The Morning After, Tech Trying to Regroup

On the heels of yesterday's vicious selloff, it might be wise to wait and see how the market's tone develops.
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If you went to bed last night expecting that tech stocks would be able to garner some sort of rebound from a 7.6% lambasting of the

Nasdaq Composite Index

, you won't be disappointed this morning.

At 9:02 a.m. EDT, the

S&P 500 futures

were up 1.2, about 7 points above fair value and a strong indication for the broad, large-cap market.

More importantly, the early outlook for tech looks strong as well. The

Nasdaq 100

futures were lately up 48 points, pointing toward an early rally in some of the stocks that got hit hardest yesterday.

"It's an ambush, not a rally," said Jim Volk, co-director of institutional trading at

D.A. Davidson

in Portland. "But I don't think it's the beginning of the end. We've got a major correction on our hands."

It's hard to offer confident advice about tech after a selloff as stunning and huge as the one we've just seen. The boosters, of course, are telling investors to buy this dip. The wisdom of that strategy may eventually be borne out. But the advice is already late. If you wanted to buy a dip, you would have found it late in the afternoon yesterday, when the Nasdaq was down more than 300 points. If you want to buy a program-driven snapback that may or may not hold, then buy at the open today.

Those who just days ago were championing the Nasdaq's ability to hold the 4300 level -- a level that got snapped like a Slim Jim yesterday -- would be hard pressed to honestly argue that tech doesn't still face significant downside risk. The best advice might be to simply lie low and see how the market's tone develops after the early buy programs burn themselves out. In the meantime, keep an eye on your margin accounts.

"The tone is not that good," Volk said. "People continue to pick their spots in technology. This morning, we're getting an oversold bounce."

It doesn't look like the market's major indices will be getting throttled by

Microsoft

(MSFT) - Get Report

, at least. Yesterday's harsh ruling against the company seems to have helped it stabilize, if not quite bottom out. It had last traded at 90 1/2 on

Instinet

, up from a close of 90 7/8.

The bond market was giving back some of yesterday's

gains, with the 10-year note down 9/32 to 103 21/32. That still puts the 10-year's yield at 6.002%, a level that probably isn't competitive enough to put much pressure on stocks.

The large European bourses were mixed in afternoon trade. Stocks were bouncing smartly on the Continent, where the Paris

CAC

was up 87.95, or 1.4%, to 6218.22. Frankfurt's

Xetra Dax

was up 112.58 higher, or 1.5%, to 7541.80.

Across the channel, equities were receding further. London's

FTSE

was down 27.7 to 6434.4.

The euro was trading down at $0.9544.

The Nasdaq's overnight plunge took its toll on Asian markets overnight.

Luckily for them, markets in Hong Kong and Taiwan were closed for national holidays. But Tokyo markets weren't, and they paid for it. While the blue-chip

Nikkei

lost just 132.06 to 20,594.29, other tech-laden indices were hit hard. The

Jasdaq

small-cap index plunged 6.67, or 6.4%, to 96.87, while the Nikkei over-the-counter index fell 122.21, or 5.5%, to 2092.30.

On the political front, the revelation on Monday that Prime Minister

Keizo Obuchi

is in a coma sent politicians in his ruling Liberal Democratic Party into action. Japan's Cabinet is expected to resign en masse today, paving the way for current party Secretary General

Yoshiro Mori

to be officially elected as Obuchi's successor tomorrow afternoon. The Cabinet lineup is not likely to change ultimately, though.

The dollar managed to edge higher against the yen overnight despite yesterday's flight from U.S. technology stocks. The greenback was lately sitting at 105.55 yen.

Korea's

Kospi

sank 16.28, or 1.9%, to 830.16. Selling in tech shares also spilled over to telecom there, with

SK Telecom

losing 5.9%.

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