U.S. Stocks Rally, pushing S&P 500 to a 5-Year High, after Fed Official Suggests Inflation Will Dampen:

U.S. stocks rallied yesterday, sending the Standard & Poor's 500 Index to a five-year high, after Federal Reserve Bank of Dallas President Richard Fisher said the economy remains strong and inflation would be dampened by a slowing economy. He further said that while the housing and auto sectors are economic weak points, the rest of the U.S. economy is doing "extremely well." The bond market, however, seems convinced an economic downturn -- and cuts in the Fed's benchmark short-term interest rate, are on the way. The yield on the 10-year Treasury note fell to 4.54 percent from 4.59 percent Friday. The yield on the 10-year Treasury bill has plummeted quickly and now stands at a seven-month low. Homebuilders, led by Pulte Homes Inc., climbed on an industry report that showed sales of existing houses fell less than economists forecast. Stocks bounced higher at the open Monday after oil prices fell to six-month lows when BP PLC said it had permission to restart the eastern half of Alaska's Prudhoe Bay oil field, which should expand oil inventories. Oil prices rose in the afternoon, with a barrel of light crude settling at $61.45, up 90 cents, on the New York Mercantile Exchange. The price of natural gas sagged, falling to a three-year low. The market has been struggling for some time, at to whether to cheer some of the signs the economy is cooling -- such as lower commodities prices -- or whether to worry about the possibility of a recession. ``The market's been so afraid lately of the economy falling off too rapidly, and there's been a fear that the housing slump will slow the economy,'' said Todd Clark, director of trading at Nollenberger Capital Partners, a San Francisco-based brokerage firm. Fisher's comments ``mitigated some of those fears.'' Fisher's remarks pushed stocks higher in what had been a session of see-saw trading, with investors first bidding stocks higher on lower oil prices, then sending them lower on falling housing prices. Investors, alert to any sign of a sharp economic slowdown, have been especially skittish in recent sessions as data has shown a slowing housing market while bond yields and oil prices have fallen hard. While the steep and sudden falloff in bond yields, slowing housing and lower commodities prices seem to indicate the economy will grow at a slower pace, not every investor feels the slowdown will be dramatic. "The pace of growth could slow down, but that doesn't mean the market is going to get killed," said Philip S. Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis. "I think it's early to talk about a recession." Fisher's comments, made after a speech in Monterrey, Mexico, came at an opportune time: With the third quarter ending this week, investors are eager for any boost to the quarter's performance. Fisher said "the recent tempering of U.S. economic growth to a more sustainable rate ... should act to lower the inflation rate over time." Less inflation means less likelihood the Fed will continue to raise interest rates. The Fed's Fisher said aside from the housing market, which is experiencing a ``serious correction,'' the U.S. economy ``is healthy and robust.'' The Dow Jones industrial average gained 67.71, or 0.59 percent, to 11,575.81. Broader stock indicators also advanced. The Standard & Poor's 500 index rose 11.59, or 0.88%, to close at 1,326.37, and the Nasdaq composite index rose 30.14, or 1.36 %, to close at 2,249.07. Advancing issues led decliners by more than 2 to 1 on the New York Stock Exchange, where consolidated volume came to 3.80 billion shares, up from 2.26 billion Friday. The technology, consumer discretionary and utilities sectors were the day's biggest gainers. The U.S. dollar was mixed against major currencies. Gold prices fell. The Russell 2000 index of smaller companies was up 8.46, or 1.18 % at 727.09. Today’s forecast: The market may remain volatile today in the run up to the expiry of September 2006 derivatives contrast on Thursday 28 September. Bull unwinding and short covering in derivatives will trigger volatility ahead of the expiry. Sebi’s relaxation of derivatives position limits and also a rally in the US and some buoyancy in Asian Market may further lift market sentiments. This along with cheaper oil and strong advance tax payments by India Inc. in the second installment ended 15 September will keep the mood buoyant. Normally, higher tax payment indicates higher profits. Trading on the bourses has been extended by 45 minutes from today due to sun outage till 1615 IST [4.14 O’clock]. Trading on NSE will be suspended for 40 minutes from 1125 IST to 1205 IST. There is no suspension of trading on BSE during this period. The revised trading time is applicable till 9 October 2006. Everyone is of the opinion that regardless of what happens to the Sensex and Nifty, the broader market will be positive today. The markets should start in the green today with at least 50 points up on the Sensex at the opening. We have two board meetings: 1. Samkrg Pistons & Rings Ltd has 20th Annual General Meeting of the Company to be held on September 27, 2006 [tomorrow] where newer issues will be thrashed out and also some announcements will be made. I had yesterday asked all to take position in the counter at Rs.75. Those who have not taken can still take buy the stock at the CMP, as the stock is nowhere near the target price---in fact it did not participate in this rally at all. After the recommendation the stock jumped to Rs.84 before cooling down a bit due to unwinding of some short positions. The Auto ancillary sector is on the top-gear and hence the prospects of the company look bright in both the short and medium term. The auto sales are expected to improve due to the festive season, starting from the end of this week. I had earlier recommended this stock in April, 2006 when it rose. 2. The Board meeting of Avon Organics Ltd will be held a day prior to the earlier mentioned date on the BSE web-site(www.bseindia.com), that is on 29-09-06 instead of 30-09-06 for taking up some important agendas. Since the company suddenly changed the date of meeting, there must be something, cooking in this counter. I would suggest u to take position in the counter ahead of board meeting, lest u miss any good announcement coming out of the said meeting. Yesterday, my earlier recommended picks Flat Products Equipments Ltd ,Tips Industries Ltd and PBA Infrastructure Ltd did extremely well on the Bourses; each one hitting, the Buyer-freeze. Tomorrow I might give the name of a company starting with P……I am waiting for some important news on the company to be home-delivered by the sources. The prospects of Tilaknagar Industries Ltd look bright in view of all the encouraging developments mentioned in my earlier postings. Exit all the sugar companies, except, Balrampur Chini (Because the Carbon Credit story is still is alive and kicking to stock from behind. But keep appropriate stop loss as mentioned in my earlier postings), because of a crash in the Sugar Price in India. The Sugar prices are expected to fall further due to some recent happenings in India and overseas. This will help generate steam in Alcohol and in some Chemical companies (Read Avon Organics Ltd) as mentioned in the earlier postings. There will be huge buying interest in Reliance Industries Ltd. The markets are gradually approaching October, considered strong for the US markets. In India, from the next month the Results season will begin and hence we could see 13, 000 before the Deewali (Or Kali Pooja which is either done, a day prior to Deewali or sometimes on the day of Deewali, according to the ‘Tithi” in Hindu Lunar-almanac; in Bengal, North East and in some parts of Bihar, Jharkhand and Orissa). I had earlier predicted 13, 000 only in January, 2007. Now that the things are looking much brighter we could see that level before Kali Pooja. From now onwards u will also get my postings in http://www.eindiabrokers.com/ --> mirror image of the popular Finance related web-site ---> www.valuenotes.com . No more for now……….more in the following postings…….. Best wishes, Suman Mukherjee India. www.bcozindia.com http://finance.groups.yahoo.com/group/SumanSpeaks http://www.eindiabrokers.com/