A funny thing happened on the way to Baghdad last week -- at least for the stock market. As news of success filtered back from the battlefield, the markets -- which had rallied powerfully in the run-up and first days of war -- lost their sense of euphoria, as economic considerations crept back to the fore. Barring any major setback, similar psychology could govern trading in the coming week.

The

Dow Jones Industrial Average

ended the week with a 1.6% gain, or 132 points, to close at 8277 -- almost all of it coming Wednesday, when the first glimmers of victory emerged from Iraq. The

Nasdaq Composite

gained 1%, or 14 points, to 1383, while the

S&P 500

rose 1.7%, or 10 points, to 878.

To be sure, war will continue to dominate the headlines in the coming days and could still cause big swings in either direction. With a potentially bloody battle for Iraq's capital ahead, the chance of bad news probably grows. Given the averages' sudden immunity to war-based rallies, that might mean the risks are weighted toward the downside in the next five sessions.

"The market will continue to trade as it has for the past six months: glued to Iraq. If we continue to hear good news, investors will become more comfortable," said Daniel Morgan, fund manager at Noble Financial Group. "But I wonder if the market won't do its traditional 'buy on the rumor, sell on the news' activity as soon as the war is over, refocusing on still-weak economic indicators."

News that allied forces had taken control of Baghdad's airport Friday and 2,500 Republican Guard soldiers had surrendered south of the city signaled advances in the war front. But footage of what was purported to be Saddam Hussein walking in the streets of Baghdad, as well as an address to his people aired in Iraqi television, led to more speculation about the leader's whereabouts.

"We're always susceptible to negative news out of the war. The longer it takes to get out of Baghdad, the more uncertainty will continue to cloud the market's prospects," said John Hughes, market analyst at Shields & Co, who still thinks the S&P could cross the 890 level, while the Dow could move above 8500.

Although investors had been ignoring economic data, a weak reading in the Institute of Supply Management's services index helped torpedo stocks last Thursday. Investors should keep an eye on the Producer Price Index next Friday, for which economists forecast a modest increase in March. Retail sales for March are also due out Friday, and are expected to show a 0.2% increase, after a 1.6% decline the previous month. And the University of Michigan releases its preliminary reading on consumer sentiment for April. Economists expect the figures to move up to 79, from 77.6 points in March.

Earnings also start trickling in, providing more potential landmines. For early indications on how the season might go, look at drugmaker

Abbot Laboratories

(ABT) - Get Report

Wednesday. The company is expected to report net income of 51 cents a share in the first quarter, down from 54 cents in the year-ago period.

Genentech

(DNA)

is another widely held share that is reporting. The biotechnology company is expected to earn 28 cents a share, from 22 cents a year earlier.