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Monday's Market: Dow Posts Solid Gain; Semiconductors Hamper Nasdaq

The Big Board managed a triple-digit gain, but several worrisome reports on chips spread misery throughout tech.

The economy stinks. Everyone on the same page yet?

Good. And so, the

Dow Jones Industrial Average ended up 102 to 10,966 as those economic fears were primarily tied to tech stocks. Today's gain puts the index within striking distance of an 11,000 close for the second time this month and the third time this year. The last Dow close above 11K happened on Sep. 14 and has been threatened about five times since then, three of those times this year, without any success.

The

Nasdaq Composite Index, which was mired in a daylong tech selloff, ended off 17 to 2643.

Both indices attempted a late-day rally. The only difference was -- the Dow hung on to a chunk of its gains, while the Comp was bear food. Volume was incredibly low today. Consider that both the New York Stock Exchange and Nasdaq Stock Market shattered volume records in early January, passing 2 billion and 3 billion shares traded, respectively.

Today, the NYSE just broke 1 billion, coming in at 1.005 billion shares. The Nasdaq traded 1.6 billion shares. Clearly, investors are sitting and waiting for the smoke to clear and choosing to invest outside of individual stocks.

It might be time to dust off an ancient, yet fitting, descriptor of today's market action. The word is "bifurcation," a noun that expresses a split or division. That split was pretty apparent this morning, as all things tech suffered, while the broader market was largely higher.

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Back in the halcyon days of

Nasdaq 5000

, bifurcation was all the rage, with the risky growth in tech making the upside move at the expense of old-economy stocks and defensive plays. But, according to comments from analysts and industry-watchers alike, spending in information technology has slowed, curbing the growth prospects for a wide variety of businesses.

Intel

(INTC) - Get Report

was a drag on the Dow and one of the leaders of the Nasdaq sell-off. It was hyperactive today, trading in excess of 40 million shares. After rallying late in the day, Mr. Chips ended down 2.6% to $34.69.

It was tanked by a report from the

Semiconductor Industry Association

, which showed that growth levels were actually leveling off and that sales had slipped from the previous quarter. That is not good, considering many chip companies need to get rid of already high inventory levels, which are only exacerbated by sliding demand. Essentially, warehouses are piling up with stuff that companies can't sell.

Analysts reacted to the report and bashed the industry.

Credit Suisse First Boston

said that inventory levels have improved and probably wouldn't until the end of the second quarter.

Lehman Brothers

said that this year would pale in comparison to last year, at least in the first half.

Bear Stearns

told investors that growth would bottom out in the second quarter, with few near-term catalysts in sight, leaving visibility hazy until March at the earliest. "Until inventory levels are brought down and the macroeconomic situation becomes more clear, we would focus on companies that are near trough or baseline valuations," the Bear wrote.

In other words, the immediate picture looks real bad, the future cannot be predicted and investors should by the weakest stocks. The Bear said it liked

Altera

(ALTR) - Get Report

, Intel,

Lattice Semiconductor

(LSCC) - Get Report

,

LSI Logic

(LSI) - Get Report

and

Texas Instruments

(TXN) - Get Report

-- but that was nothing more than wishful thinking, since all five companies were much, much lower. The

Philadelphia Stock Exchange Semiconductor Index

dropped 4.2% to 659, kicking off tech's selloff.

Some of the biggest names in technology got caught in the crossfire, with the

Morgan Stanley High-Technology 35 Index

dropping 1.1%.

Cisco

(CSCO) - Get Report

, which reports earnings after tomorrow's bell, slid 2.6% to $34.56.

Sun Microsystems

(SUNW) - Get Report

, which began day one of its three-day analyst meeting, dropped 4.5% to $27.88.

Dell

(DELL) - Get Report

,

Applied Materials

(AMAT) - Get Report

,

Palm

(PALM)

and

Broadcom

all ended with large losses.

