Updated from 1:13 p.m. EST

SAN FRANCISCO -- Remember that distant memory of a week ago when tech stocks finished off a five-day rally of 10%, putting the awfulness of late November lows safely into the time capsule?

It was fun while it lasted.

On Wednesday, with the

Nasdaq

reeling by 3%, investors were forced to consider whether that confidence-inspiring high set on Jan. 6 may now instead stand for weeks -- or months -- to come.

The tech index is off 10% since its high on Jan. 6 -- goodbye, Santa Claus rally.

The early morning news flow didn't help, with an almost pre-ordained triplet of items that reminded traders that the main headwinds to a long-term upturn in stocks are still with us: 1) banks are not "back," and a return to stable liquidity isn't imminent; 2) consumers, whacked with declining home values and job losses, are pulling back; and 3) companies with precarious balance sheets will be hanging on for dear life.

Deutsche Bank

(DB) - Get Report

took care of the first item, announcing that it expected to

post a loss

of 4.8 billion euros, or $6.4 billion, in the fourth quarter, due largely to charges related to cutting exposure to certain credit markets. The bank also said it slashed its dividend to boost its so-called Tier 1 capital ratio.

With that news weighing on shares in Europe and keeping premarket prices in the U.S. in check, the government announced that December retail sales fell 2.7% from a year ago (3.1% excluding auto sales), well below consensus analyst expectations for sales to drop only 1.2%.

For good measure, two consumer-related companies,

Under Armour

(UA) - Get Report

and

Tiffany

(TIF) - Get Report

warned the Street that their latest quarterly results would miss estimates.

Tiffany

said U.S. holiday-period same-store sales fell 30% from a year ago, bringing into serious question whether all of the company's 86 stores in its Americas region will survive 2009.

Last (and perhaps, least) was the news by

Nortel

( NT) that it filed for

bankruptcy protection

. This development probably will not be listed in year-end Surprises of 2009 stories, as the company, which was one of the giants of tech as the decade started, had been struggling for years.

But Nortel was still out there doing business (as it still intends to do), and adding to the hard times also does so for companies with which it does business. Shares of

Flextronics

(FLEX) - Get Report

, for example, were off 11% Wednesday after the company said it had been working on a risk mitigation plan for months related to its business with Nortel.

Unsurprisingly, the Nasdaq most-actives list was a sea of red, with no distinctions between stocks that are supposedly "good" or "bad."

eBay

(EBAY) - Get Report

was down 7% after being slapped with a sell rating by investment bank Collins Stewart, which rightfully posed the brain-teaser of why a stock should have risen nearly 30% from recent lows when its growth profile has fallen.

Shares of

Palm

( PALM), the darling of last week's

Consumer Electronics Show

after eliciting oohs and aahs for its upcoming

Pre smartphone

, fell more than 15% as investors may now be wondering in what sort of consumer landscape the Pre will arrive.

Even poor

Yahoo!

(YHOO)

, lauded for eliminating uncertainty by

naming a new CEO

, was in danger of closing below $12 for the first time since Dec. 30, with shares hovering around $12.41 in afternoon trading.

But the daily charts were no better for more traditionally favored stocks like

Intel

(INTC) - Get Report

,

Microsoft

(MSFT) - Get Report

Cisco

>

(CSCO) - Get Report

, and

Apple

(AAPL) - Get Report

, all of which face realities of sluggish spending by corporate IT customers and consumers, as well as profit margin squeezes.

For many of these stocks, Wednesday's selloff returns them to the no man's land between the Santa Claus rally high of Jan. 6 and the low of Nov. 21. What will be interesting to see over the next couple of weeks, amid all of the earnings reports and profit warnings, is whether investors again step in to snap up what they finally consider bargains, or whether expectations regarding the near-term upside in stocks have been lowered.