Early-morning relief strength quickly evaporated about an hour before lunch, leaving the major equity indices trading down but still within a session's distance of new highs. At midday, stocks were cautiously mixed and off both their early-morning highs and midmorning lows.

Around 10:45 a.m. EDT, stock proxies dropped into negative territory as abruptly and unknowingly as

Wile E. Coyote

. The move appears to have been technical and futures-related more than anything fundamental or news-related.

"I have no idea" what happened, confessed one big-time trader. "If someone could come let us know, that'd be great. I haven't heard any news -- we just sold off.

But it was strictly the futures. People weren't selling stocks -- we didn't get any wave to sell, sell, sell. There must have just been some

S&P

futures sell program out there."

"Yeah, but

why

did they sell?" probed Courtney Smith, chief investment officer at

Orbitex Management

. "Futures are more efficient than stocks. It is technical selling but why did it happen? We've been trying to make new levels for a week and a half. Traders say, 'Hey, we can't make that, so let's just go ahead and sell,' and they use the futures to express that opinion. So that's a possible motivation. And a failure to make new high is bearish."

But the strategist is quite optimistic -- arguing that "this is a bull market and let's never forget that" and that one must "bias every comment to the upside" -- and he sees another round of new highs by the year's end. Over the near-term, though, he expects to see a period of consolidation and "sideways chopping" in what he views as an overvalued market. "

Cisco's

(CSCO) - Get Report

got a P/E of 85 -- what's up with that? It's a great company, but 85? Please," he grumbled.

"What I want to know," Smith continued, "is why are we not doing really well

after this morning's benign numbers? We're at the same prices we were a week ago. I think we're just at the top end of the range. The

Nasdaq

went up 20% in two months -- we're overvalued. We need to let earnings catch up with the price action or we need to see interest rates going significantly down."

The May

Producer Price Index

declined by 0.1% overall vs. expectations of a 0.1% gain. The index, a measure of inflation at the wholesale level, lost 0.2% at its core, which excludes volatile food and energy prices. The core also was expected to gain 0.1%.

Retail sales

for May rose 0.1% vs. forecasts of 0.3% overall. Excluding autos, retail sales gained 0.4%, which was expected.

In active trading, the 30-year Treasury was off 1/32 to 90 26/32, yielding 5.91%. (For more on the fixed-income market, see today's early

Bond Focus.)

Along with the economic data, a half-full perception of

Intel's

(INTC) - Get Report

earnings report from last night helped fuel stocks higher earlier, leaving investors free to focus on a constant feed of earnings news. That the political situation in Argentina seems to be in control and that bond yields are below 6% aren't hurting.

The trader argued that investors still are in disaster-prevention mode and therefore not ready to make any commitments. "The day after Intel reports is always a big day," he said. "Today hasn't been a big day." Part of that is due to the balance of good and bad in the chipmaker's report, the salesman said. But another aspect is that "we've been in a wait-and-see state for a month. We've been watching the

Fed

, inflation, but everything's been benign. But we're still waiting for that disaster -- we're still prepared for it. So you don't get people making any big bets."

Intel, meanwhile, was rising 2.4% after missing second-quarter estimates by 2 cents a share but

singing a real purty tune about its second-half. Purty enough that

Merrill Lynch

reiterated its short- and long-term buy on the stock and

Morgan Stanley Dean Witter

upped its price target to 80 from 75.

Purty enough that

Salomon Smith Barney

upgraded

the stock to buy from outperform, lifted the stock's price target to 85 from 73 and increased its 2000 earnings estimates for the company. In a research note, Solly analyst Jonathan Joseph listed reasons for the upgrade: "1) a reversal of the recent price declines the company has experienced, 2) no evidence of Y2K mishaps in the second half

and 3) a stronger than normal outlook for the second half."

After climbing as high as 11,209.21 and falling as low as 11,112.01, the

Dow Jones Industrial Average

was down 33 to 11,142.

Boeing

(BA) - Get Report

and

International Paper

(IP) - Get Report

were standouts to the upside,

Hewlett-Packard

(HWP)

and

Johnson & Johnson

(JNJ) - Get Report

to the downside.

The tech-driven Nasdaq Composite Index was expanding 14 to 2792, off an earlier high of 2798.02.

TheStreet.com Internet Sector

index was picking up 2 to 655.

The broader

S&P 500

was down 2 to 1391, while the small-cap

Russell 2000

was up 1 to 459.

Market internals were mixed. On the

New York Stock Exchange

, decliners were leading advancers 1,463 to 1,297 on 426 million shares. But the ups had the downs 1,955 to 1,719 on 597 million shares in

Nasdaq Stock Market

activity. New 52-week highs were outpacing new lows 57 to 24 on the Big Board and 152 to 15 on the Nasdaq.

