What a Week: Stressed Out

The week's economic data meshed with more profit warnings, a Justice Department probe into homebuilder Beazer Homes(BZH Quote) and news that Dell(DELL Quote) uncovered misconduct in an investigation into its accounting, leaving investors with a rather bad taste.

"We've had a really big escalation in worries," says James Paulsen, chief investment strategist at Wells Capital Management. "Most of the month, the reports have been to the weaker side, escalating fears about the economy."

Datawise this week, new-home sales and durable goods orders were weak, underscoring the Federal Reserve and Bernanke's twin concerns about the downside risks to the economy: housing and weak business spending.

Fourth-quarter gross domestic product was revised modestly upward to 2.5% from its prior 2.2% estimate, but there wasn't much to get excited about. Investment in capital equipment was weaker than prior estimates, and profits were revised lower.

Friday, the Chicago PMI read 61.7, much higher than expectations of a reading of 49.5, and personal income and spending each jumped 0.6% in February. But the Fed's preferred measure of inflation, the core personal consumption expenditures index, rose 0.3%, which brings year-over-year inflation back to its recent 2.4% peak.

In his testimony, Bernanke ratcheted up the worry quotient about growth, but the data suggest his insistence in Wednesday's testimony that inflation is still the Fed's key concern could soon be tested.