SAN FRANCISCO -- For the bulls, the past week was like a tuna melt made with freshly baked bread but rotting tuna -- it looked good from the outside but the inside was enough to cause nausea. In other words, three harrowing days surrounded by two good ones.
Friday's solidly positive session left market participants feeling better about their portfolios (and tummies), but major indices still ended in arrears for a sixth consecutive week, the first time that has occurred since 1990.
For the week, the
Dow Jones Industrial Average
fell 3.8%, the
declined 2.5% and the
shed 1.3%, dramatically shaving its loss for the week with a 7.9% gain on Friday.
The week got off to a fairly promising start Monday as the Nasdaq overcame early losses of more than 120 points, closing down a scant 5. The Dow finished near its lows of the session but off only a modest 0.3%.
was a stand-down among individual issues, falling 29% after the retailer warned its third-quarter earnings would be far shy of expectations.
Monday's session was sparsely attended because of the concurrent
holidays, but that didn't stop some observers from declaring the day's turnaround a sign that the harsh selling of the preceding five weeks had run its course.
"The end is near! The end of the carnage, that is!" Charles Payne, president and chief analyst at
Wall Street Strategies
, wrote in an email to clients Monday afternoon. "I'm not sure if today's rebound attempt will hold or not, but it serves as a symbol that this selloff is overdone."
Similar sentiments reappeared throughout the week, only to be refuted by the reality of more big losses.
Oil + Earnings = Midweek Misery
A main culprit for much of the week's misery, rising oil prices, first appeared on Tuesday, when the Comp lost 3.4%, the S&P 500 declined 1.2% and the Dow shed 0.4%.
The spike in crude, brokerage downgrades of
, plus continued concerns over the junk bond holdings of brokerages, notably
Morgan Stanley Dean Witter
, combined to spoil whatever good tidings Monday's session had generated.
The news after the bell Tuesday -- a profit warning by
, disappointing revenue figures and outlook from
and a less-than-stellar conference call from
-- set the stage for more wickedness on Wednesday.
There was some resiliency to the selling Wednesday, but not much. The Comp closed down 2.2% and just above the lows hit on May 23, the nadir of the spring selloff. The Dow and S&P fell more than 1% apiece, the latter hurt by big losses in Lucent and Motorola.
The midweek drubbing brought out another cadre of
bottom-pickers, who would end up flat on their backsides the following day.
Thursday actually got off to a decent start, but a profit warning by
, plus an 8% spike in crude prices in reaction to some harrowing news in the Middle East quickly put an end to that. The Dow Industrial Average fell 3.6% ending just above the "psychologically important" 10,000 level, the Nasdaq Composite lost 3% to 3074.70, its lowest close of 2000, while the S&P 500 shed 2.6%.
Amid the carnage, though, were signs of a possible recovery, notably strength in tech leaders such as
After Thursday's close,
produced stellar third-quarter results, fueling hopes Friday would (finally) bring better fortunes for those long.
Ending With a Bang
The sentiments proved accurate, and then some. The Nasdaq exploded higher with a 242, or 7.9%, gain Friday, its third-largest point gain and second-biggest percentage rise ever. The Dow rose 1.6% and the S&P 500 climbed 3.3% as the simmering down of tensions in the Middle East (and oil prices) plus positive comments from noted strategists
Abby Joseph Cohen
rewarded the bottom seekers, at long last.
Big gains by recently beaten down groups -- notably technology, financials and retailers -- certainly cheered the mood on Wall Street. The common view is the week-ending advance has enough "legs" to extend well into next week and possibly beyond. But traders weren't exactly euphoric after six weeks of hellish losses.
"My thinking is if the rally
extends for two to five days and there's no bad news in the interim, then I think we can rally into the new year," similar to the ends of 1997 and 1998, said Doug Myers, vice president of equity trading at
in Atlanta. "But if something pops up -- catastrophic earnings or oil doing its gyrations -- then you'll have a lot of people who'll say 'I should have sold on Friday's rally.' "
Which scenario develops remains, of course, to be seen. Those of a less-than-bullish bent note Friday's session came despite stronger-than-expected reports on
producer prices and
retail sales for September. The data could make it difficult for the
Federal Reserve to ease interest rates anytime soon, something many investors probably secretly hoped for during the week.
Furthermore, oil prices and prospects for peace in the Middle East remain a wild card with the potential to undo any sustained rally attempt. Finally, the very fact stock prices could rise so rapidly is a sign, to some, the selling of recent weeks didn't do enough damage to investor psychology, meaning the "final" bottom has yet to be reached.
But that's a lot of ifs and buts. And if ifs and buts were like candy and nuts, every day would be Christmas. Sort of like Friday, that is, a gift for the long-suffering magi known as bulls.
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.