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Technology sees first weakness after lack of confidence

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Technology groups, which have a lesser amount to do with consumer confidence than groups like retailing and some of the deeper cyclicals are suffering the bulk of today's market declines after the Conference Board reported that October consumer confidence, fell to a reading of 79.4 from September's 93.7 reading and well below economist's expectations of 90.1.

While the S&P Retail Index (RLX.X) 287.75 -0.98% and Retail HOLDRS (AMEX:RTH) $76.30 -1.08% are exhibiting weakness, along with the Morgan Stanley Cyclical Index (CYC.X) 423 -1.79%, it's "big tech" as depicted by the NASDAQ-100 Index (NDX.X) 946 -3.35% that outpaces the decline of the Dow Industrials (INDU) 8,249 -1.5%, S&P 500 Index (SPX.X) 871 -2.09% and S&P 100 Index (OEX.X) 443 -2%. Even the smaller capitalized Russell-2000 Index (RUT.X) 363 -1.47%, which lagged the move upward due to lack of short- interest in many of these more illiquid components holds up relatively well versus the larger technology brethren.

Tech-weakness is lead by declines in the Fiber Optic Index (FOP.X) 32.89 -6.34% as it falls back to test a still declining 50-day SMA. Following suit is the recently revitalized Semiconductor Index (SOX.X) 276 -5.21%, which has been bolstered by renewed thoughts that the group may be reaching its trough quarter.

Outside of technology, the Oil Index (OIX.X) 242 -4.3% is breaking to a 52-week low after this morning's news from British Petroleum (NYSE:BP) $36.67 -7% that it would not be able to achieve prior production growth levels. Dow component Exxon/Mobil (NYSE:XOM) $32.88 -5.08% is also weak and leads the Dow Industrials decliner list.

Bucking the trend after giving a triple-bottom sell signal at $87 yesterday, but holding longer-term bullish trend at $85 are shares of Dow component and consumer products giant Procter & Gamble (NYSE:PG) $87.89 +2.49% after the company reported Q1 EPS of $1.12, which was 2 cents better than consensus. The company said revenues rose 10.9% to $10.8 billion. The company said its strategy of increased spending on marketing, which had marketing, research and administrative costs rising 8% to $3.13 billion helped bolster sales in its strong product categories for Tide laundry detergent, Pampers diapers and last fall's acquisition of Clairol's hair-care business.

While stocks trade lower in today's session, Treasuries saw a surge in bullishness after the release of October's consumer confidence as investors rushed back toward the perceived safety of bonds. The 5-year December futures (fv02z) 113'150 +0.67%, 10-year December futures (ty02z) 114'155 +0.99% and 30-year December futures (us02z) 110'240 +1.63% all shows gains, with YIELD dropping lower. The benchmark 10-year YIELD ($TNX.X) is back below the 4% level at 3.93%, after reaching a relative high YIELD of 4.26% just last week.

The Dow Jones US Home Construction Index (DJUSHB) 307.26 +0.24% is off earlier highs on thoughts that the lower YIELDS found in the longer-dated maturities might have home mortgage rates falling, while the Gold/Silver Index (XAU.X) 65.45 +1.56% has pulled back from an earlier 3.4% gain.

Volume at both the NYSE and NASDAQ is rather light and yet to breach the 1 billion mark. NYSE volume is running at 831 million shares, while NASDAQ is a little heavier at 937 million.

Breadth at the NYSE is negative with decliners having the upper hand by a 7 to 3 margin, while NASDAQ is negative, but to a lesser extent at 2 to 1.

The NYSE shows just 5 stocks trading new 52-week highs versus 46 stocks setting new lows, while NASDAQ has 22 stocks trading new highs versus 50 stocks at new lows.

Jeff Bailey

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