What a Week: Bulls Well-Fed

The Fed chief was careful to specify that he's still on guard against inflation, but he sees its threat as diminished thanks to recent drops in energy prices. On the other hand, he sees "some tentative signs of stabilization have recently appeared in the housing market," signaling that the economy is not headed off a cliff due to the real estate slump.

"If you look at the expectations for the economy going forward, the central outlook for the various banks is for slightly sub-par growth over the next year or two with further moderation in inflation," says Gary Thayer, chief economist with A.G. Edwards. "It looks like the soft landing scenario that the Fed has been trying to engineer."

Such an environment all but drowns out skeptics of the nearly eight-month rally in stocks.

"The market would like to pull back," says Paul Nolte, director of investments with Hinsdale Associates. "It's looking heavy, but there's very little in the way of catalysts out there that can carry stocks down for more than a couple of days. Investors, in general, are very interested in putting money to work and going into the market. When the market declines for a day or two or three, that gives them a reason to do it."

Indeed, this week's market shrugged off weak economic data in areas like January retail sales and industrial production, but the most worrisome data came on Friday, when the Commerce Department said January housing construction plunged to its lowest level in nearly a decade.