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This week's market action was about a couple of things: a reversal of a recent upheaval in fixed income and the end, certainly a pause, of a much-longer period of outperformance by tech proxies.

On the one hand, Treasuries survived a huge quarterly refunding, which helped bring a modicum of stability to blue-chip proxies. On the other hand, this week the

Nasdaq Composite

was a notable laggard, following a lackluster reaction to



earnings and weaker-than-expected guidance from




Nvidia shares tumbled 19.5% Friday, contributing to a 0.5% decline in the Comp and a 3.1% decline in the Philadelphia Stock Exchange Semiconductor Index. Nvidia is not a component of the index but its disappointment caused many observers to rethink their optimism about third-quarter results, providing an excuse for selling of other semis and related equipment makers. For the week, the SOX fell 6.3%.

As the Comp dipped Friday, the

Dow Jones Industrial Average

rose 0.7% to 9191.09 while the

S&P 500

gained 0.4% to 977.59.

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Friday's action was an apt example of the broader trends for the week, during which the Comp shed 4.2% and the S&P dipped 0.3%, while the Dow rose 0.4%.

"It was a lackluster performance, especially

Friday," said Matt Ruane, head of U.S. equities at Credit Lyonnais. "In order to get some leadership going forward, you're going to have to see

techs come back. It's worrisome where capital spending is going to come from."

In addition to tech's slide, Ruane observed how worries about interest rates have caused a rotation out of financials, while health care names suffered following



disappointing guidance. "HMOs rolled over and you had people going into safer havens and rushing into energy stocks," the trader said.

Indeed, strength in underlying commodities gave a boost to the previously out-of-favor energy complex. The Amex Natural Gas Index rose 2.5% for the week while the Amex Oil Index and Philadelphia Stock Exchange Oil Service Index each gained about 3%. While that was welcome news to the sector's beleaguered investors, more market participants are growing concerned about

oil prices, which remain above $32 per barrel and could threaten the economy's recovery.

Energy stocks gave blue-chip proxies a lift, as did more stronger-than-expected economic reports, including Monday's factory orders, Tuesday's ISM services index, and Thursday's productivity, jobless claims and retail sales reports. On Friday, the Economic Cycle Research Institute said its weekly leading index rose to 128 vs. a revised 127.1 the prior week. The index's four-week growth rate rose to 12.5% from 11.4%.

"It is unambiguous the economy is going to recover," ECRI managing director Lakshman Achuthan said in a statement.

Treasuries rallied, despite such certainty about the economy and the government's three-part auction of $60 billion of debt. The yield on the benchmark 10-year note, which moves in the opposite direction of its price, fell 12 basis points this week to 4.28%.

More than anything, the stabilization and improvement in Treasuries gave a lift to the Dow and put a floor under the S&P. The S&P also danced around some key technical levels this week, falling below closely watched support at 975 and 970 and flirting with its July 1 low of 962.13 before rebounding Thursday and Friday. Despite its relative strength, the Dow did fall below its 50-day moving average.

The Comp, as noted above, was in a world of its own, suffering from company-specific news and concerns about valuations following the index's big rally in the months preceding.

Equity market participants were unusually focused on fixed income heading into this week. The focus turned into horror Tuesday when the first leg of the auction, $24 billion of three-year notes, was poorly received (and that's being kind). Treasuries tumbled Tuesday in reaction, and stock proxies followed suit, further weakened by a 43% jump in layoffs in Challenger Gray & Christmas' July survey and cautious guidance from




Wednesday's auction of $18 billion of five-year notes was a marked improvement from Tuesday's abysmal showing, and shares rallied midday in conjunction with Treasuries. But the final hour saw stocks slide, with the Comp particularly hard hit amid recriminations over Cisco's results Tuesday evening an lowered guidance by




Thursday's 10-year note auction went better still and, along with solid same-store sales from




Best Buy


, helped the Dow and S&P overcome early losses to finish higher. The Comp's relative weakness was on display once again Thursday, and the SOX fell below its 50-day moving average, as noted

here, a prelude to Friday's slide.

Tune-In TaskMaster

I'll be back on WABC radio's Batchelor & Alexander show Friday evening, around 9:30 p.m. PDT/12:35 a.m. EDT. (OK, that's really Saturday morning for East Coasters). This is becoming a "regular" Friday gig and it's fun for me, as B&A are a hoot.

The show is nationally syndicated, so check for local listings or Webcast options. Looking ahead, I'll be out Monday (and possibly beyond), as I've been called to jury duty.

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 invites you to send your feedback to

Aaron L. Task.