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Selloff on Wall St.
Major stock gauges slump on weakness in energy, commodities, tech; jitters about the Fed factor too.
By Alexandra Twin, CNNMoney.com staff writer
February 7, 2006: 5:41 PM EST


NEW YORK (CNNMoney.com) - Stocks slumped Tuesday, as investors bailed out of energy, commodities, homebuilding and technology -- the leaders of the recent market advance.

The Nasdaq composite (down 13.84 to 2,244.96, Charts) lost 0.6 percent and the Standard & Poor's 500 index (down 10.24 to 1,254.78, Charts) lost around 0.8 percent.













The Dow Jones industrial average (down 48.51 to 10,749.76, Charts) saw a smaller decline, with strength in component Walt Disney offsetting weakness in Alcoa and General Motors.

Oil stocks, precious metals and commodities were all under pressure, as investors bailed out of the recent stock leaders.

Treasury prices fell, lifting the corresponding yields and the dollar weakened versus other major currencies.

"The worst hit sectors today are the ones that have gone up the most," said Jim Melcher, founder and president at Balestra Capital. "They've had a great rise and so it's normal to see this kind of pullback."

He expects these sectors to bounce back in the near term, due to the continued earnings potential for energy stocks and worldwide demand for commodities and precious metals.

For the short term, the overall market may be under the weather as a result of this cashing out, he added.

The selloff also reflected the broader reluctance that has been in the market since the Federal Reserve policy meeting last week, said Tim Heekin, head of stock trading at Thomas Weisel Partners.

"The lead up to the Fed meeting was that we are going to be done soon, they are going to put the brakes on, and that fueled the momentum," Heekin said. "But now people are realizing that they aren't done yet, and that's shifted the psychology."

He said that this shift is reflected in daily market volume, which is down around 15 percent so far this month from January.

After the close, Cisco (Research) reported quarterly earnings and revenue that rose from a year ago. The results topped analysts' earnings per share expectations and were in line with forecasts for revenue, according to Reuters research.

Cisco shares gained more than 3 percent in extended-hours trading and gave a lift to other tech stocks.

No economic reports are due Wednesday, however, the weekly oil inventory report is set for the mid-morning, and that is often a market mover.

Earnings are due Wednesday from Cigna (Research) before the open, as well as a few other companies.

Nasdaq and S&P futures pointed to a modestly higher open Wednesday, when fair value is taken into account.