Reversal of Fortune for Stocks

Updated from 4:03 p.m. EST

Stocks recovered from steep losses and finished mostly higher Thursday, following Wednesday's selloff on interest rate paranoia spurred by the Fed's revised monetary policy statement. Strategists were divided over whether the market was undergoing periodic profit-taking or experiencing the beginning of a long-anticipated correction.

The Dow gained 41.92 points, or 0.4%, to 10,510.29; the S&P 500 rose 5.63 points, or 0.5%, to 1134.11; and the Nasdaq declined 9.14 points, or 0.4%, to 2068.23.

Volume was heavy, with 1.92 billion shares traded on the New York Stock Exchange, while 2.61 billion shares exchanged hands on the Nasdaq. Decliners outpaced advancers by about 2 to 1 in both markets.

"Once people had a chance to digest the implications [of Wednesday's Fed announcement], they realized that it is further proof that the economy is in good shape, which should help earnings and growth," said Ray Hawkins, a trader at J.P. Morgan Chase. "I think we will have the same knee- jerk reaction when they actually raise rates, where we get an initial selloff and then rally back."

"I think yesterday's reaction and today's hesitancy speaks more to the fact that we have come so far since last March, rather than a fundamental change in the Fed's outlook," said James Awad, chairman of Awad Asset Management. "Anyone who is grounded in reality expected, with the economy so strong, a raise in interest rates was inevitable, and the Fed's statement was entirely logical."

In economic news, the minutes from the December Fed meeting showed that the FOMC had debated the use of the language "considerable period" back then. "A number of members argued that its deletion would serve to enhance the committee's flexibility to adjust monetary policy at a later date when that was deemed appropriate on the basis of evolving economic circumstances," read the minutes.