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Worldwide Boom to Drive Market Higher, Analyst Says

New York Stock Exchange workers finish up trading minutes before the closing bell at the Exchange, Tuesday, April 3, 2007 in New York. Stocks surged Tuesday on signs of resilience in the housing market and the U.S. consumer, with falling oil prices giving investors an extra reason to rally. The Dow Jones industrials gained more than 120 points. (AP Photo/Julie Jacobson)
Julie Jacobson
New York Stock Exchange workers finish up trading minutes before the closing bell at the Exchange, Tuesday, April 3, 2007 in New York. Stocks surged Tuesday on signs of resilience in the housing market and the U.S. consumer, with falling oil prices giving investors an extra reason to rally. The Dow Jones industrials gained more than 120 points. (AP Photo/Julie Jacobson)

Edward Yardeni, president Yardeni Research, told CNBC’s “Morning Call” that sound fundamentals and an international economic boom will drive the market higher.

“(The rally is) very real,” Yardeni said Monday. “We’ve got probably the greatest global boom of all time going on right now. The U.S. is benefiting from it, it’s self-sustaining, inflation is remarkably low despite the boom, and earnings are coming in a little better than expected. With interest rates remaining relatively flat in the U.S. and inching up a little bit overseas, I think the market is going higher.”

He said sub-prime mortgage woes aren’t affecting the rest of the economy, and financial stocks did well last week. Strong performance by industrials underscores a worldwide boom in capital spending.

Yardeni believes the S&P 500 will rise to 1,600 by the end of the year.

William Buechler, president of Barclay Partners Asset Management, said a spike in energy prices could slow the market. He said the recent rise in the price of a barrel of oil to the mid-$60s from about $49 stemmed from underestimating demand in India and China, which remains strong.

He said last year’s hurricane season was mild, but storms could again pound refineries along the Gulf Coast. That would disrupt supplies and drive prices higher.

“We know that April 15 tends to drive money into the IRAs and I think that was a big part of what we saw last week,” Buechler said. “Longer term, as long as the U.S. Fed continues to supply liquidity, the trend probably is higher.”