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Stocks Gleam on Plus Side as Fed Inspires Little Worry

The Fed is kicking off its policy meeting this afternoon, but the near-certain rate hike isn't dampening the continuing comeback in equities.

You can already hear the screws tightening at the corner of 20th and C streets, where the

Federal Open Market Committee

will soon convene inside the Marriner S. Eccles Building to start its two-day discussion of the future of interest rates.

But things were relatively loose at Broad and Wall, where stocks were sloshing through a positive if tentative session.

The FOMC won't announce any changes in interest rates until tomorrow afternoon, but there's little argument over what the meeting will yield. Everyone expects the Fed to hike by at least 25 basis points, and nearly no one thinks that will be the last. That leaves the market in an old familiar place, the same hostile interest-rate environment that has kept the financial-heavy

Dow Jones Industrial Average

flat for the last nine, count 'em, nine months.

Still, stocks are managing to stay the course set during the market's broad rally late yesterday.

"It looks fairly decent here," said Barry Hyman, chief market strategist at

Ehrenkrantz King Nussbaum

. "They don't seem to have any desire to really sell off today. The market has handled the NAPM numbers very well -- we're getting a nice rally in the bonds."

The bond market was moving higher despite a very mixed report from the

National Association of Purchasing Management

, which said today that its Purchasing Managers' Index fell to 56.3 in January from a revised 56.8 reading in December. But the NAPM's prices-paid component surged to 72.6 in January from 68.3 in the previous month, marking the fifth straight that index has come in over 60. (NAPM's indices indicate expansion when above 50 and contraction when below 50.)

The 10-year Treasury was up 9/32 to 95 20/32, putting its yield at 6.63%. The 30-year Treasury, meanwhile, was 19/32 higher to 95 27/32 and yielding 6.44%. (For more on the fixed-income market, see today's

Bond Focus.)

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As is its custom, technology stocks already have some big swings under their belt. After opening higher, the

Nasdaq Composite Index

fell to as low as 3911 in morning action before picking up steam to the upside. It was lately up 63, or 1.6%, to 4003, goosed largely by big gains in supercomponents


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"The market is having a tough time finding its identity today," said Charles Crane, chief market strategist at

Key Asset Management

. "On the one hand, investors are anxious about what the Fed will say when it breaks its meeting tomorrow. On the other hand, we continue to get great evidence of a very strong economy, which should support decent earnings growth going forward. Hence we're getting that push/pull environment."

At midday, the pushers were winning the battle among the trading in the large three-letter issues, with the Dow Jones Industrial Average up 66 to 11,007. The

S&P 500

, meanwhile, was 6 higher to 1400.

Drug stocks were consolidating from their recent runup. The

American Stock Exchange Pharmaceutical Index

was off 2.2%.

Eli Lilly

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had lost 3.2%,

American Home Products


was 4.4% lower.

Financials were mixed despite the slight rally in bonds. Among Dow components,

American Express

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was up 2.7%, and

General Electric

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was up 1.8%.

But other financials, especially brokerages, were under pressure, with the

American Stock Exchange Broker/Dealer Index

down 1.8%. Dow member

J.P. Morgan

(JPM) - Get JPMorgan Chase & Co. Report

was 0.7% lower.

Market Internals

Breadth was mixed on light-to-moderate volume.

New York Stock Exchange:

1,441 advancers, 1,401 decliners, 534 million shares. 21 new 52-week highs, 102 new lows.

Nasdaq Stock Market:

2,071 advancers, 1,828 decliners, 802 million shares. 61 new highs, 74 new lows.

For a look at stocks in the midsession news, see Midday Movers, published separately.