Light Volume, Selling Bias Leaves Many on Market's Sidelines

Even the morning's green upticks weren't immune to the vagaries of light volume, which has become a tell-tale sign that investors are preparing for another fed funds rate hike.

Wall Street insiders have made it clear that they will stay parked behind the starting line until Greenspan gives the green flag. So, without any new economic data out today, what sparked this morning's pseudo rally?

Major Indices INDEX CHANGE % VALUE Dow -32.04 -0.3% 10,390.23 S&P 500 -9.49 -0.7% 1364.37 Nasdaq -108.66 -3.4% 3055.89 Russell 2000 -14.91 -3.3% 444.10 TSC Internet -41.32 -6.1% 717.12 NOTE CHANGE PRICE YIELD 10-Year Treasury -6/32 100 1/32 6.454%

With tech analysis out the window after yesterday's resistance level break through, some are looking back to find a way to muddle through the future market madness. "Some high P/E Nasdaq companies dropped below their 200-day moving average or trend lines," said Jack Ablin, managing director at Colonial Asset Management , referring to how investors were relying on technical analysis to plot there investment strategy. "But I think people are using near-term history as their guide now."

Lately, the Nasdaq was off 109, or 3.4%, to 3056. The index has currently lost 37.3% from its March 10 high.

In Nasdaq trading, Costco(COST Quote) shares had the "For Sale" sign hanging from them after the retailer warned investors that it would miss analyst expectations for the fourth quarter and fiscal 2001. Wall Street firms including Morgan Stanley, downgraded the stock. Costco was falling 10 9/16, or 25.9%, to 30 1/8.

The S&P Retail Index was skidding 52, or 5.9%, to 840. Wal-Mart(WMT Quote), was discounted almost 5%, Home Depot(HD Quote) was down more than 11%.

Elsewhere in tech land, TheStreet.com Internet index stumbled 41, or 6.1%, to 713, with BroadVision(BVSN Quote) losing almost 10%.

The Philadelphia Stock Exchange Semiconductor Index, down 34.9, or 3.9%, to 836, continued to suffer losses, with Advanced Micro Devices(AMD Quote) dumping over 7.2%.

But with a lack of participation making volume much lighter than what was seen during last-year's record-breaking highs, the bumps and bounces in today's session are anything but usual. "It's not a surprise, with everything oversold," said Art Hogan, chief investment strategist at Jefferies, commenting on today's early morning rally. "But I'd like to see more volume. Everything that happens gets very exaggerated." Hogan noted that yesterday's 200-point, intra-day drop in the Nasdaq, considering recent volume, is less significant than if it were to happen during a session with heavy volume.

Lately the Dow Jones Industrial Average was declining 32, or 0.3%, to 10,390. Despite strength from its cyclicals, like Coca-Cola (KO Quote) and 3M(MMM Quote), weakness from two of its tech components IBM (IBM Quote)and Hewlett-Packard (HWP Quote), was shaving 40 points off of the old economy index.

One sector that has managed to dodge the Fed's bullet has been the interest rate sensitive financials, which typically underperform in higher rate environments. "Financials have been bucking the trend," said Patrick Boyle, director of trading at Credit Suisse First Boston, who trades financials. "The group as a whole is pretty cheap down here. Investors having been taking money out of tech and putting it to work in this sector."

Although the American Stock Exchange Broker/Dealer Index is currently down 12.8, or 2.9%, to 428, Lehman Brothers(LEH Quote) -- who recently acquired Robby Stephens' tech analyst Dan Niles -- was still in the green, along with PaineWebber (PWJ Quote).

The American Stock Exchange Airline Index, was still flying high, up 15.2, or 10.4%, to 161. The index was fueled after UAL(UAL Quote), parent to United Airlines said that it has agreed to acquire US Airways (U Quote) for about $4.3 billion in cash. For more on that story, take a look at TheStreet.com/NYTimes.com's joint newsroom.

The hope for a benign GDP number tomorrow just wasn't enough to keep the bids coming, as the early morning rally turned into an afternoon selloff. "There is little resistance offered in the market," said James Maguire, Jr., managing director at LaBranche . "If sellers come in, the buyers back away...we'll probably continue to see this until the Fed sounds the all clear bell."

Market Internals

Breadth was negative on both the NYSE and the Nasdaq on moderately light volume.

New York Stock Exchange: 1,065 advancers, 1,758 decliners, 686 million shares. 29 new 52-week highs, 90 new lows.

Nasdaq Stock Market: 849 advancers, 3,092 decliners, 1.242 billion shares. 8 new highs, 331 new lows.