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To: jim kelley who wrote (157216)	5/16/2000 5:17:00 PM
From: Lee	Read Replies (1) \| Respond to of 176387

Hi Jim,..Re:.the 1/2 point rate increase and its effects on the market going forward???? I would have thought that a 0.5 point increase would be too much but when we look at the rate of change on the ECI, Unit Labor Cost and Consumption Chain Price Index maybe it's the right amount? stls.frb.org The only problem I have is in other tightening cycles, the Fed has typically overshot. However, according to Bill Gross at PIMCO, the treasury market isn't the key to possible recessionary activity any longer because of buybacks and refunding operations. The dealers and Fed now watch the swap market which still has a positively sloped yield curve so that says we aren't slowing to any dangerous levels anytime soon. <g> Also, when the Fed eased 3 times back in '98 because of the global economic crisis and then turned around and flooded the market with bucks because of Y2K fears, it seems they unleashed some powerful capital spending which can't be exactly cut off like a faucet. I'd guess from here out, they'll be carefully watching the data. I honestly don't know what the market effects would be but would guess that the more heavily debt laden companies would have to scale back on capital spending? Would depend on the return of further capital outlays. Do you think this will cause further divergence between the DOW types and the techs? Cheers, Lee