SAN FRANCISCO -- The negatives have been mounting for some time, be they the



situation, Argentina's likely debt default, profit warnings from

American Express

(AXP) - Get Report



(MRK) - Get Report

, rising bond yields, the dollar weakening vs. European currencies while Japan appears headed for a devaluation of the yen (which has potential deflationary implications), plus valuation concerns, and renewed bloodshed in the Middle East.

Prior to today, the stock market had proven remarkably resilient to those factors, and myriad others. But the much-ballyhooed "sideways action" adopted a decidedly downbeat tone today as the

Dow Jones Industrial Average

fell 1.3%, the

S&P 500

shed 1.6% and the

Nasdaq Composite

shed 3.2%.

It's not as if the market was in need of reasons to go down (see above), but a fresh batch of negatives tipped the balance too far in favor of the sellers today.

In economic news, November retail sales were reported to have fallen 3.7%, worse than the 2.8% expected and the biggest monthly decline since 1992. Additionally, the October gain was revised to 6.4% from 7.1%.

Separately, the producer price index fell 0.6% November, double the expected drop and encouraging concerns about deflationary forces. Excluding food and energy, however, PPI rose 0.2% last month vs. a decline of 0.5% in October.

The one piece of potentially uplifting data, a bigger-than-expected drop in weekly jobless claims, was offset by fresh job cuts at American Express and

Applied Materials

(AMAT) - Get Report

, which fell 8.7%.

Other company-specific news included dismal earning forecasts from


(CIEN) - Get Report

, which lost 17%, and



, down 15.7%.




, which slid 2.5%, dealt another blow to the beleaguered telecom sector by announcing it is cutting spending plans for 2002. The Nasdaq Telecommunications Index shed 4.9%.

Finally (

pant pant

), the geopolitical environment took a surreally grim turn with the release of the tape of Osama Bin Laden celebrating the Sept. 11 attacks with his associates. Also, Israel severed diplomatic ties with Palestinian chairman Yasser Arafat, while India's parliament was attacked. Given all that, President Bush's withdrawal from the 1972 ABM treaty raised concerns about nuclear proliferation in an increasingly unstable world.

Perhaps the most surprising aspect of the day's session is not that stocks fell, but that the bond market also tumbled. The price of the benchmark 10-year Treasury fell 19/32 to 99 11/32, its yield rising to 5.08%.

Without making too much of one session, the Treasury market's inability to garner any kind of "flight to safety" bid is an unsettling development for those owning U.S. financial assets.

After that kind of session, it would be easy for me to trot out some bearish market-watcher because -- believe me -- they are champing at the bit. Instead, I took the pulse of the bulls by calling Anthony Cecin, manager of Nasdaq trading at U.S. Bancorp Piper Jaffray in Minneapolis, who was among those adopting a

bullish stance early in this cycle, which he has since reiterated.

"You had some cautionary comments, more layoff announcements and that makes people squeamish," Cecin said, calling the Ciena warning particularly damaging. "But I still feel we're in an uptrend

even if it's not going to be seamless. People are entitled to take some profits."

Indeed they are. Probably wise to do so, as well.

Paper Paper Paper

After rising as high as $29.55 early on, shares of



fell 1.6% to $28.30. The drop wasn't surprising, given the odds G-P will sell its building products division to


(WY) - Get Report

have been seriously diminished.

As detailed

last night , the sale of its building products business would be another welcome event in G-P's efforts to become a more consumer-focused and less debt-burdened company. But


(WY) - Get Report

increased bid of $55 per share for Willamette is likely to halt the deal.

"If Willamette rejects our proposal and consummates a transaction involving the Georgia-Pacific building products business, we will withdraw our offer," Weyerhaeuser said in a letter to Willamette's board, arguing the combination would result in "significant value destruction for Willamette shareholders."

A G-P spokesman did not return a phone call and Willamette said only that it would review the Weyerhaeuser offer. Many observers believe Weyerhaeuser's new bid, up from $50, will be enough to entice Willamette shareholders, effectively killing the G-P deal.

Notably, Richard M. Clark, who controls 3.2 million shares, or 3% of Willamette, said in September he would sell to Weyerhaeuser if the price was raised to $55 a share.

"Weyerhaeuser's revised $55 offer is consistent with expectations and should speed this deal to its logical conclusion," commented Mark W. Connelly of Credit Suisse First Boston. "While Willamette may continue to drag its feet, we have considered a deal inevitable from the outset and remain convinced that a deal can be struck soon."

Connelly, who maintains hold recommendations on all three of the paper and forest product giants, suggested that Willamette's talks for G-P's building-products business was a "credible negotiating tactic" for Willamette, "but the business combination makes little sense."

Nevertheless, he views the likelihood of a Weyerhaeuser-Willamette combination as "neutral news" for G-P "because we never took seriously the prospect for a Willamette deal."

The bullish spin on the story is that industry consolidation is a "good thing" for G-P even if it's not directly involved in the transaction. Also, the annual survey of the paper industry out yesterday projected capacity growth of 0.4% per year for 2002-04, which would be the lowest level of growth for a three-year period in the history of the survey.

As one fund manager who is long G-P noted, most analysts are looking for a "huge recovery" in the paper industry in the next 18 months, concurrent with an economic rebound. Additionally, he believes the "fast money" is likely done selling after having been spooked by the asbestos revelations earlier in the week.

The source, who runs about $350 million, requested anonymity, which has to be good enough for the longs if it's good enough for the shorts.

Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.