Yesterday's post- Fed party left the market with a lingering headache as stocks coasted lower. Judging from the light volume, a lot of investors simply opted out for the day.

Major proxies chopped lower out of the gate and were lately all in the red. The

Dow Jones Industrial Average was down 157, or 1.4%, to 10,778, while the tech-laden

Nasdaq Composite Index was off 80, or 2.1%, to 3638. The broader

S&P 500 was down 21, or 1.5%, to 1445, while the

Russell 2000 was down 7, or 1.5%, to 499.

Yesterday, after the Federal Reserve doled out its most aggressive rate hike in five years, stocks initially stumbled but managed to regain their momentum and wrap up a day of solid gains. The blue-chip Dow had lately surrendered all of yesterday's 126-point gain. The Nasdaq was close to erasing yesterday's 109-point pop.

Adam Wagner, president of

Wagner Hermann & Herbst

in Houston, was having difficulty making sense of the recent market action. Referring to the 50-basis-point hike and the Fed's

hints at further tightening, he said, "That was pretty much the worst announcement they could make. Some people felt like 'Look out, we're going to retest the lows,' but there was also a lot of talk that maybe this is a good thing," if the tightening cycle is going to draw to a close sooner, he said.

The "super selloff" immediately after the announcement was expected, Wagner said. "I don't know what to make of

today's selling. Anything can happen. It's like this is Stock Market 102. Forget everything you learned in Stock Market 101."

Ray Hawkins, vice president of block trading at

J.P. Morgan

, viewed the action as "just a reprieve from yesterday," saying that people are realizing interest rates aren't done going up. Hawkins also mentioned an upcoming options

expiration on Friday, noting that Wednesday and Thursday are the days where things get shifted around beforehand. "All things considered, it's not that bad," he said. "We're putting out bids and not finding sellers. There's a lot of people sitting on their hands."

Profit-taking in

Hewlett-Packard

(HWP)

was hurting the Dow. H-P and its spinoff

Agilent Technologies

were tumbling after both companies reported solid earnings

last night. H-P was off 5.9% while Agilent was down 10.1%.

J.P. Morgan

(JPM) - Get Report

was a rare green spot in the blue-chip Dow, lately up 1.7%, though it wasn't representing the general direction of financial stocks. The

American Stock Exchange Broker/Dealer Index

was down 1%, while the

Philadelphia Stock Exchange KBW/Bank Index

was off just a fraction.

Chase Manhattan

(CMB)

was edging up 0.1%, and

American Express

(AXP) - Get Report

had reversed earlier weakness to rise 0.6%.

Semiconductor stocks were taking a rest after yesterday's action, with the

Philadelphia Stock Exchange Semiconductor Index

down 1.3%. News of a minor earthquake in Taiwan wasn't lending any confidence amid the overall weakness today. But

Analog Devices

(ADI) - Get Report

was jumping 8.6% after delivering strong second-quarter earnings and a sunny outlook. The company said its revenue could rise more than 65% for the full year.

Internet stocks were under water, with

TheStreet.com Internet Sector

index off 27, or 2.9%, to 902. Analysts and fickle investors were frowning on the finally announced merger of Spain's

Terra Networks

(TRRA)

and U.S.-based portal

Lycos

(LCOS)

. Terra was sliding 10.6%, while Lycos was off 12.2%; Terra parent

Telefonica

(TEF) - Get Report

was off 6.2%. This morning

ABN Amro

cut Lycos to hold from outperform, while

Merrill Lynch

analyst Peter Bradshaw cut Terra to neutral from accumulate.

UBS Warburg

downgraded Lycos to hold from buy.

Net bellwether

America Online

(AOL)

was down 1.8%, while

Yahoo!

(YHOO)

was pushing up 1.2%.

Most airline stocks were riding higher, with the

American Stock Exchange Airline Index

up 0.8%.

American Airlines

parent

AMR

(AMR)

was up 4.4%, while

Delta Air Lines

(DAL) - Get Report

was rising 0.3%. The

Dow Jones Transportation Average

was down 0.6%, though, largely on weakness in

USFreightways

(USFC)

and

Northwest Airlines

(NWAC)

.

The 10-year Treasury was down 9/32 to 100 7/32, its yield rising to 6.47%.

Market Internals

Breadth was negative, particularly on the Big Board, on light volume.

New York Stock Exchange:

824 advancers, 1,929 decliners, 479 million shares. 16 new 52-week highs, 39 new lows.

Nasdaq Stock Market:

1,210 advancers, 2,513 decliners, 678 million shares. 12 new highs, 62 new lows.

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