The major indices were rebounding this morning...again. Few stocks or sectors have escaped the recent market shakeout, and investors may think stocks are looking cheap. But don't be too surprised if the bounce fades later in the day. The market has tried to bounce several times in the past week without anything to show for it.

Sanford Bernstein's

downgrade to market perform from outperform on optical stocks

Cisco

(CSCO) - Get Report

and

Nortel Networks

( NT) this morning sank the tech-heavy

Nasdaq Composite Index right out of the gate.

Bernstein blamed the downgrade on concerns of a slowdown in spending on telecommunications equipment, but then

Salomon Smith Barney

and

Merrill Lynch

countered Bernstein's call, reiterating their buy ratings on the companies. Salomon said it thought the Bernstein call was "old news," while Merrill acknowledged these stocks could be under pressure for the next few weeks. Cisco was lately down 0.6%, while Nortel was up 5.1%. Nortel was rising on news that it has won contracts for $525 million to build wireless networks in China and Taiwan.

Cisco's pain was spreading to other fiber-optic names such as

Corning

(GLW) - Get Report

. Corning was lately off 0.2%.

Telecom-equipment maker

Lucent

( LU) was rising, however. Lucent was 8.7% higher, with traders suggesting that it put in a bottom yesterday.

Exodus

( EXDS) was another Nasdaq loser. The stock was getting clobbered following news of its plans to acquire

Global Crossing's

GlobalCenter Web-hosting unit for about $6.5 billion in stock. A deal was initially aborted two months ago. Exodus, one of the Nasdaq's most actives, was down 10.5%.

So what was giving wing to the Nasdaq? Internet stocks were certainly helping.

The Internet sector was making a comeback this morning after

J.P. Morgan

made positive comments on it. The firm said yesterday's selloff was unwarranted. Internet stocks had a lousy session yesterday after

priceline.com

(PCLN)

warned of an earnings miss.

Morgan was bullish on

America Online

(AOL)

,

eBay

(EBAY) - Get Report

and

Yahoo!

(YHOO)

, which were rising 1.9%, 9.7% and 6.9%.

Even Internet incubators like

CMGI

TheStreet Recommends

( CMGI) and

Internet Capital Group

(ICGE)

were rebounding. These stocks hit 52-week lows in trading yesterday. CMGI was lately up 10.1%, while Internet Capital rose 12.3%.

Meanwhile,

Hewlett-Packard

( HWP) and

Procter & Gamble

(PG) - Get Report

were the Dow's rising stars. H-P was adding some 15 points of upside to the blue-chip benchmark, with Procter adding 24. Procter was getting a lift after it said this morning that it thinks double-digit EPS growth on the year is achievable.

Eastman Kodak

( EK) continued to put pressure on the index, however. Kodak was falling for a third straight day this morning after warning that its third-quarter earnings per share would fall 20 cents to 25 cents below its previous forecast. Kodak has fallen some 32% in the past three days, and was currently cutting just 8 points from the Dow.

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Sector Watch

The energy stocks were giving up their traditional strength at the open. The

American Stock Exchange Oil & Gas Index

was off 1.1%. Other defensive stocks continued to show strength however, with the

Amex Tobacco Index

up 3.6%, the

Dow Jones Utility Average

1.5% higher and the

American Stock Exchange Pharmaceutical Index

1.5% higher.

Financial stocks were also showing strength. The

American Stock Exchange Broker/Dealer Index

was up 2.4%, the

Philadelphia Stock Exchange/KBW Bank Index

was up 2.0%, and the

S&P Insurance Index

was 1.3% higher.

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Bonds/Economy

Treasuries are narrowly mixed despite upward revisions to the

Consumer Price Index

(

definition |

chart |

source

), which were made

yesterday.

The

Bureau of Labor Statistics

this morning announced that in each month from January to August, the CPI was 0.1 percentage point higher than originally reported, except in May and July, when it was higher by 0.2. The inflation rate in August was 3.5%, revised from 3.4%, and the core inflation rate, which excludes food and energy prices, was 2.7%, revised from 2.6%, the BLS said.

The BLS revised the CPI after discovering that a software error had resulted in miscalculations.

The benchmark 10-year Treasury note lately was up 2/32 to 99 16/32, yielding 5.816%

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