The Good, the Bad and the Ugly All in One Week -- and What a Week it Was!

Tech's strength saved the day today.
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SAN FRANCISCO -- A week of alternatively nightmarish and electrifying volatility came to an end today with something resembling calm. Additionally, major market averages returned to the form investors have come to expect: That is, with tech stocks in the lead and blue-chips trailing behind.

That's not to say the session lacked for volatility or excitement. Picking up where it left off

yesterday, the

Dow Jones Industrial Average

opened the session with a flourish, rising to as high as 10,763.38 about 90 minutes into the trading day. But the index faded from there trading as low as 10,567.31 before closing down 35.37, or 0.3%, to 10,595.23.

Weakness in

Alcoa

(AA) - Get Report

,

General Motors

(GM) - Get Report

and

Honeywell

(HON) - Get Report

exerted the greatest drag on the index.

The

Nasdaq Composite Index

rose in concert with the Dow early on, then sustained its strength after lunchtime while its blue-chip counterpart faltered. The Comp closed up 80.75, or 1.7%, to 4798.14 as tech favorites resumed their comeback from big declines earlier in the week.

Bellwethers such as Dow components

Microsoft

(MSFT) - Get Report

and

Intel

(INTC) - Get Report

, as well as

Sun Microsystems

(SUNW) - Get Report

and

Cisco

(CSCO) - Get Report

paced the Comp. The

Nasdaq 100

rose 2%.

Chip and equipment makers such as

Applied Materials

(AMAT) - Get Report

-- which received positive comments from

Credit Suisse First Boston

--

Teradyne

(TER) - Get Report

and

Texas Instruments

(TXN) - Get Report

also gave tech proxies a lift. The

Philadelphia Stock Exchange Semiconductor Index

rose 2.3%.

Other big tech names on the rise included Dow component

Hewlett-Packard

(HWP)

,

Micron

(MU) - Get Report

and

Nortel

(NT)

.

Also,

America Online

(AOL)

rose 3.8% after agreeing to

buy out

Bertelsmann AG's

50% stake in its European and Australian units.

TheStreet.com Internet Sector

index rose 43.59, or 3.6%, to 1272.61.

Concurrently, momentum favorites such as

Juniper Networks

(JNPR) - Get Report

,

Infosys

(INFY) - Get Report

and

E.piphany

(EPNY)

rebounded from harsh selling earlier in the week.

"There's still the same sense of urgency to buy on the dips," said Charles Payne, president and chief analyst at

Wall Street Strategies

. "While there are questions over valuations, nobody wants to be left behind. It's tough to watch a stock go up 50 points in one day and not participate."

Payne said investors were "looking for an excuse" to sell the high-flyers heading into this week and that investors tradition get more conservative ahead of

Federal Open Market Committee

meetings.

The Nasdaq's big reversal earlier this week "sort of hastened that phenomena," he said. But with its rebound yesterday "nobody wants to be left behind."

That being said, the big selloff in biotech stocks on

Tuesday "hurt the spirit of momentum investors," Payne observed. "I don't think it's going to scare people out of the market but people will be willing to pull the ripcord a little faster than normal" from here.

Today, biotech favorites such as

Abgenix

(ABGX)

and

Emulex

(EMLX)

rallied smartly but the overall group was mixed. The

American Stock Exchange Biotech Index

slid 0.1%.

Among broader market proxies, the

S&P 500

rose 6, or 0.4%, to 1464.47 behind strength in the aforementioned tech bellwethers and renewed gains by financials, especially brokerages such as

Charles Schwab

(SCH)

. The

American Stock Exchange Broker/Dealer Index

rose 5.6%.

But most other major industry groups faded from huge gains posted midweek, restraining the S&P. The

Russell 2000

rose 0.55, or 0.1%, to 574.79.

In

New York Stock Exchange

trading, 1.3 billion shares were exchanged while declining stocks led advancers 1,576 to 1,408. In

Nasdaq Stock Market

action 1.67 billion shares traded while gainers led 2,228 to 2,012. New 52-week highs bested new lows 47 to 45 on the Big Board and by 76 to 71 in over-the-counter trading.

Withholding Judgement

Despite the Dow's two-day rise of 8.35%, even some avowed value-stock advocates were unsure whether the comeback is sustainable.

"We're back to the same old type of market," said Kari Bayer, quantitative strategist at

Merrill Lynch

. "Our work shows there's nothing to support the narrow leadership in tech

but the market hasn't paid attention."

Bayer said the Dow's "disconnect" from the Nasdaq is not what the

Federal Reserve

wants to see. Also, with 80% of S&P 500 companies posting positive earnings surprises in the fourth-quarter and the trend expected to continue in the first-quarter, that argues for a "more normal" type environment where the broader market rises rather than just the "pure momentum plays" in tech, she said.

But because of today's a triple-witching session, Bayer said it's too early to say whether the Dow's midweek frolicking is a sign of things to come or simply an anomaly.

Many traders were short the

Standard & Poor's Depositary Receipts

(SPY) - Get Report

and long the

Nasdaq 100 Trusts

(QQQ) - Get Report

heading into the week, according to various market sources. When the S&P stocks began rising and the Nasdaq 100 slid earlier in the week, they were forced to cover those positions.

Thus, "Monday is the trust test of what's going on in this market," Bayer said.

Meanwhile, the bond market advanced as traders focused on the fact the core rate of the

consumer price index

-- which excludes food and energy -- was up just 0.2% last month, rather than the 0.5% gain for CPI overall. The price of the 10-year Treasury note rose 10/32 to 102 5/32, its yield falling to 6.20%.

Among other indices, the

Dow Jones Transportation Average

fell 55.05, or 2.1%, to 2623.83; the

Dow Jones Utility Average

slid 5.84, or 2%, to 289.93; and the

American Stock Exchange Composite Index

shed 6.65, or 0.7%, to 1011.

For the week, the Dow soared 6.7%; the S&P 500 jumped 5%; the Nasdaq Comp lost 5%; the Russell 2000 shed 4.8%; the DOT slid 3.6%; the Dow transportation average jumped 10.9%; the Dow utility average rose 4.4%; and the Amex composite lost 2.2%.

Market data above are preliminary. For coverage of today's top stocks in the news, see the Company Report, published separately

.