- The Washington Times - Monday, September 25, 2006

NEW YORK (AP) — Stocks rose smartly yesterday after Dallas Federal Reserve President Richard Fisher suggested inflation would be dampened by a slowing economy and said that while the housing and auto sectors are economic weak points, the rest of the U.S. economy is doing “extremely well.”

His remarks pushed stocks higher in what had been a session of seesaw 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 have shown a slowing housing market while bond yields and oil prices have fallen hard.

Mr. 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.

Mr. 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.

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 thinks the slowdown will be dramatic.

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 1,326.37, and the Nasdaq Composite Index rose 30.14, or 1.36 percent, to 2,249.07.

Advancing issues led decliners by more than 2 to 1 on the New York Stock Exchange. The technology, consumer discretionary and utilities sectors were the day’s biggest gainers.

Bonds rose, with the yield on the 10-year Treasury note at 4.55 percent, down from 4.59 percent Friday. The yield on the 10-year Treasury bill has plummeted quickly and now stands at a seven-month low as bond traders anticipate a weakening economy. The U.S. dollar was mixed against major currencies. Gold prices fell.

Stocks bounced higher at the start of trading yesterday 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 with 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. An unexpected decline last week in the Philadelphia Federal Reserve’s manufacturing conditions survey, which showed stalled growth, helped send the market lower Thursday and Friday.

Early in the session, stocks fell after the National Association of Realtors reported that the median home price for the month was $225,000, compared with a revised $230,000 in July, marking the first year-to-year median price decline since 1995. The drop was the second-biggest in the survey’s 38-year history.

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