Thanks to Abby, Market Set to Dive

News that Abby Joseph Cohen has reduced her recommended equities exposure has knocked the market on its ear.
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Stocks seemed to be having a pretty tough time figuring out what to do with themselves before

Goldman Sachs


Abby Joseph Cohen

showed up.

Cohen, generally regarded as one of the bull market's most emphatic supporters, has cut her recommended exposure to equities by 5 percentage points to 65%, in the process upping her exposure to cash by the same amount. Her balanced aggressive portfolio now looks as follows: 65% equities, 27% fixed-income, 5% cash and 3% commodities.

That news was all it took to knock the futures on their ear. At 9:08 a.m. EST, the

S&P 500 futures

were down 5.5, about 8 points below fair value and indicating a good selloff in the early going. The futures had been up as much as 10 points earlier in the morning.

The outlook for the large technology stocks is also negative, with the

Nasdaq 100

futures down 36 points.

If trading is as thin as it was yesterday, the market could see some significant declines. But the broad market's ability to bounce has been impressive lately.

"The markets really have a much better underlying tone as the rallies have broadened out," said Jim Volk, co-director of institutional trading at

D.A. Davidson

in Portland. "There's been buying more across the board, as opposed to rotating from one group to another."

"You'll get your surprises here that cause selloffs, but it seems that the way things are going, the underlying tone is still pretty good."

Meanwhile, investors are still dealing with the same gray clouds that cast a pall over yesterday's session, keeping trading light and major indices modestly depressed. Negotiations among


ministers are turning out to be a bit trickier than many had expected, and the vagaries of the OPEC talks could bring a touch of volatility to oil and oil-service stocks, which swung around wildly yesterday as details of the discussions hit the wires.

Iran is opposing Saudi Arabia's desire for a production increase of 1.7 million barrels a day. Taking into account the amount of oil that OPEC members are actually producing now, the Saudi proposal would result in only about 500,000 barrels of new production daily.

Meanwhile, the prospect of a settlement in the government's antitrust suit against


(MSFT) - Get Report

looks much more distant than it did a few days ago. Several states interested in pursuing a breakup of the company are balking at settlement, as

reported in a

story yesterday. A ruling on the case may or may not be forthcoming; several published reports have suggested that Judge Thomas Penfield Jackson may delay his verdict.

Once again, there's not a lot of corporate news to trade on. The biggest mover in the premarket was Belgian speech technology firm

Lernout & Hauspie


, which was flying after agreeing to buy privately held

Dragon Systems

for 5.45 million shares. Lernout, which will pick up 170 scientists and engineers in the deal, was trading at 124 on


, up from a close of 108 3/4.

With no major economic data scheduled for release, the bond market was edging higher, perhaps taking some solace in the pending drop in equities. The 10-year note was up 5/32 to 102 14/32 and yielding 6.166%.

The large European indices were mixed in afternoon trade. London's


was off 44.3 to 6642.9. But equities were faring better south of the channel, where the Paris


was up 67.40, or 1%, to 6518.25. Frankfurt's

Xetra Dax

was up 35.13 to 7927.62.

The euro was trading at $0.9692.

Asian markets moved modestly higher overnight.

Hong Kong's

Hang Seng

managed to close up 8.83 to 18,301.69, despite selling from foreign investors in some tech shares ahead of the first quarter's close.

In Tokyo, blue-chips mounted a late rally to swing back from negative territory and help the


rise 93.31 points to 20,374.34.

In currency dealings, the dollar sank to 106.40 yen as U.S. investors started to unwind long dollar positions. The greenback was lately sitting at 106.03 yen.

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