'Superball' Techs Dribble Lower as Shift Toward Value Rolls On

Investors the last few days have bid up small-cap and value plays as the Net cools a bit.
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If you wanted to write about what a horrible day this has been in the stock market, you might start with something like this:

Stocks were getting pummeled at midday, as the selling pressure that sunk the market yesterday continued unabated. Though the Dow Jones Industrial Average was up 8.88 to 10,420.54 on the strength of cyclicals, other indices told the real story. The broader large-cap measure, the S&P 500 was down 14.31, or 1.1%, to 1314.13, while the tech-barnacled Nasdaq Composite was down 40.25, or 1.6%, to 2467.03. And Internet issues were getting hammered. TheStreet.com Internet Sector Index was down 45.55, or 7%, to 645.62, while TheStreet.com E-Commerce Index was off 6.23, or 4.6%, to 128.92. Meanwhile, the Russell 2000 was down 2.11 to 415.28.

You could write that, but it wouldn't quite capture the tone of the day. It's not just cyclicals that are doing better -- most


are trading higher. Advancers were outpacing decliners 1,658 to 1,198 on the

New York Stock Exchange

with 606 million shares changing hands. And even on that hurting

Nasdaq Stock Market

, decliners were only narrowly beating advancers, with 714 million shares traded.

We are in the midst, said

Morgan Stanley Dean Witter

U.S. investment strategist Peter Canelo, of a massive rotation. "Three asset allocation shifts are in process right now. You're going from noncyclicals to cyclicals, there's also a an internal shift from growth to value, and there may also be a shift from big to small."

These shifts -- if they hold up -- have been a long time coming. Even before the global financial crisis hit in 1997, cyclical, growth and large-cap stocks were in favor. When the turmoil struck, this became even more pronounced. Fears of how deep the global slowdown would be, along with expectations of a slowdown in the U.S., drove investors into the areas they felt were safe -- the big-cap growth stocks that top off the S&P 500. This drove the S&P 500 higher while the rest of the market flagged. As a result, portfolio managers focusing on value underperformed the index. Eventually, many threw in the towel, began shadowing the index and sent the S&P higher still.

These things "created a concentration on earnings and price momentum which led to this extreme allocation toward technology and health care," said Canelo.

But now it's beginning to look like the world is on the mend, and that the U.S. economy is entering anything but a slowdown. Asian markets are on the mend, portending recovery; Brazil looks like it will get over its recession quickly; the

European Central Bank

has slashed rates; and there's talk that the U.S. will grow at its fastest pace of the decade this year.

You have to wonder how much the damage in Internet stocks has to do with this being tax day. Internet stocks are, we're constantly told, a retail phenomenon. If that's true, there are probably a lot of retail investors who realized late last night when they were doing their taxes that they've booked a ton of capital gains this year. And so they sold.

A pretty theory, but hard to prove. And there is certainly reason enough to book profits in these things. They've come a long way since they last ran into selling pressure in early February. From its Feb. 10 bottom to Monday, the DOT gained more than 75%. Still, the recent decline may be short-lived.

"It's going to be hard to kill off the momentum in these things, people have it so driven into their heads that when these things dip it's a buying opportunity," said Dan Mathisson, head stock trader at

D.E. Shaw Securities

. "These things are like superballs."

Thursday's Midday Movers

By Heather Moore
Staff Reporter


(PFE) - Get Report

was down 11 1/2, or 8%, to 133 1/8 after reporting that first-quarter


sales dropped to $193 million from $236 million in the fourth quarter. The company forecast single-digit second-quarter earnings-per-share growth, citing a strong year-ago quarter due to Viagra's launch, but said it's comfortable with analysts' full-year earnings estimates. Pfizer posted first-quarter earnings of 62 cents a share, on target with the 24-analyst

First Call

prediction and ahead of the year-ago 53 cents.



James Cramer

weighed in on the report in a

piece this morning.

Elsewhere in earnings,

General Motors

(GM) - Get Report

was losing 2 3/8 to 87 3/8 even after posting first-quarter earnings of $3.04 a share, beating the 16-analyst estimate of $2.89 and moving up from the year-ago $2.27. And


(F) - Get Report

was down 1/4 to 62 1/2 despite reporting first-quarter earnings of $1.46 a share, topping the 10-analyst outlook for $1.39 and higher than the year-earlier $1.22.

In other news:


(AA) - Get Report

was up 1 3/4 to 55 after

Morgan Stanley Dean Witter

upgraded the stock to neutral from underperform.

Friedman Billings Ramsey


was up 4 9/16, or 46.5%, to 14 3/8 on news it plans to launch an online investment bank,


. The company said online investors will have the chance to register to participate in all of the firm's future IPOs. Meanwhile, other companies that soared on their connections to online banking and investing late last week continued this week's fall.


(AMTD) - Get Report

was down 13 3/16, or 8.9%, to 135;



was down 15 15/16, or 14.1%, to 97; and



was down 21 9/16, or 12.7%, to 149 1/4.

Earnings/revenue movers

Advanced Micro Devices

(AMD) - Get Report

was up 1 3/8, or 9.3%, to 16 1/8 after late yesterday reporting a first-quarter loss of 81 cents a share, narrower than the 13-analyst estimate of a loss of 92 cents.


took a closer look at the report in a story

last night.

In other earnings news: