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SAN FRANCISCO -- The sneaking suspicion heading into this week was that the rally begun in late May was running out of steam. By week's end that suspicion had morphed into reality -- with a tinge of fear thrown in after precipitous declines capped the week.

More earnings warnings and disappointments, a resurgent

IPO calendar, plus more signs of economic strength, conspired to send stock proxies down in unison, with the once-vaunted technology stocks spearheading the decline. For the week, the

Dow Jones Industrial Average shed 2.1%, the

S&P 500 lost 4.1%, the

Nasdaq Composite declined 10.5% and the

Russell 2000 lost 6.2%.

"This week has closed the door on the summer rally," said Greg Nie, chief technical analyst at

First Union Securities

in Chicago. "The bulls made an honest effort

from late May to mid-July, but the momentum was not there."

Like many observers, Nie noted there still has not been a capitulation session marked by both overwhelming volume and negative breadth. Even Friday's decline -- which took the Nasdaq down 4.7% and to its lowest close since June 1 -- was "simply finishing the week's process" rather than a penultimate session, he said.

To some, that suggests more harsh selling to come. Nie disagrees, expecting more "lackluster" action to follow, rather than a more draconian scenario.

Still, "this week's action calls for a more temperate approach, cutting back on aggressiveness and lowering the risk profile," the technician said.

For those not already adopting such a posture (and many did), the market started the work for you this week.

Starting Off on the Wrong Foot

The week got off to a fittingly feeble start Monday as concerns about PC growth sent traditional tech bellwethers such as

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reeling. Weakness in momentum favorites such as

Extreme Networks

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further waylaid the Comp, while


tumbled after posting disappointing top-line growth.

Blue-chip proxies also fell Monday, but strength in areas such as pharmaceuticals and insurers helped stem the damage, while

Bear Stearns


rallied amid speculation it was a takeover candidate. The "flight to safety" trend was evident throughout the week and responsible for the Dow's relatively better performance.

Tuesday was the week's most innocuous session. Major proxies (save the Russell) rose modestly behind tech stalwarts such as

Sun Microsystems

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and drugmakers like




But market breadth favored declining issues,

Alan Greenspan's testimony made it clear a rate hike at the

Fed's August meeting remains a possibility, and the news after the bell from

LSI Logic

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wasn't favorable. Collectively, that augured weakness on Wednesday (and beyond), which is precisely what occurred.

Slouching Toward the Weekend

The Dow was hardest hit Wednesday, led lower by financials such as

J.P. Morgan

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and techs such as




Broader market averages also declined amid shocking weakness in chipmakers, notably LSI and


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The Comp was spared greater damage largely thanks to

JDS Uniphase


, which rose 4.5% in extremely heavy trading ahead of its inclusion into the S&P 500. But JDSU would soon suffer for its recent successes and lost 13.8% for the week; many stocks (and investors) suffered a similar pox.

Selling pressure accelerated Thursday. The closely watched

employment cost index

was in line with expectations but a stronger-than-expected

durable goods report

spooked some investors.

Beyond the macro news, cautious comments from


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rippled through various sectors of technology.


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continued a week-long unraveling begun by the departure of president and COO Joseph Galli Tuesday, followed by disappointing top-line growth reported late Wednesday, which led to a slew of downgrades on Thursday.

Hopes for a bounce Friday proved as fleeting as the actual market's early strength. A stronger-than-expected


report did little to help an already jittery market. Meanwhile, the

lack of premium in



bid for

Alteon WebSystems


raised questions about the value of perceived takeover targets. Alteon shed 18.5% for the week, but that followed a 192% climb from June 1 to July 21.

The Calendar Turns Deadly

Concerns about earnings were the most widely touted explanation for the week's morass, and the high-profile disappointments certainly played a big role. But supply issues, somewhat overlooked by the mainstream media, were also paramount.

According to , 19 deals were priced this week, raising more than $4.5 billion at their offering levels (not including greenshoes). Because additional supply came from secondaries and the end of so-called lockup periods for IPOs priced late last year and early this year, the total dollar amount is considerably higher.

"People are selling some tech, telecom and other

of the strongest performing groups to raise cash for supply coming out," said Timothy Heekin, director of equity trading at

Thomas Weisel Partners

in San Francisco. "That's taking some of the support out of the overall market -- clearly, that's a big influence" on the action this week.

Even as the broader market tanked Thursday and Friday, IPOs







Applied Molecular Evolution




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Avici Systems


each rose smartly.

The IPO market's revival is a positive sign of the overall market's recovery from the spring swoon. The bad news is the broader market was unable to withstand the onrushing supply. Worse, the calendar is chock-full for the coming week.

With underwriters scrambling to get deals priced before the "dog days" of August, the question is which arrives first: the traditional summer slowdown or a moratorium imposed by the type of action we saw in the week just past.

Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at .