There are some things you just don't want to see in the morning. Like demanding co-workers, rambunctious children and the hair of the dog that bit you.

If you're an investor, few things could be harder to watch than the view of the

Dow Jones Industrial Average's

wild ride this morning.

Following a slew of

analyst downgrades this morning on

IBM

(IBM) - Get Report

and an

earnings miss from

J.P. Morgan's

(JPM) - Get Report

merger buddy

Chase Manhattan

(CMB)

, the Dow dropped more than 400 points to a session low of 9656.12 before 10 a.m. EST.

Trading collars, or "curbs" used to help calm volatile markets, went into effect on the Dow almost as soon as trading began. That happens when the index loses 210 points.

"Obviously, IBM and J.P. Morgan are the big drivers today," said Scott Curtis, a trader with

Kaufman Brothers

. "Unfortunately, they've dragged a lot of other stocks with it, but if you look at the rest of the Dow, it's relatively flat."

Combined, IBM and J.P. Morgan have thrown almost 130 points to the Dow's nasty side. And if you look at the other 28 blue-chip companies that make up the Dow, 13 were in the green. If you hypothetically discount IBM and J.P. Morgan, the Dow would only be off a bit more than 40 points. Still, despite the "looks worse than it really is" picture on the Dow, Curtis said that there's still a lot of fear in the market.

The

Nasdaq Composite Index was able to shake off much of its early woes, when it took a huge dive in sympathy with the Dow. It hit a session low of 3026. Makes the 5132.5 high of the year for the Nasdaq seem like a distant memory.

The Nasdaq was lately fighting for a perch it could keep in positive territory. It was led higher by a resurgent semiconductor sector.

Chipmakers in the

Philadelphia Stock Exchange Semiconductor Index

, which have been at or near 52-week-lows for the last few weeks because of fears about a slowdown in the sector, were last up 3.4%. Chip stocks were led higher by

Intel

(INTC) - Get Report

. The embattled chip giant rose 8.1% to $39.06 on news that it was

upgraded by analysts after it beat its lowered earnings

last night.

"We're testing last Thursday's low," Curtis said of the day the tech heavy index dropped to near the 3000 mark. "I think there's a lot of fear out there. The

put

/call ratio is very high. A put is bet that a stock will drop, with the investor making money if the stock falls. Calls are the exact opposite -- a bet that a stock will go up. Calls are traditionally used by people who do not have the capital to buy shares, but think the price will go up nonetheless. If the puts end of the spectrum is far higher than the calls, it means that people think the market is pretty bad.

The

volatility indexis also very high and came close to last week's high, and when the volatility index gets above 30, then you know people are scared." The

Chicago Board Options Exchange Volatility Index

was lately up 0.7% to 32.9.

While many stocks are off there lows for the day, there's fear on the street. The volatility index is a measure of how much people think that the

S&P 100

index of large companies will fluctuate over the next year. It is based on call/put ratio on the S&P 100. So if there is a wide spread between puts and calls, it means investors believe the S&P 100 will be more valuable.

Taking a broader, more economics-driven picture of the market, Drew Matus, an economist at

Lehman Brothers

, said a cocktail of high growth in

gross domestic product (a measure of the value change of things in the economy), earnings misses and subsequent investor shell shock have helped shellac the market.

"It's not like we're seeing negative growth compared to what we had. I think people thought that 5% gross domestic product growth would continue forever. People are getting 4% growth. What you're seeing is a move to adjust to the new reality," he said. "What set this off was analyst expectations for earnings."

Lehman's picks for third- and fourth-quarter GDP growth are just south of 4%, which is certainly lower than what happened in the first and second quarters of 2000. GDP then grew in excess of 5%. Still, Matus said the second-half gross domestic product estimates are good numbers because they still show growth and are "real growth figures," which don't even take into account inflation, which could add in another 2 to 3% to GDP.

Matus said: "Higher growth equals more sales and more sale equals higher earnings."

And when growth slows, expectations are not met and people get disappointed. Matus said people got used to rapid growth of 5% or more. Now, they are making that correction in the stock market.

Market Internals

Some people say that what's on the inside is what really matters. Well, that's really bad news for the

Big Board and Nasdaq markets, because they've got terrible insides.

New York Stock Exchange: 767 advancers, 1,986 decliners, 838 million shares. 14 new 52-week highs, 244 new lows.

Nasdaq Stock Market: 1,211 advancers, 2,568 decliners, 1.5 billion shares. 16 new highs, 439 new lows.

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Most Active Stocks

NYSE Most Actives

  • America Online (AOL) : 29.6 million shares.
  • Chase Manhattan (CMB) : 22.1 million shares.
  • IBM (IBM) - Get Report: 20.6 million shares.

TheStreet Recommends

Nasdaq Most Actives

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Sector Watch

Intel may be helping chip stocks soar, but

IBM

(IBM) - Get Report

, blue-chip brethren to Intel, did the exact opposite thing to the

Philadelphia Stock Exchange Computer Box Maker Index

. The index dropped -.8%, following the 14.4% plunge in Big Blue.

Financials were hurting, following the drop in both Chase and J.P. Morgan The

American Stock Exchange Broker/Dealer Index

fell 2.5%, while the

Philadelphia Stock Exchange/KBW Bank Index

fell 1.1%.

And people have found the forest and the trees. The

Philadelphia Stock Exchange Forest & Paper Products Index

rose 3.3%.

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Bonds/Economy

What's bad for stocks today is good for bonds. The bond market is rallying this morning as investors look for safer investments amid weakness in equity markets.

The benchmark 10-year

Treasury note was lately up 7/32 at 100 23/32, pushing its yield down to 5.652%. That puts the government security at its lowest yield of the year.

Bonds have pared back some of their gains from earlier in the morning as the

Dow Jones Industrial Average rebounded off its lows of the day and the

Nasdaq moved into positive territory.

The bond market is clearly much more concerned with the weak performance of the stock market and its implications for lower interest rates than it is with the growing signs of inflationary pressure in the economy.

The bond market was relatively unconcerned by September's

Consumer Price Index

(

definition |

chart |

source

), which was released before the stock market opened this morning and showed a 0.5% rise in the headline inflation number. It also showed a 0.3% increase in the core inflation rate that excludes food and energy prices.

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International

International

European markets were awash in red this morning following the bad news from IBM last night.

London's

FTSE 100

fell 0.9% to 6148.20.

The

CAC 40

in Paris dropped 2.1% to 5937.35, while the

Xetra Dax

in Frankfurt fell 1.1% to 6447.15.

The euro continued lower, lately trading down to 0.8391.

The major

Asian equity markets closed broadly lower Wednesday, as the region's technology shares got pounded after IBM reported weak revenues Tuesday.

In Tokyo, the

Nikkei 225

tanked 467.7, or 3.1%, to close at 14,872.5, ending under 15,000 for the first time in more than a year and a half.

In Tokyo trading, the dollar fell to 107.85 yen.

Elsewhere, Taiwan's

TWSE

index closed off 270.1, or 4.7%, at 5432.2, as chipmakers including

Taiwan Semiconductor

(TSM) - Get Report

, which dropped nearly 7%, got mauled. Hong Kong's

Hang Seng

index fell 414.9, or 2.8%, to 14,458.5.

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