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It looked as if it might be "

deja vu

all over again" Wednesday morning as the benign

Consumer Price Index report failed to generate much enthusiasm on the Street of Dreams. As was the case Tuesday, positive economic news was met by a quick pop and then a drop. While the



S&P 500

both remained in the green, tech stocks couldn't hold and pressured the

Nasdaq Composite Index

throughout most of the day.

I mentioned Wednesday that I didn't think traders would get a second chance if the data were in line but, to borrow from's


Jim Cramer

, that was Wrong! Even with


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good news, the


dropped more than 50 points from its early high before the clock struck 10:00. That looked to me like a good chance for those looking to join the fray, but a quick rebound faltered and the market was a mixed bag. A mostly positive

Beige Book only led to a modest blip and the market stumbled into the close.

I've taken some flack over the past couple of years for being skeptical about the

Bureau of Labor Statistics'

perverse methodology of generating data that are supposed to reflect inflation at the consumer level. Since the


no longer views CPI as a good measure of the real world, could it be that an increasing number of investors have also begun to see it as a bunch of B(L)S?

Apart from so many adjustments and assumptions, how housing costs (obviously a large part of the overall and "core" reading) are computed is a major flaw. But that's not as visible to most investors as is what one pays at the gas pump every week. The better than expected 0.1% increase last month was primarily a function of lower energy prices. If only one could pull into the station and have a choice of regular, premium or BLS gasoline.

Obviously (one would think), June's CPI will show a different story, which may have kept traders from getting too exuberant. However, the action in bondland and the financials undermines the theory that inflation worries were responsible for the decline in tech stocks.

At the closing bell, the Dow was up 66; the S&P 500 bounced into the close to end with a 1-point gain and the Nasdaq Composite closed on its low, down 54 points. Microsoft notwithstanding, mega-cap techs led the way lower as the

Nasdaq 100

fell 88.

Hewlett Packard




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were the 30-stock average's big drags, accounting for 78 negative Dow points, with the Old Economy stocks providing the lift.

New York Stock Exchange

breadth was positive by about 450 issues, and Nasdaq breadth was negative by about the same. Volume was in line with Tuesday's levels on both venues. On a positive note, 52-week highs topped lows by exactly 3-1 on the Big Board.

Things in bondland were more consistently favorable, as yields fell across the curve. Although the short end significantly outperformed in the early going, as traders put on steepening trades, a coupon pass helped to spark a strong rally in the bonds. The benchmark 10-year note went out at 6.04% and the two years ended at 6.39%, ignoring higher energy prices, as traders became convinced that the Fed will stand pat on June 28. I still think there's a good chance the

Federal Open Market Committee

will increase rates 25 basis points considering the verbiage that accompanied the last rate increase, and taking into account

San Francisco Federal Reserve

Prez Robert Parry's comments yesterday that it's still too early to conclude that the economy has reached a "sustainable" growth rate.

While much of the attention was focused on the tech sector's malaise, which was led by yesterday's big winners -- semiconductors, the positive action in the financials may be more telling as to the overall health of the market. Drugs, retailers and consumer-products stocks also posted solid gains, as did many of the deep cyclicals such as chemical and paper stocks. Although July crude topped $33 and closed up $0.29 per barrel at $32.95, energy stocks were basically flat and airline stocks were in the green.

I thought that we'd break through the near-term resistance on the Nasdaq Composite (3895) and S&P 500 (1480) Wednesday if the CPI were in line, which could ignite a bit more enthusiasm. Having again bounced off the upper end of the recent range is a bit discouraging, and may be the best explanation for Wednesday's sluggishness. Of course, pre-announcement season is generally a testy time, especially when the economy appears to be slowing and traders have to worry about second-half guidance.

Nonetheless, momentum indicators remain positive, and I noted a good number of large-cap tech stocks that still looked attractive Wednesday on our morning call. With some of the financials also looking good, and the market's internals improving, the market should be OK. And with the Fed's tightening about done, I still think there's a good chance for a summer rally. However, until we break out of the current range, traders should continue to take profits quickly and use pullbacks to get long.

Bill Meehan is the Chief Market Analyst for Cantor Fitzgerald, a Manhattan-based institutional trading and research firm, and writes for the Cantor

Morning News. Prior to that, he was a market analyst for Prudential Securities. At time of publication, Meehan held no positions in any stocks mentioned in this column, although holdings can change at any time. He appreciates your feedback at

Morning News, Copyright, 2000 is a product of Cantor Fitzgerald & Co.("Cantor Fitzgerald"). The material is based upon information that Cantor Fitzgerald considers reliable, but Cantor Fitzgerald does not represent that it is accurate or complete, and it should not be relied upon as such. Cantor Fitzgerald and its affiliates, officers, directors, partners, and employees may, from time to time, have long or short positions in, buy or sell and deal as principal in the securities, or derivatives thereof, of companies mentioned herein and may take positions inconsistent with the views expressed. None of the information contained herein constitutes, or is intended to constitute a recommendation by Cantor Fitzgerald of any particular security or trading strategy or a determination by Cantor Fitzgerald that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. You should consult with and rely upon your own advisors whether and how to use such information in making any investment decision.