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pNEW YORK (Reuters) – Stocks could extend their rally and the Dow industrials .DJI may climb above 10,000, should the Fed’s policy-makers and economic data support the view the economy is recovering from recession./p pNext week the Federal Open Market Committee will meet on Tuesday and Wednesday, when investors will anxiously await the policy-makers’ assessment of whether the economy is improving./p pThe week’s key economic data will include U.S. existing home sales, a report on 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./p pThe Standard Poor’s 500 Index .SPX has staged a six-month climb from a 12-year closing low, rising 58 percent. The rally has fed on expectations of a rebound from recession coupled with cheap money that has flooded roughly every market./p pThe 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 Co in New York./p pNext week, the Fed is expected to acknowledge a batch of recent economic data pointing to a fledgling recovery. The FOMC’s policy statement, due about 2:15 p.m. on Wednesday at the end of the two-day meeting, will come about a week after Fed Chairman Ben Bernanke’s comments that the U.S. recession was very likely over./p pBut Bernanke also said the recovery would be slow and it would take time to create new jobs./p pWe’re seeing investors that 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, market strategist at D.A. Davidson Co in Lake Oswego, Oregon./p pThat optimism has translated into an extension of the rally in stocks. For the week, the Dow rose 2.24 percent, capping its best week in two months. The Standard Poor’s 500 index .SPX gained 2.45 percent and the Nasdaq added .IXIC 2.50 percent./p pInvestors are wondering whether interest rates will remain at record lows for a period of time and whether the economic recovery will remain on track./p pWe get both those questions answered partially next week, Boockvar said, referring to the FOMC meeting and key data including the index of leading U.S. economic indicators and durable goods./p pSTEADY FED/p pCentral 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./p pThe Fed has already announced they’re going to halt the purchases of Treasuries, Boockvar said./p pThe real exit strategy is (normalizing) the Fed funds rate, and they are not close to doing that.  strongContinued…/strong/p

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