Don't Know Why, There's No Sun Up in the Sky, Gloomy Trading

It didn't take long for investors' early cheer to slip away this morning.

Fueled by some decent action overseas and a jump in futures prices during the overnight session, stocks jumped into the positive column at the opening bell this morning. But that foray into the green turned out to be brief, and by midmorning all the major indices had turned lower. Breadth has been negative -- particularly on the Nasdaq Stock Market -- and volume tepid. All in all a gloomy day.

Major Indices INDEX CHANGE % VALUE Dow -18.03 -0.17% 10,632.09 S&P 500 -4.34 -0.30% 1461.29 Nasdaq -74.60 -1.93% 3800.20 Russell 2000 -10.04 -1.92% 513.02 TSC Internet -29.00 -3.05% 919.6 NOTE CHANGE PRICE YIELD 10-Year Treasury +6/32 102 27/32 6.107%

Traders, however, were holding off on donning sackcloth.

"We're kind of in a trading range, and it looks like we're going to stay in that range for the next day or so," said Todd Clark, head of listed trading at W.R. Hambrecht. "That's really pretty decent action, since we haven't given back too much of the gain" from the rally two weeks ago.

With a raft of key economic reports due later this week, Clark expects that the market will break out of its range, heading higher if the data comes in well, retesting the lows if it doesn't.

The report everybody is focusing on the most is the May Consumer Price Index , due out on Wednesday. If the key inflation report comes in well, Wall Street economists reckon the Federal Open Market Committee will hold off on raising rates at its meeting June 27 and 28. (Most expect that the Fed will have to raise rates at later meetings, however.)

"If these numbers are weaker, that will be a positive," said Peter Boockvar, equity strategist at Miller Tabak. "On the other hand, the market is getting concerned about pre-announcements."

We're in the period when companies whose earnings are not up to snuff start confessing their sins to investors. The latest is Citrix (CTXS), which said today that its second-quarter will come in well below analyst forecasts. The company has shed 44.2%. This follows warnings last week from Procter & Gamble (PG), (EDS) and McDonald's (MCD).

Investors are worried that, with the Fed working to slow the economy, there may be more company warnings. It also seems likely that when earnings are reported, even companies that have done well so far will be less optimistic about future earnings prospects.

"I think the message on earnings will be okay, but the growth in earnings will be slower than it had been," said Doug Cliggott, equity strategist at J.P. Morgan. He remains cautious on the market and recommends an overweight in just two groups -- energy and consumer staples -- on the theory that these sectors are showing the best relative earnings growth and will continue to do well in a slowing economy.

Past the lunch whistle, the Dow Jones Industrial Average was off 1 to 10,613, while the broader S&P 500 was down 4, or 0.28%, to 1453.

The tech-heavy Nasdaq Composite was down 74.60, or 1.93%, to 3800.20.

And TheStreet.com Internet Sector Index was down 32.25, or 3.5%, to 915.6.

There were some bright spots. Financial stocks were doing better, rebounding from a bad day on Friday. The Philadelphia Stock Exchange/KBW Bank Index was up 8.24, or 1%, to 830. Dow component J.P. Morgan (JPM), up 1.9%, was one of the best performers there.

With crude up a $1.18 to $31.38 a barrel, energy stocks were also doing well. The Amex Oil & Gas Index was up 13.43, or 2.6%, to 540.4. The Philadelphia Stock Exchange Oil Service Index was up, or 4.6%, to 121.3.

The 10-year Treasury was up 6/32 to 102 27/32, dropping its yield to 6.104%.

Market Internals

New York Stock Exchange: 1,357 advancers, 1,391 decliners, 418 million shares. 48 new 52-week highs, 28 new lows.

Nasdaq Stock Market: 1,372 advancers, 2,439 decliners, 723 million shares. 61 new highs, 44 new lows.

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