After the Rally: Stocks Resume Digestion

Broadly, the Dow Jones Industrial Average added 0.04% to close at 12,666.31, while the S&P 500 added 0.07% to close at 1448; the Nasdaq Composite added 0.04% to close at 2471.49.

"Without a catalyst, sideways is not surprising," says Art Hogan, chief market analyst at Jefferies & Co., lamenting the slow feeling so far this week. "The Cisco report is the only game in town," he quips.

Cisco's (CSCO Quote)postclose earnings bested expectations, and the report was initially welcomed by the market. Then traders sold the news in typical tech-earnings fashion. But the stock was recently up 4.8% in after-hours trading after the networking giant raised sales guidance for the third quarter.

Like a big do-over, the semiconductor sector reversed much of Monday's gains on Tuesday after National Semiconductor(NSM Quote) offered weak earnings guidance for 2007. National Semi slid 2.7% while the Philadelphia Semiconductor Sector Index fell 0.5% and the Merrill Lynch Semiconductor HOLDRs(SMH Quote) fell 0.7%.

Bucking the trend was graphics-chip maker Nvidia (NVDA Quote), which advanced 3.5% following a JPMorgan upgrade.

Topsy-Turvy Treasuries

The 10-year Treasury note rose 10/32 Tuesday, its yield falling to 4.76% in part because Treasury Secretary Henry Paulson forecast the economy is "transitioning from a period of above-trend growth to a more sustainable level of about 3% growth," in testimony for the House Ways and Means Committee.

Treasury yields have fallen sharply after approaching 5% last week ahead of Friday's jobs report, having gotten slightly "ahead of themselves" in worrying about rate hikes, says William Hornbarger, fixed-income strategist at A.G. Edwards.