Greenspan and the Groundhog: Both See Dark Shadows and Both Make a Move - TheStreet

SAN FRANCISCO -- As was widely anticipated, the Federal Reserve raised interest rates by 25 basis points today. What happened afterward was -- in retrospect -- also predictable, as the stock market produced a relatively muffled response, with major averages finishing mixed and not far from opening levels.

As many suggested, it seemed a 25-basis-point tightening was "built into" the market and any "relief rally" had already occurred in the past two days. Still, those expecting a dramatic selloff were left wanting.

"Looks like we got a push on the Fed meeting," said Bryan Piskorowski, market analyst at

Prudential Securities

. "Greenspan saw his shadow, which means we got six more weeks of rate uncertainty. That being said, I think the market's reaction is somewhat positive."

Alan Greenspan

as

Punxsutawney Phil was a common theme on Wall Street today, owning to the

statement accompanying the quarter-point hikes in both the fed funds and discount rates. The Fed gave every indication more tightening is forthcoming unless economic data show a material slowdown:

The Committee remains concerned that over time increases in demand will continue to exceed the growth in potential supply, even after taking account of the pronounced rise in productivity growth. Such trends could foster inflationary imbalances that would undermine the economy's record economic expansion. Against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the Committee believes the risks are weighted mainly toward conditions that may generate heightened inflation pressures in the foreseeable future.

Jim Bianco, president of

Bianco Research

in Barrington, Ill., also used the Groundhog's Day reference in an e-mail this afternoon in which he noted the

fed fund futures

contract for April is

pricing in a 100% probability of another rate hike in March.

The fixed-income market liked the Fed's apparent vigilance to fight inflation's return, as bonds rallied across the yield curve. The price of the 30-year Treasury bond -- up sharply before the Fed announcement and after

Treasury

announced its future

refunding plans -- rose 1 18/32 to 97 17/32, its yield declining to 6.31%.

But the bond market's euphoria was lost on equities.

The

Dow Jones Industrial Average

traded as low as 10,996.69 and as high as 11,118.93 before the Fed's announcement at 2:15 p.m. EST. In its aftermath, the index fell to as low as 10,987.07 before recovering to as high as 11,104.89. But the blue-chip proxy declined sharply in the final 30 minutes, closing off 37.85, or 0.3%, to 11,003.20.

Reversing

yesterday's performances,

Hewlett-Packard

(HWP)

and

IBM

(IBM) - Get Report

were among the Dow's big gainers, while

American Express

(AXP) - Get Report

and

General Motors

(GM) - Get Report

its heaviest drags. GM fell 4.6% after

announcing changes in its top management.

The counterbalancing forces of strong technology bellwethers and weak financials kept the

S&P 500

hovering near breakeven for much of the day before finishing down 0.16 to 1409.12.

The

Nasdaq Composite Index

was the strongest of the "big three" averages for the entire session, although it could not sustain its intraday high of 4125.74. But the tech proxy maintained positive territory throughout the session, closing up 21.96, or 0.5%, to 4073.94.

The Comp's biggest tech components mainly traded with a mainly negative bias, with

Cisco

(CSCO) - Get Report

returning 3.3% of yesterday's big gain. But the tech-avenged index got another boost from

Qualcomm

(QCOM) - Get Report

, which rose 4.2% after announcing a joint venture with

Ericsson

(ERICY)

to improve cell phones. Ericsson gained 0.6%. The

Nasdaq 100

rose 0.6%.

Other names helping the Comp -- including

Broadcom

(BRCM)

and

Atmel

(ATML)

-- each rose sharply after (and in anticipation of) bullish presentations at a

Bank of America

conference in San Francisco.

Meanwhile, Net giants such as

Yahoo!

(YHOO)

, up 3.4% on news of its

deal with

Siemens

(SMAWY)

, further aided the Comp.

TheStreet.com Internet Sector

index enjoyed its best rally of the week, rising 36.18, or 3.4%, to 1109.40. Additionally,

TheStreet.com New Tech 30

rose 14.49, or 2.4%, to 619.92. Unveiled Jan. 5, the TSC New Tech 30 is a market-cap-weighted index focusing on tracking the so-called hot money part of the market. A list of index components is available at

http://www.thestreet.com/newtech/.

The

Russell 2000

rose 6.14, or 1.2%, to 509.89 as market breadth again favored gainers.

In

New York Stock Exchange

trading, 1.039 billion shares were exchanged while advancers led declining stocks 1,686 to 1,320. In

Nasdaq Stock Market

action 1.532 billion shares traded while gainers led 2,334 to 1,715. New 52-week lows bested new highs 120 to 37 on the Big Board while new highs led 147 to 79 in over-the-counter trading.

Can't Get No Relief

"We had the relief rally into" the meeting, said Sam Ginzburg, managing director of equity trading at

Gruntal

. "Now, I don't know what makes us go higher."

Like many, the trader was already looking ahead to Friday's

employment report

for January, calling it "the bigger number" than today's Fed news. "If Friday comes in OK you can play it," he said. "If it's bad, you can give everything back."

Prudential's Piskorowski was also turning his focus to the jobs data, but seemed more optimistic about the market's outlook going forward.

"At the end of the day, we have a market that's seen good quarterly earnings, an economy cruising along and a Fed that stands ready to act in order to create a prolonged period of economic growth," he said. "At the same time, we'll continue to hem and haw about the rate situation and will be living number to number."

That is "blessed gridlock" and "the stuff that will keep the bull's run alive," the market watcher said.

Among other indices, the

Dow Jones Transportation Average

rose 33.03, or 1.3%, to 2609.66; the

Dow Jones Utility Average

slid 1.54, or 0.5%, to 311.41; and the

American Stock Exchange Composite Index

gained 4.61, or 0.5%, to 877.69.

Market data above are preliminary. For coverage of today's top stocks in the news, see the Company Report, published separately

.