What a Week: Payrolls Soothe

On the flip side, the strong jobs report reminded traders of some of the signs of strength that emerged this week. The Fed reported Thursday that household net worth increased by $1.4 trillion in the fourth quarter. The trade deficit also shrank in January to $59.1 billion, while workers' wages rose.

"The trade data may spur some upward revisions to first-quarter GDP growth," says James Paulsen, chief investment strategist at Wells Capital Management. "Everyone thought it was a fourth-quarter phenomenon, but it could be a contributor all year long."

But the relationship with Goldilocks is still not "back to normal" yet.

As if on cue to keep the animal spirits quelled, Susan Bies, a Federal Reserve governor and bank regulation expert, said Friday afternoon at a conference in Washington, D.C., that regulators are concerned about "payment shock" from rising mortgage payments on adjustable rate loans. She also said the subprime market "is not at the end of a wave, but at the beginning."

To make things more confusing, Bies also said that the economy is strong and that the job market should continue to boost consumer spending.

The stock market turned down Friday on her words but clawed its way back upward by the finish. Indeed, traders seem to be taking some of the most recent subprime headlines in stride. Thursday's news of New Century Financial's(NEW Quote) possible bankruptcy filing did not dramatically hamper the stock market's rebound. New Century slid another 17.1% on the day.

In sum, the market's correction, or the most heated part of the market's fight with Goldilocks, may have died down this week. But next week brings February's report of retail sales, and the producer and consumer price indices. If both are high, the rate-cut expectations could spin 180 degrees into inflation fears. What seemed Friday morning to be just a two-week spat could well become a bigger but different argument.

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