Business & Money News

Tom O’Halloran’s goal is to buy stocks that will bust right out of his category.

O’Halloran, portfolio manager of Lord Abbett Developing Growth Fund, buys small-cap growth stocks. But he doesn’t want them to stay that way.

“We want the small-cap stars that can become mid- or large-cap stars within one to seven years,” O’Halloran said.

He has had a few of those lately. The fund sold solar power company First Solar () last year when it was near $20 billion in market cap. The stock rocketed nearly 800% last year. Another solar company, SunPower, () reached $10 billion in market cap when the fund started cutting it back.

O’Halloran starts small. His universe typically ranges from $500 million in market cap to $2 billion when he first buys.

He wants companies that are growing sales at least twice as fast as the economy. In a normal environment of 3% growth in the economy and 3% inflation, he’s seeking at least 12% sales growth.

Financial strength is another key. Developing Growth seeks a strong balance sheet and it prefers profitable companies.

He and his team of five small-stock analysts dig into the company’s fundamentals. A good business model is vital, and favorable industry forces help, O’Halloran says. They look for competitive advantages and strong, credible management, too.

“If a company is good on all four of those, we consider it a very fine business,” O’Halloran said.

That narrows the 3,000 or so stocks that fit his size criteria to about 250. He trims that to about 120 holdings at any one time by focusing on growth characteristics.

He’s not only hunting for powerful growth, but also a trend in the right direction. He sold former highflier Crocs () last year when it said profit growth would slow from about 200% to 40% this year.

Stick To The Process

O’Halloran won’t stray from the fund’s process. “We view the process like the U.S. Constitution. It’s unchangeable,” he said.

The fund will sell a stock when the reasons it bought it have changed. The business model or management might have weakened, or the company could be losing share. Earnings or sales growth might have peaked. He’ll also sell if valuation reaches an extreme.

The fund has beaten its small-cap growth peers tracked by Morningstar Inc. for three straight years. That includes the fund’s whopping 35.9% gain last year that trounced its peers’ 7.6% gain and the S&P 500’s 5.5% return.

Developing Growth has beaten its peers and the S&P 500 over the past three-, five- and 10-year time periods, too. The fund’s 16.53% five-year average annual return tops peers’ 12.50% gain.

Last year’s outsized gains, he says, came mostly from “unusually good stock picking.” The bear market that started last year hasn’t been kind to many of these highfliers. Going into Wednesday Developing Growth was down 16.13% vs. 13.52% for its peers and 10.67% for the S&P.

New Oriental Education, () which teaches English to students in China, was an example. The stock soared 140% last year. Now a smaller holding, it plunged through its 10- and 40-week moving averages the past two weeks and is about 45% off its November high.

Sectors played a big part, too. The fund was heavy in consumer and tech stocks last year. It was light in health care and industrials. And the fund hasn’t owned banks for nine months, he says.

This year, that has changed. The fund is now overweight in health care, whose stable growth looks good in a slowing economy. Tech is about equal weight vs. the market, while O’Halloran is steering away from consumer stocks due to economic concerns.

Illumina () recently became the fund’s largest holding. The maker of genetic testing gear fits O’Halloran’s health care theme. Its sales have been growing in triple and high-double digits, it posts strong profit margins and it just settled a rival’s lawsuit. “That’s a major overhang that’s been lifted,” O’Halloran said.

Indexes faltered to a mixed close Wednesday as slipping crude oil prices and a possibly final interest-rate cut failed to buttress buyers.

The NYSE composite closed 0.2% higher, based on early figures, led by energy stocks.

But the Nasdaq notched a 0.6% loss. The S&P 500 slipped 0.4% while the Dow ended down a fraction.

Preliminary figures showed volume rose across the board, marking the Nasdaq’s second distribution day in recent weeks. It was also a distribution day for the S&P 500. The Dow’s loss was too small to be considered institutional selling.

