So much can change in a day. Expectations of a spring rally for stocks after Tuesday's midday turnaround morphed into concerns about a spring economic slowdown Wednesday as major averages surrendered all of the prior day's gains and then some.

Weak retail sales, profit warnings by

Harley-Davidson

( HDI) and other firms, plus a disappointing five-year Treasury note auction were cited as catalysts for the decline.

The

Dow Jones Industrial Average

fell 120 points, or 1.2%, to 10,387; the

S&P 500

lost 16 points, or 1.3%, at 1172; and the

Nasdaq

shed 33 points, or 1.6%, to 1972, eclipsing its six-month low of 1973.88 touched March 29.

About 80% of the more than 2 billion shares traded on the Big Board was of the downside variety, and declining stocks led advancing ones by 23 to 9. Down volume was 82% of the Nasdaq's 1.75 billion total, and losers led 21 to 8 in over-the-counter trading.

Much of the selling was focused in technology stocks, particularly semiconductors after a profit-warning from Europe's biggest chip production equipment maker,

ASML Holding

(ASML) - Get Report

, which fell 6.3%.

In addition, the Semiconductor Equipment Association said that worldwide sales of chipmaking equipment dropped for the first time in 19 months in February. The Philadelphia Stock Exchange Semiconductor Index fell 2.7% and

Advanced Micro Devices

(AMD) - Get Report

fell 1% ahead of its earnings report. After the close, AMD announced an

unexpected loss for the quarter and said it will separate out its flash memory unit through an initial public offering. In after-hours trading, AMD stock was recently up 3.8% to $17.70.

Meanwhile,

Apple Computer

(AAPL) - Get Report

, which fell 3.8% ahead of its earnings, reported

better-than-expected earnings and sales, and offered upbeat guidance for its fiscal third quarter. Still, Apple's stock was down 1% to $40.60 in recent after-hours trading.

Seeing the Slowdown

While most economists were calling for slower growth in the second half, weak March retail sales -- together with Tuesday's record-high trade deficit and the weaker March jobs numbers -- are bringing the timing of a slowdown closer into view.

Retail sales rose a mere 0.3% in March, below forecasts for sales to rise 0.8%. Excluding autos, sales only increased 0.1%, compared with expectations for a 0.5% gain.

As was the case with the March trade deficit, energy prices played a big role. Gasoline prices rose on average more than 15 cents per gallon during March.

Merrill Lynch, for one, trimmed its first-quarter growth forecasts to 3.5% from 4.3% based on the retail sales and trade data. And for the second quarter, Merrill now expects growth of 3.2% instead of 3.5%.

So far, discount retailers are the most likely to suffer from rising gasoline prices, says Wachovia economist Gina Martin. But if oil prices continue to eat into the income of wealthier consumers, more high-end retail products will be impacted.

Even with crude oil and gasoline prices falling from their highs, economists say the impact on consumer sentiment is expected to reduce spending at least through May, and that's if oil prices continue lower. On Wednesday, crude oil for May delivery fell $1.64 to $50.22 after a government report showed that crude inventories rose 3.6 million barrels in the previous week. The Department of Energy report also showed that gasoline stocks increased by a higher-than-expected 800,000 barrels.

Funnily enough, Wednesday was also the day that Philadelphia Fed President Anthony Santomero chose to keep beating the inflation drum, saying that U.S. economic growth remains solid and won't be hurt by high oil prices, according to

Bloomberg

.

Concerns about growth failed to aid Treasuries, which turned negative after the government's latest offer of five-year Treasuries was met with paltry demand, including from indirect bidders, which include foreign central banks.

The 10-year Treasury note was down 6/32 Wednesday to yield 4.38%. The dollar, likewise, took a hit Wednesday from the combination of lower growth and reduced expectations of aggressive rate hikes by the

Fed

.

In keeping with TSC's editorial policy, Godt doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send

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