A window of opportunity opened for the bulls Tuesday morning. Inflation jitters were again set aside, if only temporarily, as investors focused on strong earnings from Genentech ( DNA) before the open and Alcoa ( AA) Monday after the close.

But investors' hesitancy to embrace stocks remained evident ahead of the 2 p.m. EDT release of the minutes of the Federal Reserve's Sept. 20 meeting, when the central bank hiked rates and signaled more to come, determining that inflation risks outweighed growth concerns after Hurricane Katrina.

After trading as high as 10,301 earlier, the Dow Jones Industrial Average was recently up 7.52 points, or 0.07%, at 10,246.28. The S&P 500 was down 2.84 points, or 0.24%, at 1184.49. It earlier had risen to 1193.

And while tech bulls are anticipating strong results from tech darlings Apple ( AAPL) and Advanced Micro Devices ( AMD) after the close, the Nasdaq Composite was underperforming, recently down 15.97 points, or 0.77%, to 2062.95, off an earlier high of 2085.

It could be that the heavy selling pressure experienced last week -- and a less severe version on Monday -- still needs to run its course. There is likely more bad news to come about just how serious a risk Fed officials perceive inflation to be -- with some revelations on that front presumably forthcoming in the Sept. 20 Fed minutes. (Ahead of the release, the price of the benchmark 10-year Treasury note was recently down 8/32, its yield rising to 4.39%.)

Looking for a Catalyst

It could be that the Nasdaq's drop is simply setting the stage for a much anticipated fourth-quarter rally, one that could be sparked by strong earnings from Apple.

"We need some kind of impetus to really get us going," says Donald Selkin, director of equity research at Joseph Stevens. "Energy prices coming down have not helped and there is nothing on the interest rate front that's going to help. The only thing that is going to help us is earnings, and Apple is a big one."

On a hopeful note, Vadim Zlotnikov, market strategist at Bernstein, notes that 85% of tech companies reporting thus far have beaten expectations. "Conservative expectations and steady demand seem to have offset adverse currency a strong dollar in the third quarter," Zlotnikov wrote in a research note last week. "This bodes well for the reporting season."

In terms of timing a broad market rebound, however, it's still too early to tell, according to Mark Newton, technical analyst at Morgan Stanley. He says the tech charts still point to further consolidation until Oct. 20-26 for all three broad averages.

The charts also led Newton to urge some profit-taking on Apple. The stock, although it has fallen from a high of $54.44 on Oct. 4, still has gained close to 30% just in the last three months. Ahead of its earnings after the close, Apple was recently up 1.97% at $51.36.

Other trend watchers, such as Selkin, note that there remains a degree of uncertainty about seasonal factors this year. September and early October generally mark a period of downside for stocks, but with the hurricanes creating an upset, the market actually rallied through September.

If there is indeed more selling to alleviate more of the market's anxieties, then the Fed's minutes, expected to reveal growing hawkishness from central bankers, might be the perfect occasion.

Meanwhile, the price of crude oil, the epicenter of recent concerns about inflation, was recently up $1.20 to $63 a barrel.

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 appreciates your feedback; click here to send him an email.

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