Don't Blame Judge for NASDAQ Roller Coaster

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Yes, the NASDAQ is in a correction. No, the market is not crashing. And no, the whole thing isn't Thomas Penfield Jackson's fault. NASDAQ's ticker numbers dropped with the swiftness of an elevator in free fall on Monday and early Tuesday, leaving angry investors waving their fists at Judge Jackson for his ruling against Microsoft Monday afternoon. But as the market rebounded in the second half of trading Tuesday, it became more and more clear that the long-inflated NASDAQ may simply be approaching normalcy, with profitable firms such as Cisco and Intel bouncing back to respectable numbers while overinflated "dot-coms" stayed in the gutter.

"Microsoft is sort of a big excuse for what's happening on Wall Street," says TIME Wall Street analyst Dan Kadlec. "What we saw today, and really for the past week, is simply a reversal of what happened early in the year. For a long time these stocks were going up just because they were going up. Well, all of a sudden things were going down just because they were going down."

Many analysts say a gray cloud has been hovering over the NASDAQ since New Year's, one noticed by institutional investors but not by the individual investors caught up in ongoing enthusiasm for all things Internet. Throw in the promise of continued interest rate hikes by Fed chairman Alan Greenspan and it adds up to a major correction waiting to happen. A correction is generally held to be a 10-percentage-point drop-off. At its low point Tuesday, the NASDAQ was off about 25 percent from its high.

But there is good news. "Considering how strongly the market rebounded Tuesday, it looks as though we have seen the bottom of this thing," says Kadlec. "Especially the technology blue chips — they all came back strongly. But the dot-coms now really seem like they're broken for good."