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Summers pullout from Fed race boosts Dow, S&P 500

A trader works on the floor of the New York Stock Exchange (NYSE) on September 6, 2013 in New York City
A trader works on the floor of the New York Stock Exchange (NYSE) on September 6, 2013 in New York City.

US stocks mostly gained on Monday helped by news that Larry Summers, perceived as in favor of tighter monetary policy, pulled out of the race to lead the Federal Reserve.

The Dow Jones Industrial Average and the S&P 500 both gained, but large drops by Nasdaq giants Apple (-3.2 percent) and Facebook (-3.0 percent) dragged the Nasdaq Composite lower.

The Dow finished up 118.72 (0.77 percent) at 15,494.78.

The broad-based S&P 500 gained 9.61 (0.57 percent) at 1,697.60, while the Nasdaq Composite lost 4.33 (0.12 percent) at 3,717.85.

Analysts credited both the US-Russia pact to eliminate Syria's chemical weapons and Summers removing himself from contention to be chairman of the Fed.

Many analysts believed that President Barack Obama now would pick Fed vice-chair Janet Yellen, a monetary dove, to replace Ben Bernanke at the end of January.

"The more constructive tone to the markets reflects the belief that the pace of tapering will be slower under a Yellen (Fed) than under Summers," said Steven Ricchiuto, chief US economist at Mizuho Securities.

However, he cautioned, Yellen's nomination is no certainty; Obama could opt for another candidate, with speculation focused on former Fed officials who could be more hawkish on tightening policy than Yellen.

"As such, we are not convinced that this is a turning point for the markets," he said.

Boeing shares led the Dow gain, rising 3.9 percent on reports that the aircraft maker's bid outpaced rivals in a $7.6 billion deal to supply fighter jets to South Korea.

Packaging and paper maker Boise Inc. jumped 26.1 percent after Packaging Corporation of America set a $2 billion deal to take over the company. Packaging Corp. gained 10.8 percent.

Apple shares appeared to continue sinking on the disappointments in its new iPhones launched last week and its China strategy for them.

Facebook came off its recent highs as investors awaited rival Twitter's IPO.

China's Qihoo 360 fell 5.6 percent on profit taking from last week's peak.

Bond prices were mixed. The yield on the 10-year Treasury dropped to 2.87 percent from 2.90 percent Friday, while the 30-year rose to 3.87 percent from 3.85 percent. Prices and yields move inversely.