(Updated from 4:09 p.m. EDT)

The

Fed may have moved, but the markets hardly did.

After the Federal Reserve's decision to cut the key short-term interest rate by 50 basis points to 4%, its lowest level since May 1994, the major stock market indices finished close to the flatline. The

Dow Jones Industrial Average fell 4.36 points to 10,872.97; it was down more than 50 points before the Fed verdict. The

Nasdaq Composite Index climbed 3.6 points to 2085.50; it was up about 10 points prior to the announcement.

Traders weren't surprised by investors' reaction to the news, as today's cut was already priced into the market. "We got everything we wanted," said Jay Meagrow, vice president of trading at

McDonald

. "We've had such a great couple of weeks; this move was already in the market."

Stocks soared in April on expectations the Fed would do its part to make sure the economy gets better in the second half of this year. As of today's close, the Nasdaq is up 27.3% since hitting a recent low of 1638.80 on April 4; it remains down 15.6% for the year. The Dow is up 15.8% since its recent low on March 22 and is up 0.8% for the year.

With today's move, Fed Chairman

Alan Greenspan & Co. have slashed the

fed funds rate five times this year, knocking 2.5 percentage points off.

Up and Down With the Dow
The Dow industrials today, at 15-minute intervals

Source: BigCharts.com

In a message accompanying today's rate-cut decision, the Fed said it continues to be vigilant about the slowing economy, which means additional cuts may be in store over the next few months. "The erosion in current and prospective profitability, in combination with considerable uncertainty about the business outlook, seems likely to hold down capital spending going forward," the Fed said in its statement.

Trading volume, which generally surges after an interest rate cut, was light today, although it ticked up a bit after the Fed announcement. Going forward, experts predict it will pick up soon. "Volume should trend back to normal," added Meagrow. "But we'll probably trade in a narrow range." Stocks that are sensitive to interest rates, including financial, technology, and retail names, closed up today. Economically safe stocks, such as drugs and consumer staples, eased a bit.

Bumpy Comp
The Nasdaq today, at 15-minute intervals

Source: BigCharts.com

There was talk ahead of the Fed meeting that the monetary policy body might elect to cut rates by just a quarter percentage point today as a way of informing the equity market it was concerned about an upward spiral in wages and prices. But today's rate cut shows the fragility of the economic recovery has the Fed concerned enough to postpone worries about inflation. The central bank's next meeting is June 26-27.

Life After the Fed

There was more than just the Fed to digest today, as earnings season got swinging again after a relatively quiet week. Investors have begun to

focus more keenly on financial reports, as they provide clues about whether the economy is really coming around.

This morning,

Wal-Mart

(WMT) - Get Report

posted first-quarter earnings that were

in line with lowered expectations. Same-store sales rose 3.7%, and Wal-Mart said it expects to return to double-digit earnings growth in the second half of 2001.

Home-improvement retailer

Home Depot

(HD) - Get Report

posted results that matched last year's results and topped Wall Street estimates by two pennies. Wal-Mart closed down 3.7% to $52.32, while Home Depot gained 2.2% to $50.21.

Chip firm

Applied Materials

(AMAT) - Get Report

, software outfit

BEA Systems

(BEAS)

and storage firm

Brocade Communications

(BRCD)

each rose ahead of their earnings reports, released this evening.

In after-hours trading, Applied Materials, the most heavily traded stock on both

Instinet

and

Island

ECN, lately lost 0.8% to $49.48 on Instinet and 0.8% to $49.50 on Island after

missing analysts' expectations and reporting sharply lower second-quarter results amid the slowdown in the chip sector. Its shares finished the day at $49.89 on the

Nasdaq. Applied Materials is the first of the chip equipment makers out with figures for a quarter that includes April.

Investors after hours duly rewarded BEA Systems for topping analysts' first-quarter expectations, on higher revenue that rose 67% from the same period last year. The Web business software stalwart lately surged 5.3% to $35.85 on both Island and Instinet, up from its close of $34.04 on the tech-heavy Comp.

Also in the green, Brocade gained 0.2% to $42.59 on Island after tempering lower second-quarter results with a positive outlook, projecting a recovery in the second half of the year.

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Market Internals

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Most Active Stocks

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International

Banks and oil stocks carried London's

FTSE 100

higher this morning, as the proxy rebounded from a major last-minute derivatives sale yesterday afternoon, worth just under $426 million, according to

FT.com

. That program trade sent the index down an extra 130 points to close off 206.3. The London Stock Exchange is investigating the big share selloff. The FTSE closed up 152.4 to 5843.

Earlier weakness in Paris and Frankfurt had turned, and the major indices there were lately in the green. The Paris

CAC 40

closed up 56.4 to 5544.1, while Frankfurt's

Xetra Dax

closed up just 5.7 to 6070.5.

Asian stocks were mixed overnight, with strong gains in Tokyo and mild losses in Hong Kong. After a weeklong correction, Tokyo's key

Nikkei 225

closed 181.0 higher to 14,054.0, led by gains in blue-chips like wireless

NTT DoCoMo

. Hong Kong's

Hang Seng

slipped just 22.0 points to 13,237.2, as investors waited on the U.S. rate cut.

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