What a Week: Tech in Back Seat

Despite the outsized press coverage of Intel's (INTC) midquarter update and furious brow-furrowing over the five-year anniversary of the bubble's peak, tech was a sidebar this week as "other markets" and other sectors remained on center stage.

The Treasury market, most notably, fell sharply amid rising worries about inflation; for the week, the yield of the benchmark 10-year note rose 23 basis points to 4.54%, its highest level since July and the worst week since last May, according to Bloomberg.

The Treasury market was roiled by fears of central bank rate hikes in the U.S. and Europe, evidence of creeping price pressures in the Fed's beige book report and by rising commodity prices, which were partially fueled by the dollar's continued weakness. The greenback, in turn, was hit by a record monthly budget deficit, along with evidence the dollar's weakness has done nothing to stem the expansion of the trade deficit, which was reported Friday at a larger-than-expected $58.3 billion for January.

The dollar was also kept on its heels by ongoing concerns about foreigners diversifying their holdings after Japanese Prime Minster Junichiro Koizumi dropped a direct comment on the subject, which was later deemed a "misunderstanding." Fed Chairman Alan Greenspan, conversely, did not hedge: "Foreign investors will at some point cut dollar asset holdings," the chairman said in a speech Thursday at the Council on Foreign Relations in which he again warned about the "unsustainable federal budget deficit paradigm."

The dollar's decline circled back to weigh on Treasuries, which in turn kept downward pressure on stocks. For the week, the Dow Jones Industrial Average fell 1.5%, the S&P 500 lost 1.8%, and the Nasdaq Composite declined 1.4%.

Assuming the dollar's trickle-down effect on Treasuries and stocks continues, next week could bring more of the same.