The Nasdaq slipped despite a 3% jump by Google () as other tech stocks tumbled.

Research In Motion () took a pounding, losing 4.66 to 121.63. The smartphone maker appears to be adding another handle to its base.

On the upside, communications chipmaker NetLogic Microsystems () gapped up for a 3.93 gain to 32.79. The company handily topped Q1 consensus. The 14% jump left shares just below a possible buy point at 33.

On the foreign front, Brazil’s Bovespa index rose to a record high, blasting ahead 6.3% after Standard & Poor’s announced it was raising the country’s foreign bond rating. The move gives Brazil’s bonds investment-grade ratings, on par with India, Morocco and Romania, and may help attract additional foreign capital.

Brazilian home builder Gafisa ()jumped 5.89 to 43.55. Companhia Brasileira () added 3.94 to 45.49. Unibanco Holding () spiked up 15.28 to 145.41. Banco Itau Holding () gained 2.28 to 28.05. Banco Bradesco () rose 1.58 to 22.58.

3:15 p.m. Update: Stocks Retreat After Fed Announcement

By VINCENT MAO

The major stock indexes hovered near session highs in late trade Wednesday. Equities extended gains just after the Fed gave the market another rate cut, but they’ve pulled back some.

At 2:51 p.m. EDT, the Dow and Nasdaq were up 1% each. The S&P 500 gained 0.6% and Nasdaq 0.5%.

Volume was tracking higher on both exchanges.

Techne () climbed 2.43 to a near eight-year high of 74.22 in heavy trading. The biotech is following through after clearing a 71.52 buy point from a base-on-base pattern Tuesday.

Cummins () powered up 4.75 to 62.24 in heavy trade. Earlier today, the engine maker topped views with a 37% jump in Q1 earnings. That was its best performance in several quarters. Cummins is building a potential cup base.

On the downside, Cash America International () dropped 4.25 to 40.90 in busy trading. But it bounced from a session low of 38.30. Jefferies & Co. cut the pawnshop operator to hold from buy, citing valuation.

2:30 p.m. Update: Fed Cuts Rates As Expected

By ED CARSON

The Federal Reserve cut the fed funds rate by 25 basis points to 2%, as expected, citing weak U.S. economic activity and “stressed” financial markets. But it also cited rising commodity prices and inflation expectations, making the inflation outlook unclear.

The Fed said it expects sharp rate cuts in recent months would support growth, but stood ready to act as needed.

The vote was 8-2, with the dissenters likely favoring no move. Many analysts expect that this would be the last Fed cut of the latest cycle of rate reductions.

Stocks, which were rallying just ahead of the Fed’s action, moved up and down after the news. At 11:24 a.m., the Dow was up 0.9%, while the Nasdaq and S&P 500 rose 0.5%.

1:15 p.m. Update: Indexes Back Off Ahead Of Fed

By VINCENT MAO AND ALAN R. ELLIOTT

Stocks pulled back from session highs by midday Wednesday, ahead of the central bank’s decision on interest rates.

At 12:44 p.m. EDT, the Dow led with a 0.7% gain. A 13% jump in shares of General Motors () on an earnings report boosted the index. The Nasdaq and NYSE composites were up 0.5% each, the S&P 500 0.3%.

The Fed’s interest rate announcement is due at about 2:15 p.m. EDT. A quarter-point cut to 2% is expected.

May crude futures fell an additional $1.88 a barrel, slipping to $113.75. A 3.9-million-barrel increase in weekly inventories was nearly triple the consensus forecast and the 13th increase in the past 16 weeks. Gasoline inventories fell for a seventh straight week.

Crude pegged a record high Monday after the shutdown of some production and a major pipeline outage in the North Sea, along with various production interruptions in Nigeria. Oil dropped nearly 3% on Tuesday after the restart of the North Sea pipeline. It is now 5% off Monday’s high.

