Stocks Tank Amid Tech Wreck

We�ve established in this space a certain skepticism for the mandatory reason-finding for each point the market moves up or down.

On Tuesday, however, with the major indices awash in red, it seemed pretty obvious, didn�t it: the growing uncertainty in the Middle East, lately of the Libyan variety, pushed oil prices up more than 6% and threw into the forefront what a world of triple-digit oil prices could mean.

And yes, it�s true that with the market having gotten in the habit of moving in fits and starts on a regular basis, a move of 6% of a major commodity is going to get some attention.

But what exactly do oil prices have to do with a loss of almost 3% in tech stocks?

Instead, we like the argument mostly suggested earlier by the blog Zero Hedgethat Tuesday�s massive selloff made it so apparent how the meltup in stock prices over the past month had a lot to do with short-covering. And as we�ve seen before, shorts more often than not aim their sights on tech stocks.

When the world finally produced an external shock to the system that created more than passing uncertainty to the U.S. financial market, the bid for stocks � that had been artificially created lately by outstanding short-covering bids � was nowhere to be found.

In addition, let�s acknowledge, as the Wall Street Journal�s Dave Kansasdid over the weekend, that tech stocks, and specifically semiconductor names, have done the leading in this five-month market rally.

On Tuesday, then, it may be a case of you win with tech speculation, you lose with tech speculation � note, for example the drop of more than 9% of a stock like graphic-chip maker Nvidia (NASDAQ:NVDA), which had spent the prior two months jumping about 80%.

Notice the 5% giveback in shares of daytrading favorite Sirius XM Radio (NASDAQ:SIRI), following its runup of about 30% in the past two months.

Semiconductor stocks as a whole, for what it�s worth, fell 4% after climbing 50% since late August. With the shorts having run for the hills throughout 2011, momentum had to face the music.

Oh, and this just in: a rough earnings report late Tuesday from Hewlett-Packard (NYSE:HPQ)�won’t do much for a reversal out of the gates on Wednesday.