So much for that 100-point gain being the start of something on the upside. Technology stocks did a U-turn after yesterday's rally, getting sideswiped along the way.

The Nasdaq closed down 81.47, or 2.2%, at 3685.5, erasing most of yesterday's 104-point gain.

TheStreet.com Internet Sector

index closed down 23.19, or 3.2%, at 703.17, after gaining 27 points yesterday. There was no catalyst for the selloff other than shorts taking advantage of yesterday's gains to regain momentum. Light volume made their job a little easier. Weakness in chip stocks weighed on the rest of the tech sector.

There was some late excitement in an otherwise dull day.

Exodus Communications

(EXDS)

closed up 1 1/2, or 3.4%, at 45 15/16.

CNBC's

David Faber reported and attempted to refute rumors that Exodus could be taken over by

Global Crossing

(GBLX)

.

Faber said the rumors stemmed from talk that Exodus had pulled out of a

Piper Jaffray

telecom conference slated for later this week. Faber concluded by saying that his sources said a takeover of Exodus by Global Crossing was "highly unlikely." Exodus traded to around 49 as

CNBC

teased the story, but dropped after Faber dissed the rumor.

Digex

(DIGX)

, which like Exodus also does Web hosting, also fed off the rumor, closing up 8 1/4, or 13%, at 71 5/16.

There were a couple of other notable movers in the sector.

priceline.com

(PCLN)

closed up 1 5/16, or 5.6%, at 24 15/16, though that was off of a session high of 26 5/8. Gains came on news that

Liberty Media

(LMG.A)

and

Vulcan Ventures

bought the rights to purchase stock in priceline worth $190 million.

On the downside,

Barnes & Noble.com

(BNBN)

closed down 31/32, not much except when you consider that left it at 4 5/32 -- so the loss was a tidy 19%. Losses came after the

company missed quarterly estimates.

Finally,

America Online

(AOL)

closed down 11/16, or 1.3%, at 52 9/16. The company said it was lowering the price range of the initial public offering of

AOL Latin America

, due to dampened investor enthusiasm. The company is to go to market at the end of this week or the beginning of next week. The issue of 25 million shares is now priced at $8 to $10, from $15 to $17.

2:18 P.M.: What's a Tech Investor to Think?

The tech sector has been unable to follow through on yesterday's bounce, but stock sellers haven't been able to seize the day either. The

Nasdaq Composite Index has essentially held flat all day, lately trading down 35.5, or 0.94%, to 3731.4.

This morning's

Purchasing Managers' Index helped lift Treasuries, though not enough to provide much of a boost for stocks. A fundamentalist will tell you that the market will key off Friday's employment report. The report could go a long way toward determining whether the

Federal Reserve raises interest rates when it meets later this month.

Friendly numbers in the jobs report would likely tilt the scales toward a steady Fed policy, thus giving the stock market a catalyst to rally into the meeting that will take place on Aug. 22. It still must get through a plethora of initial public offerings and secondary offernigs this week, along with the inevitable fear that comes ahead of an employment report.

Our friends the technical analysts provide more concrete numbers for investors to consider.

While impressed with the volume and breadth of yesterday's rally, Dick Dickson, technical analyst with

Scott & Stringfellow

notes that, so far, nothing has happened to indicate a reversal of the downtrend that has dominated market action over the past two weeks. He indicates that to accomplish anything other than a short-term rally, the Nasdaq will need to clear the 4300 level, which was the high index reached on July 17. But he notes that a trade above 4300 appears unlikely and instead expects to see lower prices over the next couple of months.

Dickson's sentiment was somewhat shared by Steve Frenkel when we spoke to him last

week. Frenkel's 3583 target for the Nasdaq was reached yesterday when it traded as low as 3616. Okay, the numbers aren't exact, but remember this is not an exact science.

Frenkel expects a bounce back to the 4000 level, where he would then go short, targeting 2780 by October.

John Roque, vice president at

Arnhold and S. Bleichroeder

, says the current correction is the real thing. He lists a couple of reasons why he doesn't see a bottom forming yet. Roque notes that there has been no surge in volume, despite the correction in the Nasdaq. Bottoms usually form when volumes soar, leading investors to capitulate.

But instead of focusing just on Nasdaq volume, Roque also looked at the

Nasdaq 100 Unit Trust

(QQQ) - Get Report

, known as QQQ. He notes that there has been a pickup in volume on the Qs, so perhaps investors are using the Qs to hedge their long bets. He said that volume for the Q's rose sharply on Friday to 36.5 million shares, which was the highest level since the May 24 bottom and suggests a bounce-- as the market had yesterday.

"Stocks have not yet begun to ignore bad news or respond favorably to good news," he writes. "Though earnings have generally been good over the last few weeks stocks have not enjoyed the fruits of the companies successes. We can understand stocks going down on bad earnings news, but when stocks go down on good earnings news we get concerned. Until stocks begin to ignore bad news and respond favorably to good news this correction is for real and not a caricature."

Roque says that a close under support at 3400 would set up a retest of the May 24 low at 3043. He sees resistance at 3842, 3954, and 4000. Resistance levels are key upside barriers targeted by technical analysts.

10:36 a.m.: Tech Treading Water After Week's First Spate of Data

If this is how August is going to go, we all might want to close shop and head for the beach.

Technology stocks were little changed early on as the market digested this morning's

National Association of Purchasing Manager's

index. The

Nasdaq was down 46 to 3721, while

TheStreet.com Internet Sector

index was down 11 to 715.

One of this morning's best performer was

priceline.com

(PCLN)

, up 7.9%. Gains came on news that

Liberty Media

(LMGa)

and

Vulcan Ventures

bought the rights to purchase $190 million of the company's stock.

The forward contract entitles Liberty and Vulcan Ventures to take title to 8 million priceline.com shares no earlier than August 1, 2001 and no later than August 1, 2002. priceline founder Jay Walker said he intends to use approximately $125 million of the proceeds of the transaction to participate in the third financing round of

WebHouse Club

, priceline's grocery and gas service.

Earnings, or losses as the case usually is with new economy stocks, continued to trickle in. Among the notable movers,

Barnes & Noble.com

(BNBN)

was down 17.1% after missing

estimates.

This morning,

Goldman Sachs

downgraded Barnes & Noble.com to market performer from market outperformer. It was the second downgrade in the past week for analyst Anthony Noto, who also downgraded his pet stuffed animal

eToys

(ETYS)

last week. Goldman helped bring Barnes & Noble.com public last year.

"While most e-Tailers reported top line softness as we had anticipated, they demonstrated effective cost controls," Noto wrote in a note on the downgrade. "It appears that BNBN's management had limited opportunities to cut discretionary spending as most of its costs in marketing are more fixed than other e-Tailers."

Barnes & Noble.com reported a 27-cent loss for its second quarter, missing the

First Call/Thomson Financial

estimate of an 18-cent loss. The online bookseller said it still expects to turn a profit within two years.

Among other movers,

Liquid Audio

(LQID)

was down 11.5% despite besting estimates. The manufacturer of software to deliver music over the Internet posted a second-quarter loss of 35 cents a share, beating the 40-cent loss estimate.

Finally,

SG Cowen

was pumping up

BroadVision

(BVSN) - Get Report

, noting that the company is having an analysts' meeting on Wednesday that could give the stock a lift. It was off 2.8% today.