CyberSource () climbed 1.99, or 12%, to 18.29 in fast trade. It cleared a 17.66 buy point of a double-bottom base. Volume was tracking more than three times average. It’s in buying range until 18.54. After Tuesday’s close, the provider of online payment services posted a Q1 profit, excluding items, of 16 cents per share. That was 2 cents above views and double year-ago levels. Revenue surged 141% to $53.4 million, also above views.

NetLogic Microsystems () gapped up and rallied 3.40, or 12%, to 32.26. Late Tuesday, the chipmaker reported a 58% jump in first-quarter profit and a 46% rise in revenue. Both were ahead of views. The stock’s Accumulation/Distribution Rating has improved to B from a worst-possible E last month.

Open Text () gapped up and gained 1.67 to 35.65 in fast trade. This morning, the business software maker won two upgrades after posting better-than-expected earnings and sales late Tuesday. Research Capital upgraded the business software firm to buy from accumulate. And GMP Securities lifted shares to buy from hold. Both brokers raised their price targets on the stock.

On the downside, Bois d’Arc () gapped down and tumbled 1.95, or 8%, to 24.03 in huge trade. The oil and gas producer dropped despite news that it would be acquired by Stone Energy () in a deal valued at $1.8 billion. Stone shares tumbled 9%.

11:15 a.m. Update: Indexes Hold Ground In Mixed Volume

By ALAN R. ELLIOTT

Indexes clung to highs after an early jump spurred by earnings wins across a broad range of sectors.

The NYSE composite held a 0.7% gain, and the Nasdaq stuck with a 0.6% advance at 10:53 a.m. EDT. International issues led the NYSE’s upside, while biotechs scored solid gains for the Nasdaq. The S&P 500’s 0.4% rise lagged the Dow’s 0.7%. Citigroup () pulled both indexes lower.

Advancing stocks led decliners by better than 3-to-2 on both exchanges. Trading volume was lower on the NYSE, slightly higher on the Nasdaq.

Stocks were deeply mixed across Asia. The Shanghai composite bolted 4.8% as banks and insurers drove higher on solid Q1 earnings reports. Hong Kong’s Hang Seng index slipped 0.6% ahead of a holiday Thursday.

In Europe and the U.K., indexes recovered from early losses and had posted moderate gains in late trading.

The April Chicago Purchasing Managers’ Index, a broad gauge of manufacturing activity in the Midwest region, came in better than expected. The 48.3 reading was still below the crucial boom-bust 50 mark that would begin to indicate economic expansion. But it was the index’s third monthly gain after slipping to a six-year low in February.

Monolithic Power Systems () amped up for a 1.20 gain to 22.42. The semiconductor chip maker reported Tuesday it neatly topped Q1 views and said it planned to restate some prior tax figures to lower levels. The move broke shares above a 22.03 buy point from a handle in a six-month, double-bottom base. Cummins Diesel () powered ahead 5.38 to 62.87 after plowing over Q1 sales and earnings views.

Private college educator Strayer Education () jumped 16.18 to 196.07 on powerful volume. It, too, topped Q1 EPS views and upped Q2 guidance above consensus. The gap-up move launched the stock above the 196.01 buy point from a five-month cup-shaped base.

10:15 a.m. Stocks Rise On Mixed Volume

By VINCENT MAO

Stocks opened to the upside Wednesday and tacked on more gains ahead of this afternoon’s decision on interest rates.

At 9:54 a.m. EDT, the NYSE composite had gained 0.6% and the Dow 0.5%. The Nasdaq and S&P 500 each rose 0.4%.

Volume was tracking mixed, with NYSE higher and Nasdaq lower.

First Solar () gapped up and rose 13.37, or 7%, to 298.29. That puts the stock 5% past a 283.10 buy point from a cup base. Before the open, the maker of solar modules said Q1 earnings spiked to 57 cents a share, up from 7 cents a year earlier and a dime above views. Sales nearly tripled to $196.9 million, also above views.

