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[BRIEFING.COM] On Monday investors took a breather. On Tuesday they took some profits. Several factors weighed on the market's mind, but a mid-day rally in the semiconductor industry caught its attention and served as a diversion. Buyers stepped in and sent the indices to solid gains, but the enthusiasm did not last. Semiconductors retraced their steps, and, by late afternoon, the market had fully erased intra-day gains.

Fed Chairman Bernanke's speech, which he delivered last night to the Economic Club of New York, was the first item behind the early bearish bias. As expected, his talk focused on the yield curve. The market had hoped that he would provide some insight into the direction of monetary policy, though, and he did not. Expectations for a rate hike next Tuesday remain; we continue to foresee another one in May, and we do not think that the possibility of a third should be dismissed. The fact that the core rate of the Producer Price Index rose a more than expected 0.3% in February did not help matters today. That increase followed a 0.4% rise in January, and is somewhat disconcerting. The two above-trend gains have pushed the year-over-year gain in core PPI to 1.7%. That figure is not worrisome, but a similar gain in March could foster concerns over tight resources and pricing pressures.

The data, juxtaposed with the argument that Bernanke's speech emphasized the economy's strength, fed interest rate worries. Those concerns, anticipation of the FOMC decision, a lingering sense of uncertainty, and technical factors led to a sell-off across the Treasury market. Last week, improvements in bond yields drove the stock market's advance. Today, the benchmark 10-year rose to a 4.72% yield. Yields were up across the curve, and the Treasury action prompted consolidation within the equity market. The Financial sector came under particular pressure, and its 0.9% loss was the force behind the indices' declines. Other rate-sensitive areas, like Utilities (-0.9%) and homebuilders, also suffered. Some caution ahead of this week's housing data contributed to the extended weakness in the latter area.

Trading action across the broader market lately has appeared to be tied less to oscillating energy prices than before. However, the fact that energy prices recovered today contributed to the market's negative tone. Early declines had resulted in a weighty drop in the Energy sector, but price rebounds did not fully reverse its fortunes. It too faced some wide-spread selling and closed 0.2% lower. Although metal commodities performed in relatively flat fashion, the Materials sector fell 1.3%. Silver was the exception; the metal surged to a 22-year high after the SEC approved a rule change regarding a silver ETF.

As mentioned earlier, semiconductors had spurred the market's afternoon advance. Bargain hunters had taken the SOX up more than 2%. Intel (INTC 19.78 +0.16), one of our recommended holdings for active investors, fared especially well following positive comments out of Bank of America. The rally was short-lived, though, and gains were not sustained. Semis' fall spurred selling across the Tech board. The sector dropped 0.5% and the Nasdaq lost 0.9%. Separately, Oracle (ORLC 13.62 -0.10) was a sore spot that contributed to the market's early bias. The company beat expectations for its fiscal Q3 EPS, but its in-line top line growth and reiterated guidance did not inspire investors. Other than the Oracle news, the corporate front was a light one. Continued attention to General Motors' (GM 22.00 +1.15) negotiations with the UAW and Delphi helped limit the Dow's decline. News of Colgate-Palmolive's (CL 57.58 +0.58) cash acquisition of Tom's of Maine helped support Consumer Staples, but the defensive sector still fell 0.4%. The Telecom sector was the only sector to close higher. Its 0.1% gain had a muted effect upon trade, however.NYSE Adv/Dec 899/2391...Nasdaq Adv/Dec 998/2038