Tech Starting to Act Its Altitude

Financial markets have a funny way of confounding expectations, as demonstrated again on Wednesday. Late Tuesday, "everybody" knew stocks would soar in reaction to solid postclose earnings from Intel (INTC Quote - Cramer on INTC - Stock Picks), while the Treasury market was deemed toxic.

Initially, that scenario appeared on track, as stocks rallied early while Treasury prices plummeted again, sending yields on the benchmark 10-year note to nearly 4.10%, its highest level since March 21. But those trends didn't last long, and major averages spent most of the day in modestly negative territory, while Treasury prices rebounded sharply from their early shellacking.

After trading as high as 9153.42, the Dow Jones Industrial Average closed down 0.4% to 9094.59. The S&P 500 shed 0.6% to 994.09 vs. its intraday best of 1003.47, while the Nasdaq Composite slid 0.3% to 1747.97 after trading as high as 1767.90.

Wednesday marked the third straight session stock proxies have been unable to sustain early gains. Furthermore, Wednesday's early rally lasted the shortest amount of time -- barely 30 minutes -- and the intraday highs for major averages were the lowest of the week, thus far. Finally, market internals were the week's worst, with declining stocks besting advancing issues 23 to 9 in Big Board trading and 18 to 13 in over-the-counter activity. At 1.5 billion and 1.8 billion shares, respectively, volume was quite solid on this mildly negative session.

Recent action has generated some discussion about whether the postwar rally has (finally) peaked or is merely taking a respite. Little that occurred Wednesday provided clear evidence for either outcome, although the debate will certainly intensify if the decline accelerates.

News after the close from IBM (IBM Quote - Cramer on IBM - Stock Picks), whose second-quarter results were a penny shy of consensus estimates, could facilitate more weakness Thursday, at least in the early going.

The Semi-Logical Song

Commonly cited reasons for the stock market's setback included renewed concerns about North Korea's nuclear ambitions, as well as Federal Reserve Chairman Alan Greenspan's warning that "substantial and excessive" federal budget deficits will curtail economic growth over time. (All in all, though, day two of Greenspan's Congressional testimony was fairly uneventful.)