What a Week: Deal-Driven

As investors wring their hands over the possible impact of subprime loans on banks and others in the financial industry, the financial sector is down 3.4% for 2007, according to Merrill Lynch's U.S. sector analyst Brian Belski. This week, the KBW Banking Index slipped 0.3%.

Otherwise, the old market leadership remains mostly intact, even though the Goldilocks economy theme is mostly wrung out.

"Despite the changing macro landscape, sector leadership has stayed status quo for the most part," writes Belski. "Energy, materials and utilities continue to claim three of the top four spots in terms of sector price performance for both year-to-date and the last 12-month periods (in spite of deteriorating fundamentals)."

The economic fundamentals didn't take any serious hits this week either. On the downside, the Institute for Supply Management's report of activity in the nonmanufacturing sector was weaker than expected as its inflationary prices-paid component increased. But supporting the bulls was job growth that remains intact, mortgage applications that held up, a rise in pending home sales and chain store sales that recorded a third-consecutive gain.

The bond market was largely unmoved, as traders continue to weigh the possibility of rate cuts. The 10-year bond finished the week yielding 4.67%, compared with 4.65% last Friday.

Investors seemed surprisingly unfazed by New Century Financial's bankruptcy filing and M&T Bank's(MTB Quote) warning that the alt-A mortgages are starting to deteriorate.

Indeed, the fear index also known as the CBOE Volatility Index reflects this return to a more-complacent state. The VIX fell 10.2% this week.

Perhaps helping to put a lid on fear, the Labor Department reports nonfarm payrolls Friday to a shuttered stock market and a partial day for the bond market. Analysts expect that 133,000 new jobs were added in March.

Next week, all eyes turn to earnings season. Alcoa(AA Quote) is due to report Tuesday evening. Expectations for first-quarter earnings growth have shrunk over the course of the quarter to between 3% and 5%.

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