Bittersweet remarks from a slew of

Federal Reserve members and cautious words from the U.S. central bank chief himself helped push the market lower this week, as investors reconsidered the timing of an economic recovery and how robust that recovery will be.

The

Dow Jones Industrial Average dropped below 10,000, falling 2.6% for the week to close at 9987. The

S&P 500 lost 2.3% to 1145, and the

Nasdaq Composite shed 1.7% to 2022.

Fed Chairman Alan Greenspan dampened investors' hopes Friday, saying that the U.S. economy faces "significant" risks over the near term despite a number of encouraging signs.

"There are sound reasons for concluding that the long-run picture remains bright," he

said at a speech in San Francisco. But "it is still premature to conclude that the forces restraining economic activity here and abroad have abated enough to allow a steady recovery to take hold."

The remarks, which leave the door open for another rate cut at the end of this month, were similar to comments made by other Fed officials earlier this week, though Greenspan's speech was perhaps more negative. His comments came on the same day

a government report on the

producer price index for December signaled that inflation remains tame.

Among those weighing in with their views this week were Richmond Fed President Alfred Broaddus, New York Fed President William McDonough, Dallas Fed President Robert McTeer, Boston Fed President Cathy Minehan and St. Louis Fed President William Poole.

Most of the officials actually suggested the recession should be over by mid-year, but they also said the rebound would be weaker than what some investors may be anticipating.

"The market didn't want to hear that," said Peter Cardillo, chief strategist at Westfalia Investments.

The S&P 500's gain of 20% and the Nasdaq's 45% rally since Sept. 21 suggest that investors were hoping for more than just a lukewarm recovery.

"We may have bottomed, but expectations had really been built up," said Peter Boockvar, equity strategist at Miller Tabak. "We got way overbought, and now we're taking a breather."

The week's economic data, while mostly better than expected, failed to give stocks a lift amid the mixed commentary. Jobless claims fell less than anticipated in the latest week, wholesale prices were in check, and most retailers showed that the Christmas shopping season wasn't as much of a bust as some analysts had feared. Factory orders were the only real disappointment, dropping 3.3% in November, compared with expectations for a 2.9% decline.

While there were snippets of upbeat corporate news this week, the disappointments were just as prevalent.

The week started out with a positive preannouncement from

Compaq

(CPQ)

and a flurry of bullish calls from analysts on tech bellwethers such as

Microsoft

(MSFT) - Get Report

,

Dell

(DELL) - Get Report

and

BEA Systems

.

But on Tuesday,

Gateway

(GTW)

warned of a revenue shortfall.

AOL Time Warner

(AOL)

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and

Ciena

(CIEN) - Get Report

also issued somber outlooks.

Things looked brighter again on Wednesday when

Cisco Systems

(CSCO) - Get Report

said it expects market share gains in the current fiscal quarter. In addition, SG Cowen raised

Intel's

(INTC) - Get Report

2001 and 2002 earnings estimates.

Enron's

(ENE)

nagging bankruptcy woes,

Merrill Lynch's

(MER)

job cuts and

Ford's

(F) - Get Report

massive

restructuring program were stark reminders that corporate America continues to face significant challenges.

John Waterman, managing director of investments at Rittenhouse Financial, attributed the week's losses less to investor concerns about the economy and earnings and more to a simple bout of "profit-taking" after such a huge run-up.

"It's inevitable that you'd get some consolidation," he said. "Whichever way you look at it, stocks are overvalued."

While most investors are painfully aware that

price-to-earnings ratios have raced ahead over the past few months, analysts say the problem has become more acute on the eve of fourth-quarter earnings announcements.

"Technology fundamentals are bottoming but stocks appear to be discounting a robust recovery," said Steve Milunovich, tech strategist at Merrill Lynch. "If consensus estimates are correct, about 70% of the names we evaluated appear too expensive."

Investors may want to consider that when Intel, Microsoft,

Yahoo!

(YHOO)

,

eBay

(EBAY) - Get Report

,

Sun Microsystems

(SUNW) - Get Report

and

Nortel

(NT)

report their earnings next week.