What a Week: Fits and Starts Foreshadow

In the months following the mid-March lows, major averages rallied sharply despite a raft of potential negative developments, including geopolitical concerns, lackluster economic data and expanding valuations.

Since late June, the stock market has been churning amid a rapid rise in bond yields and nagging concerns about George Bush's waning popularity and (more recently) Freddie Mac's FRE accounting.

This week brought more upbeat developments, most notably the deaths of Saddam Hussein's sons. Additionally, the economic front saw better-than-expected reports on jobless claims, durable goods and new-home sales, while the index of leading economic indicators rose for a third-straight month.

Yet major averages were unable to rally on the good news, ending modestly higher for the week. On the other hand, stock proxies avoided any big setbacks and rallied at key technical junctures Tuesday and again on Friday, when the Dow Jones Industrial Average rose 1.89% to 9284.57, the S&P 500 gained 1.74% to 998.68, and the Nasdaq Composite climbed 1.72% to 1730.70.

Friday's big gains, largely attributed to rumors of the pending capture of Hussein, secured positive weeks for the Dow, up 1%; the S&P, up 0.5%, and the Nasdaq Composite, up 1.3%.

Key themes this week were the bulls' inability to dramatically capitalize on the aforementioned positive geopolitical and macroeconomic developments. But that was offset by bears' inability to keep the downward pressure on stocks despite ongoing concerns about the economy's path and more details about accounting improprieties at Freddie Mac, as well as questions about AOL Time Warner's AOL subscriber base.

In many regards, the week was a wash.

"There was nothing spectacular" on either the earnings of economic fronts "to indicate a great third quarter nor anything bad enough to sink [stocks] back into to the mire," said Scott Curtis, head of U.S. equity trading at Credit Lyonnais. "I think it was a market sensitive to earnings and economic indicators, and whichever way they pointed, that's the way the market traded."