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[BRIEFING.COM] Per usual, the market traded with a sense of caution Monday as investors stayed close to the sidelines ahead of the first FOMC meeting in 19 years not chaired by Alan Greenspan. While a 15th consecutive 1/4% hike in the overnight lending rate has already been priced into the market, uncertainty as to the whether or not the wording of the policy statement will offer clues about the direction for interest rates underpinned a sense of nervousness and stalled some of the wishful thinking behind recent market strength. The S&P 500, which is up 4.5% in 2006, is positioned to record its biggest first-quarter gain in seven years.

Since Fed Chairman Bernanke has given no indications of his policy leanings and economic conditions have not changed, there is more of a risk that Tuesday's policy statement will be a disappointment. Briefing.com chief economist Tim Rogers -- the only prognosticator to rank in the USA Today's top 10 all three years -- does not see a lot of inflation pressures and believes the Fed will raise rates just once more this year after Tuesday.

With regard to sector strength and weakness, industry leadership was evenly split. Of the five economic sectors closing lower, Health Care was the day's biggest drag on stocks following analyst downgrades on medical equipment stocks (e.g. ZMH, SYK) and consolidation in the drug group. Consumer Staples was another influential leader to the downside as weakness in tobacco, beverages and food retail offset a mixed report from Walgreen (WAG 45.03 +0.66) which missed forecasts by a penny but grew profits and market share.

Among the five sectors trading higher, Materials paced the way to the upside after Citigroup raised its 2006 price forecasts for copper and aluminum and upgraded Phelps Dodge (PD 76.50 +1.36), a suggested holding in our Active Portfolio. Energy, which turned positive as trading entered the lunch hour in sympathy with a rebound in oil prices, held onto modest gains while Technology eked out a small advance as strength in hardware and networking offset consolidation in semiconductor and software. Despite a rise in borrowing costs and Lehman downgrading bank stocks worldwide on valuation concerns, Financial nearly found enough strength from brokerage and insurance names to offset weakness in rate-sensitive issues but the sector finished flat. The absence of market moving economic reports -- data which the Fed has made clear will influence monetary policy -- left bond traders focused on technical indicators and kept volume lighter than usual ahead of tomorrow's Fed decision. The yield on the 10-yr note (-07/32) closed at 4.69%.
NYSE Adv/Dec 1392/1876...Nasdaq Adv/Dec 1502/1567