What a Week: Fade to Green

Financial markets ran the gamut of fear to greed this week, with greed winning out in the end.

For the week, the Dow Jones Industrial Average rose 1.6%, the S&P 500 gained 1.6% while the Nasdaq Composite climbed 2.1%.

At its onset, the week didn't seem to have the makings of the S&P's biggest weekly gain since April. It started with a continuation of last week's theme: fear of inflation and rising rates. These concerns were prominently displayed Tuesday, as the 10-year Treasury yield eclipsed 5.30% intraday and closed at its highest level since 2002. Stocks cascaded lower in response, but Tuesday's decline proved to be the end of the selling, at least for this week.

Thanks in part to benign comments about price pressures in the Federal Reserve's beige book, Treasury yields stabilized Wednesday, paving the way for the Dow's biggest point gain since July 19, 2006. Wednesday's advance led to more gains on Thursday and Friday, both aided by tame inflation data, falling yields and more merger activity.

As the 10-year's yield retreated to 5.17% Friday following tame core consumer price index data, the Dow rose 0.6% to 13,637, the S&P rose 0.7% to 1533, and the Nasdaq Composite rose 1.1% to 2627.

The combination of falling core CPI inflation plus signs of strength this week -- including Wednesday's stronger-than-expected retail sales report and Friday's Empire State Manufacturing Index -- revived talk of the so-called Goldilocks economy. At a minimum, the PPI and CPI, along with Friday's weak industrial production report, reduced concerns about the potential for a Fed rate hike.