Irrational exuberance redux.

The Federal Reserve

, it appears, is worrying about the economy's pace again, and perhaps has again been swayed by fears that an asset bubble is developing.

The Wall Street Journal

says that the Fed moved to a tightening bias at its March 31 meeting.

Such a media leak is rare, and since the Fed usually uses

The Washington Post's

John Berry to telegraph its mind to the market, there is a degree of skepticism out there.

"We haven't had something like this in a while," says Mike Cloherty, senior market economist at

Credit Suisse First Boston

. "It hasn't happened in the past couple of years."

Any doubt on this one is misplaced, though, says Cloherty. The

Journal's

report rings true.

"It's going to be very interesting to watch the equity markets today," he adds.

In case you were wondering, that's the Chinese interesting.

The market's turn for the worse has prompted Ralph Acampora,

Prudential Securities'

chief technical analyst, to change his near-term market outlook to negative.

"The market is overextended," he says. "You have a justified concern on interest rates. The market has not been that exciting -- the breadth has been deteriorating over the last couple of days. You put it all together, it spells a nasty correction." Acampora says that stocks could pull back 5% to 10% before they find their feet.

The market is headed for a sharp dropoff at the open. At 9 a.m. EDT, the

S&P 500

futures are off 16.30, indicating an ugly open. They closed even below fair value on Friday, so things are actually a tad worse than they look. It looks like the selloff that so many on Wall Street have hoped for has finally come.

The Treasury market is off sharply, with the yield on the long bond above 6% for the first time since early March. The 30-year Treasury bond is off 1 13/32 at 101 6/32, lifting the yield to 6.04%

After mulling the details of the government's latest economic stimulus package over the weekend, Japanese investors decided that they didn't like what they saw. Though the package

does

include more fiscal spending than originally thought, it doesn't address the structural problems that beset Japan. If Japan's economy is in crisis, its policy makers still aren't acting like it.

The

Nikkei

dropped 361.29 to close at 15,649.95.

In Hong Kong, where the market watches the Fed closely, today's

Journal

report sparked heavy selling. The

TST Recommends

Hang Seng

dropped 286.22 to 10,593.71.

German stocks fell. The

Dax

slipped 56.14 to 5789.60.

With the U.S. open looking grim, London stocks are taking it on the chin. The

FTSE

is off 117.3 at 5746.6.

Cincinnati Bell

(CSN)

announced that it is spinning off its billing and customer-management businesses into a separate subsidiary, dubbed

Convergys

.

Times Mirror

(TMC)

is selling

Matthew Bender & Co.

to U.K.-based

Reed Elsevier

for $1.65 billion.

Mellon Bank's

(MEL)

board rejected

Bank of New York's

(BK) - Get Report

$24 billion takeover offer yesterday. Bank of New York says that though it will not launch a hostile bid for Mellon, it will take its case to Mellon's shareholders.

Harnischfeger

(HPH)

announced this morning that it has "discovered cost overruns and possible accounting irregularities in its Beloit Corporation subsidiary limited to four large, ongoing projects in Indonesia." The company estimates that it will take an extra $100 million charge.