Oil rallied again this week, but left enough room for stocks to gain. The major indices finished the week with big gains built on Wednesday and Friday, as oil prices set records only for three days instead of all five as they've done for most of August.

The

Dow

industrials finished the week with a 2.9% gain, the

S&P 500

advanced 3.2% and the

Nasdaq Composite

bested both, rising 4.6%.

Crude prices still added more than $1 a barrel to finish the week at $47.86. Some had predicted that crude might back off after Venezuela's recall election failed and OPEC promised more supply. Didn't happen, but maybe that will be next week.

The September contract expired Friday and the now-in-focus October contract is $1.14 lower.

The two days of oil declines fueled stocks hit hardest by concerns that that rising energy bills will sap profits and reduce consumer and business demand for goods and services. Airlines like

AMR

(AMR)

and

Continental

(CAL) - Get Report

gained almost 15% each. Retailers also gained, with

Tiffany

(TIF) - Get Report

up almost 9% and

Home Depot

(HD) - Get Report

gaining 10%.

Tech stocks rallied as well, led by communications-gear makers like

Ciena

(CIEN) - Get Report

, up almost 20%, and

Lucent

(LU)

, up 15%.

A oil goes, so go stocks. "The stock market has been more concerned than anything else about oil," says Arnie Dill, chief economist for Reliance Trust in Atlanta. "It's a net negative for overall profitability at every firm that uses energy."

Still, Dill's worried that it's not just oil that's constraining the economy and causing job growth to weaken. Clogged freight railways and shortages of cement and fuels other than oil also are holding back firms. The situation raises the specter of the devil of the 1970s -- stagflation -- according to the former Fed economist.

"We're running into these constraints before we've got full employment, so we could see inflation without growth" Dill says. That wouldn't help stocks or bonds, the latter of which have been taking a little too much solace from rising oil prices, according to Dill.

There isn't much coming next week to shed more light on the state of the economy. Sales of new and existing homes for July will give a backward-looking glance at the real estate market, and the Commerce Department's revised second-quarter GDP report is due on Friday and unlikely to make many waves.

As this week's rally unfolded, a number of analysts and investors began to see bargains -- or perhaps bargains in the making. But no one's calling a bottom in August. They're looking for bigger dips before major buying.

Jeffrey Saut, chief investment officer at Raymond James, is looking at technical indicators. The Nasdaq crossed more than 10% below its 200-day moving last week opening the door for some bargain-hunting, he wrote in a weekly commentary. But the S&P and Dow have a ways to fall yet before hitting the barrier, he says.

Investors should get ready and draw up buy lists for the coming correction, he wrote. "As for when that is, it's kind of like pornography ... you'll know it when you see it!"

Larry Puglia, who has beaten 90% of competitors over the past 10 years at the helm of

T. Rowe Price's

$7 billion

(TRBCX) - Get Report

Blue-Chip Growth Fund, says some of the big names in technology are down to attractive levels, if not outright bargains.

He likes

Microsoft

(MSFT) - Get Report

, and owns it in the fund, because he's confident personal computer demand will be strong and says that the advance word he's hearing on the next version of Windows, dubbed Longhorn, is very good. "The stock could go into the low 30s. "It's not a great bargain here but it's still attractive," Puglia said. The stock gained 0.67% to $27.20 this week.

Cisco Systems

(CSCO) - Get Report

, which disappointed the Street with lower-than-expected revenue growth and a moderate outlook for the rest of the year, is also attractive and could go up to $25, he says. Cisco gained 5.71% to $18.88 for the week.

"When I hear people saying these companies are mature, frankly that just makes me more interested," he says.

Even if the week's rally fades, at least investors won't have to read any more

Google

(GOOG) - Get Report

predictions next week. The press has been piling on for months with cries and warnings that the search engine, on pace to generate nearly $1 billion of cash flow this year, was a disaster in the making.

Instead, Google priced its shares at $85 on Wednesday night. They opened up 18% and it finished the week at $108.31. That's right at the bottom of the original price range that Google forecast. Broker Jeffries & Co. slapped a buy rating on the shares on Friday.

And in a final follow-up to the week's news, China's No. 2 women's table-tennis pair won the gold on Friday. The pair had to play China's top team earlier after a rule change instituted to prevent an all-China final. Maybe the IOC could do something about oil prices next.

In keeping with TSC's editorial policy, Pressman doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send

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