It's important to note that even though they're both reading from the same sheet music, stocks and bonds aren't locked in

Beach Boys

harmonies here. It's a lot more like

Flatt

and

Scruggs

.

So while the Treasuries are getting whacked, the selling is less severe in the stock market. "I can't say things are that bad, considering what the bond's doing," said Bryan Piskorowski, market analyst at

Prudential Securities

. "Stocks are holding up pretty well."

The selling in stocks has also been selective. High-tech issues and other growth stocks are getting hurt the most, while value and cyclical stocks are holding up well. That makes sense: Part of why bonds are falling is because it looks like the world economy is getting better. True, cyclicals get hurt when the interest rates rise, but an improving global outlook takes away a lot of the sting.

The

Dow Jones Industrial Average

was lately off 72 to 10,884, while the broader

S&P 500

was down 20 to 1328. The

Nasdaq Composite

was off 53, or 2%, to 2481,

TheStreet.com Internet Sector Index

was down 20, or 3%, to 617. The small-cap

Russell 2000

was down a meager 1 to 433.

Decliners were outpacing advancers 1,660 to 1,282, with 688 shares passing hands on the

New York Stock Exchange

. In

Nasdaq Stock Market

action, decliners were topping advancers 2,079 to 1,783 on 712 shares.

The 30-year Treasury was down 1 9/32 to 92 8/32, lifting the yield to 5.80%.

2:04 p.m.: Crumbling Bond Market Continues to Depress Stocks

Some brave soul is probably buying right, guessing that the April

jobs report

won't be as bad as the market thinks it will, guessing the bond will come roaring back, taking the stock market with it.

But most of Wall Street is not brave -- if anything, it's yellow. After making some good gains this year, the safe thing to do is take some chips away. After all the

Fed

chairman,

Alan Greenspan

, said this morning, a strong jobs report could easily make bond traders think the Fed will move toward a tightening bias.

"Right now, you hear the whine of the slow leak," said Doug Myers, vice president of equity trading at

Interstate/Johnson Lane

. "The bond market's off, and that hand in hand with the

Nasdaq 100

is what's letting the air out of the balloon."

The

Dow Jones Industrial Average

was lately off 98 to 10,857, while the broader

S&P 500

was down 22 to 1325. The

Nasdaq Composite

was off 45, or 1%, to 2489, while the Nasdaq 100, heavy with the kinds of high-tech growth that's fallen out of favor recently, was down 53, or 2%, to 2103.

TheStreet.com Internet Sector Index

was down 14, or 2%, to 624. Small-caps were something of a bright spot -- the

Russell 2000

was down a meager 1 to 433.

The breadth story wasn't so bad, and volumes were low, suggesting that belief in the danger may be a bit weaker than the averages suggest. Decliners were outpacing declingers 1,586 to 1,274, with 586 shares passing hands on the

New York Stock Exchange

. In

Nasdaq Stock Market

action, decliners were topping advancers 2,009 to 1,786 on 608 shares.

The 30-year Treasury was down 1 12/32 to 92 6/32, lifting the yield to 5.81%.

1:14 p.m.: Midday Musings: Jittery Market Casts a Wary Eye Toward Fed and Bonds

12:04 p.m.: Stocks Bounce From Lows After Dropping on Greenspan Comments

Fed

Chairman

Alan Greenspan

delivered a jolt that sent stocks reeling this morning, but toward noontime they recovered some of their losses.

The

Nasdaq Composite Index

, home of many of the stocks Greenspan was talking about when he called valuations hard to justify, lately was up 2 to 2537 after trading as low as 2506.59.

Microsoft

(MSFT) - Get Report

was leading the big-cap techs, up 1 5/16 to 80 7/16 on its deal to invest $5 billion in

AT&T

(T) - Get Report

.

Smallish-cap issues were solid as well, with the

Russell 2000

up 1 to 436. (The

S&P SmallCap 600

, a truer small-cap measure, was up fracationally to 174.) And modest strength in Internet stocks had

TheStreet.com Internet Sector

index up 3 to 640.

Continuing in the loss column were the

Dow Jones Industrial Average

, off 59 to 10,896, and the

S&P 500

, down 8 to 1339.

The bond market remained under heavy pressure but was off its worst levels. The benchmark 30-year Treasury was down 21/32 to 92 28/32, its yield swelling to 5.76%.

Barry Berman, head trader at

Robert W. Baird

in Milwaukee, said the weak bond is unsurprisingly the stock market's primary focus right now.

"The stock market followed the bond futures lower, they stabilized, turned around a couple of points and stocks followed," he said. "The focus for stocks right now, it's a question of which one you want to put first: It's inflation and interest rates. The bond market is worried about inflation and the Fed and they run up and down on expectations. The stock market is worried about interest rates."

Market internals were middling.

