Does Wall Street need a Xanax? Judging by this week's choppy trading you would think that the third-quarter earnings season was off to a terrible start. But it wasn't, of course.

With 160 of the S&P 500 reporting, 110 of them beat earnings expectations, 25 missed and 25 were in line. The positive bias in tech stocks was even stronger: 20 beat, five were in line and just one -- Intel ( INTC) (more about that later) -- missed.

"The market isn't translating this into stronger gains; it's a disconnect," says First Call analyst David Dropsey. "Investors keep changing their minds about what to worry about."

And worry they are. Consider the list of concerns tossed off by an investor who manages a small-company oriented growth fund: "The yield curve is flattening, consumers are tapped out, rates are still going up, and Bush may not be able to lower taxes," he fretted. "The consumer sees the value of his house going down and the price of gas and heating oil going up. It's not a good combination."

On the other hand, the strong bottom-line performance of tech issues belied top-line misses that could weaken the traditional end-of-year rally.

Case in point -- IBM ( IBM). Big Blue zipped past earnings expectations by 13 cents a share -- but sales fell short of the $21.71 billion that Wall Street targeted by more than $100 million. Excluding 2004 revenue from IBM's PC business, which the company sold May 1, third-quarter revenue increased a modest 4% from the same period a year ago.

Looked at on a four-quarter rolling basis, growth in each of the last two quarters was 1.4% and 0.48%, says analyst Richard Williams of Garban Institutional Equities.

Of particular concern, he said, was the slowdown in global services revenue on a four-quarter basis, which fell to 0.62% in the third quarter, "the first time this metric has been below 1% growth in more than six periods. Considering the high-margin nature of this source of revenue we wonder how well IBM's earnings can maintain going forward if this trend persists," he wrote in a note to clients.

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