Friday's trading was a good indication of how psychologically potent this whole 10,000 thing is getting.

After an early jump, the

Dow Jones Industrial Average

dropped below Thursday's close of 9897. Five times the Dow made a run for Thursday's closing level, only to get knocked back. Midafternoon it broke through, fell back to the Thursday close, bounced, fell, bounced and then dropped to a lower close.

It's a rare thing to see a level on the Dow exert influence of that magnitude. The

S&P 500

is usually where you see that kind of thing. Besides giving a far broader read on the market, the S&P has got active futures and options contracts, and the people who trade those contracts care a great deal about things like support and resistance.

There were a lot of people on television and in print Friday going on about how 10,000 was just a number, how it had no bearing on what's going on with the market. But one look at how that 30-stock average -- the one that bears so little relationship to the broader market -- was setting the tone, and you could see that talk was all a lot of hooey.

'We need a clearer picture that earnings are going to accelerate this year,' said Citibank's Barbara Marcin. 'Until we see a better earnings picture, and

if we keep this narrow market, I don't think it supports a much higher valuation.'

Oddly enough, though, if this 10K talk serves to do anything, it is to focus the market in on fundamental concerns. It's sort of like that other meaningless benchmark, the 40th birthday -- you check your midsection. The stock-market equivalent of that is valuation, and, sadly, valuation looks a little extended.

"We need a clearer picture that earnings are going to accelerate this year," said Barbara Marcin, senior equity portfolio manager at

Citibank Global Asset Management

. "Until we see a better earnings picture, and

if we keep this narrow market, I don't think it supports a much higher valuation."

This is not to say that Marcin is terribly negative about the market. She expects that it will pretty much trade in a range for much of the year, that eventually global growth will pick up, raising earnings prospects and bringing about a broadening-out in the market that will help propel the indices higher.

The other big piece of the valuation picture is the interest-rate scenario, and here, too, there are worries. "On the one hand, the economy is firmer than most people expected," said Stanley Nabi, vice chairman of

Wood Struthers & Winthrop

. "On the other hand, the deflation that we have imported from other countries seems to be coming to an end. The possibility now exists that maybe the honeymoon on the pricing end is coming to an end. This sets the stage for higher interest rates somewhere in the foreseeable future. Which is no good for the stock market."

Nabi also found disconcerting the things that some of Wall Street's more popular talking heads have been saying lately. "There are a number of market observers

who only three or four weeks ago thought the market was headed for a significant correction," he said. "Now, they're talking about 11,000, 12,000 this year." He termed it a kind of capitulation to the idea that the only way the market can go is up. "When that happens," he said, "exactly the opposite takes place."

'There's No Way This Fed Can Tighten'

Nabi's inflation concerns, at least, are not shared by many on Wall Street. The general feeling is that there has been a leveling off in interest rates, that the Treasury market has found the range it will stay in until the

Fed

moves, and that the Fed isn't going to move for a long, long time.

"The economy is very strong right now, and because of the potential inflationary pressures that could cause way out there somewhere, the Fed can't ease," said Don Fine, chief market analyst at

Chase Asset Management

. "On the other hand, there's absolutely no sign of inflationary pressure -- there's no way this Fed can tighten."

It is mostly minor data that the Treasuries face in the coming week, and in general they should be market-friendly. The big event, the February

Consumer Price Index

release on Thursday, should show what it's shown for the last few years -- that there isn't a lot of inflation out there.

Tuesday's

capacity utilization

figures should also be friendly. "Capacity utilization is apt to drop again and get very close to 80%," said Bill Sullivan, chief money-market economist at

Morgan Stanley Dean Witter

. "What that suggests is that one-fifth of American capacity sits idle. Following along that theme, it seems very unlikely that we see any inflationary pressures."