Updated from 1:06 p.m. EST

The stock and bond markets were not to be spooked on this Halloween, even one day ahead of another universally expected rate hike by the Federal Reserve. Still, economic data released Monday morning did little to assuage economists' concerns about both inflation and growth in the fourth quarter.

Monday's data -- the Chicago Purchasing Managers Index (PMI) for October, and personal income and spending data for September -- revealed signs of consumer fatigue while suggesting enough inflationary pressures to keep the Fed raising rates well into next year.

But stocks and bonds have spent two months trying to overcome inflation concerns since hurricanes Rita and Katrina caused a spike in energy prices. And while the impact of surging energy quotes and of higher interest rates on consumption and growth is still being determined, markets already expect the Fed to continue hiking rates at least until early next year to ward off inflation.

Equities players, therefore, saw no compelling reasons to interrupt Friday's impressive rally. In recent action, the Dow Jones Industrial Average was up 63 points, or 0.6%, at 10,466. The blue-chip average received an early lift from Wal-Mart ( WMT), which said October same-store sales should be up 4.3% from a year ago, above its previous 2% to 4% forecast. In addition, Caterpillar ( CAT) was recently up nearly 3% after forecasting compounded average earnings growth of 15% to 20% until 2010.

The S&P 500 was up 10 points, or 0.9%, at 1209. Energy shares were also rallying, even as crude oil prices dropped, after Valero's ( VLO) third-quarter results flew by Street expectations.

The Nasdaq Composite was leading the pack, recently gaining 31 points, or 1.5%, at 2120. The Philadelphia Semiconductor Sector Index was up 2.3% in recent action, led by a 3.5% gain in Advanced Micro Devices ( AMD).

The benchmark 10-year Treasury bond was recently up 4/32, while its yield, which moves inversely to price, fell to 4.55%.

Bonds have been sliding recently, and their yields rising to this year's highs, amid expectations that inflation pressures had accelerated since the hurricane-induced energy price spike. In addition, there are expectations that reconstruction activity in the hurricane-hit Gulf States will also boost prices.

But so far, there has been little evidence that soaring energy quotes are seeping into core inflation and Monday's economic data was no different.

The personal consumption expenditure index, part of the consumer income and spending report, rose 0.9% in September, its largest increase since February 1981. But excluding food and energy, the PCE rose a mild 0.2%. Meanwhile, the prices paid component of the Chicago PMI rose to 79.6 in October, from 76.3 last month, its highest reading in almost a year.

While personal income rose a much larger than expected 1.7% in September, the reading was distorted by wild swings in the month that followed the hits of hurricanes Katrina and Rita. August income was revised to minus 0.9% from 0.1% previously, reflecting uninsured losses, while the September reading rebounded because of receipts of insurance benefits.

Meanwhile, spending rose 0.5% in September but actually fell 0.4% in real terms, i.e., once adjusted for inflation. Real spending had fallen 1% in August.

Consumption now appears to be on "extremely weak note" going into the fourth quarter, according to Goldman Sachs chief economist Bill Dudley. "Atop what appear to be significant declines in October auto sales, we will need significant growth and/or upward revisions in coming months to work out of this hole and produce a modestly positive consumption reading for the fourth quarter."

Yet there were more signs of steady economic growth in the Chicago PMI, as there were in Friday's initial reading of the third-quarter GDP.

The Chicago PMI rose to 62.9 in October from 60.5 in September, its strongest level in three months and above economists expectations for the index to rise to 57.4, matching a strong improvement in the Philadelphia Fed index of regional activity two weeks ago.

The Chicago PMI suggests upside risks to Tuesday's national index on the manufacturing sector by the Institute for Supply Management, which is expected to fall to 57.0 from 59.4 in September.

All in all, even amid increasing signs of strains from consumers, the Fed will likely continue raising rates at least until early next year at least, says Joel Naroff, president of Naroff Economic Advisors.

According to Miller Tabak, the market fully expects the Fed to hike rates by a quarter point on Tuesday and again on Dec. 13. And the market sees 80% chance of another quarter point hike at the Fed's Jan. 31 meeting, presumably the last of Alan Greenspan's tenure as Fed chairman.

So the same concerns that have led the market to five-months lows in early October remain in place. But with those concerns apparently already priced into stocks and bond prices for the moment, this Halloween is shaping up to be a treat for the bulls.
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; click here to send him an email.

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