GSE sizzle starts to fizzle as techs slump

Small-cap stocks remained solidly higher into mid-session trading, but the morning euphoria sparked by the Treasury Department takeover of government-sponsored enterprises (GSE) was losing steam as tech stocks failed to join the party. At 12:42 p.m. ET, the Russell 2000 (NYSE:IWM) was up 9.27, or 1.29%, at 728.12, but well below the morning peak just shy of 740.

Tech shares slipped into the red, pulling down other index products as investors in tech stocks remain concerned that a global slowdown will curb spending on technology and curb investor appetite for the latest, greatest cell phone and personal computer gadgets. In addition to the slide in tech stocks, thrifts were getting absolutely hammered as the market basically gives up hope that preferred stock holders in Fannie Mae (NYSE:FNM) or Freddie Mac (NYSE:FRE) will get anything back, as the Treasury’s takeover appears to be focused on the credit side of things. Still, optimism about the GSE news provided a lift to homebuilding stocks and home furnishing stocks on ideas that it could help put a bottom in the slumping housing market. Also, financial stocks were boosted by ideas their exposure to debt through the GSEs would now be much more secure.

Some of the upside momentum in financial shares was stalled by a big slide in Lehman Brothers Holdings Inc. (NYSE:LEH), which was spooked by fears that valuable firm assets would be sold off at fire sale prices. LEH shares were down some 18%.

In addition to thrifts, coal stocks were getting pounded again today, a theme that has been repeated often in recent days following news that hedge funds with commodity stock ties have been liquidating. Also, steel, mining, aluminum and fertilizer . . .

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