Tech Stocks Get Rude Reawakening

Updated from 1:13 p.m. EST

SAN FRANCISCO -- Remember that distant memory of a week ago when tech stocks finished off a five-day rally of 10%, putting the awfulness of late November lows safely into the time capsule?

It was fun while it lasted.

On Wednesday, with the Nasdaq reeling by 3%, investors were forced to consider whether that confidence-inspiring high set on Jan. 6 may now instead stand for weeks -- or months -- to come.

The tech index is off 10% since its high on Jan. 6 -- goodbye, Santa Claus rally.

The early morning news flow didn't help, with an almost pre-ordained triplet of items that reminded traders that the main headwinds to a long-term upturn in stocks are still with us: 1) banks are not "back," and a return to stable liquidity isn't imminent; 2) consumers, whacked with declining home values and job losses, are pulling back; and 3) companies with precarious balance sheets will be hanging on for dear life.

Deutsche Bank(DB) took care of the first item, announcing that it expected to post a loss of 4.8 billion euros, or $6.4 billion, in the fourth quarter, due largely to charges related to cutting exposure to certain credit markets. The bank also said it slashed its dividend to boost its so-called Tier 1 capital ratio.

With that news weighing on shares in Europe and keeping premarket prices in the U.S. in check, the government announced that December retail sales fell 2.7% from a year ago (3.1% excluding auto sales), well below consensus analyst expectations for sales to drop only 1.2%.