Visa () added 1.10 to a new high of 81.98. On Tuesday, the credit card processor staged a huge reversal. Shares fell more than 6% early in the day but bounced back to close up 7%.

Fellow credit care firm MasterCard () extended Tuesday’s 13% pop, with Wednesday morning shares gaining 4.52 to 278.50. It’s now 25% past a 222.35 buy point.

On the downside, Rofin-Sinar Technologies () gapped down and slumped 8.27, or 18%, to 37.67 on huge trade. Before the open, the maker of laser cutting and welding tools posted fiscal Q2 earnings and sales below analysts’ expectations.

Chicago Bridge & Iron () gapped down and tumbled 6.20, or 13%, to 42.11 in heavy trading. The engineering and construction company reported Q1 profit shy of expectations.

9:15 a.m. Update: Stocks Poised For Higher Open

By VINCENT MAO

Stock futures pointed to a higher open Wednesday on better-than-expected GDP data.

Nasdaq futures climbed 6 points vs. fair value, S&P 500 futures gained 3 points and Dow futures rallied 37 points.

In economic news, the ADP Employment Survey predicted 10,000 new private-sector jobs in April.

The jobs report from the Labor Department will be out on Friday. A decrease of 80,000 jobs, both public and private, is seen.

The advanced reading of the first-quarter gross domestic product said the economy grew 0.6%, slightly above economists’ estimates for a 0.5% rise.

The employment cost index rose 0.7%, slightly below forecasts.

Just shortly after the open, the Chicago PMI index for April will be out. Forecasts call for a dip to 47.5.

The weekly energy inventories report is due out at 10:30 a.m. EDT.

Meanwhile, the Fed’s announcement on interest rates is due at 2:15 p.m. EDT. The central bank is widely expected to cut rates to 2% and then halt their string of cuts.

A couple of Dow components reported earnings.

General Motors () climbed 4% in the pre-market after reporting a smaller-than-expected first-quarter loss. The auto giant lost 62 cents a share, excluding items, down from a profit of 17 cents a share the prior year. Sales fell 2% to $42.7 billion, but that was above analysts’ estimates for $40.1 billion. During the quarter, the company faced a number of challenges, including the weak economy an labor strikes.

Procter & Gamble () climbed 3% in pre-open trading after it beat views. The consumer products supplier reported fiscal Q3 earnings of 82 cents a share, up 11% from a year before and a penny above estimates. Sales hit $20.46 billion, also above estimates. P&G raised the lower end of its full-year guidance to a range of $3.48 to $3.50 a share vs. views for $3.50.

Elsewhere, Citigroup () announced late Tuesday that it’s seeking to raise $3 billion through a stock offering to help boost its capital. A day later the company raised the offering to $4.5 billion. Citi has been hurt by huge write-downs tied to the subprime mortgage crisis. Shares fell 3% in the pre-market.

Garmin also fell 3% in pre-open trading after it delivered Q1 earnings and sales below views. The GPS device maker is trading near two-year lows.

Stocks climbed sharply Monday after battered bond insurers got a vote of confidence late in the day.

The NYSE composite staged a broad 1.6% climb. The Nasdaq finished up 1.1% with a leg up from biotechs and mortgage stocks.

Small caps and midcaps led, with the S&P 600 and 400 each gaining 2%. The S&P 500 rose 1.4%. The Dow jumped 1.5% as Alcoa () added 2.30 to 38.85 after agreeing to sell its packaging unit to a New Zealand buyer for $2.7 billion.

Trading ran 7% higher on the NYSE and down 8% on the Nasdaq, according to preliminary figures.

MBIA () jumped 2.40 to 14.58. Standard & Poor’s backed a triple-A rating for troubled bond insurers MBIA and Ambac (), and removed MBIA’s rating from Credit Watch, reporting that the company was making progress in raising capital.

The stock remains 79% below its October level. Ambac rose 1.70 to 12.41.

