updated 9/26/2006 9:11:58 AM ET 2006-09-26T13:11:58

Stocks rose smartly Monday 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.”

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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 has shown a slowing housing market while bond yields and oil prices have fallen hard.

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.

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.”

The Dow Jones industrial average finished the day up 67.71 points, or 0.59 percent, while the broader Standard & Poor’s 500-stock index rose 11.59 points, or 0.88 percent, closing at a fresh 5 1/2-year high. The Nasdaq composite index jumped 30.14 points, or 1.36 percent.

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 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 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.

“I don’t think there’s any question we’re heading into a recessionary environment, “ said John O’Donoghue, co-head of equities at Cowen & Co. “The question is how severe it’s going to be.”

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.

In company news, tobacco stocks fell after a federal judge in New York granted class action status to tens of millions of “light cigarette” smokers for a potential $200 billion lawsuit against tobacco companies. Altria Group Inc. fell $5.26, or 6.4 percent, to $77.06; Reynolds American Inc. fell $2.27 to $59.75; Loews Corp. fell 20 cents to $37.80.

Chiquita Brands International Inc. fell $2.20, or 14 percent, to $13.53 after the company said it would suspend dividend payments and consider selling its shipping business to cut debt. It also said difficult market conditions, including problems with E. coli in spinach, have hurt third-quarter results.

Computer maker Dell Inc. rose 72 cents to $22.16 after the company said it plans to hire another 500 engineers to work in its central Texas product development operations.

Oil companies were mixed as oil prices bounced higher; stocks in the sector have been sliding since late August. Exxon Mobil Corp. rose 15 cents to $65.06; BP fell 14 cents to $65.06 and Chevron Corp. rose 24 cents to $62.18.

Overseas, Japan’s Nikkei stock average fell 0.01 percent. Britain’s FTSE 100 lost 0.41 percent, Germany’s DAX index gained 0.31 percent and France’s CAC-40 rose 0.09 percent.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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