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Fed holds rates at 1.75%, but changes bias to "neutral"

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The Federal Open Market Committee (FOMC) has decided to leave the Fed Funds rate at 1.75% and changed its bias from "weakness" to "neutral" as it now sees economic risk as being balanced between inflation and economic weakness.

"The economy bolstered by a marked swing in inventory investment, is expanding at a significant pace," said excerpts from the FOMC written statement. The decision to leave interest rates at current levels was unanimous among the panel members.

With 1-hour left in today's trading session, stocks have come back off their best levels of the session as the S&P 500 (SPX.X) did trade near the 1,175 level that has served as resistance since early December, but edged back from that level and currently trades up 1.9 points at 1,167.

The tech heavy NASDAQ Composite (COMPX) moved into negative territory and trades down 6 points at 1,500 lead lower by networking stocks as depicted by the Networking Index (NWX.X) at 239.76 -2.69% and wireless stocks as characterized by the Wireless Telecom Index (YLS.X) at 70.43 -2.5%.

HP says shareholders approve merger with Compaq

Hewlett Packard (NYSE:HWP) $18.61 -3.32% is saying that it believes the early tabulation of votes from shareholders will have HP claiming victory in its merger vote. Based on a preliminary count by its proxy solicitor, HP said it expected that it would have enough votes when the final tally is announced.

Chief opponent of the merger, Walter Hewlett, scheduled a mid- afternoon press conference to respond. The immediate MARKET response on Wall Street was "sell" HWP and "buy" Compaq (NYSE:CPQ) 10.92 +5.4% on the belief that the merger was indeed going to go through.

Jeff Bailey
Senior Market Technician
Option Investor

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