The market swallowed its rate-hike pill like a resigned child. After some initial hesitation stocks ran out and played for the rest of the afternoon.

The

big news came and went at 2:15 p.m. EDT, when the

Federal Reserve announced it was lifting the target

fed funds rate by an aggressive half percentage point to 6.5%. The move marks the sixth increase in the fed funds rate since last June and the first time in five years that the Fed lifted rates by more than a quarter-point in one shot. But given the lasting impression of March's hotter-than-expected

Consumer Price Index

numbers, along with other reports, no one was surprised by the move.

"Many of the bulls are just happy to say, 'Give us our medicine,'" said Dan Ament, assistant vice president and investment executive at

Dain Rauscher

in Minneapolis. "The market just kind of took it in stride." He added that the pre-emptive move suggests that rate hikes won't be dragged out over a long period of time.

After spending the morning in rally mode, major proxies stumbled after the announcement, including a statement that suggested the Fed's inflation fight is not over yet. "Some people thought the Fed might come out and say, 'That is the end,' but that is sort of irrational," said Todd Clark, head of listed trading at

WR Hambrecht

in San Francisco. "You just saw a little bit of profit-taking" in the wake of the announcement.

Still, stocks regained their footing and were looking pretty solid at the end of the day.

The Dow Jones Industrial Average jumped 126.79, or 1.2%, to 10,934.57 while the

Nasdaq Composite Index rose 109.89, or 3.1%, to 3717.54. The broader

S&P 500 gained 13.68, or 0.9%, to 1466.04 while the small-cap

Russell 2000 moved up 8.18, or 1.6%, to 505.99.

About an hour after the announcement, Ament noted there was "somewhat of a retreat from the highs as the market absorbed the news, but they have regained some very respectable levels."

Clark said much of the action today was the work of short-term traders, noting that portfolio managers will make decisions tomorrow. "Some of the interest-rate-sensitive stocks should come off a bit," he said, noting their recent run. Clark said we could see upside in some of the consumer nondurable stocks, such as

Colgate-Palmolive

(CL) - Get Report

and

Procter & Gamble

(PG) - Get Report

.

Financials were under a bit of pressure today, with the

Philadelphia Stock Exchange/KBW Bank Index

down 1.5% and the

American Stock Exchange Broker/Dealer Index

off a notch. Dow component

American Express

(AXP) - Get Report

slipped 2% while

Chase Manhattan

(CMB)

slipped 0.5%.

Technology stocks, and semiconductor stocks in particular, put on an impressive show. The

Philadelphia Stock Exchange Semiconductor Index

hopped 3.7%. Dow component

Intel

(INTC) - Get Report

was up 3.2%, while

National Semiconductor

(NSM)

jumped 9.3%.

Internet stocks were strong, with

TheStreet.com Internet Sector

index rising 48.35, or 5.5%, to 929.62.

Lycos

(LCOS)

soared 17.3% on further talk (since confirmed) that it will merge with Spanish Internet company

Terra Networks

(TRRA)

.

Looking forward, Ament said we will probably go into a "quiet period where stocks actually trade on their own merits. Now I think we are going to go back to fundamentals and a rational stock picker's market."

Market Internals

Breadth was positive on moderate-to-light volume.

New York Stock Exchange:

1,672 advancers, 1,267 decliners, 955.7 million shares. 81 new 52-week highs, 62 new lows.

Nasdaq Stock Market:

2,329 advancers, 1,749 decliners, 1.466 billion shares. 59 new highs, 73 new lows.

For a look at stocks in the news, see the Company Report, published separately.