Bullish forecasts on natural gas from a Goldman Sachs analyst and from a Chesapeake Energy () executive sent natural gas-related energy plays soaring.

Southwestern Energy () gushed 5.89 to 67.61 on big volume. Shares are nailing new highs as they go for a sixth straight week of gains.

On the downside, MasterCard () fell 5.03 to 198.45 on heavy trading. Reports said competitor Visa had its sights set on the largest-ever U.S. public offering, aiming for $18.8 billion in proceeds when goes public probably within the next several weeks. MasterCard closed below its 10-week line for the first time since January. It closed in the upper half of its trading range, 13% below its December high.

3:15 p.m. Update: Stocks Extend Gains In Late Trade

By VINCENT MAO

Stocks ramped up in late trading Monday after Standard & Poor’s reaffirmed AAA credit ratings on bond insurers Ambac Financial and MBIA. MBIA jumped 12%, and Ambac rose 5%.

At 2:43 p.m. EST, the Dow had climbed 1.2%, the NYSE composite 1%, S&P 500 0.7% and Nasdaq 0.6%.

NYSE volume was tracking higher, and Nasdaq’s lower.

Energy issues powered up.

Stone Energy Corp. () gained 3.03 to a 52-week high of 49.49. It cleared a 48.63 buy point of an eight-week cup base. The oil and natural gas firm reports earnings on Wednesday. Analysts see profit rising 40% to $1.62 a share.

Group member Forest Oil () climbed 1.34 to 50.84. It may be adding a handle to its cup-shaped base. Forest’s earnings and sales growth accelerated in recent quarters.

On the downside, Strayer Education () dropped 4 points to 154.75. On Thursday, the school operator closed under its 200-day moving average for the first time in over a year.

Its industry group, Commercial Services-Schools, was among the biggest decliners. Group mates Apollo Group () dropped 1.93 to 60.92 and DeVry () fell 0.91 to 43.81. School operators have been under pressure in recent weeks as lenders tightened criteria for obtaining student loans.

1:15 p.m. Update: Stocks Hang Tough In Midday Trading

By VINCENT MAO

The major indexes were all higher in midday trading Monday. They battled back after slipping into mixed territory earlier.

At 12:48 p.m. EST, the Dow and NYSE composite were up 0.3% each. But that was off session highs of 0.9% and 0.8%, respectively. The S&P 500 and Nasdaq gained 0.2% each.

Volume was tracking a bit higher on the NYSE and slightly lower on the Nasdaq.

Fertilizer and oil-related groups were among the day’s best performers. Financial, consulting and Internet groups took heat.

Southwestern Energy () jumped 3.89 to a new high of 65.62. The oil and gas producer has improved its profit growth in the past two quarters. Analyst expect the trend to continue when Southwestern reports results on Friday. Earnings are slated to climb 80% to 36 cents a share.

Carrizo Oil & Gas () tacked on 1.24 to trade at 55.73. JPMorgan Chase started coverage of the much-smaller energy firm with a neutral rating. The stock is in its ninth week of a cup-shaped base. Its Relative Strength line is already at new highs ahead of price, indicating that it is outperforming the market.

Crude oil futures remained firm, edging up 29 cents to $99.10 a barrel at midday.

Meanwhile, Meridian Bioscience () gapped up and rallied 1.24 to 33.43. The maker of diagnostic test kits is working on a potential base-on-base pattern.

On the downside, Mechel () slumped 4.79 to 122.04 in brisk trade. The Russian mining and steel firm ran as high as 131.32 following a Deutsche Bank upgrade. At that peak, the stock was extended 104% above its 200-day moving average.

Medco Health Solutions () dropped 1.67 to 46.67 and sliced its 50-day moving average. The pharmacy benefits manager’s profit growth slowed to flat growth in the latest quarters.

11:15 a.m. Update: Stocks Climb In Firm Volume

By ALAN R. ELLIOTT

Investors ignored weak housing data to turn around an early slump and add to Friday’s late-day surge.

