The Dow Jones industrial average scored its first gain in three days today as traders cautiously bought stocks in anticipation of tomorrow's potentially pivotal meeting of the Federal Reserve Board's Open Market Committee.
Nudged by the latest consumer confidence survey -- which found the Conference Board's index at its highest level in two years -- the Dow climbed 56 points to 10413.43.
The Standard & Poors 500 stock index also ended a three-day down streak, gaining 3 points to 1136.20. The Nasdaq Stock Market composite index, which has been in an up and down pattern, was up 15 points to 2034.93.
Even this modest advance was a big of a surprise, because for the last couple of weeks the markets have been moving sideways, waiting to see if Fed Chairman Alan Greenspan will deliver the increase in interest rates that Wall Street has been expecting for so long.
As far as Wall Street oddsmakers are concerned, a quarter point interest rate is what The Washington Post's horse racing scribe Andy Beyer calls a "mortal lock." Counting on Greenspan to gradually bring rates back from their lowest level in 40 years, bond traders have already pushed up the rates on government bonds and mortgage interest rates have followed suit.
Wall Street will be caught off guard if Greenspan doesn't raise rates tomorrow, so no one has been speculating about how the market might react if that doesn't happen. One theory is that the market might take a hit, because Wall Street economists think starting to raise rates now would be the best economic policy.
And how will Wall Street react if Greenspan does boost rates by a quarter of a point? Maybe not at all. Maybe investors have already swallowed and digested a modest rate increase. More likely it will cause investors to implement strategies they have been discussing in anticipation of high rates -- shifting money away from industries that might be hurt by higher rates, into companies that are expected to benefit. Some of that has been going on already, but big traders have been playing their cards close to the vest.
The real question tomorrow is not what the Fed will do, but what it will say.
Along with interest rate number, the Fed will put out a brief analysis of the economic conditions that prompted the decision, and Wall Streeters will look for nuances in every word of it.
Tomorrow's early trading could be twitchy, or totally restrained. The real action will start at 2:15 p.m., when the Fed speaks.