Market Close: Fed policy change chills Wall Street

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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.