SAN FRANCISCO -- The law of unintended consequences reared its ugly head today.


Goldman Sachs

equity strategist

Abby Joseph Cohen

announced she was reducing her recommended equity exposure and technology stock weightings

yesterday, she pretty obviously didn't want to come off as "bearish" on tech or cause a severe market reaction. Similarly, when


decided to increase production it clearly didn't intend to send oil prices swooning.

But Cohen's comments got an already jittery market thinking (more) about potential overvaluation in tech stocks, which helped spur Tuesday's selloff in tech. That, in turn, carried over into today's session where tech favorites tumbled and blue-chip names assumed leadership. Meanwhile, crude prices fell 2.5% to $26.41 a barrel.


Nasdaq Composite Index

fell 189.22, or 3.9%, to 4644.67 today, its third biggest point decline in history. Technology stocks big and small -- save notable exceptions such as


(MSFT) - Get Report



(ATHM) - Get Report

-- fell sharply for the second straight session.

Microsoft rose 2.3% after announcing an alliance with


(IBM) - Get Report

to sell appliance servers; meanwhile, there was a welcome lull in news reports about a potential settlement in its dealings with the

Justice Department

. IBM fell 2.1%.

Excite@Home rose 9.1% after


(T) - Get Report

said it would

increase its voting stake in the Internet portal. AT&T gained 1.4%.

But those were clearly the exceptions, as bellwethers such as


(INTC) - Get Report

to highflyers such as

Checkpoint Software

(CHKP) - Get Report




stumbled in unison. Internet Sector index lost 93.01, or 7.6%, to 1124.08 while the

Nasdaq 100

shed 3.7% and the

Philadelphia Stock Exchange Semiconductor Index

slid 5.3%.

Meanwhile, the

Dow Jones Industrial Average

rose 82.61, or 0.8%, to 11,018.72 after trading as high as 11,101.55.

The Dow gained thanks to strength in Microsoft, as well as strong gains by non-tech components such as


(XOM) - Get Report


General Electric

(GE) - Get Report



(WMT) - Get Report

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ExxonMobil rose 2%, leading a strong showing by energy stocks despite the dip in crude prices. The

American Stock Exchange Oil & Gas Index

rose 4.9% while the

Philadelphia Stock Exchange Oil Service Index

rose 5.1%.

Retailers and other consumer focused stocks were also strong as money went searching for perceived values in so-called Old Economy stocks. The

S&P Retail Index

rose 4.8%.

Those gains helped the

S&P 500

rise 0.79, or 0.1%, to 1508.52, overcoming the negative effects of bellwether tech names.


Russell 2000

fell 16.04, or 2.9%, to 543 as biotech favorites such as



suffered big losses in concert with small-cap tech names. The

American Stock Exchange Biotech Index

fell 7.7%.

"It's another one of those days where they're selling the New Economy and buying the Old," said Bob Basel, director of listed trading at

Salomon Smith Barney

. "People are doing the group rotation off what

Cohen said yesterday."

Some traders attributed the action to other factors, such as the coming end of the first-quarter. But, expect "more volatility tomorrow and Friday vis-a-vis end-of-quarter activity," Basel said. "This is more on Abby's comments."

Asked about the fact Cohen simply expressed a view espoused by many others, the trader said simply: "She's got a lot of clout."


New York Stock Exchange

trading, 1.04 billion shares were exchanged while advancers led declining stocks 1,613 to 1,337. In

Nasdaq Stock Market

action 1.7 billion shares traded while losers led 2,989 to 1,317. New 52-week lows bested new highs 56 to 53 on the Big Board and by 120 to 65 in over-the-counter trading.

Feeling a Change in the Wind

The action this week -- indeed the action since mid-March -- has some market players hopeful the long-awaited, long-anticipated revival of blue-chip stocks at the expense of technology issues is at hand.

Stanley Nabi, chief investment officer at

DLJ Investment Management

, admitted having expected such a shift previously, only to have been proven wrong.

"But there is some accumulation of factors here that show there may be a better balance developing between the Old Economy and the New Economy," Nabi said.

The veteran strategist noted 18 months ago (or so) areas such as pharmaceuticals were trading with price-to-earnings ratios of 35 to 40 times, thus making the choice to pay higher P/Es for technology stocks easier to digest. But currently, many of those non-tech industries have "reached levels of valuation reminiscent of the recession" in the early 1990s, while tech names are trading at higher P/Es still. "The disparity of valuation has become so wide it's become noticeable even to those who don't notice" valuation, he said.

Other factors include the increasing supply of high-tech stocks, either via the end of lock-ups on IPOs even as the same -- and other -- companies attempt to sell secondary offerings.

Additionaly, the rotation into different "subsegments" within technology by speculators has become so quick and intense, there may not be any sectors left for the momentum players to get into, he said.

Finally, there are "seasonal factors," such as the end of the quarter. While so-called window dressing is usually thought of as a time when fund managers buy winners, Nabi noted many also "take profits" to "average down" exposure to names that have become outsized parts of portfolios.

"A combination of these things is going to slow the demand for these high P/E tech stocks," he said. "I'm not going to pound the table to say it's happening now and we see the turn. But it has to happen sometime in the short-term."

But another market player dismissed talk of a shift.

"I'm sticking with the scenario rates are going higher, the


will slow the consumer and stocks like

Home Depot

(HD) - Get Report

that are up sharply today probably have more downside than upside right now," he said. "I'd lean more toward the New Economy than the Old for the shorter run. They're less affected by the rate scenario than the old-line stocks we've seen rally today."

Among other indices, the

Dow Jones Transportation Average

rose 9.27, or 0.4%, to 2690.24; the

Dow Jones Utility Average

rose 6.42, or 2.3%, to 290.77; and the

American Stock Exchange Composite Index

shed 15.61, or 1.5%, to 1000.90.

Market data above are preliminary. For coverage of today's top stocks in the news, see the Company Report, published separately