And so, money poured out of tech and into other areas -- especially petroleum-based stocks, which have tracked higher as the price of crude and natural gas have jumped in recent sessions. Crude futures on the

New York Mercantile Exchange

, despite slipping today, were still above $30 a barrel. The

Philadelphia Stock Exchange Oil Service Index

rose 3.1%, while the

American Stock Exchange Natural Gas Index

rose 1.9%. The bigger, broader oil companies that do not focus on providing services or selling natural gas, were posting more moderate gains.

ExxonMobil

(XOM) - Get Report

, one such company and a blue-chip to boot, gained 2.2% to $84.80.

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Like ExxonMobil, 19 of the 30 blue-chips were in the green, positivity that offset an Intel loss that shrank throughout the day.

Coca-Cola

(KO) - Get Report

,

IBM

(IBM) - Get Report

and

Eastman Kodak

(EK)

were some of the best performing stocks.

Market Internals and Most Actives

Remember all that talk about bifurcation? Well, here's where you can see the results of that phenomenon most clearly. The Nasdaq, packed with tech, was also packed with losers. Volume has dried up. Insert tumbleweeds here. It's like a trading dust bowl out there.

When

Phillips Petroleum

(P)

announced that it purchased independent oil refiner

Tosco

(TOS)

in a deal worth $7 billion in stock, a lot of people took notice. Tosco, which has trouble breaking 1 million shares some days, pushed way past that limit -- while gaining 16.1% to $40.19.

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Sector Watch

What does HMO stand for? Who cares, man. The

Morgan Stanley/American Stock Exchange HMO Index

was up 2.8%.

That said, just look at all that bloodletting in technology. It looks like a pagan paean to evil, with dot-coms, networkers, peripherals and wireless slaughtered by an uncertain future.

The

American Stock Exchange Networking Index

rose 0.2%, while the

TheStreet.com Internet Sector Index

dropped 1.1%, despite the fact that

Yahoo!

(YHOO)

gained 6.3% to $35.06,

AOL Time Warner

(AOL)

gained 3.3% to $49.37 and

Amazon.com

(AMZN) - Get Report

gained 0.4% to $14.44.

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Bonds/Economy

Treasury prices for notes are trading within a narrow range, while the long bond is about half a point higher. Although the

Treasury

will sell $10 billion to $11 billion each of the 4.75- and 10-year notes and the 30-year bond this week, the 30-year is gathering premium value because of its near-certain removal later this year.

Traders usually go into a selling pattern just before a Government Treasury auction to drive down the price of the new notes to be issued. Yields for the notes are up marginally, while those at the longer end are down by about 3 basis points.

The benchmark 10-year

Treasury note lately was down 3/32 to 104 9/32, yielding 5.173%.

In economic news,

Purchasing Managers' Non-Manufacturing Index

(

definition |

source

) fell to 50.1 in January from its revised value of 60.1 in December. Readings above 50 denote expansion, so the index is only just barely positive. New orders and order backlogs decreased, and export and employment growth slowed. Meanwhile, imports were unchanged. This data is in line with that of the manufacturing index, which came out last week and indicated a sharp dip into recession territory.

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International

European indices were mixed and weak. London stocks struggled to move ahead as strength in oil shares battled weakness in telcos, and the

FTSE 100

ended just on the plus-side, gaining 12.8 to 6269.2. Paris'

CAC-40

dropped 2.9 to 5823.5, and Frankfurt's

Xetra Dax

was off 10.1 to 6628.1.

The greenback was slipping back against the euro again, lately trading at 0.9392.

Asian markets suffered a nasty setback overnight. Tokyo's

Nikkei 225

lost 318.11, or 2.3%, to end at 13,385.52. Hong Kong's

Hang Seng

lost 240.45 to close at 15,830.84, while South Korea's

Seoul Composite

dipped 29.32 to a finish of 579.16.

The dollar was lately trading at 114.95 yen.

For more on world stock markets, check out

TheStreet.com's

global indices information.

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