I'm still scratching my head over yesterday's market action.

Shares of Office Depot (NYSE:ODP) met a hole puncher, shedding 32% of their value after the office-supplies superstore talked down its guidance. Comps fell a sharp 10%, with margins slammed even harder.

The rumble was felt throughout the sector, with shares of Staples (NASDAQ:SPLS) and OfficeMax (NYSE:OMX) falling in sympathy. Of course. If people aren't loading up on toner cartridges or Aeron chairs at the local Office Depot, they're unlikely to be filling those needs elsewhere. They're just not buying them.

Office furniture makers probably took a big hit too, right? Wrong. They actually went the other way.

Furniture Maker

7/8/08 Gain

Herman Miller (NASDAQ:MLHR)

3.1%

Steelcase (NYSE:SCS)

3%

Knoll (NYSE:KNL)

5%

HNI (NYSE:HNI)

0.7%

Are you kidding me? Let’s go out on a limb and assume that penny-pinching companies were buying toilet paper in bulk at warehouse clubs, or buying printer cartridges at discount department stores. Even then, it's not as if mainstream discounters are major movers of office furniture. If Office Depot is struggling, it's hard to fathom office furniture going the other way.

Perhaps even more importantly, Mr. Market threw an office party. The Nasdaq Composite, which is loaded with tech companies that rely on healthy IT budgets for brisk sales, soared by better than 2% yesterday.

I don't get it. Office Depot may be a fading speck of a retailer, but a sharp drop in sales at the store level should be as ugly an omen as you can find in assessing the state of corporate America. Office Depot may be less relevant today than it was a couple of years ago, but it's still every inch a bellwether.

I'm no bear. I haven't shorted a stock in years. I'm glad to see the market rally for a change. However, it picked a strange day to break from grim reality. Yes, oil got a little cheaper, but corporate America is holding back, people. That's never a good sign.

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