4 May 2005, 11:32  Stocks stumbled to a mixed as the Federal Reserve kept to its policy of gradual interest rate hikes

Stocks stumbled to a mixed finish Tuesday as the Federal Reserve kept to its policy of gradual interest rate hikes, but provided little new insight into the health of the economy. The Dow Jones industrial average rose 5.25, or 0.05 percent, to 10,256.95. The Dow was down 46 points five minutes before the close, but surged into positive territory after the Fed amended its policy statement to add the wording about inflation being contained, which had been inadvertently omitted. Broader stock indicators finished narrowly mixed. The Standard & Poor's 500 index was down 0.99, or 0.1 percent, at 1,161.17. The Nasdaq composite index gained 4.42, or 0.23 percent, at 1,933.07. The Fed's Open Market Committee announced a widely expected quarter percentage point hike in the nation's benchmark lending rate, to 3 percent, and said future rate hikes would remain "measured," a phrase designed to ease investors' fears of more aggressive increases. Most of the statement that accompanied the latest rate move was unchanged from the Fed's March 22 meeting, stating that long-term inflationary pressures "remained well contained." The central bank acknowledged that higher energy prices are starting to slow spending growth, but that wasn't enough for the Fed to abandon its approach to rate hikes. "It's pretty much the same as last time, and it shows the Fed's not overly pessimistic about the economy," said Jack Ablin, chief investment officer with Harris Private Bank in Chicago. "The fact that they're not changing their underlying longer-term strategy here adds a certain degree of comfort for investors." Falling crude prices gave a little support to stocks, with a barrel of light crude settling at $49.50, down $1.42, on the New York Mercantile Exchange. Wall Street again received mixed messages on the economy, with American factories showing a tiny 0.1 percent increase in orders last month, better than the large drop economists had forecast. "People were thinking that Fed would address the economy, maybe be a little more flexible on rates to allow the economy to get over the slowdown, but they obviously aren't as concerned about that," said Jack Caffrey, equity strategist for J.P. Morgan Private Bank. While stocks have recovered modestly from a terrible April, Wall Street had been hoping that a strong, positive statement from the Fed would help stocks push upward even further. Uncertainty over the economy has kept stocks from moving substantially off their 2005 lows. "Right now, the market has stabilized, but until we get some more data on how much the economy is going to slow, how much earnings are going to slow, I don't think you can make any stronger statement than that," said Hugh Johnson, chief investment officer at Johnson Illington Advisors in Albany, N.Y. "It's clear the economy is slowing, but investors want to know how much and how far."

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