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At the end of the story Squeaky and Gretchen smile at each other as a sign of mutual respect. Both girls recognize in each other an opponent worthy of respect. Squeaky realizes that Gretchen is just as serious about running as she is and appreciates this. It also shows the awakening and growth of Squeaky as a character; up to this point in the story she remains unchanged (flat character).
Squeaky and Gretchen smile at each other at the end of the race because by now they both respect each other. Also Squeaky realizes that Gretchen also tries her best at running and is just as serious.
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