Those Old Economy

Dow

stocks that have been beaten down and oversold are finally a buy. So has tech mania finally bit the dust, or are those

Nasdaq

darlings of sessions gone by just getting a dose of their own medicine?

This week, Wall Street insiders who have been trying to make sense of the market's recent activity seem to agree that we're about due for some follow-through. "More of the recent same, more Old Economy stocks and violent moves up and down," said Larry Rice, chief investment strategist at

Josephthal

. "It's a trader's utopia."

Lately the Dow Jones Industrial Average was soaring 397, or 3.9%, to 10,528, having traded as high as 10,584.37. It's on pace to top its previous record point gain, a rise of 380.53, or 5%, to 8020.78 on

Sept. 8, 1998. Financials

American Express

(AXP) - Get Report

and

J.P. Morgan

(JPM) - Get Report

were the index's highest flyers, while tech giant

Hewlett-Packard

(HWP)

was being a drag, down 4, or 3%, to 128.

The

Philadelphia Stock Exchange/KBW Bank Index

rocketed 7.7% and the

American Stock Exchange Broker/Dealer Index

bounced 2.4%.

Oil stocks were helping to fuel trading on the

New York Stock Exchange

. The

American Stock Exchange Oil & Gas Index

index was burning up 3.7%, with

Phillips Petroleum

(P)

and

Atlantic Richfield

(ARC) - Get Report

up on news that Phillips would acquire Arco's Alaskan oil and gas assets, paving the way for an Arco-

BP Amoco

(BPA)

marriage.

So what's the deal? Just last week, investors were indulging in tech stocks with huge valuations and no earnings to show for themselves. According to Brian Finnerty, head of trading at

C.E. Unterberg Towbin

TheStreet Recommends

, the answer might lie in the recent economic data. "Since Friday, the psychology has changed," he said. "We have seen good numbers right in a row and know that we don't have any inflation, which is letting the financials and consumer nondurables be bought." He was referring to today's

Producer Price Index

, whose core figure was up only moderately, and yesterday's muted

industrial production

figures.

Peter Cardillo, chief investment strategist at

Westfalia

, agrees that the data are a major contributor. "Hints in the industrial production number and the weak unemployment claims indicate that the economy is slowing and as a result, the Old Economy is in play," he said.

Undoubtedly, investors are changing their ways, but everyone knows old habits die hard. "The market will pay for growth again when it gets down enough, that's for sure," said Finnerty.

Rice added, "Another day of this and the Old Economy will be overbought, and money will bounce back into tech."

But just as the Dow toyed with, then broke below, the key 10,000 support level, the Nasdaq has a rubicon of its own, Cardillo said. "The divergence is in favor of the Old Economy," he said. "The real test is for the Nasdaq is 4500. A close under 4500 could signal a correction that could take us down another 5% to 10% below where we're at."

Lately the Nasdaq was continuing to struggle, down 15 1/2, or 0.3%, to 4567. It earlier traded as low as 4455.10. Yesterday's losses left the Composite down more than 9% from

Friday's record, less than a percentage point short of a 10% correction.

Semiconductors were losing ground. The

Philadelphia Stock Exchange Semiconductor Index

fell 1.8%, with

Rambus

(RMBS) - Get Report

plummeting 30 3/4, or 7.2%, to 391 1/4.

Elsewhere in techland,

The Street.com Internet Sector

index lost 22, or 1.9%, to 1173.

Yahoo!

(YHOO)

was bouncing back from the losses it sustained yesterday, after

CNBC's

Tuesday-night report of a possible merger with

eBay

(EBAY) - Get Report

. The auction giant was also in recovery mode.

The broader

S&P 500

leapt 41, or 3%, to 1433 1/2, while the small-cap

Russell 2000

slipped a fraction to just under 559.

Market Internals

Breadth on the NYSE was positive on moderately heavy volume.

New York Stock Exchange:

2,234 advancers, 696 decliners, 923 million shares. 37 new 52-week highs, 33 new lows.

Nasdaq Stock Market:

1,829 advancers, 2,272 decliners, 1.2 billion shares. 45 new highs, 77 new lows.

For a look at stocks in the midsession news, see Midday Movers, published separately.