This week presented a replay of the pattern that has emerged repeatedly for the past two years: A sharp rally raised hopes for a recovery, only to be met with debilitating losses.

There's a good reason that sounds like a classic description of a bear market, and little that transpired this week suggested it's ending anytime soon.

The

Dow Jones Industrial Average

managed a weekly advance of 1%, but the

S&P 500

fell 0.3% and the

Nasdaq Composite

dropped 3% for the week.

Despite the relatively modest weekly moves, losses on Thursday and Friday -- particularly for tech and biotech stocks -- wiped out much of the goodwill generated by Tuesday's sharp advance.

About the best thing about Friday's session was that the S&P 500 held above its weekly intraday low of 1063.56, reached Wednesday. After trading as low as 1068.89, the index recovered to close off a relatively modest 1% to 1073.43. Similarly, the Dow closed above 10,000 (albeit barely) after having traded as low as 9943.70, well above its weekly intraday low of 9767.15 hit Monday.

However, the Nasdaq Composite breached its weekly intraday low of 1640.97, hit on Monday, falling 1.9% to 1613.03 Friday, its lowest close since Oct. 9. Additionally, the Philadelphia Stock Exchange Semiconductor Index fell below its Feb. 22 intraday low of 500.57, closing down 4.7% to 480.21 on Friday. Also, the AMEX Biotech Index hit a 52-week low of 400.8 Friday before closing down 1.5% to 409.70.

For the week, the SOX fell 6.7% and biotech index dropped 4.5%.

Macro & Micro

Several individual names dominated headlines this week, notably

WorldCom

(WCOM)

,

Tyco International

(TYC)

,

Sun Microsystems

(SUNW) - Get Report

, and

Oracle

(ORCL) - Get Report

, as well as smaller-caps such as

Peregrine Systems

(PRGN)

and

Overture Services

(OVER)

.

But the dominant factor moving stock proxies this week was a string of lackluster economic data, punctuated by Friday's employment report. The government reported that a lower-than-expected 43,000 nonfarm jobs were added in April, while the unemployment rate rose to a higher-than-expected 6%, the highest level since August 1998.

Economists were quick to note that a rise in the unemployment rate is not unusual at this stage of a recovery as companies seek to increase the output of existing employees before hiring new ones (or rehiring old ones). Similarly, most of the week's other reports suggested the economy's recovery is continuing; for example, separate surveys by the ISM showed continued expansion in both the manufacturing and services sectors.

However, the reports -- both individually and in the aggregate -- proved insufficiently bullish to encourage buyers. Furthermore, the nagging concerns about the path of the economy proved damaging to the dollar, which hit a two-month low vs. the yen and a six-month low vs. the euro intraday Friday.

The combination of weakening stocks and the dollar -- which fed on each other -- helped produce gains for presumed safe havens, such as U.S. Treasuries and gold and related shares.

The benchmark 10-year Treasury note ended Friday yielding 5.06%, leaving it unchanged for the week. The two-year note also rallied sharply Friday, erasing its weekly price loss in the process, as the jobs data confirmed expectations the

Federal Reserve

won't raise interest rates anytime soon, certainly not at its policy meeting on Tuesday.

Such expectations also pushed down mortgage rates, helping housing stocks continue their remarkable rise; for the week, the S&P Homebuilding Index rose 5.2%.

Still, few other sectors shared any celebration over the Fed's likely inaction. Notably, defensive, i.e., "recession-proof," names such as

Coca-Cola

(KO) - Get Report

,

Procter & Gamble

(PG) - Get Report

and

Anheuser Busch

(BUD) - Get Report

were among the week's best performers.

The Great Debate

For all the angst generated this week, the weekly losses for broader market averages weren't that horrendous, and the Dow did rise 1%. The fact so many traders and investors are wringing their hands with worry has some market watchers hopeful that a sustainable bounce is coming. Many of those folks continue to look to the Arms Index as a sign that pessimism has risen to extreme levels, and the inventor of the index expressed a similar view this week, as

reported here.

But those relying on the Arms Index have been stymied for some time now.

Alan Newman, editor of H.D. Brous & Co.'s

CrossCurrents

, noted the 21-day Arms Index "typically acts as a terrific buy signal" when it rises to 1.20 or above. But since Jan. 1 it has been above that level 49.6% of the time, "yet stocks cannot seem to rally very far, if at all," Newman observed. "We're not about to pin our hopes on the extreme high

Arms Index readings to buttress any case for the bull. For the time being, the picture clearly continues to fortify the bear case."

Ultimately, the same can be said about this week's action.

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

Aaron L. Task.