(Updated from 10:46 a.m.)

Investors were shaking things up this morning. After spending much of the morning in positive territory, blue-chips were lately falling. The tech-heavy

Nasdaq, however, was able to keep its ledger in the positive despite disappointing handset sales announced this morning by Finnish mobile-phone maker

Nokia

(NOK) - Get Report

.

Mobile-phone makers certainly weren't escaping the pain. Nokia was falling 10.4%,

Ericsson

(ERICY)

was dropping 6.6% and

Motorola

(MOT)

, which reports earnings tomorrow, was 3.5% lower. Nokia this morning announced that it had 64% growth year-on-year in handset sales, which totaled 128 million. Analysts, however, had forecast sales as much as 140 million units. Amid concern over slowing global handset demand, many analysts fear that mobile-phone companies are propping up sales by slashing prices. That's no good for earnings or stock price valuations.

In early December -- in the thick of a sharp correction in earnings forecasts -- Nokia was one of the few to issue

encouraging words. The world's biggest mobile-phone maker then said it expected growth for 2001, 2002 and 2003 at the high end of the 25% to 35% range. Nokia didn't revise those forecasts this morning.

After

W.R. Hambrecht

gave a sobering fourth-quarter preview for the e-services sector, consulting company

Cambridge Technology Partners

(CATP)

was vertically challenged this morning. It was lately off 12.2%. Fellow consultant

Scient

(SCNT)

was off 2.3%, but

Sapient

(SAPE)

was lately up 12.8%.

Yahoo!

(YHOO)

and

Amazon.com

(AMZN) - Get Report

were higher despite downgrades this morning. The Nasdaq was riding yesterday's bounce higher with strength collecting across the board -- in PC makers, semiconductors, biotechs and Internet stocks.

It's not a great time to guess the market. That nasty gremlin called recession continues to escape from the lips of many on Wall Street. And the fourth-quarter earnings season has just begun. In a slowing economy, corporate and consumer spending on technology has already prompted the best of the bellwether companies to lower forecasts for earnings. As companies report earnings and issue forecasts for coming quarters, the market will get a sense of how much worse corporate sales, profits and the economy in general can get.

And the market seems divided about whether to stick with defensive stocks or anticipate a recovery in the economy and move back into cyclical stocks. While the effects of the Federal Reserve's interest-rate cut last week aren't expected to be fully felt for months, it is at least a move towards economic recovery. Cyclicals, like PC makers and semiconductors, tend to grow and slow in synch with economic expansion and contraction. Defensive stocks, on the other hand, do not depend on the economy as much and so tend to provide shelter from a market storm.

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Sector Watch

Financial stocks were helping to drag down the Dow. Indeed, analysts this morning said that if the stocks of financial companies didn't keep pace with gains in the rest of the market, they would kill the rally. That's what's happening now. It's interest-rate sensitive financials that really matter because the real potential strength in this market is the

Federal Reserve's interest-rate cut last week.

The

Philadelphia Stock Exchange/KBW Bank Index

was lately off 1.4% and the

American Stock Exchange Broker/Dealer Index

was slipping 1.8%.

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Bonds/Economy

Treasury prices are lower this morning as profit taking and the repositioning of portfolios continues in the absence of weighty economic data. The latest retail sales numbers show improvement, but the retail sales report for December, due Friday, is expected to be negative considering that auto sales finished at their lowest levels in four years. The market hopes to gauge from Friday's report the alacrity with which the

Federal Reserve will make its next move. Until then, there is little news on which Treasuries can reverse the current supply-side selling. Yields are up marginally, still near the 5% threshold for the 10-yr note.

The benchmark 10-year

Treasury notelately was down 16/32 to 105 18/32, raising its yield to 5.014%.

The

BTM-UBSW Weekly Chain Store Sales Index

(

definition |

chart ) rose 0.5% in the latest week after a gain of 0.3% in the prior week. The index measures retail chain-store sales at seven of the largest U.S. retailers. It is now at its highest reading since the week ending August 12. After a lackluster sales season around Christmas, the index's rise is being attributed to favorable shopping weather in the South and the Northeast. Analysts have also been able to make an "easy" comparison to the first week of 2000, a period that was especially depressed since repeat buyers did not show up. Many of them had stocked up in anticipation the Y2K problem.

Another retail sales index, the

Redbook Retail Average

(

definition |

chart ) registered strong gains as well, once again helped by he weather and substantial markdowns. It was 3.9% in the week ending January 6. The Redbook index for January, which reflects same-store sales at a number of department store companies, is currently running 2.9% ahead of December, exceeding the 2.3% target.

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