Expensive thrills…enjoy the ride!

Stocks are only cheap if they are going higher after you buy them.

There is no stopping the Gold bulls, with the precious metal touching a new record high. The flip side is that the yellow metal is slipping out of the grasp of common man in India. The other concern gaining currency is with regard to asset price inflation. Ironically, gold is seen as a hedge against inflation. That reminds us that crude oil is hovering around US$75 a barrel. Inflation back home is likely to spike further and might just force the RBI to hike rates earlier than anticipated.

Today, we expect the market to extend Monday’s rally, spurred by firm Asian markets. If the bulls manage to hold their sway there could be a bear squeeze. Liquidity is not an issue but valuation is. Though the undertone appears to be upbeat be careful of what you are buying. Results will have a say in near-term direction but one cannot afford to ignore the global cues. Stocks in the US and Europe struggled overnight amid nagging worries over the pace and strength of the economic recovery.

A survey shows that the Great Recession is over in the US. But, some experts warn that the housing sector could take a double dip and the recovery won’t be V shaped. It would be a more moderate rebound and deflation is bigger threat than inflation in western world.

Results Today: Ashapura Minechem, Bajaj Auto Finance, Bajaj Finserve, Concor, HDFC Bank, IndusInd Bank, Infotech Enterprises, Motilal Oswal Financial, Parsvnath, Rallis India and Sonata Software.

FIIs were net buyers in the cash segment on Monday at Rs9.63bn on a provisional basis. The local funds were net sellers at Rs2.74bn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net buyers at Rs3bn. On Friday, the foreign funds were net buyers of Rs2.5bn in the cash segment. Their net investments in Indian stocks this year has crossed US$12.8bn. Mutual Funds were net sellers at Rs2.88bn on Friday.

US shares struggled for direction and closed virtually flat on Tuesday, as weakness in the financial sector and disappointment about Johnson & Johnson's results hampered the Dow's attempt to reclaim 10,000.

The Dow Jones Industrial Average lost 14 points, or 0.1%, to 9,871.06. The S&P 500 index lost 3 points, or 0.3%, to 1,073.19 and the Nasdaq Composite index ended unchanged at 2,139.89.

Stocks slipped at the start as traders braced for the first big wave of quarterly results this week. Gold touched a fresh record high and the dollar weakened. Treasury prices rallied, sending yields lower. Stocks briefly turned higher in the late morning, before heading lower again.

Since bottoming at a 12-year low in March, the S&P 500 has gained nearly 59%, as of Monday's close.

Investors are feeling increasingly compelled to put cash into equities. Though the market has run ahead of fundamentals - both economic as well as corporate - strong liquidity will prevent any big falls.

The Dow has been making several attempts lately to surpass 10,000, a key psychological barrier. It last closed above 10,000 on Oct. 3, 2008.

US stocks had posted modest gains on Monday on a light news day as investors turned a little cautious after pushing the Dow and S&P 500 to fresh one-year highs. On Tuesday, the focus turned to the quarterly results.

On Tuesday, Johnson & Johnson became the second Dow component to report results. The drug and medical products maker reported higher quarterly earnings that beat estimates thanks to cost cutting and a one-time tax benefit. The company also reported weaker quarterly revenue that missed expectations.

J&J boosted its 2009 earnings guidance to a range of US$4.54 to US$4.59 per share, versus an earlier range that topped out at US$4.55 a share. Nonetheless, investors focused on the negative and shares fell 2.5%.

Other Dow gainers included Home Depot, Chevron, DuPont and Wal-Mart. Among the financials, Goldman Sachs slipped 1.5% after Merideth Whitney Advisors downgraded it to "neutral" from "buy." That pressured a number of other financial shares, including Dow components Bank of America, JPMorgan Chase and Travelers Companies.

Bank of America said that it will waive attorney-client privilege and hand over legal documents related to its controversial merger with Merrill Lynch. The company has been under pressure from regulators for months to provide more information on the purchase.

CIT Group tumbled 11.5% after the lender's CEO said he would resign by the end of the year.

Cisco Systems said that it is buying Starent Networks for US$2.9bn in cash. Starent makes gear that enables wireless carriers to tie their networks to the Internet.

Treasury prices rallied, lowering the yield on the 10-year note to 3.32% from 3.30% late on Friday, as bond markets were closed on Monday for Columbus Day.

Bond prices built on gains after Fed governor Donald Kohn said that while the pace of the economic recovery will pick up next year, the jobless rate will also keep rising, hitting 10% next year.

Treasury saw strong demand for its two debt auctions: US$30bn in 3-month notes and US$30bn in 6-month notes.

The dollar fell versus the euro and the yen.

US light crude oil for November delivery rose 88 cents to settle at US$74.15 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery rose US$7.50 to settle at US$1,065 an ounce, a record close.

After the close, Dow component Intel reported quarterly sales and earnings that topped estimates. The chipmaker also issued a bullish forecast, saying that it expects fourth-quarter revenue of between US$9.7bn and US$10.5bn vs. the US$9.51bn consensus. Intel also said that it expects gross margins, a key measure of profitability, in the 59% to 65% range versus the 56.7% consensus.

Dow component JPMorgan Chase reports results Wednesday morning. Reports are also due on September retail sales, August business inventories and September import and export prices.

European shares ended in the red amid uninspiring economic news. Major regional equity markets ended at annual highs on Monday but retreated on Tuesday. The pan-European Dow Jones Stoxx 600 index lost 1% to close at 241.94, although it remains up 22% year-to-date.

The ZEW German economic sentiment indicator showed an unexpected decline. In the UK, British consumer prices rose at their slowest annual pace in five years in September, government data showed Tuesday. See full story.

UK's FTSE 100 index declined 1.1% to settle at 5,154.15 while the German DAX index lost 1.2% to end at 5,714.31 and the French CAC-40 index fell 1.2% to 3,801.39.