Stocks were continuing their recent decline today, but the major indices were well off their lows of the morning. After two days of crushing losses, the

Nasdaq sank to its lowest close in almost two years yesterday, while the

Dow swooped down 204 points on the day, matching its closing low for the year.

Almost 150 Nasdaq stocks were trading at new 52-week lows this morning, and little in tech was being spared. Decliners were beating advancers on the index by 24 to 7, and on the

NYSE by 17 to 9. Volume was heavy and thick.

Investors were dropping Internet, PC making and networking stocks like hot potatoes, but chip stocks were mostly being spared. Meanwhile, retail and financial stocks continued yesterday's slide. Earlier strength in some of the defensive plays, like the tobacco and drug stocks, had lately faded. But energy, gold and paper stocks were still on the up.

Within tech, the storage sector was winning the prize for most reviled sector this morning after sector leaders

Brocade Communications

(BRCD)

and

EMC

(EMC)

warned of slowing in coming quarters. Brocade was the biggest trade on the Nasdaq; it was lately down 10.7%, having rebounded slightly from a new 52-week low of $33.31. EMC was down 9.5% to $39.06. Other storage stocks were also getting bashed --

Extreme Networks

(EXTR) - Get Report

was falling 3.8% to $23.88 and

Network Appliances

(NTAP) - Get Report

was bumping down 3.3% to $33.25.

Brocade warned after the close of regular trading yesterday that revenue growth in the second quarter would be "very modest" -- perhaps flat -- and lowered its earnings target for 2001 by 2 cents. EMC said its sales could fall as much as $1 billion below its own expectations.

Another big mover was

Sun Microsystems

(SUNW) - Get Report

. Sun was one of the three-most actively traded on the Nasdaq and it hit a new 52-week low before coming back a bit. It was lately up 6.1% to $20.81. Sun got bashed by

Merrill Lynch

yesterday; the company holds its midquarter conference call with analysts today after the close.

One tech name was getting a major boost this morning: broadband network specialist

Efficient Networks

(EFNT)

, which was up 87.3% to $23.06 after Germany's

Siemens

announced it had agreed to buy the company for $1.5 billion in cash.

The

Dow was feeling the most weight from consumer staples stock

Coca-Cola

(KO) - Get Report

and drug stock

Merck

(MRK) - Get Report

, together cutting 22 points from the index.

Worry Warts

One of the market's problems is that investors have begun to doubt earlier predictions that the economy and earnings are destined recover in the second half of this year. Following some major earnings warnings from telecom-equipment makers

Cisco

(CSCO) - Get Report

and

Nortel

(NT)

, among others, in the past few weeks, the pros are now looking farther out.

Still, help may come sooner than some think, in the form of more interest rate cuts. The

fed funds futures -- which help predict

Federal Reserve actions on interest rates -- are fully pricing in a half-point rate cut by the March 20

FOMCmeeting, while chances of an intermeeting cut are at a 60% to 80% rate of probability, according to the futures. Rate cuts help get the economy going again by making cash more easily accessible to corporations and consumers.

Meanwhile, this morning's

leading economic indicators

index for January rose 0.8%, more than double the expected 0.3% and December's 0.6% drop. A composite index of 10 economic indicators, this index is designed to predict economic activity six to nine months in the future -- so it's considered a pretty good forecaster of the ups and downs of the business cycle.

The index's indicators include: the average manufacturing-worker workweek, initial jobless claims, vendor performance, manufacturers' new orders for nondefense capital goods, building permits, the level of the

S&P 500, the inflation-adjusted measure of money supply, the interest-rate spread between the 10-year Treasury note and the

fed funds rate and the expectations portion of the University of Michigan

Consumer Sentiment Index.

Initial jobless claims for the week ended Feb. 17 came in this morning slightly below forecasts, showing that the economy may be a bit stronger than some people had thought. Jobless claims for the week totaled 348,000, compared with

Reuters

consensus forecasts of 355,000. The previous week's numbers were also revised downward to 344,000 from 352,000.

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Sector Watch

Semiconductor stocks were getting a second day of relief today. The

Philadelphia Stock Exchange Semiconductor Index

was up 1.6% after rising 0.2% yesterday.

Tobacco giant

Philip Morris

(

(MO) - Get Report

earlier hit a new 52-week high, and was still up 0.96% to $48.52. This stock has climbed steadily since the beginning of last year from $19 in Febuary 2000. The

S&P Tobacco Index

was just barely rising, up 0.04%.

Elsewhere in the defensive stock playground, the

Amex Pharmaceutical Index

was down just 0.6%.

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Bonds/Economy

Treasury prices are moving up as a result of steady economic data and continued weakness in stocks. The money market had been weaker at the opening bell as traders continued to worry about the potentially inflationary implications of higher-than-expected producer and consumer prices in January. Higher inflation reduces the chances of a near-term interest rate cut, which the bond market doesn't like. But with equities getting battered yet again today, investors are looking toward government securities as the safest place for their money for now.

The benchmark 10-year

Treasury note lately was up 4/32 to 99, lowering its yield to 5.131%.

In economic news, the

initial jobless claims

(

definition |

chart |

source

), which track the number of people applying for unemployment benefits for the first time, rose to 348,000 in the week ended Feb.17. Although this is 4,000 more than the prior week's revised number, the figure is substantially lower than the 355,000 that economists had predicted in a

Reuters

poll. The four-week moving average, however, climbed for the third consecutive week, to 350,750. Still, recent figures suggest that the string of layoffs may be drawing to a close.

The index of

leading economic indicators

(

definition |

chart |

source

), which forecasts economic activity more than half a year in advance, rose by 0.8% in January after having fallen for two consecutive months. The anticipated rise had been for 0.3%.

The

Help-Wanted Index

(

definition |

chart |

source

) fell by 3 points, to 76, last month. The gauge, which had a base value of 100 in 1987, tracks jobs openings in newspapers nationwide.

The

Consumer Comfort Index

(

definition |

chart ), which measures how consumers view the economy's direction and their participation in it, fell by a point, to 19, for the week ended Feb. 18.

Finally, the surplus in the

federal budget

(

definition |

chart |

source

) rose to $76.38 billion in January from $32.67 billion in December. It is also $14.2 billion higher than the number from a year ago. Such excess in the government's receipts over its expenditure has played a large part in the intended lowering of taxes and the possible stoppage in issuance of the long bond.

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