Both the NYSE and Nasdaq composites had added 0.7% at 10:52 a.m. EST. Trading volume climbed about 5% on both exchanges. The Nasdaq’s biotech index pulled ahead of the pack with a 2.4% advance. Midcaps and small caps slightly outpaced larger issues. The S&P 400 gained 1%, the small cap S&P 600 added 0.9%. The Dow added 0.8% and the S&P 500 followed with a 0.6% increase.

Stocks across Asia, except in China, moved higher. The Shanghai composite tumbled 4.1% and Hong Kong’s Hang Seng edged 0.2%. Tokyo’s Nikkei 225 blasted ahead 3.1% after Chinese news reports said China’s sovereign wealth fund would buy as much as $10 billion in Japanese stocks. South Korea’s Seoul composite posted a 1.3% gain.

The boards were green in Europe and the U.K.: London’s FTSE 100 gained 1.6% while France’s CAC-40 strode ahead 1.9%.

January existing home sales fell below forecasts, leaving the pace of sales just below December’s 10-year low. The National Association of Realtors showed 4.89 million units sold in January, down from an upwardly revised 4.91 million in December.

Potash Saskatchewan () headed on 3.09 to 160.09 in solid volume. The fertilizer producer broke out of a cup-with-handle base Feb. 12. It has advanced in five straight sessions, and is now 9% above the 147.20 buy point.

Itron () bolted 5.59 to 94.61 in double average volume. The meter-reading technology maker has climbed since posting better-than-expected Q4 sales and earnings Feb. 21. It is now back above its 10-week moving average, but 16% below its Oct. 30 high.

EOG Resources () tacked on 3.53 to 102.88 in solid volume. The move pushed the natural gas producer to new highs and began a sixth-straight week of gains.

10:15 a.m. Update: Stocks Dip In Early Trade

By VINCENT MAO

The major stock indexes headed slightly lower in early trading Monday.

At 9:57 a.m. EST, the NYSE composite and S&P 500 each fell 0.4%. The Nasdaq lost 0.3% and the Dow 0.2%.

Turnover was tracking sharply higher on both exchanges.

Freeport-McMoRan Copper & Gold () dropped 1.81 to 97.55 in brisk trading. The stock has found resistance near the 100 level.

Financials were again under pressure after Goldman Sachs cut earnings estimates on Citigroup (), JPMorgan Chase (), Bear Stearns (), Merrill Lynch () and Morgan Stanley (). Goldman expects “major write-downs in leveraged loans” and other subprime-related investments. The financial sector SPDR () fell 0.66 to 26.53.

Western Digital () rose 0.67 to 31.90 as it moved back above a 31.80 buy point of a cup-shaped base. The hard drive maker’s profit growth has accelerated in recent quarters. Analysts expect profit for the current fiscal year to nearly double.

Perfect World () gapped up and gained 1.78, or 7%, to 27.24 in fast trade. The Chinese online gaming firm swung to a Q4 profit of 34 cents a share, beating views. It also regained it 50-day moving average.

9:15 a.m. Update Stocks Head For Lackluster Open

By VINCENT MAO

Stock futures pointed to a mostly flat open Monday, as investors await more news of a potential bailout for troubled bond insurer Ambac Financial.

Nasdaq futures fell 2 points vs. fair value, S&P 500 futures slipped a fraction of a point and Dow futures lost 7 points.

On Friday, stocks turned higher in the final minutes of trading after CNBC reported of a possible rescue plan for Ambac, which faces billions in losses from insuring repackaged subprime mortgages. According to reports, a plan may be announced today or Tuesday. Ambac shares climbed 2% in the pre-market. Group mate MBIA () gained 1% in the pre-market.

In economic news, Fed Governors Randall Kroszner and Frederic Mishkin will give speeches at 9:50 a.m. EST and 3:30 p.m. EST, respectively.

