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Market Update: Tech Joins Blue Chips in Red at Midday

<LI>Microsoft falling despite positive comments from analyst.</LI><LI>Gillette slips to new low.</LI><LI>SOX recovering slightly.</LI>

Techs stocks shed their modest early gains to join the blue chips in negative territory, as profit warnings continue to take a toll on the stock market.

Lately, the

Dow Jones Industrial Average

was slipping 70 to 10,857, with

J.P. Morgan

(JPM) - Get Report

supplying the most pressure. But big industrial

3M

(MMM) - Get Report

was also tearing 14 points away from the index.

Meanwhile, the tech-laden

Nasdaq

was falling 66 to 3769. In Nasdaq trading,

Qualcomm

(QCOM) - Get Report

was bouncing 5.6% on bullish Wall Street comments.

Elsewhere in tech,

Goldman Sachs

analyst Rick Sherlund eased investors concerns on

Microsoft

(MSFT) - Get Report

. In a research note, Sherlund said that management had no plans to pre-announce the company's quarterly results and that he was comfortable with the firm's first-quarter EPS estimate of a 41 cent profit. Despite the positive comments, Microsoft was falling 1.3%.

In company news,

Gillette

(G) - Get Report

slipped to a new intraday trading low of $27.81 after it warned that third-quarter results would be only slightly up from the year-ago report. This morning,

Edward Jones

sliced its rating on the consumer giant to hold from a buy.

AT&T

(T) - Get Report

was losing 1.6% after

British Telecom

(BTY)

confirmed that the two companies would negotiate merging some of their business. British Telecom was popping 1.2%

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Sector Watch

After a huge run-up sparked by merger mania in the financial sector, brokers were on the skids with The

TST Recommends

American Stock Exchange Broker/Dealer Index

shedding 3.6%.

Lehman Brothers

(LEH)

, which has been tagged as a possible takeover target, was losing 4.3%, while

Goldman Sachs

(GS) - Get Report

was stumbling 4.4%.

The Philadelphia Semiconductor Index

was recovering 1% after trading lower Friday. Micron

(MU) - Get Report

was bouncing 5% on an upgrade from Lehman Brothers.

The

American Stock Exchange Oil & Gas Index

hit a new all-time high of 557.54, with gains from

ExxonMobil

(XOM) - Get Report

and

Chevron

(CHV)

. The group continues to be pushed higher amid rising oil prices. It was lately up 1% to 552.5.

The

Philadelphia Stock Exchange Oil Services Index

was also off, down 1.8%, with

Haliburton

(HAL) - Get Report

down fractionally.

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Bonds/Economy

The disinversion of the Treasury yield curve was continuing, with the 30-year Treasury bond's yield now higher than the five-year note's for the first time since January.

It's happening because Treasury prices are mixed. Long-maturity issues are lower in price, causing their yields to rise relative to those of the short-maturity issues, which are little changed.

This continues a trend that emerged last week based on two key assumptions: first, that the

Fed is through hiking interest rates, and may even cut the

fed funds rate in the next several months if rising energy prices cause economic growth to slow too much. Investors typically push up long-term yields relative to short-term ones when they expect the Fed to take action to stimulate economic growth.

Second, Election Day could spell the end of the policy of using federal government surplus funds to pay down the national debt by buying back mainly long-maturity Treasuries from investors, which inflates their value relative to shorter-term Treasuries.

The benchmark 10-year Treasury note lately was down 5/32 at 99 3/32, making its yield 5.873%.

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