The S&P/TSX composite index climbed 93.48 points to 12,816.88. The Canadian dollar lifted 0.20 of a cent to 96.93 cents US.
Larry Summers has long been perceived as an opponent to the Fed's aggressive $85 billion a month bond-buying program, which has helped push down interest rates to spur lending and jump-start economic growth. The program, dubbed quantitative easing, has also weakened the U.S. dollar and boosted stock markets.
The Dow Jones industrials surged 118.72 points to 15,494.78 and the broader market measure, the S&P 500, added 9.61 points to 1,697.60.
"Certainly, markets are interpreting Summers' withdrawing from the race as Fed chairman implies that quantitative easing could persist for longer, that (higher) interest rates could be pushed further into the future," said Paul Ferley, assistant chief economist at the Royal Bank of Canada.
The departure of Summers, who was considered to be President Barack Obama's first choice to succeed current Fed chairman Ben Bernanke, now puts vice-chair Janet Yellen in the lead for the position. Yellen is believed to be a supporter of the bank's stimulus program.
Obama is expected to make the nomination as early as this month.
The development comes as the Fed is set to make a key announcement Wednesday on what it plans to do about the asset purchases. It's widely expected that the central bank will announce that it'll begin tapering anywhere between US$10 billion to US$15 billion a month on signs that the U.S. economic recovery is moving forward. What is still left up in the air is at what pace the money will be rolled back.
Meanwhile, after being positive for most of the day, the Nasdaq fell 4.34 points to 3,717.85, pulled down by losses from tech giant Apple Inc., which unveiled two new iPhone models last week. Apple (Nasdaq:AAPL) fell more than three per cent, or $14.78, to close at US$450.12.
After weeks of uncertainty over Syria, United Nations inspectors confirmed Monday that chemical weapons were used on a relatively large scale in an attack last month in Syria that killed hundreds of people.
The findings represent the first official confirmation by scientific experts that chemical weapons have been used in Syria's civil war, but the report left the key question of who launched the attack unanswered.
The rebels and their U.S. and western supporters have said the government of President Bashar Assad was behind the Aug. 21 attack, while Damascus and its closest ally, Russia, blame the rebels.
Commodities were mixed as the October crude contract dipped $1.62 to US$106.59 a barrel. December gold bullion saw an uptick of $9.20 to US$1,317.80 an ounce. December copper was up two cents at US$3.22 a pound.
Nearly all sectors on the Toronto Stock Exchange closed up with sizable gains, as the info tech sector led the charge with an uptick of 2.56 per cent. Shares in Wi-Lan Inc. (TSX:WIN) were up nearly seven per cent, or 23 cents, to $3.62 after the company and Alcatel Lucent USA Inc. agreed to settle their dispute over several patents and withdraw litigation before U.S. district courts in Florida and Texas.
On the corporate front, Aimia Inc. announced it has reached an agreement with TD Bank Group and the Canadian Imperial Bank of Commerce for its popular Aeroplan loyalty credit card programs. Under the deal, each bank would have the rights to half the portfolio of accounts.
Shares in Aimia (TSX:AIM) gained more than seven per cent, or $1.22, to $17.85. TD (TSX:TD) shares were up 0.97 per cent, or 87 cents, at $90.79, while shares in CIBC (TSX:CM) jumped 0.75 per cent, or 61 cents, to $81.74.
Meanwhile, Bombardier (TSX:BBD.B) flew the first test flight of its CSeries commercial aircraft Monday. The flight sets off a year of testing, leading to delivery of the first aircraft, which seats 110 to 125 passengers and is slated to enter into service in about a year. The heavily anticipated first flight had been delayed three times over nearly nine months. Its share fell 0.6 per cent, or three cents, to $4.96.
Air Canada shares also rose more than four per cent, or 15 cents, to $3.43 after Canada's largest airline announced that the company's stock was being added to the S&P/TSX Composite Index after the close of trading Sept. 20.
In economic news, Statistics Canada said foreign investors resumed purchases of Canadian securities in July, adding $6.1 billion to their holdings. That followed a $15.4-billion divestment in June. Meanwhile, Canadian investment in foreign securities slowed to $900 million and focused on bonds.
South of the border, U.S. factories boosted output 0.7 per cent in August, the best since December, mainly led by auto production.