Updated from June 28

The major stock averages advanced Thursday ahead of the conclusion of the

Fed

meeting and an expected 25 basis point rate hike. The morning's economic data was in-line with expectations and did not sway the market from its pre-Fed rally.

"The market this morning shouldn't be taken any way," says Timothy Heekin, director of equity trading at Thomas Weisel Partners, adding that the FOMC meeting is just one of several cross-currents going on as the week comes to an end. There is the end of the quarter and the end of the half-year, the Russell rebalancing and the start of pre-announcements ahead of second-quarter earnings season. Heekin predicts stocks trade in a range through the summer without broad directional moves. He puts the

S&P 500

in a range between 1245 and 1265.

As of mid-morning the S&P 500 was recently up 0.77% at 1255.62, the

Dow Jones Industrial Average

was up 0.64% to 11,043.60, and the

Nasdaq

was up 1% at 2132.91.

The Bureau of Economic Analysis made its final revision to first quarter GDP growth, putting the figure at 5.6%, in line with expectations and up from 5.3% previously. There was no change in the measure of the Fed's favorite inflation measure -- core personal consumption expenditures, which grew at an annual rate of 2% in the first quarter.

But below the surface, some details point to the likelihood that the year-over-year monthly core PCE price index will rise to 2.2% in May. "Rounding obscured a slight upward revision" in the Bureau's measure of the price of services, which went to 2.04% from 2.00%, says Peter Kretzmer, economist at Banc of America Securities. "This increasing the chances of year-over-year monthly core PCE price index rising to 2.2% in May," he writes.

Initial unemployment claims rose for the second week in a row, as 313,000 people filed claims in the week ended June 24. This was slightly higher than the 310,000 claims that economists expected. The four-week moving average declined for the fourth week straight, however, to a four-month low of 305,500, writes Gary Bigg, economist at Banc of America Securities.

Friday brings May's personal income and spending data, and the PCE index for the month, which could put the Fed deeper into the corner in terms of inflation-fighting. Goldman Sachs economist Ed McKelvey forecasts a 0.23% increase from April. Given a 0.4 percentage point margin of error, rounding could make the difference. "The probability of an increase that rounds up to 0.3% is significant, as is the probability of a 2.2% print for year-to-year change," he writes.

In the meantime, all eyes will be on the FOMC statement at 2:15 p.m. EST and what clues Bernanke may give about the direction of monetary policy going forward. As it awaits the Fed's decision, the market is being tossed between two dominant fears: One, that Bernanke and the Fed may sacrifice the economy's strength and overtighten to gain credibility. Two, the Fed will neglect inflation and allow it to run rampant.

"It's damned if you do, damned if you don't," says Heekin. If his range-bound theory bears out, then if the pre-Fed rally may be met by selling, he says. "There is no directional catalyst," he says, adding the low volume on the exchanges recently also points to lack of conviction or interest in the market and the likelihood of range-bound market behavior. The moves will be company or sector-specific, he predicts.

McDonald's

(MCD) - Get Report

was among the market's leaders Thursday, following an upgrade by Merrill Lynch.

Some fear-mongering may be going on as the topic of a 50-basis-point rate hike gets lots of lip service, but without much conviction. The fed funds futures are pricing in 100% odds of another 25-basis-point hike and just 12% odds of an additional 25, according to the CBOT. Understandably then, the U.S. equity and bond markets were sloppy Wednesday ahead of the FOMC meeting's conclusion.

"The market wants to know that the Fed knows that if they go too far, they'll kill people," says Howard Simons, analyst at Bianco Research and contributor to

RealMoney.com

. Another 25 basis points on the fed funds rate doesn't matter that much, "you just want to know there isn't a monster under the bed," he says. Thursday's expected 25-basis-point rate hike will be the 17th straight in the Fed's two-year old tightening cycle.

Major stock averages struggled through much of the day Wednesday, but ended in the green. The Dow gained 0.45% to 10,973.56, while the S&P 500 tacked on 0.55% to close at 1246. The Nasdaq climbed 0.55% to 2111.84.

Still, the market's tone is negative. Volume is weaker on up days vs. down. For example, 2 billion shares traded on the

New York Stock Exchange

Wednesday and 1.6 billion in Nasdaq activity, down from 2.2 billion and 1.8 billion shares, respectively, during Tuesday's thrashing.

Notwithstanding the success of

J. Crew Group's

(JCG)

IPO Wednesday, the stock market is reflecting nerves about the consumer, who may stand to lose in both an inflationary or economic slowdown scenario, says Larry Berman, chief technical strategist at CIBC World Markets.

Of the 32 stocks in the S&P 500 that reached fresh 52-week lows in the past week, the bulk of them are tied to the consumer, including

Ford Motor

(F) - Get Report

,

Bed Bath & Beyond

(BBBY) - Get Report

,

Tiffany & Co.

(TIF) - Get Report

and

eBay

(EBAY) - Get Report

. Bed Bath & Beyond and Ford, whose debt rating was downgraded by Standard & Poor's, hit new 52-week lows Wednesday while Tiffany bounced.

"The consumer is the weak spot," says Berman, adding that the consumer is also facing about $1 trillion of increases in adjustable-rate mortgages amid a slowing housing market.

Before the Fed

Rethinking Recent History

Many remember that the May 10 FOMC meeting marked the peak for many stock market indices. But that may have been more about Japan and the global economy than the Fed. Emerging market stocks and commodities had already begun selling-off as the

risk-reduction trade was well under way.

It was Japan's threatened end of quantitative easing that sparked investors to unwind several risky trades predicated on borrowing yen at 0% to invest in other high-yielding assets around the world, says Simons. The unwinding gained steam as the Fed and other central banks raised rates in May.

"Helicopter Ben" has nothing on Japanese policymakers, who countered deflation in the 1990s by going to a 0% interest rate policy and flooding the markets with yen. In February, Japan began withdrawing 21.56 billion yen from the marketplace.

From Feb. 10 to June 12, Japan withdrew about $186.78 billion from its system based on an average exchange rate of 115.432, according to Simons. "The equivalent shrinkage in the U.S. would be a $2.272 trillion withdrawal in the money supply," he says. "Such a withdrawal in liquidity in the U.S. money supply would have a material effect."

The Nikkei has taken a beating over the past three months and the Bank of Japan recently put about 7.5 trillion yen back into the system after seeing the damage it had done. The Nikkei surged 1.6% overnight to 15,121 Thursday, helping pave the way for Wall Street's early advance.

In keeping with TSC's editorial policy, Rappaport doesn't own or short individual stocks. She also doesn't invest in hedge funds or other private investment partnerships. She appreciates your feedback. Click

here

to send her an email.