdued ahead of the Federal Reserve’s expected reduction of stimulus measures next week.
In reaction to the withdrawal of Summers, the U.S. dollar slipped to a near four-week low against a basket of currencies.
Further whetting risk appetite were signs of progress in Syria following a Russian-brokered deal aimed at averting U.S. military action.
