NEW YORK (CNN/Money) - A signal from the Federal Reserve that interest rates could go higher in the months ahead appeared to unnerve investors early Wednesday, a day after U.S. central bankers took a more upbeat assessment on the economy.

Early indications point to a lower open for the major stock indexes.

The latest government data fueled speculation that borrowing costs won't go any lower. Housing starts rose to an annual level of 1.77 million units in February, the government said, well above expectations of economists, who were looking for a decline.

Fed policy makers did what they were expected to do Tuesday, leaving interest rates alone while shifting their stance on the economy to neutral from wariness about weakness. A statement that the economy is expanding at a "significant pace" signals that rates may be going up later this year.

Bruce Steinberg, economist at Merrill Lynch, expects the Fed to raise rates in June or August, something it hasn't done since May 2000.

"If the unemployment rate backs up again, which we believe is likely, the Fed will probably wait," Steinberg told clients. "If the unemployment rate remains at its current level or decreases, the Fed is likely to tighten sooner."

Besides the Fed, investors also get to mull the latest developments in the Hewlett-Packard/Compaq Computer merger. HP management claimed Tuesday that it appeared to have won the shareholder vote to approve the deal, but dissident shareholder Walter Hewlett -- the son of a company co-founder -- refused to concede.

HP (HWP: Research, Estimates) shares lost 6 percent in European trading Wednesday after falling 45 cents to $18.80 in U.S. trading Tuesday. Compaq (CPQ: Research, Estimates), whose shareholders vote Wednesday, jumped 8 percent on the Continent after adding 78 cents to $11.14 Tuesday in the U.S.

The Dow Jones industrial average starts at 10,635.25, its highest close since June 21, after gaining 57.50 Tuesday. The Nasdaq composite index is at 1,880.87, having added 4 points, while the Standard & Poor's 500 index begins at 1,170.29, following an advance of 5 points.

Asian markets were mixed Wednesday, with Tokyo's Nikkei index closing 2.3 percent lower. European bourses fell in early trading.

Treasury prices were little changed in early trading, with the 10-year note yield slipping to 5.28 percent from Tuesday's 5.29 percent. The dollar gained against the euro but weakened versus the yen. Brent oil futures fell 4 cents to $24.87 a barrel in London.

Intel (INTC: Research, Estimates) lost $1.07 to $30.65 early Wednesday. Salomon Smith Barney trimmed its second-quarter sales forecasts for the chip maker to $6.7 billion from $6.9 billion.

Shares of Mercury Computer Systems (MRCY: Research, Estimates) tumbled $6.78 to $28.25 before hours Wednesday after cutting third-quarter profit guidance.

Genesis Microchip (GNSS: Research, Estimates) fell $1.92 to $27.40 early Wednesday after saying chief financial officer Pete Mangan has decided to leave the company to pursue other interests.

FedEx (FDX: Research, Estimates) Wednesdayreported profit of 39 cents a share for the latest quarter, above last year's 37 cents and forecasts for no change. Shares of the delivery company gained 3 cents to $57.73.

Bear Stearns (BSC: Research, Estimates) bucked the down trend in the brokerage business, reporting that profit rose in its first quarter, lifted by a 61 percent surge in bond underwriting sales. Bear Stearns' shares rose $1.15 to $63.15 Tuesday.

Lehman Brothers Holdings (LEH: Research, Estimates) reported lower first-quarter earnings that nevertheless topped forecasts. Its shares gained $1.68 to $66.23 Tuesday.