Data on January existing-home sales will be out at 10 a.m. Economists expect a dip to 4.8 million units from 4.89 million units in December.

Genetech () jumped 8% in pre-market trading. On Friday, the Food and Drug Administration granted the biotech accelerated approval for its Avastin breast cancer drug.

Deutsche Bank downgraded General Motors () and auto parts maker BorgWarner () to hold from buy, citing a challenging environment. GM shares lost 2% in pre-open.

Lowe’s Companies () fell 3% in pre-market trading. Amid a slumping housing market, the nation’s second biggest home improvement retailer reported a 33% drop in Q4 profit. It guided Q1 earnings below consensus estimates.

Take-Two Interactive Software () soared 48% in pre-open trading. Over the weekend, the maker of the highly popular “Grand Theft Auto” game series rejected a $1.9 billion offer from rival Electronic Arts (). Electronic Arts fell 2% in the pre-market. Take-Two will release the fourth installment of “Grand Theft Auto” April 29.

Credit card firm Visa might raise close to $19 billion from an initial public offering it, experts say. That would make it the biggest IPO in U.S. history. In a Securities and Exchange Commission filing the company said it would offer 406 million shares at $37 to $42 per share.

Even before Tuesday’s 0.75% slash in the federal funds rate by the Federal Reserve, mortgage rates had been sliding. Last week’s cut pulled down home loan rates more.

The average rate for a conforming 30-year fixed-rate mortgage was 5.57%, according to Bankrate.com data released Jan. 23. Conforming loans are those for amounts up to $417,000. That’s down from 6.31% in late 2007. Rates averaged 5.75% as of Jan. 16.

So it’s increasingly attractive to take out a home loan or refinance an existing mortgage.

“It’s the largest four-week decline in nearly 20 years,” said Greg McBride, senior financial analyst at Bankrate.com.

At the current 5.57% rate, borrowers would pay $153 a month less on a $200,000 loan than six months ago.

Why the steep slide?

“It’s a response to bad economic news,” McBride said. When things look tough, many investors seek safe havens.

One way they do that is by buying U.S. Treasury bonds. The increased demand for Treasuries drives up prices. And higher prices mean lower yields.

Mortgage rates are closely tied to rates on 10-year Treasuries. So lower yields on Treasuries also have pushed down mortgage rates. More signs of economic weakness could force rates lower.

Some investors expect the Federal Reserve to lower short-term interest rates even more to stimulate the economy. But easier money could fuel inflation.

Inflationary fears could send long-term interest rates higher. So mortgage rates would rise.

The bottom line is that there is no guarantee where mortgage rates will go from here. McBride says that anyone thinking about refinancing a mortgage should do so now.

In ARM’s Way

When does a refi make sense? It’s a good move if you have an adjustable-rate mortgage due to be re-set in 2008 or 2009. You’d be removing the risk that rates would resume their upward trend.

You can refi now to a fixed-rate mortgage. You’ll lock in the lowest rates since mid-2004.

Holders of high-rate jumbo mortgages also stand to gain a great deal if they can refi to a conforming mortgage. A jumbo loan is larger than $417,000.

Jumbos are not bought by government-sponsored enterprises, such as Fannie Mae and Freddie Mac, which provide an implicit federal guarantee. In today’s turbulent market, investors want mortgage-backed securities with those guarantees.

To appeal to cautious investors, lenders charge higher rates for jumbo loans. The higher the rates paid by borrowers, the higher the yields that can be passed through to investors in jumbo-mortgage-backed securities.

As a result, loan rates on 30-year, fixed-rate jumbo mortgages are 6.85% now.

That’s a huge spread over the 5.57% conforming loan average.

Say you have an outstanding jumbo loan with an interest rate around 7%. Its loan balance is $450,000.

If you have $33,000 available, you can refi your $450,000 loan down to $417,000, by putting in your cash. Then you’ll knock your rate all the way down to 5.57%.

