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Today's Market: Stocks Turn Down as Yesterday's Fizz Turns Flat

<LI>PC makers hold on to gains, but chip stocks lose ground.</LI><LI>Drugs and tobacco getting battered.</LI><LI>Transports soaring.</LI>

(Updated from 12:57 p.m. EST)

It's been a little more than 24 hours since the

Fed made its

surprising rate-cut announcement, and the market is having difficulty sustaining a rally, though for a time both major indices sported double-digit gains.

Were yesterday's 300-point gains for the

Dow Jones Industrial Average and the

Nasdaq Composite Index premature? Today the markets have zig-zagged on both sides of the flatline, and indecision seems the order of the day, so far.

Peter Cardillo, chief strategist at

Westfalia Investments

, said he was "somewhat surprised" by the strength of the market at late-morning. "I really thought we'd see a selloff ahead of tomorrow's numbers," he said. Lately, it seemed that his initial expectation was more on-target that it had looked a little after noon, when the Dow was up as much as 83 points.

The numbers to which he is referring are tomorrow's

jobs report results, which are expected to be quite negative. Some have been saying the Fed cut interest rates by 50 basis points in order to prevent the market from going into free fall. That data will show what happened to employment in December as the economy was slowing.

Cardillo said the market would be able to show how effective the rate cut really is by how the market reacts to the numbers tomorrow.

"The market is relieved that the Fed is taking action, but it doesn't mean all our ills are cured," Cardillo said, adding it will take three to six months before the cut really infiltrates the economy.

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Financials, and tech were still garnering some positive attention from the news. In blue-chips, that meant some bounce for


(IBM) - Get International Business Machines (IBM) Report



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J.P. Morgan Chase

(JPM) - Get JPMorgan Chase & Co. (JPM) Report


Defensives remained under pressure as money moved into the battered tech sector.


(MRK) - Get Merck & Co., Inc. (MRK) Report


Johnson & Johnson

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Philip Morris

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were getting flattened again today.

In the tech arena,

BMC Software


was adding on 43.8% to $22.50 after the company said it would beat estimates for the third quarter.

All was not shiny and happy in tech, though.

JDS Uniphase




(QCOM) - Get QUALCOMM Incorporated Report

were suffering, while Internet company



took a beating for last night's post-close warning it would miss first-quarter earnings.

On the

New York Stock Exchange,

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Edison International

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was falling as its utility Southern California Edison continues to endure California's power crisis.

Same-store sales for December came out today. Apparel retailers were mixed, but





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were a couple of shining stars. Talbots was lately up 4.8% to $51.63, while Kohl's was jumping 7.9% to $68.88.


S&P Retail Index

, though, was feeling the weight of the retailers that didn't get the sales they needed. It lately was off 0.5%.

Sector Watch

Transports were back on the brighter side, with the

American Stock Exchange Airline Index

up 3% and the

Dow Jones Transportation Average

4.5% higher.

Many tech sectors were doing well, too, despite the Nasdaq's small dip into the red in early afternoon. The

Philadelphia Stock Exchange Computer Box Maker Index

was rising 2.3%. After advancing this morning, however, the

Philadelphia Stock Exchange Semiconductor Index

turned down in the afternoon, losing 1.2%.

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Treasuries are trading higher this morning after yesterday's heavy sale in notes and bonds, which was caused by the frenzied move into equities. As the market digests the decision by the

Federal Reserve to lower interest rates well before its monetary policy meeting in three weeks, there are some murmurs of an overreaction among stocks. There remains considerable expectation of another interest rate deduction of 25 basis points at the end of the month -- in fact, 22 of the 24 primary money market traders polled by


expect such a move. Bond yields are slipping again, approaching their lows of a few days ago. The latest jobs data brought back some reality after yesterday's euphoria, with the number of people applying for first-time unemployment insurance rising by a sizable margin.

The benchmark 10-year

Treasury note lately was up 30/32 to 105 13/32, lowering its yield to 5.031%.

In economic news, the

initial jobless claims


definition |

chart |


) rose to 375,000 in the week ending Dec. 30, from 359,000 in the previous week. The number has risen for the third consecutive week and is at its highest level in two and a half years. Last week's result was substantially revised from the 333,000 as initially reported, understandable since only 18 states had provided hard data at that time. The four-week average rose to 352,250, its uppermost number since mid July of 1998.

Factory orders


definition |

chart |


) rose 1.7% in November, more than expected. Economists polled by


had forecast a 1.3% rise, on average. The annual growth rate of factory orders rose to 2.1% from 1.8% in August.

Finally, the

Purchasing Managers Non-Manufacturing Index


definition |


) dropped to 53 in December from 58.5 in November.

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