This week was the same as it ever was, or, at least, the same as it's been since March 2000: Fleeting rallies were enthusiastically embraced as a sign of better times ahead, but the prevailing trend was decidedly downward.

That trend was glaringly evident at week's end when a midday reversal Thursday sprouted yet another crop of "bottom" callers. The market's gains early Friday further encouraged such talk. But the only "bottom" that could be found Friday afternoon was the bottom falling out from under the rally.

Once as high as 8849.22, the

Dow Jones Industrial Average

ended Friday down 1.3% to 8684.53. Broader market averages fared relatively better but still relinquished early gains: The

S&P 500

ended down 0.6% to 921.39 after trading as high as 934.31 while the

Nasdaq Composite

shed 0.1% to 1373.50 vs. its intraday best of 1402.45.

Friday afternoon's swoon was a fitting end to a week that began with three consecutive sessions of heavy selling. The action Monday, Tuesday and Wednesday pretty much assured the week would be another losing one for the major averages, which it most decidedly was: For the week, the Dow shed 7.4%, the S&P 500 lost 6.9%, and the Comp dumped 5.2%.

The weekly losses for the Dow and S&P were the worst since the week trading reopened after the Sept. 11 attacks (the Comp's loss was its worst since April). There were many market-related allusions to September 2001 this week, most notably as the S&P and Comp fell below their Sept. 21 intraday lows on

Wednesday, each hitting levels unseen since 1997. On Thursday,

the VIX rose (briefly) above 40 for the first time since last September.

The other big similarity between the current environment and last September is heavy outflows from equity mutual funds. For the week ended July 10, equity mutual funds suffered outflows of $3.2 billion, AMG Data reported. That follows outflows of $11.1 billion in June, the largest month of outflows since September 2001.

"The duration of the latest episode of mutual fund outflows has now exceeded the five-week string that succeeded the 9/11 attacks, although the magnitude of this episode is somewhat smaller," observed Thomas McManus, equity portfolio strategist at Banc of America Securities. "We consider the existence of equity fund net redemptions to be a slight bullish indicator from a contrary perspective."

Indeed McManus raised his recommended equity allocation to 55% from 50% on June 10, in part because of the "redemption signal," which has historically flashed at important market lows. Still, McManus remains "significantly underweight equities" relative to his peers and "defensively postured" within stocks.

Other participants, however, may be less restrained in recalling the market's stellar rally from the September lows into early January. But for all the apparent similarities in the market between now and then, some important differences exist:

Back then, government officials expressed solidarity in both words and actions. This week, politicians' lack of concrete action and politicking undermined the widely spouted rhetoric about restoring investor confidence;

In September and early October, the Federal Reserve lowered the fed funds rate by 100 basis points -- and cut another 75 in November in December. A rate cut at this point might not be greeted as warmly, for it would be a tacit signal that the economy isn't as strong as the Fed has been saying it is (more on that below);

In September 2001, investors hadn't yet absorbed the string of revelations of corporate malfeasance, which continued this week with various and sundry issues facing Bristol-Myers Squibb , Merck , and Qwest Communications , as well as the ugly specter of congressional hearings into the WorldCom debacle.

Finally, perceptions about the economy were far different then vs. now. Whereas the economy confounded forecasts for a steep decline after the 9/11 attacks, the risk today is the economy doesn't grow as quickly as most expect.

Friday's weaker-than-expected University of Michigan consumer sentiment data and higher-than-expected jobless claims and PPI data on Thursday were among the cracks in the "strong recovery" armor, as was the late-week spike in crude prices. (Admittedly those negatives were offset by strong retail sales data and results and forecasts from companies such as


(WMT) - Get Report



(DELL) - Get Report


General Electric

(GE) - Get Report


The consensus on Wall Street remains that a "double-dip" scenario is highly unlikely but consider this observation from a reader, which encapsulates what a lot of folks are thinking: "For years the

stock market has been touted as a reliable harbinger of good things to come in the economy -- now all of a sudden when the economy is supposedly expanding and the market is continuing to fall," there's talk of how the stock market and economy have disconnected.

The stock market is far from infallible as an economic forecaster, but maybe it


telling us something about the economy's future path and we don't want to listen? Certainly the market's message this week wasn't easy on the ears ... or eyes, or pocketbooks of most.

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.