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Market Close: Fed policy change chills Wall Street

The Dow Jones industrial average fell 16 points to 10,836.95 Tuesday after the Federal Reserve Board said it would leave interest rates unchanged for now but adopted a tightening bias going forward. The Nasdaq closed off 3 points to 2,558.35.

While the announcement came as little surprise to Wall Street, the news did erode an early 80-point gain.

"The countdown is really on for a future tightening move by the Fed," said David Jones, chief economist at Aubrey G. Lanston & Co. "It is no longer a matter of whether they will tighten, but when."

Technology investors took the news in stride Tuesday.

Hewlett-Packard Co. (HWP) shot up 7 1/4 to 96 after the company topped second quarter expectations.

Dell Computer Corp. (DELL), which reports after the bell, gained 13/16 to 44 1/16. Compaq Computer Corp. (CPQ) added 1/4 to 26 1/4 while Gateway Inc. (GTW) and Apple Computer Inc. (AAPL) rose 5/16 and 7/8 a share, respectively.

IBM Corp. (IBM) picked up 3/4 to 238 1/4 and Advanced Micro Devices Inc. (AMD) closed up 1/2 to 19 3/8. Intel Corp. (INTC) fell 9/16 to 58 7/8.

Amazon.com Inc. (AMZN) lost 5 to 132 5/8 after buying a 35 percent interest in Homegrocer.com for $42.5 million. Books-a-Million Inc. (BAMM) added 1 29/32 to 10 5/8 after the bookseller cut its prices on NYT best sellers 55 percent, and trimmed prices on other books as well.

America Online Inc. (AOL) dropped 1 to 135 1/8. Excite Inc. (XCIT) fell 1 7/16 to 154 3/16 and Yahoo! Inc. (YHOO) plunged 5 to 156 13/16. Lycos Inc. (LCOS) added 4 7/16 to 112 15/16 ahead of its earnings report.

Redback Networks Inc. (Nasdaq: RBAK) stormed up 61 1/8 to 84 1/8 in itsinitial public offering.

Qualcomm Inc. (QCOM) closed off 5 9/16 to 103 3/16 after saying it would meet or exceed third quarter estimates in response to concerns about the company's Korean business.