September's well-earned reputation as a month of volatile and often negative market action asserted itself this week. A combination of weaker-than-expected economic data and corporate results plus jitters about terrorism amid the two-year anniversary of the Sept. 11, 2001, attacks helped weigh on shares, although losses were relatively minor.

Gains on Monday, Thursday, and Friday's comeback kept weekly losses contained, with the

Dow Jones Industrial Average


S&P 500

each off 0.3% for the week while the

Nasdaq Composite

shed 0.2%. The weekly performances were arguably not as bad as they might have been, evidence of the stock market's underlying bullish tone.

Friday proved an apt example. After trading as low as 9380.90, the Dow recovered to close up 0.1% to 9471.55. The S&P ended up 0.2% to 1018.63 vs. its intraday worst of 1007.71 while the Comp rose 0.5% to 1855.04 after trading as low as 1822.

The early declines were triggered by disappointing results on August retail sales and the University of Michigan's preliminary consumer sentiment index for September, as well as lackluster results and guidance from


(ORCL) - Get Oracle Corporation Report


As equities rebounded midday Friday, Treasuries surrendered some of the early gains spurred by the disappointing economic data. The 10-year Treasury rose 14/32 to 99 30/32, its yield falling to 4.26% vs. its intraday low of 4.17%. For the week, the yield on the benchmark note, which moves in opposition to its price, fell 8 basis points. (As an aside, few market participants seem worried the recent rally in Treasury prices means economic growth will subside.)

Less robust-than-hoped for economic corporate data and the market's relatively modest negative reaction -- both early Friday and for the week -- is a "taste of things to come," according to Jeffrey Kleintop, chief investment strategist at PNC Advisors, a Philadelphia-based firm with nearly $50 billion under management.

Tastes Like Chicken

Investors have "maintained confidence" despite "challenging events" such as the mutual fund scandals, terrorism fears, a lackluster labor market, breakdown of the road map to Middle East peace and blackout, largely thanks to the rapid pace of upward earnings revisions, Kleintop said. "We're unlikely to see that pace of upward revisions

continue and the market is maybe not ready for the transition ahead of it."

At current levels, the strategist sees the market as "not unreasonably valued" and maintains a fairly upbeat allocation mix of 65% equities and 35% fixed income. But he foresees a correction of 5% to 10% that "may come fairly quickly" and possibly morph into something more serious if there's no improvement on the labor front.

PNC's chief economist forecasts GDP growth of 3.5% in both the third and fourth quarters, well below consensus expectations of at least 4% for each. Similarly, Kleintop's estimate for 2003 S&P operating earnings is $51.75 vs. the consensus of $52.62; he's also below consensus for 2004.

"I'm afraid the Street has gotten head of themselves in extrapolating recovery," he said. "Though we're on the cusp of a broader recovery, it's not going to follow through" to the degree many expect.

The strategist isn't a

hard-core bear by any stretch, and noted Friday's higher-than-expected producer price index "put deflation fears further in the rearview mirror." But he forecast this "rough patch" is likely to emerge around the time third-quarter earnings season rolls around, with this week being a bit of a preview.

Friday's headlines about retail sales (which many dismissed because they didn't jibe with automakers' more robust sales) and Oracle's results echoed Thursday's higher-than-expected weekly jobless claims data, plus not-as-good-as-anticipated announcements earlier in the week from

Texas Instruments

(TXN) - Get Texas Instruments Incorporated Report



(XLNX) - Get Xilinx, Inc. (XLNX) Report


Notable names lowering guidance this week included

National City







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. Analyst downgrades of retailers such as

Home Depot

(HD) - Get Home Depot, Inc. (HD) Report

further lent to the negative tone.

Counterbalancing those announcements were upbeat results and/or guidance from

TheStreet Recommends

RF Micro Devices



Research in Motion



Capital One Financial

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Adobe Systems

(ADBE) - Get Adobe Inc. Report

, and

TriQuint Semiconductor



There also were analysts' upgrades of


(IBM) - Get International Business Machines (IBM) Report

and positive comments about


(MSFT) - Get Microsoft Corporation (MSFT) Report

, which on Friday announced a doubling of its modest dividend.

Kibbles and Tid-Bits

Gains on Thursday and Friday ameliorated concerns generated by selling earlier in the week. Most notably, on Wednesday when the S&P fell below its "breakout" level at 1015 and the Philadelphia Stock Exchange/KBW Bank Index came within 10 points of crucial technical support at 850. For the week, the BKX slid 0.9% to 868.16. (Technicians see 1005 as a similarly critical level for the S&P 500.)

Kleintop does not share the prevailing

concern about the sector. PNC is long and he remains bullish on firms levered to the capital markets, including


(C) - Get Citigroup Inc. Report


Bank of America

(BAC) - Get Bank of America Corp Report


Morgan Stanley


, as well as insurers

Old Republic

(ORI) - Get Old Republic International Corporation Report


American International Group

(AIG) - Get American International Group, Inc. Report


Gold stumbled after hitting a seven-year closing high of $383 per ounce Tuesday, as forecast here. A week that began on such a strong note ended Friday with the yellow metal shedding 1% to $376.90 per ounce, down 0.2% for the week.. Notably, gold couldn't sustain its advance even as the dollar weakened, particularly vs. the euro, which was trading at $1.1293 late Friday vs. $1.1106 a week prior. The dollar was at 117.34 yen Friday vs. 116.88 a week ago.

Finally, I'll be back on WABC radio's "Batchelor & Alexander" show Friday night, around 9:15 p.m. PDT/12:15 a.m. EDT (i.e., Saturday morning for East Coasters.) The show is nationally syndicated, so check for local listings or Webcast options.

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.