The dollar gained some ground against the yen after Japan's apparent intervention early this morning. That's something that makes the market feel good.

In contrast to the year-end rally here driven by real estate and other domestic plays, taking a lead now are stocks which have a high correlation with the Nasdaq market.

Higher borrowing costs will lead to a shrinking housing market and a slowdown in the U.S. economy. Overseas investors, being concerned about the U.S. economic outlook, will pull their money out of the Japanese market.

Speculation that some mutual funds here would pour 150 billion yen into equities also encouraged some speculators to buy shares in a thin trading session.

The market is becoming very nervous about the earnings outlook for the tech sector after a string of bearish outlooks by tech giants such as Nortel and Sun Microsystems.

It's not just the weakness in U.S. stocks this time. The dollar is falling (against major currencies) at the same time, and money is flowing out of the U.S..