What a Week: Payrolls Soothe

On Wednesday, Chicago Federal Reserve President Michael Moskow said that "it is much too early to say that inflation is no longer a concern." Paulson, on a trip in Asia, repeatedly said the economy is in "solid" condition.

And the Federal Reserve's beige book acknowledged some weaker growth but mostly revealed a Fed that remains relatively sanguine about future economic growth. The Fed is certainly not on board with Alan Greenspan and his recession fears.

After the payrolls report, the yield on the 10-year Treasury note rose to 4.9%, up from 4.51% last week. After a volatile week, oil fell 2.6% on the week to close at $60.05 per barrel.

Despite the surface anxiety in stocks, some of the most cyclical parts of the market, or what many call the old leadership, climbed back.

As overseas markets stabilized, the iShares MSCI Emerging Markets Index gained 4% this week, as did the Oil Service HOLDRs(OIH Quote) exchange-traded fund. The Dow Jones Transportation Average gained 1% this week, while the Morgan Stanley Cyclical Index gained 1.9%. The small cap Russell 2000 Index gained 1.25% while the S&P Retail Index finished up 1.1%.

But many traders still spent much of the week emphasizing the subprime mortgage market or the yen carry trade unwinding. Adding to economic angst was a weaker-than-expected report of nonmanufacturing activity from the Institute for Supply Management. Factory orders were weak, and same-store sales reports were disappointing.