Dow Down, Comp Up at Midday

Blue chip stocks were leading the way down at midday, with the Dow Jones Industrial Average down 109.25 to 10,605.57. Technology stocks were putting up a brave struggle, with the Nasdaq Composite Index edging up 27.06 to 3872.80. The S&P 500 was also lower, down 5.94 to 1472.79, while the Russell 2000 was taking a cue from the Comp in its efforts to stay afloat, lately 0.84 to 513.06.

Major Indices INDEX CHANGE % VALUE Dow 109.25 -1.02 % 10,605.57 S&P 500 -5.92 -0.40% 1472.79 Nasdaq +27.06 +0.70% 3872.80 Russell 2000 +0.84 +0.16% 513.06 TSC Internet +4.3 +0.48% 900.30 NOTE CHANGE PRICE YIELD 10-Year Treasury +13/32 103 23/32 5.986%

"The market is being led lower by financials," said Ray Hawkins, vice president of block trading at J.P. Morgan, speculating that money could be flowing from financial stocks to technology given the relatively better behavior of the Comp. Hawkins also attributed the decent volume to an options expiration today. "There is not a ton of customer business. There are some buyers in tech and sellers in financials and nothing in between," he said.

But that didn't stop investors from reading between the lines where earnings outlooks were concerned. Xerox (XRX) stirred things up with a warning it will miss second-quarter earnings expectations, because of slower sales of high-end printer products and significant unexpected provisions in its $400 million-a-year business in Mexico. The stock was lately shedding 16.8%.

In addition to earnings nervousness, investors may also be spooked by today's "triple-witching," the simultaneous expiration of index futures, index options, and selected stock options, but Jim Benning, a trader at BT Brokerage, said any sharp swings caused by the expirations would be short-lived.

"The effects of triple-witching always reverse themselves the next morning anyway, so anything weird that happens today will turn around on Monday," he said.

Futures and options expirations, which expire in the morning and afternoon, respectively, tend to boost market volatility as institutions roll over their quarterly contracts. The September contract started trading last Thursday, but the market can pop quickly in either direction on the last day of expiration.

Friendly housing starts and consumer sentiment numbers earlier this morning weren't giving any fuel to this market.

"After recent data, these numbers weren't so surprising, that's why they didn't have a lot of impact," said Benning.

With some pretty cool numbers in recent weeks, the market continued to weigh the likelihood that interest rates will stay put at the Fed's June 28 meeting against fears that an economic slowdown will bite into earnings.

Falling financials included Dow components American Express (AXP) off 5.5% and J.P. Morgan (JPM) down 3.8%. The American Stock Exchange Broker/Dealer Index was down 5.5%.

There are a number of hot little stocks this morning, including Qualcomm(QCOM), brokerage Lehman Brothers(LEH), Rambus(RMBS) and Red Hat(RHAT).

Qualcomm was rebounding this morning after tumbling yesterday and the stock was recently up 4 9/16, or 7.4%, to 66. Yesterday, Chase Hambrecht & Quist downgraded the company's earnings estimates.

TheStreet.com took a look at what happened to this former highflier in a story yesterday. We also looked at the analyst who thought the stock was going to the moon just six months ago. And another of our reports checked out how heavily mutual funds are invested in the stock.

That's a lot of Qualcomm!

Rambus was soaring after Morgan Stanley Dean Witter raised it to strong buy from outperform. The stock was up 28, to 50%, to 84.

Lehman Brothers lifted 1 1/8 to 90 5/8 after it rolled out second-quarter earnings far above forecasts of $2.78 per share, versus the Reuters consensus estimate of $2.49 per share and the previous quarter's $2.09 per share.

Circuit City(CC), meanwhile, was down 1 3/8 to 36 after announcing this morning it met first-quarter earnings estimates.

TheStreet.com recently wrote about the quarter's corporate earnings and the Fed's interest rate plans.

Bonds/Economy

Treasuries leapt higher after the 8:30 a.m. EDT release of the May housing starts report, which was significantly weaker than expected.

The bond market is hungry for indications of slowing economic activity because of the possibility that continued above-trend growth will lead to higher inflation, which hurts bond prices.

In addition to the lower-than-expected number of housing starts (1.592 million, the lowest since June 1999, vs. a consensus forecast of 1.624 million), building-permit issuance, a predictor of future housing starts, also fell sharply. The May permit-issuance pace of 1.492 million was the lowest since December 1997.

The benchmark 10-year Treasury note was lately up TK at TK, dropping its yield to TK.

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International

European markets were sluggish and mixed at midsession, with only London gaining ground.

The Paris CAC was down 56.72, or 0.8%, to 6456.26, while Frankfurt's Xetra Dax was down 65.41, or 0.9%, to 7623.21.

Across the channel, London's FTSE was up 22.8, or 0.32%, to 6511.6.

The euro was lately trading back up at $0.9643.

Asian markets were mixed overnight.

Hong Kong's Hang Seng index continued to rise on optimism about a comeback in real estate prices and closed up 354.04, or 2.20%, to 16,434.38.

In Tokyo trading, the Nikkei 225 index continued to slide, off 20.39, or 0.12%, to 16,318.31.

The greenback was recently fetching 106.25 yen.

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