Wednesday's Midday Watchlist

By Thomas Lepri
Staff Reporter

Enter the world of bizarro earnings, where things aren't always what they seem, and where Intel's assurance of strong third-quarter results seems to be working with investors. Intel was lately up 1 9/16 to 66 15/16 despite yesterday reporting second-quarter earnings of 51 cents a share, 2 cents below the 31-analyst

First Call

estimate but ahead of the year-ago 33 cents.

Meanwhile, things were going the other way for

Polaroid

(PRD)

, lately down 3 1/8, or 10.9%, to 25 5/8 despite meeting the 9-analyst earnings forecast of 33 cents a share in its second-quarter. Last year the company earned 3 cents a share for the period. And

State Street

(STT) - Get Report

was skidding 8 7/16, or 10.3%, to 73 1/4 after it said it earned 75 cents a share in its second quarter, matching the 15-analyst prediction and up from last year's 66 cents. Expecting more,

Merrill Lynch

cut State Street to long-term accumulate from long-term buy.

Mergers, acquisitions and joint ventures

Egghead.com

(EGGS)

and

Onsale

(ONSL)

set plans to merge in a tax-free stock transaction valued at about $400 million. Onsale will exchange 0.565 of a share for each Egghead.com share outstanding, a ratio that values Egghead at about $12.71 a share, a slight premium to its closing price yesterday of 12 1/16. Egghead was lately up a teenie to 12 2/16, while Onsale was off 3/4 to 21 11/16.

QRS Corporation

(QRSI)

was bumping up 3 3/8, or 7%, to 53 1/2 after it yesterday announced a obscure deal to distribute its

QRS Keystone

electronic catalog to Korean retailers through the information and communications unit of department and discount store operator

Shinsegae Group

. Retailers use the catalog, which list manufacturers' products by universal product codes, to manage their inventory.

Earnings/revenue reports and previews

The first of the big auto companies reported second-quarter earnings today with a bang.

Ford

(F) - Get Report

said it earned $2.00 a share for the period, 4 cents above the 16-analyst consensus and up from last year's $1.91. But the massive automaker was lately off 9/16 to 42 16/16.

In other earnings news:

Offerings and stock actions

Pan-Asian Web portal

China.com

(CHINA:Nasdaq) was giving back 5 1/2, or 8.3%, to 61 9/16 after its extraordinary trading debut yesterday.

Tibco Software

(TIBX)

was shooting up 19 3/4, or 130.8%, to 34 3/4 on its first day of trading. The company, which is majority owned by

Reuters

(RTRSY)

, was priced yesterday at $15 a share by lead underwriter

Goldman Sachs

, at the top end of its pricing range.

Analyst actions

Live virus vaccine firm

Aviron

was sputtering down 4 3/8, or 13.51%, to 28 1/16 after

Morgan Stanley Dean Witter

cut it to outperform from strong buy, citing, in part, the stock's recent weakness.

GoTo.com

was lately advancing 10 3/8, or 19.2%, to 64 3/8 after

Donaldson Lufkin & Jenrette

started it with a buy rating.

Banc of America Securities

started

Exodus Communications

(EXDS)

,

Inktomi

(INKT)

and

Ticketmaster Online-CitySearch

(TMCS)

with buy ratings, setting price targets of $170, $170 and $55, respectively. Only Exodus was energized at midday, lately up 6 3/8, or 4.7%, to 141 15/16.

Symbol Technologies

(SBL)

was stepping up 3 3/8, or 9.4%, to 39 3/8 after Merrill upgraded it to long-term buy from accumulate and set a 12-month price target of $43.

Miscellany

Ask Jeeves

(ASKJ)

was moving up 6 5/16, or 12.4%, to 57 7/8 for no particular

reason at all.

ADRs of

Hitachi

(HIT)

were popping up 6 11/16, or 6.9%, to 104 13/16 after it set plans last night to create an asset management business to coordinate investments for its group-wide pension plans. The company has more than 700 subsidiaries worldwide.

Iridium

(IRID)

was plunging 31/32, or 12%, to 7 1/8 after

Motorola

(MOT)

said that it won't bankroll the struggling satellite phone company any further unless financing partners

Lockheed Martin

(LMT) - Get Report

and

Raytheon

(RTNA)

help restructure it. Motorola listed Iridium's three options as out-of-court restructuring, Chapter 11 bankruptcy protection and, finally, liquidation.

Shares of

Marine Drilling

(MRL)

were sliding down 1 7/8, or 9.54%, to 13 5/8, on news that

Esso Exploration

, a division of

Exxon

(XON) - Get Report

, rejected delivery of the

Marine 700

, a semisubmersible rig capable of drilling as much as 7,500 feet underwater.

Tiny drugmaker

ViroPharma

(VPHM)

was rocketing 5 9/16, or 43.6%, to 18 5/16 on yesterday's news that its common-cold drug,

pleconaril

, showed promising results in midstage trials.

Staff Reporter Mavis Scanlon contributed to this story

.