Further gains for New York stocks hinge on Fed and data

       US stocks could extend their rally and the Dow industrials may climb above 10,000, should Federal Reserve policymakers and economic data support the view that the US economy is recovering from recession.
       The Federal Open Market Committee will meet tomorrow and Wednesday,when investors will anxiously await central bankers' assessment of whether the economy is improving.
       The week's key economic data will include existing home sales, new orders of durable goods such as washing machines and refrigerators, new home sales and a final reading for September on consumer sentiment - all likely to put the expectations for recovery to the test.
       The Standard & Poor's 500 Index has staged a six-month climb from a 12-year closing low, rising 58%. The rally has fed on expectations of a rebound from recession coupled with cheap money that has flooded most markets.
       "The market has obviously had a nice run with a combination of hopes for second-half recovery and a very easy Fed policy," said Peter Boockvar, equity strategist at Miller Tabak in New York.
       The Fed this week is expected to acknowledge recent economic data pointing to a fledgling recovery. The FOMC statement, due at 1:15 am Thursday Thailand time, will come a week after Fed chairman Ben Bernanke said the US recession was "very likely" over. But he also said recovery would be slow and it would take time to create new jobs.
       "We're seeing investors who were really direly pessimistic move the meter to slightly more optimistic, and that is confirmed with each little piece of economic data," said Fred Dickson of D.A. Davidson & Co in Lake Oswego, Oregon.
       That optimism has translated into an extension of the rally in stocks. In the week to Friday, the Dow advanced 2.24%to 9,820.20, its highest level in 11 months.The Nasdaq rose 2.5% to 2,132.82 while the S&P gained 2.45% to 1,068.30.
       The 50% gain for the Dow since March represents the best six-month rally for the blue-chip index since 1933, according to finance professor Mark Perry at the University of Michigan.
       Investors are wondering, though, how long interest rates will remain at record lows and whether the economic recovery will remain on track.
       "We get both those questions answered partially next week," Mr Boockvar said, referring to the Fed meeting and key data including leading economic indicators and durable goods.
       Central banks around the world have begun debating how, and more importantly when, to phase out the emergency steps taken to contain the worst global financial crisis in decades. Most are not expected to do so until well into 2010.
       The Fed has already announced it's going to halt the purchases of Treasuries,Mr Boockvar said."The real exit strategy is [normalising] the Fed funds rate, and they are not close to doing that."
       A Reuters poll released last Wednesday showed economists expect the Fed to hold rates steady until the third quarter of next year. It also showed expectations the US economy will make a more robust recovery from recession than expected a month ago.
       Central banks' strategies also will be part of the discussion during a two-day G20 summit in Pittsburgh, starting on Thursday. Bankers' pay and other financial regulations will also be examined.
       On the macro front, August durable goods orders, due for release on Friday,are forecast to rise 0.5%.
       "People are looking for validation (of the improved sentiment) in the durable goods data," said John Praveen, chief investment strategist at Prudential International Investments Advisers.
       Sales of existing or used homes, due on Thursday, are expected to show a rise to an annual rate of 5.35 million units in August, from July's rate of 5.24 million. August new-home sales are expected to increase to an annual rate of 440,000 from 433,000 in July.