Cocky Market Crows In Record Results

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For a nest of gamblers, Wall Street can take a while to place its bets. But when it does... Nearly a full week after a tame inflation report made it apparent that the Fed would raise rates once, and just once, when it meets this Tuesday, the markets finally got used to the idea on Monday. The Dow came charging out of the gate to steam up more than 130 points, and after a midafternoon lull sprinted through the tape at 199.15 – well into record territory. And all this on the eve of a rate hike? Welcome to the "discount" rally. "It’s not so much whether Greenspan raises rates or not, it’s how sure they are that they know what he’s going to do," says TIME senior economics reporter Bernard Baumohl. "Right now they’re sure – they’ve discounted for the rate hike over the past few sessions, and today the rally was on."

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But that doesn’t necessarily mean that confidence will still be there at 2:15 p.m. (ET) Tuesday, when The Great Greenspan clears his throat. "There’s always that bit of uncertainty as the day draws near," Baumohl says. Come noon, along with the profit-taking from Monday to contend with, there’ll be plenty of investors who don’t feel quite as smart as they did the day before. No hike? Twice the hike? Rally? Sell-off? Stay out of it until Greenspan’s gospel (2:15 p.m.) is fully digested. For the record, the safe betting is on one quarter-point hike (come on, guys – when was the last time the Fed raised a half-point?) and then let things be for the rest of 1999. But you knew that already – we told you last week.