New York Stock Exchange

decliners were narrowly edging advancers 1,391 to 1,321 on 397 million shares. On the

Nasdaq Stock Market

, 1,792 advancers were leading 1,695 decliners on 400 million shares. New 52-week highs were outpacing new lows 58 to 9 on the Big Board and 50 to 20 on the Nasdaq.

Most active on the NYSE was AT&T, up 4 11/16 to 61 5/8 on 25 million shares. Microsoft was the Nasdaq's most active issue, with 20 million shares changing hands.

Tech Focus

Among major tech indices, the

Morgan Stanley High-Tech 35

, the

Philadelphia Stock Exchange Semiconductor Index

and the

Philadelphia Stock Exchange Computer Box Maker Index

were all down fractionally.

Rambus

(RMBS) - Get Report

was a somewhat mysterious standout among chip equipment makers, up 5 1/16, or 9%, to 62 13/16. The stock failed to participate in yesterday's rally in the sector and might be making up for a little lost ground.

--

John J. Edwards III

11:04 a.m.: Stocks Drop on Greenspan Comments

Unlike other deities and near deities,

Federal Reserve

Chairman

Alan Greenspan

needs no mountaintop to speak from on high. At the

Federal Reserve Bank of Chicago

(

Chicago!? Why, it couldn't be! Dirty Turtle.

) today, Greenspan spoke the words. And it wasn't what Wall Street bulls wanted to hear.

The beauty of Greenspeak is it can be parsed in a variety of ways, and there's something for everyone in today's speech. But inflation hawks were no doubt excited by the chairman's comment: "There are imbalances in our expansion that, unless redressed, will bring this long run of strong growth and low inflation to a close."

Potential rekindlers of inflation's flame mentioned by Mr. Greenspan include the recent sharp rise in the price of oil, the "tentative signs" of recovery in world economies and tight labor markets.

Bond prices, both in the cash and futures markets, improved a bit as the speech unfolded but quickly and sharply reversed course. Equity gauges followed directly, although have since bounced off their lows.

The price of the 30-year Treasury bond was lately down 28/32 to 92 20/32, its yield rising to 5.77%.

The

Dow Jones Industrial Average

, which approached breakeven during the speech after a weak opening, was lately down 46 to 10,909. The

S&P 500

was down 9 to 1338. The

Russell 2000

was down fractionally at 434.

The

Nasdaq Composite Index

was down 11 to 2523 after briefly trading in positive territory this morning after Greenspan made his almost de facto comments about the productivity gains generated by technology.

TheStreet.com Internet Sector

index was off 3 to 634.

"I don't think what he said was wildly negative. But he's well aware the debt markets have been on the ropes, and he hardly alleviated any of those fears," said one bond trader of Greenspan's speech. "The market has been fretting he'd say something that was negative. He didn't say anything horrendously negative. But when he says things like, 'Of most concern is how long this remarkable period of prosperity can be extended,' you have to start to say to yourself, 'Is he going to an asymmetric bias in May to set up a tightening in June?'"

The trader, who requested anonymity, observed the Europeans have taken steps to improve the euro in recent weeks. "My suspicion is at the last conclave Alan Greenspan told these guys, 'If you don't want the euro to go straight into the

toilet, you'd better recognize we can't keep our interest rates where they are.'"

Still, the trader does not believe the Fed will raise rates this year. "Inflation is under control, the economy is growing, so let sleeping dogs lie," he said.

However, that does not mean he's betting against the rising negativity in the bond market.

If the jobs data tomorrow are weaker than expected, the unemployment rate rises and there's no wage pressure, bonds will rally a "point, point and a half, no problem," he said. "But if it's strong, we'll get hammered. There are sellers in the marketplace.

ECI

flushed out the shorts.

GDP

was horrendously strong. Greenspan is not doing anything to make people feel they want to be buying dips."

--

Aaron L. Task

10:16 a.m.: Stocks Mixed in Early Volatile Trading

Volatile stocks were bouncing back after a plunge at the open as

Fed

Chairman

Alan Greenspan

was delivering his latest Rorschach analysis of the U.S. economy at the

Chicago Fed

.

The

Dow Jones Industrial Average

was south 15 to 10,941. The

S&P 500

was off 2 to 1345. The

Nasdaq Composite Index

was up 6 to 2541. The

Russell 2000

was up 1 to 435.

TheStreet.com Internet Sector

index was up 5 to 643. The 30-year Treasury bond had slipped 18/32 to 92 30/32, yielding 5.75%.

Most Up at Open -- NYSE

AT&T

(T) - Get Report

, up 4 1/16 to 61, fresh off its successful bid for

MediaOne

(UMG)

and news of a $5 billion investment by

Microsoft

(MSFT) - Get Report

.

Most Up at Open -- Nasdaq

Gemstar International

(GMST)

, up 14 9/16 to 125.

Most Down at Open -- NYSE

Aegon

(AEG) - Get Report

, down 3 11/16 to 90 1/2.

Most Down at Open -- Nasdaq

Knight Trimark

(NITE)

, down 2 15/16 to 146.

--

Thomas Lepri