It was just as expected.

And despite all the sound and fury, stocks finished Tuesday about where they began, running a circle around the

Federal Open Market Committee's

eighth straight rate hike, emboldened hawks and even an "inadvertent" case of apparatchik amnesia.

The major indices touched their best levels of the day immediately after the release of the central bank's statement, which acknowledged that spending growth has indeed softened, "partly in response to the earlier increases in energy prices." The yield of the benchmark 10-year Treasury bond spiked in unison with the indices.

But that was all the

Fed

would give. It was disappointing news only to the handful of investors hoping that softer economic growth would allow the central bank to at least hint at a possible relaxation of its rate-tightening schedule.

Far from dropping its guard, the Fed slightly raised the alarm level on inflation. The FOMC statement omitted its opinion found in previous statements that energy prices were not seeping through to core inflation, which is to say, the Fed now thinks that's happening.

Subconsciously, somebody at the Fed must have wanted to sound even more hawkish by removing a phrase found in previous statements stating that "longer-term inflation expectations remain well contained." The central bank then issued a correction reinstating the language, helping the major indices close higher. Sometimes a cigar is just a cigar.

After dipping in afternoon trade, the

Dow Jones Industrial Average

gained 5.25 points, or 0.05%, to 10,256, while the

S&P 500

remained off 0.99, or 0.09%, at 1161.17. The

Nasdaq Composite

added 4.42 points, or 0.23%, to 1928.

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The market didn't need to be reminded by the Fed of the impact of soaring energy prices. On Tuesday, battered automakers reported that U.S. truck sales dipped in April as more consumers avoided gas-guzzling SUVs.

Ford

(F) - Get Report

said U.S. sales fell 2% in April to 281,292 vehicles, despite an 11% jump in car sales.

General Motors

(GM) - Get Report

said sales fell 7.4% to 385,939 vehicles. GM truck sales dropped 17% to 215,321, while U.S. car sales gained 7.5%.

Regardless, these signs of "softer spending" have not moved the Fed to tears. Several economists -- including veteran Fed watcher John Lanski of Moody's -- believe the Fed means to signal that the fed funds rate will continue rising to 4% by year-end. That would imply four more quarter-point hikes over the five meetings that remain in 2005.

"It would have been worrying for investors if the Fed had hinted that slower growth may warrant a halt in rate hikes," says Lonski. "That would mean a much more significant slowdown than what's expected now."

But not all hope is lost for the die-hard believers in a more lenient Fed. In the FOMC statement, the Fed followed its acknowledgement of weaker spending by saying that labor market conditions "apparently continue to improve gradually."

Of course, that phrase could be rendered meaningless if Friday's April employment report confirms the weakness seen in March. The Fed will also have the luxury of seeing the May employment report before it next meets at the end of June.

Job growth of 125,000 or less in both months could lead the Fed to take a pause in June, even if it does stick to its "measured" pace language, says Moody's Lonski.

Until next Friday's report provides a clearer picture, economists so far have been hard-pressed to find evidence of a strong employment picture besides sparse regional evidence.

On the contrary, some even point to the far-reaching implications of the sharp rise in inventories -- as sales dropped -- in the first quarter, for job growth going forward. The $80 billion buildup was the largest in five years. According to David Rosenberg, chief North American economist for Merrill Lynch, if businesses want to return to normal inventory-to-sales ratios, they'll have to get rid of $50 billion worth of stock between the second and third quarters.

Based on historical precedents, during an inventory-correction phase, employment growth never accelerates, Rosenberg says. "We could well see nonfarm payrolls average little more than 130,000 from now through September."

So the great debate about the economic "soft patch" is likely to continue for a while. Once again, the benchmark 10-year Treasury bond rose in price, keeping its yield near two-month lows of 4.16%. Clearly, the bond market still believes that inflation remains contained (and the Fed made sure the market remembers) as evidence of slower growth keeps mounting.

In keeping with TSC's editorial policy, Godt doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send

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