What a Week: Whither Santa?

Elsewhere in the tech space, investors were taking profits this week in names that previously had been big winners. Shares of Microsoft(MSFT Quote) fell 1.8% on the week while Apple(AAPL Quote) fell 6.2% and Oracle(ORCL Quote) fell 3.2% following its lackluster earnings report on Tuesday.

The bond market sold off Friday, but yields were little changed on the week. The 30-year Treasury bond fell 1 2/32, yielding 4.76%, 4 basis points higher than last week's 4.72% yield. The 10-year fell 18/32 Friday to yield 4.62%, up from last week's 4.59% yield. The two-year note's yield was unchanged on the week at 4.72%.

Treasury traders may be bearish about the economy, but they are starting to recognize that the data do not "argue for an easing cycle," says T.J. Marta, fixed-income strategist at RBC Capital Markets.

The Fedspeak this week was relatively hawkish as well, as the lone FOMC dissenter Jeffrey Lacker gave the bond market a bitter warning Thursday.

"The risk that core inflation surges again, or does not subside as desired, clearly remains the predominant macroeconomic policy risk," said Lacker. "The longer core inflation persists above 2%, the greater the danger of inflation becoming entrenched at too high a rate."

Lacker's words still have weight, but his formal dissent with the Fed's decision to stop raising the fed funds rate will have less meaning come January. The FOMC turns over four voting positions.

Three of the new voting members are hawkish, but economists think a new formal dissenter is unlikely. Nonetheless, the new voting members are among the Fed's most hawkish, including Chicago's Michael Moskow, St. Louis' William Poole, and Kansas City's Thomas Hoenig. Boston's Cathy Minehan will join as well. The FOMC loses votes from dovish San Francisco's Janet Yellen and Cleveland's Sandra Pianalto, as well as Atlanta's Jack Guynn, who has retired.

Voter shuffle aside, the FOMC goes into 2007 looking quite sharp -- the economy is slowing and inflation has been tamed, as per their summer forecast. If inflation remains low, Bernanke will have to overcome a rough start to cement a great first year as Fed chairman.

1 What would best describe your stance heading into the coming week of trading? Bullish Bearish Neutral 2 Which of these sectors do you think is set to move up in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities 3 Which of these sectors do you think is set to move down in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities View the results without voting