Today's Market: Nasdaq Strong at Midday, While Dow Sags

Profit warnings were no match for oversold tech, as the Nasdaq rocked into rally mode. But the blue-chips were still burned by foreign currency concerns and rising raw material prices, as investors remain concerned about how they will dent companies' bottom line.

The song remains the same for the stock market. Both blue-chips and tech are struggling through a rocky earnings confession period, the dollar's strength against a weak euro and the rising price of oil. But conditions did look better for tech today, with semiconductors' wound beginning to heal, thanks to some bullish Wall Street comments.

Major Indices INDEX CHANGE % VALUE Dow 28.11 -0.26% 10,780.41 S&P 500 5.46 +0.39% 1450.11 Nasdaq 61.1 +1.64% 3787.6 Russell 2000 0.69 -0.13 % 515.91 TSC Internet 5.49 +0.71% 778.07 NOTE CHANGE PRICE YIELD 10-Year Treasury 2/32 99 5/32 5.861 %

Lately, the Nasdaq was bouncing 61.1 to 3787.6, with Intel(INTC Quote) climbing 5%, after Bear Stearns reiterated its strong buy rating on the semiconductor giant.

The Philadelphia Stock Exchange Semiconductor Index, which has slipped 17.5% since the start of September, snapped back 4%.

Meanwhile, the Dow Jones Industrial Average was heading south, off 28.11 to 10,780.41, with losses from big cyclical names like Alcoa(AA Quote). The company was sliding 5.5%, countering tech strength. The aluminum maker yesterday after the close said its third-quarter earnings would miss analyst expectations due to higher energy costs.

The Morgan Stanley Dean Witter Cyclical Index was off 1.6%, hitting a new intra-day trading low of 450.32.

"The dollar, oil and pre-announcement season are your three big themes. By the time earnings season comes, what's left is mostly good news, so getting through pre-announcement season may cause a rally," says Brian Conroy, head of listed trading at J.P. Morgan. But, Conroy said, with the weak Euro and the rising price of oil causing some bad earnings, we wouldn't see a sustained rally until those conditions improve. TheStreet.com recently wrote about soaring oil prices and earnings warnings .

And with crude oil futures continuing to tip north of $35 per barrel, third-quarter earnings might not be the only period that gets cliched by the high price of oil. " I think the focus has shifted to the price of oil, and that's what's been giving the market some concern," said James Maguire, managing director at LaBranche. "I think maybe it's starting to look beyond the third-quarter earnings, with concern that the rising price of oil may put a damper on earnings going forward."

The American Stock Exchange Oil & Gas Index was losing 1.6%, after hitting another all-time high yesterday. Texaco(TX Quote) was falling 2.5%, while British Petroleum (BP Quote)was off almost 2%.

The Philadelphia Stock Exchange Oil Service Index was also 1.3% lower, with Halliburton(HAL Quote) off 1.1%.

Elsewhere, the broad S&P 500 was climbing 5.46 to 1450.11, while the small cap Russell 2000 was falling back fractionally.

In other company news, financials were bouncing back, after Goldman Sachs(GS Quote) reported better-than-expected third-quarter earnings. The American Stock Exchange Broker/Dealer Index was up 1.6% to 654.06, after falling from its recent all-time high level of 708.76. J.P. Morgan's(JPM Quote) recent decision to combine with Chase (CMB Quote) quelled merger speculation, which had sent the index soaring more than 15% in the past three weeks.

"Goldman Sachs had a strong number, and they financial stocks have been buried lately, so people are trying to buy on the dip," said Patrick Boyle, director of trading at Credit Suisse First Boston. "Lehman Brothers (LEH Quote)is out tomorrow, and Morgan Stanley(MWD Quote) on Thursday, and people figure that they'll report strong numbers too. They were taken up too far too fast, so the stocks collapsed the last three days. "

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Market Internals

Breadth was negative on moderate volume.

New York Stock Exchange : 1,145 advancers, 1,489 decliners, 535 million shares. 36 new 52-week highs, 88 new lows.

Nasdaq Stock Market : 1,763 advancers, 1,851 decliners, 815 million shares. 36 new highs, 92 new lows.

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Most Active Stocks

NYSE Most Actives

• AT&T (T Quote): 10.0 million shares.

• Lucent (LU Quote): 9.4 million shares.

• Chase Manhattan Bank (CMB Quote): 9.2 million shares.

Nasdaq Most Actives

• Intel (INTC Quote): 32.5 million shares.

• Cisco (CSCO Quote): 27.8 million shares.

• Qualcomm (QCOM Quote): 22.8 million shares.

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Sector Watch

Telecom was heading higher, with the Nasdaq Telecom Index climbing 1.5%.

Biotech was also posting gains, with the Nasdaq Biotech Index 1.6% higher.

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Bonds/Economy

The trend that has taken hold in the Treasury market in the last week -- long-term yields rising, while short-term yields hold steady -- is on hold for today.

In the last several trading sessions, long-term Treasuries have fallen in price so much that the 30-year bond's yield finds itself higher than the 10- and five-year note yields for the first time since January. The shift has been driven mainly by the belief the Fed is unlikely to hike interest rates again this year.

But the shift was so sudden and violent that market participants are not surprised to see it pause for a day. After all, anyone who has simultaneously owned short-term Treasuries and been short long-term Treasuries over the last week was sitting on a fat profit, and could reasonably have been expected to close out those positions by selling the short-term issues and buying back the long-term ones.

The benchmark 10-year Treasury note lately was up 2/32 at 99 5/32, its yield 5.861%. But the 30-year Treasury snapped a three-session losing streak, and lately was about a quarter-point higher.

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International

European markets were narrowly mixed near break-even. Frankfurt stocks had turned just barely into the green .

The FTSE 100 was down 6399.50 to 6389.60.

Across the channel, the CAC 40 in Paris was down 2.86 to 6519.52, and the Xetra Dax in Frankfurt was up 9.55 to 6901.24.

The embattled euro was lately trading a hair higher at $0.8543.

Asian markets traded higher overnight.

A late-day rally in selected technology shares helped nudge key Japanese indices a hair higher today. But the buying continued to be countered by selling from institutional investors that shed blue-chips ahead of book closings for the fiscal first half.

The Nikkei 225 index rose 63.03 to close at 16,124.19.

Hong Kong's Hang Seng index rose 117.04 to close at 15,677.20, reversing the ugly 4% drop recorded yesterday. A bout of short-covering in the futures market, along with property shares rallying helped sentiment today. Cheung Kong rose HK$2.50, or 2.7%, to 94.25 ($12.09), while Sun Hung Kai Properties climbed 2.25, or 3.5%, to 66.75.

Korea's Kospi index declined for the ninth straight session, closing down 6.39, or 1.1%, at 571.17. Investors are still fleeing the market on worries over slowing corporate restructuring. Taiwan's TWSE index also fell 175.24, or 2.5%, to end at 6734.90.

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