Financials Seize Spotlight from Tech

Thursday is a classic example of what happens when a technically overextended market meets some bad fundamental news -- and I'm not talking about the GDP numbers.

Early in the day, it appeared the tech sector was going to be the primary focus, following Oracle's revenue miss and renewed concerns about Google's paid clicks. Indeed, the Nasdaq fell early and often, closing down 1.9%.

As Barry Ritholtz of FusionIQ and The Big Picture blog explains in the accompanying video, Oracle's revenue miss undermined one of the tech bulls' last arguments: That a weak dollar would support multinational tech names.

Oracle's woes did spill over into rivals like SAP and Salesforce.com, but big-cap tech stocks like Cisco, Apple, and Research in Motion suffered as the broader market took an afternoon swoon.

After initially resisting the downward pull from tech (and those GDP numbers), the Dow and S&P ended down about 1% each as traders yet again found themselves obsessing over the financials.

First, Oppenheimer's Meredith Whitney forecast a first-quarter loss at Merrill Lynch. Then, renewed rumors about Lehman Brothers being in trouble helped revive fears of "systemic risk" -- even as the brokerage firm steadfastly denied the scuttlebutt.

"There are a lot of rumors in the marketplace that are totally unfounded," said a Lehman spokeswoman. "We are suspicious that the rumors are being promulgated by short sellers of our stock."

Many traders recall that Bear Stearns also denied rumors of its impending doom just days before the Fed engineered its takeunder by JPMorgan. That said, Lehman has access to the Fed's discount window, an option Bear was not afforded.

Ironically, Lehman cut estimates on many of its rivals on Thursday morning -- but I'm sure the afternoon rumors about the firm were totally unrelated.