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Who Can You Trust?

With the government's data in high doubt, we're left to wonder whether the economy's really slowing.

Yesterday's market was the kind that basically marked time (while I did the same all last week), but I must admit I was a bit disappointed that there was so little follow-through after the somewhat bizarre employment report. While the data have continued to indicate that the economy has begun to cool, there seems to be a growing belief that the

gubmint's

numbers have been tortured to such an extent that they fail to accurately describe the real economy.

Nonetheless, while there may be legitimate concerns about the accuracy of the jobs and inflation data, there's enough anecdotal evidence to make the case that the

Fed's

rate increases have begun to bite. Good news in terms of reducing the odds that Mr. G's merry band might overshoot and drive the economy into recession; but there's still the question of how a slowdown will impact second-half earnings. 'Tis the season to worry about second-quarter earnings, as the confession period gets into full swing, and that was the primary theme Monday.

Having been skinned last week,

Citrix Systems

(CTXS) - Get Citrix Systems, Inc. Report

was almost cut in half again on heavy volume after the company warned that its earnings will be only about half what analysts had expected, resulting in some timely downgrades on the one-time highflier. That news, and some profit-taking in thin trading, outweighed

Corning's

(GLW) - Get Corning Inc Report

higher guidance, which only benefited the fiber optic group.

Harmonic

(HLIT) - Get Harmonic Inc. Report

was also battered after the company stated that second-quarter sales to

AT&T

(T) - Get AT&T Inc. Report

will be "lumpy."

Having opened on a firm note, the overall market turned lumpy with the tech-heavy

Nasdaq Composite Index

leading the way lower. However, traders really took their lumps late in the day after a final-hour rally attempt was squelched, and the major market measures broke to the day's lows into the close. The sell-off picked up steam after

Computer Associates

(CA) - Get CA, Inc. Report

plunged on concerns at its analyst meeting about a lack of second-quarter guidance.

At the final bell the

Dow Jones Industrial Average

TheStreet Recommends

was off 50, the

S&P 500

11, the Nasdaq 107 and the

Russell 2000

was down 16 points. The

Nasdaq 100

led the way lower, losing 122 points, as only 11 of its components finished in the green. Volume was a paltry 756 million on the

New York Stock Exchange

, and only 1.25 billion on the Nasdaq. Big Board breadth was only marginally negative, but it was negative by more than 1,000 issues on the Nasdaq. The weakness helped to push yields lower in bondland, which also saw very light volume ahead of today's retail sales report and the Fed chairman's comments, as the benchmark 10-year note eased to 6.07% and the 2-year note went out under 6.50%.

Semiconductor, biotech and Internet stocks led the way down, as the

Philadelphia Stock Exchange Semiconductor Index

, or SOX,

Philadelphia Stock Exchange/KBW Bank Index

, or BKX, and

TheStreet.com Internet Sector

index, or DOT, all lost about 5% on the day. Retailers continued on sale with the

S&P Retail Index

, or RLX losing 2.2%, as traders flee the group on fears that consumers will have to reign in spending if there's any chance the economy will slow enough to satisfy the Fed. While that may make sense for many in the group, especially those that are heavily dependent on big-ticket items, it may be getting overdone for selected stocks.

Energy stocks were the big winners, as crude spiked $1.54 per barrel to $31.74 on comments from Algeria's oil minister that OPEC is unlikely to increase production at next Wednesday's meeting.

Deutsche Bank-Alex. Brown

upgraded the energy-services stocks, and the

Philadelphia Stock Exchange Oil Service index

, or OSX gained 5.2%.

The question in the very near term is whether the past six days of range-bound action is simply consolidation or if we've hit some meaningful resistance. I'm inclined to think consolidation is most likely, although things might continue to be a bit lumpy as we slog through pre-announcement season. So, traders should be quick to take profits and use pullbacks as short-term opportunities to trade the long side. The gap on the Nasdaq's chart left from the employment data (at 3582.50) might need to be filled, but anything more severe is apt to turn momentum indicators negative.

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 had no positions in any stocks mentioned in this column, although holdings can change at any time. He appreciates your feedback at

commentarymail@thestreet.com

Morning News, Copyright, 1999 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.