According to Isaac Newton's first law of motion, an object in motion tends to stay in motion unless acted upon by an unbalanced force. That law seems to continue guiding the market higher from its late April lows, with the headwinds of rising interest rates, higher oil prices and slowing global growth all balancing out each other.

The balance between risk and reward seemed in equilibrium Tuesday, another day of minor moves for the major averages as oil prices eased slightly from Monday's stratospheric levels.

The

Dow Jones Industrial Average

lost 9.44 points, or 0.1%, to 10,599.67, and the

S&P 500

fell 2.49 points, or 0.2%, to 1213.61. The

Nasdaq Composite

added 2.94 points, or 0.1%, to 2091.07.

Treasury yields continued to decline, largely on the belief that growth will be slowing enough to convince the

Federal Reserve

to end its year-old rate-hike campaign sooner vs. later. The benchmark 10-year bond surged 17/32 and its yield fell to 4.04% as Bill Gross spoke.

The head of bond powerhouse

Pimco

told a mutual fund conference that the

Fed

, facing a slowing global economy, may not only soon stop hiking rates but it may even have to start easing before the end of the year. Sweden's central bank, meanwhile, went ahead and slashed interest rates as it drastically reduced its growth forecasts.

You know summer is here when Sweden makes it to the headlines. But the move is important as it may signal similar action by the European Central Bank. And it may also go a long way toward helping explain the strange resilience of stocks in the face of oil approaching the $60 mark.

The price of crude retreated Tuesday, falling 47 cents to $58.90 per barrel, after hitting a record high on Monday.

If global growth slows enough -- and high oil prices could definitely help in that department -- surely the Fed will come to its senses and at the very least stop raising rates as well. Or so the (bullish) thinking goes.

And it wasn't just Sweden that cut rates. The Hungarian central bank also followed suit. And just as Sweden cut growth forecasts for the year to 1.9% from 3.2%, France said it expects growth to reach 2% at most in 2005, from 2%-2.5% previously.

"The global easing cycle commences," wrote David Rosenberg, Merrill Lynch's chief U.S. economist.

In this increasingly interdependent world, more economists are saying that the Fed should pay more heed to the flattening of the yield curve, which is pointing to slower growth, and stop raising rates. But "the Fed will be late to this game," according to Rosenberg.

The dilemma may go to the heart of the question in the back of market players' minds: As the major indices still flirt with resistance levels, are there reasons for the momentum to continue?

"Momentum hasn't waned since the April lows" and expectations that rate hikes will end soon "could bring an immediate boost to current market valuations," says Barry Hyman, market strategist at Ehrenkrantz King Nussbaum.

"But as we head into a seasonally weak period, and the price of oil is where it's at, I would be a seller if we take out resistance levels," he says. "Of course, if oil were to drop $9, I'd turn

into a buyer."

Even believing in the good stories in the technology sector -- such as increased capital spending in the semiconductor industry -- depends on whether the global economy behaves as expected in the second half of the year.

Of course, it's not just Europe, which accounts for only 2% of U.S. exports, that counts, notes Wachovia economist Jay Bryson. The key remains with China and Asia. According to Bryson, there's not much cause to worry there. "Growth in China may be slowing, but that's from levels of 10% to maybe 8%, so we can still count on strong economic activity."

Evidence of China's appetite was demonstrated Tuesday as China's state-run energy firm

CNOOC

(CEO) - Get Report

is reportedly close to start a bidding war for

Unocal

( UCL), by topping

Chevron's

(CVX) - Get Report

$62-per-share offer. In addition, Chinese appliance maker

Qingdao Haier

joined private-equity funds to make an offer to buy

Maytag

( MYG).

Still, it's U.S. consumers who remain the key to global consumption and growth, and it's there that the rising price of oil again presents a test. Housing-price appreciation is still fueling that consumption, but at some point oil prices will again take a bite.

Earlier this year, Fed Chairman Alan Greenspan clearly dismissed the long-lasting impact of oil prices on the economy; first and foremost, as he predicted, oil would come down. Now that oil is again close to stratospheric levels, he won't be able to shrug it off as easily. Maybe Pimco's Gross is right after all.

To view Aaron Task's video take on today's market, click here

.

In keeping with TSC's editorial policy, Godt doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He appreciates your feedback;

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