What a Week: Buoyancy

After being hounded by bad news throughout this summer, the markets got a reprieve this week and responded in kind.

Stocks rallied this week on the back of a cease-fire between Israel and Hezbollah; falling oil prices; earnings season drawing to a close with profit growth up 16.3%; and benign inflation reports that played right into the Federal Reserve's forecast for slower growth and tamer inflation.

The Dow Jones Industrial Average gained 0.4% Friday to 11,381.47, up 2.6% on the week. The S&P 500 added 0.37% to 1302.30 Friday, up 2.8% for the week. The Nasdaq Composite, which had fallen furthest during the summer swoon, gained 0.3% to 2163.95 Friday, up 5.2% this week.

The rally in the early part of the week centered on the old leadership, namely cyclical companies sensitive to the economy. Traders took some of the week's economic data as reassuring signs that the consumer might not fall off a cliff, and that industrial production is still relatively strong.

Caterpillar (CAT - commentary - Cramer's Take), which had fallen 8.3% last week, recovered 1.8%, while U.S. Steel (X - commentary - Cramer's Take), which had lost 4.9% last week, rebounded 6.7% this week.

As the week wore on, however, the rebound got smaller, and traders turned to the most busted-up names in the market -- technology companies. This behavior, combined with some relatively low volume days led some investors to question the staying power of these gains.

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In keeping with TSC's editorial policy, Rappaport doesn't own or short individual stocks. She also doesn't invest in hedge funds or other private investment partnerships. She appreciates your feedback. Click here to send her an email.