Tech stocks keep running higher, and so does Wall Street's general sense of bewilderment.

That the asset class with the richest valuations is running higher despite the

Federal Reserve's

apparent inclination to continue raising interest rates until the economy slows is an entirely new thing. In the past, whenever economic growth has heated up to the point where the Fed feels it needs to crash the party, it's been a signal to shift into cyclical stocks. This makes sense, because the latter stages of economic growth are usually the time when commodity producers start to get pricing traction. And in fact, this is exactly what's happened lately -- commodity prices


on the upswing.

But cyclical stocks are not. The

Morgan Stanley Cyclical Index

is down 18.1% this year. Meanwhile, the

Morgan Stanley High-Tech 35

is up 16.7%.

"We're in a very interesting situation," said David Bowers, the new chief investment strategist at

Merrill Lynch

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, "where either the old model is breaking down, or the market is chasing the wrong sectors."

This, Bowers reckons, is where the battle lines in the market will be drawn in the weeks to come. Some players will adhere to the notion that tech stocks are immune to interest rates, that the demand for technology is so strong that profits in the sector will continue to move ahead at a quick pace even if the overall economy slows.

And ranged on the other side will be those who think that even for tech, interest rates will matter. One argument for this is that a major factor in economic growth has been the performance of tech stocks. So to slow the economy, the Fed needs to slow tech stocks.

"The stock market continues to see an enormous shift out of traditional, old-economy stocks to new-economy stocks," said Richard Berner, chief U.S. economist at

Morgan Stanley Dean Witter

. "The rally in the stock market is being primarily driven by that. That means the Fed, quite frankly, will have more work to do."

With the

Nasdaq Composite Index

knocking on 5000, one wonders how much of a role tech-stock gains specifically play in any wealth effect. It seems like a good guess that they have an outsized influence. Many investors may not really think of their tech-stock gains in the same way they think about the money they've put in their 401(k)s. Then there are those lucky people who have options in tech companies at a very low cost basis -- they, too, may have more of a penchant to spend freely.

Unfortunately, there's no way to quantify whether tech-stock gains influence spending in any way differently from gains in other stocks. "I have been asking myself that question," said Berner. "It's a good one. Don't have the answer."

The two big economic events of the coming week should have something for new- and old-economy types alike. On Monday, Fed Chairman

Alan Greenspan

will give a talk on technology and the economy. If he sticks to recent form, he will probably shy away from the new-paradigm stuff. Yes, the economy can grow more quickly than in the past. No, it cannot safely grow as quickly as it is now.

On Tuesday, however, the revised fourth-quarter productivity report is set to come out. Many economists expect that productivity gained upwards of 6% -- a new-era number if there ever was one.