Lesson No. 743 of the late-stage bull market: It takes two sectors to rotate. Technology stocks were getting shellacked at midday, but a general skepticism among traders about the viability of the some long-neglected sectors was keeping rotation to a minimum.
Those technology stocks with the largest market capitalizations were taking the biggest beating, a trend that had the
Nasdaq Composite Index
down 86, or 1.9%, to 4333.
Level 3 Communications
-- they were all down, and down big.
was down 7, or 0.5%, to 1382. But some modest sector rotation was helping the
Dow Jones Industrial Average
stay above water. The Dow was up 79, or 0.8%, to 10,599, largely because of gains in its financial and cyclical components.
each were up around 2%.
Meanwhile, crude's ability to hang near the $30-a-barrel level was boosting oil stocks, including Dow component
, which was up about 4.3%.
Traders were less than enthusiastic.
"The market looks like it's rotating every day," said John Manahan, head trader at
Brown Brothers Harriman
. "But once it rotates, it just rotates back to the tech stocks. As soon as they take them down a little, people come back and buy them."
It's little wonder. With the
still in tightening mode, the interest-rate environment is far from friendly to the financial sector. Thirty-dollar crude can't hurt the oil service stocks, but there's no consensus as to whether that price level will hold. And cyclical stocks, whose performance is tied to the contours of the economy, continue to suffer from a sort of late-expansion syndrome: The U.S. economy may be smoking, but it's not likely to get too much hotter.
The promise of organic growth remains the main fundamental driver of stocks. And when the market's favorite growth stocks start contracting, things quickly get volatile.
You'd be hard pressed to find a better poster-stock for volatility than
of late. After dumping 20% of its value yesterday, the stock had sunk another 32 points, or 12%, before investors started creeping back to the wreckage. Infosys was lately down about 2%.
Hardcore volatility like that is a little scary, to say the least. "I get concerned when I see stocks flipping around 50 to 100 points a day," said Barry Hyman, chief market strategist at
Ehrenkrantz King Nussbaum
. "The market is tolerant to a certain point, as it was with
. But then you take a look at these stocks and say, how much can you buy at $600 a share? Is it worth the leverage? Unless you're trading for the minute, the answer is no. And when you get to that limit, it's time to look for a new group of stocks."
One of those new stocks was software firm
, which lately has been constructing the sort of parabolic chart typical of a momentum darling. The stock was up 10 1/8, or 17.2%, to 69.
Notwithstanding the negative intermediate-term sentiment on their respective sectors, financial and paper stocks were enjoying good bounces from their recent lows. The
Philadelphia Stock Exchange/KBW Bank Index
was up 2.3%, while the
Philadelphia Stock Exchange Forest & Paper Product Index
was up 2.7%.
Meanwhile, while most of the tech sector was getting pummeled,
was flying. Rambus was up 13 1/16, or 11.7%, to 124 1/2, on what traders are calling a massive short squeeze. Today's move comes on top of yesterday's surge of 23 3/16, or 26.3%, to 111 7/16.
The bond market wasn't doing anything to improve the tone on Wall Street. The benchmark 10-year Treasury was down 1/32 to 99 17/32, putting its yield at 6.57%. The 30-year Treasury, meanwhile, was 16/32 higher to 99 26/32 and yielding 6.26%.
Small-caps and Internet stocks were generally lower. The
was off 5, or 0.9%, to 535, while
TheStreet.com Internet Sector
index was down 23, or 2%, to 1117.
Breadth was ugly on moderate volume.
New York Stock Exchange:
1,306 advancers, 1,577 decliners, 630 million shares. 34 new 52-week highs, 141 new lows.
Nasdaq Stock Market:
1,506 advancers, 2,488 decliners, 1 billion shares. 176 new highs, 86 new lows.
For a look at stocks in the midsession news, see Midday Movers, published separately.