Stocks Setting Up to Bounce - TheStreet

It looks as if stocks are setting up for a bounce off yesterday's very

weak finish.

The market: Join the discussion on

TSC

Message Boards. At 9:10 a.m. EST, the

S&P 500

futures were up 3.9. That's close to 4 points above fair value and indicates some strength at the open. The

Nasdaq 100

futures, meanwhile, were up 35.55 to 4012.05, a good sign for tech.

There's no doubt that investors have a deeply ingrained willingness to buy on weakness. But it will take courage to trust an early rebound from a selloff as broad and deep as we saw yesterday. The market may be a touch less volatile than it was a month ago, but it remains just as difficult to read on an intraday basis.

"The market's a little jittery right now," said Phil Marber, head trader at

Cantor Fitzgerald

. That's an understatement if ever there were one.

Take the macro issues of earnings and interest rates. If one wanted to reduce the myriad factors affecting the stock market down to just two, it would be those. Strong earnings and falling interest rates will cause multiples to expand, while weak earnings and rising interest rates will force contraction. And in an environment marked by strong earnings yet rising interest rates -- an environment stocks have become very familiar with -- multiples will do little of anything, much as they have in the broad, nontech market for so long. The S&P 500 hasn't budged since last July.

Earnings remain strong, as the generally outstanding set of fourth-quarter reports will attest. But the recent, wacky action in the bond market has made the second half of the equation a lot tougher to game.

It's no secret that the prospect of a shrinking supply of 30-year bonds as the Treasury moves to pay down debt has been keeping long-term yields lower than they otherwise might have been. It's also no secret that the five-year and 10-year notes have become better indicators of bond-market sentiment. Nor is it any secret that that sentiment is notably more negative than the artificially low yields on the long bond have been suggesting.

Still, throughout it all, many stock-market participants have shown few reservations about interpreting the 30-year Treasury's outperformance as a sign of the long-term sustainability of benign inflation. They may be right, but the past week's reversal of the long bond's rally may be making more than a few traders do a double-take (if not a spit take) on that theory.

The bottom line is that the stock market will have a tough time finding its feet until the bond market does.

The 30-year Treasury has moved around moodily ahead of the Treasury's auction of long bonds. Having gained about a half-point earlier in the morning, the bond was lately up just 3 ticks to 97 17/32, putting its yield at 6.308%. Meanwhile, the 10-year note unchanged at 99 13/32 and yielding 6.582%, while the five-year note was down 1/32 to 96 17/32, yielding 6.736%.

Nasdaq heavyweight

MCI WorldCom

(WCOM)

is out this morning with upside earnings.

Dell

(DELL) - Get Report

is scheduled to report after the close.

The large European indices were mixed in early afternoon trading. The Paris

CAC

was off 35.77 to 6235.83, while Frankfurt's

Xetra Dax

was up 18.79 to 7647.90. London's

FTSE

, meanwhile, was 24.8 lower to 6290.6.

The euro was trading at $0.9864.

Asian markets were generally lower overnight.

In Tokyo, the

Nikkei

dipped back below the key 20,000 level, losing 297.75, or 1.5%, to 19,710.02.

Sony

(SNE) - Get Report

lost 2.9% amid chatter that the March release of its PlayStation2 game console could be delayed. The

Yomiuri Shimbun

today reported that the PlayStation2 might have problems in running existing PlayStation game software.

The dollar bobbed around 108.56 yen in lethargic trading, with resistance pegged at 110.00 yen. The greenback was lately trading at 108.77 yen.

Tokyo markets are closed tomorrow for a national holiday.

Hong Kong managed to avoid a big selloff despite

yesterday's huge gains and the downdraft on Wall Street, the

Hang Seng

rising 25.71 to 16845.17.

Tomorrow the

Hong Kong Association of Banks

is expected to hike bank deposit rates by 25 basis points to 4.0%, matching the move by the

Fed

earlier this month.

Singapore's

Straits Times

index was down 2.02 to 2225.30, while Korea's

Kospi

fell 9.87, or 1.0%, to 966.18.

For a look at stocks in the preopen news, see Stocks to Watch, published separately.