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[BRIEFING.COM] What was widely expected to be a cautious day of trading, in anticipation of bidding farewell to Alan Greenspan's 18-year reign as Fed Chairman with a 14th consecutive 1/4% fed funds rate hike (to 4.50%), ended the same way it began, in negative territory.

Even though a second straight change was made to the FOMC policy statement's wording, signaling that the series of "measured" 1/4% rate hikes that began in June 2004 has now ended, mention that "some further policy firming may be needed" to keep economic growth and inflation balanced weighed on sentiment. That ambiguity, along with the statement that "Although recent economic data have been uneven, the expansion in economic activity appears solid," was more hawkish than investors hoped for and strongly suggests that another rate hike is coming at the March meeting. Despite modest market weakness and turning in the day's worst performance among the three major averages, the S&P enjoyed its best January since 2001.

Of the split industry leadership that dictated much of the late-day choppiness, Technology paced the way to the downside. Profit-taking in semiconductor offset an intraday 52-week high on Microsoft (MSFT 28.15 +0.15) following its patent case victory. Energy was also an influential leader to the downside as a pullback across the energy complex weighed heavily on the sector as did consolidation in Valero Energy (VLO 62.43 -0.77), last year's best performing S&P constituent (+128%) which beat forecasts but not by as much as many expected.

Consumer Discretionary was also weak, playing into why we've had an Underweight rating on the sector since April 2004, as losses in homebuilding and media were accompanied by discouraging Q4 guidance from Goodyear Tire (GT 15.64 -3.12). Consumer Staples lost ground as a cautious FY06 outlook from Altria (MO 72.34 -1.57) overshadowed a strong report from Archer Daniels Midland (ADM 31.50 +2.76) which has sent ADM shares to a historic high.

Materials, though, held onto a modest gain as strength in gold, steel and an analyst upgrade on Alcoa (AA 31.50 +0.97) help offset a 64% drop in Q4 profits from Phelps Dodge (PD 160.50 -1.60), a suggested holding in our active portfolio which had rebounded of late as copper prices continued to hit historic highs. Health Care also clung to a slight gain, as strength in HMOs, ahead of President Bush's State of the Union address, barely offset losses in the drug group, as Merck's (MRK 34.50 +0.04) better than expected report lost momentum into the close.

Separately, consumer confidence in January rose a stronger than expected 106.3, the highest level since mid 2002, but since the data don't correlate well with spending trends, the report was largely dismissed ahead the FOMC's wording. Jan. Chicago PMI checked in at 58.5, slightly below forecasts and a Dec. read of 61.5, but was overshadowed in anticipation of tomorrow's more influential national ISM manufacturing index. Also, a 0.8% rise in the Q4 employment cost index was also overlooked in favor of seeing how the text of the policy directive would set the table for Ben Bernanke, as he steps in as the new Fed Chairman tomorrow.
NYSE Adv/Dec 1758/1534...Nasdaq Adv/Dec 1636/1411