28 October 2021

Markets Roar On News From Fed Chair Candidates

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The S&P 500 hit a six-week high after news that former Treasury Secretary Lawrence Summers is no longer a candidate to be the next Federal Reserve chairman. His confirmation was seen to be a contentious process that would add uncertainty to the market.

Equity investors welcomed this news and showed optimism that Janet Yellen, a top contender, would succeed chairman Ben Bernanke. She is widely expected to pursue a similar policy of stimulating the economy to bring the unemployment rate down. Yellen is currently the Fed's vice chair.

Bond investors were optimistic, too. The 10-year Treasury yield fell to 2.87% as investors rushed to buy long-term bonds. The dollar sold off against major currencies, including the euro and the British pound.

With Summers out of the running for the Fed chair, it also has added to expectations that the Fed will continue its current path of quantitative easing. Summers was seen as more likely to wind down stimulus than the now front-runner, Yellen.

Summers' surprise decision to remove his candidacy on Sunday came just days before the U.S. central bank will meet to decide when, and by how much, to scale back its monthly bond-purchase program, which is currently buying $85 billion in bonds each month.

Markets did retreat some after President Obama warned Republicans in Congress that he would not negotiate an extension to the debt ceiling as a part of the budget

Stocks continued to rally despite the a temporary halt to options trading Monday afternoon at exchanges run by CBOE Holdings (CBOE), Nasdaq OMX (NDAQ), BATS Global Markets and Miami International Holdings due to issues at the Options Price Reporting Authority (OPRA), which provides trading data and price quotes. The temporary halt did not disrupt broader market trading, but it is another cause for concern for the exchanges.
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