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Stocks and Stomachs Churn on Wall Street in Lurching Session
By Brian Louis
TheStreet.com
  

NEW YORK — Airsickness bags aren't just for airplanes anymore. They're the fashionable new accessory on a trading floor near you.

Consider:

The session began rather nicely for stocks: The market appeared to shrug off the Dell earnings warning from yesterday after the close; there were plenty of companies posting solid, estimate-beating earnings; and the early advance in equities was broad.

But with the volatility the way it's been lately, one couldn't expect the situation to stay the same, and the above-mentioned gains didn't last. And in tune with the way things have been for a while, the Nasdaq Composite Index was the major market gauge overall making the biggest percentage moves on the upside and the downside.

The Nasdaq Comp - along with the other major market averages - advanced early and hit its intraday peak a little after 11 a.m. EST. Things looked good for the Comp, considering the drubbing it suffered yesterday. The Dow Jones Industrial Average and the S&P; 500 also peaked intraday around the same time.

From there, however, it was a steady slide for stocks. By early afternoon, the market had given up its gains and fallen into the red. Major stock proxies stabilized lower for a while and made an upside push, but that push didn't last long. Sellers again regained the momentum and thumped stocks lower, with the Comp suffering the most pain. Major gauges bottomed out late in the session, around 3:15 p.m. The Comp hit an intraday low at 3973.59. The S&P; 500 cratered at the 1370.99 level, while the Dow bottomed out at 10,915.40.

From those levels, some interest in stocks returned and the momentum that had buried the market earlier reversed. By session's end, stocks had erased a big chunk of their intraday losses. But not all of them. (Need one of those bags yourself yet?)

The stock market's troubles helped to spur a fine performance in the long end of the Treasury market. The 30-year Treasury bond rose 20/32 to 94 26/32, putting its yield at 6.52 percent. The 10-year note, however, fell 7/32 to 95 4/32, yielding 6.70 percent.

The Dow edged lower by 4.97 to 11,028.02. Coca-Cola and IBM led the Dow's losers, while General Motors led the winners.

The S&P; 500 slipped 5.53, or 0.4 percent, to 1398.56.

The Comp gave up 30.35, or 0.8 percent, to 4039.56. The Nasdaq 100, also known as the NDX, said goodbye to 28.06, or 0.8 percent, to 3593.15. Dell, Qualcomm and Sun Microsystems were drags on both gauges. Dell slumped 2 13/16, or 7 percent, to 37 9/16. Qualcomm, which got crushed yesterday, fell 4 11/16 to 120, while Sun shed 1 11/16 to 76 15/16.

The Russell 2000 surrendered 4.02, or 0.8 percent, to 517.02.

TheStreet.com Internet Sector index shed 4.95, or 0.4 percent, to 1140.73.

TheStreet.com New Tech 30 fell 5.86, or 1 percent, to 612.13. The TSC New Tech 30 is an expanded index replacing the Red Hots index. The market-cap-weighted index remains focused on tracking the most scorching part of the market, the magnet for Wall Street's hot money. A list of the index components is available at http://www.thestreet.com/newtech/.

Tomorrow, bond and stock traders will confront two big economic reports: The fourth-quarter Employment Cost Index and the gross domestic product. Analysts are laying particular importance on the ECI number, a favorite of Fed Chairman Alan Greenspan.

Taken by Surprise

"This market was a surprise today," said Peter Cardillo, chief strategist at Westfalia Investments, in an early-afternoon interview. Cardillo said he expected that the Nasdaq would've moved lower at least initially because of the Dell news. The fact it didn't right away "has sort of taken me and the rest of the Street by surprise."

The surprise, considering the fact that the Nasdaq eventually faded, was short-lived for the most part.

Cardillo said the market has discounted a 25 basis point interest rate hike next week by the Fed. The Federal Open Market Committee is slated to meet Feb. 1-2.

Over the short-term, Cardillo said he's expecting the market to hold in until the Fed is out of the way. However, the strategist sees some trouble after that. The strategist said that as the 401(k) money flowing into the market subsides, the market could endure a correction in late February and early March, with the Nasdaq slammed the most. He said that the Nasdaq could suffer a 15 percent to 20 percent correction.

However, Cardillo said he does see the Dow at 12,500 at year-end.

Cardillo noted that as the market faded early in the afternoon, the bond market rose, suggesting money flowing out of stocks into bonds. Cardillo also said the huge volume the market's seen lately suggests investors will be seeing volatility for quite some time yet.

Volatility was on other market watchers' minds also.

John Hughes, technical analyst at Shields, said the market's volatility is "at best disconcerting," even to the "most seasoned investors."

As the market prepares to say goodbye to January, what comes next investors (who are long) may not like.

Hughes pointed out that February is not typically a positive month for returns in the market, and he said that the S&P; 500 could perhaps go down to 1300 and the Dow to 10,500.

In New York Stock Exchange trading, 1.124 billion shares were exchanged while declining stocks beat advancers 1,557 to 1,482. In Nasdaq Stock Market action 1.777 billion shares traded while losers beat winners 2,284 to 1,829. It was the fifth-heaviest volume day for the Nasdaq ever.

New 52-week lows beat new highs 119 to 43 on the NYSE while new highs beat new lows 184 to 76 in over-the-counter trading.

Among other indices, the Dow Jones Transportation Average stumbled 49.52, or 1.9 percent, to 26

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