But what if you don’t have a spare $33,000? Your monthly nut on a $417,000 loan would be $2,386. You’d have to cut a monthly check of $397 on a 10-year home-equity $33,000 loan at the prevailing average rate of 7.8%.

The combined $2,783 is still less than the $2,949 that a jumbo loan for the total amount would cost.

What if you have a conforming fixed-rate loan now? When does it make sense to refinance? That depends on how long you plan to stay in your house and the spread from your existing mortgage.

If your current mortgage rate is 6%, you’ll save almost 0.5% by refinancing, or about $114 a month. It’s worth looking into.

But you should plan to stay in your home for at least a few more years. Then the savings on loan interest will offset the refi cost.

If you have a current loan where the rate is 6.25% or 6.5%, say, the case for refinancing is even stronger. Web sites such as Bankrate.com have calculators to help you decide.

In any case, when you refinance today you’ll probably be better off choosing a fixed-rate loan. With an ARM, you’ll save little or nothing in initial interest rates. And you’ll be exposed to future rate hikes. Of experts and analysts polled by Bankrate this week, 64% said they thought rates would rise in the next 35-45 days, while 27% see a fall.

Trade-Offs

A 15-year fixed-rate mortgage will cost a bit less in total interest than the 30-year version. The average rate on a 15-year loan is 5.11%.

But the monthly payments are higher. So 15-year loans are popular with homeowners refinancing loans they’ve had for a while.

They won’t extend the mortgage for another 30 years. But the borrower must be able to afford the higher payments of a 15-year schedule.

Beyond refinancing, lower mortgage rates make buying a home more affordable now. Falling home prices help, too.

U.S. crude oil futures ended at a record high Thursday, fueled by yet another rally in heating oil futures, which hit a new peak.

Earlier, prices were down on bearish news of a heavy booking of Saudi oil exports to the U.S. up to early June, OPEC’s assurance that it would pump more oil if needed, and higher OPEC exports this month according to estimates by an analyst tracking oil flows.

On the New York Mercantile Exchange, June crude settled up 16 cents, or 0.13%, at $123.69 a barrel. It traded from $121.58 to $123.90 in regular floor-trading hours. It rose further in post-settlement trading to a record $124.57, bettering Wednesday’s intraday peak of $123.93.

In London, June Brent crude ended up 52 cents, or 0.43%, at $122.32 a barrel, a settlement record, after trading from $120.89 to $123.87, a record session high.

Nymex June heating oil, which also lifted crude higher on Wednesday, finished up 6.25 cents, or 1.81%, at a record $3.5098 a gallon, trading from $3.4316 to $3.5152, which eclipsed the $3.46 record peak from Wednesday. In post-settlement trade, it rose further to a new peak of $3.5291, surpassing Wednesday’s record of $3.46.

The heating oil crack spread ended at $23.72, rising from Wednesday’s $21.26.

On Wednesday, the U.S. Energy Information Administration said that domestic distillate stocks, which include heating oil and diesel fuel, fell 100,000 barrels last week to 105.7 million barrels, against forecasts for an 800,000-barrel rise.

In London, ICE gas oil futures hit record highs on Thursday, with the May contract to expire on Monday.

The May-June spread widened to as much as $25, highlighting the tight prompt distillate market.

Nymex June RBOB gasoline ended up 1.96 cents, or 0.63%, at a record $3.1378 a gallon, trading from $3.0909 to $3.1415. In the post-settlement trade, it rose higher to hit a new intraday peak $3.1525, beating Wednesday’s peak of $3.1323.

The RBOB crack spread finished at $8.10, after ending at $7.43 on Wednesday.

World oil markets have enough supply now, but OPEC is willing to pump more if needed to keep pace with demand, Abdullah al-Badri, the group’s secretary-general, said in a statement on Thursday.

The euro rebounded from a two-month low against the dollar, as the European Central Bank left interest rates intact.