This week was one made for hackneyed phrases: "Santa didn't show"; "Investors got lumps of coal"; "Blue Christmas on Wall Street," etc.

In other words, it was a disappointing week for those long stocks. Rather than experiencing any holiday cheer or the onset of the traditional year-end rally, this week saw the Dow Jones Industrial Average fall 2.4%, the S&P 500 shed 2.3% and the Nasdaq Composite slide 1.1%.

"It's curious, everything that has become consensus is wrong," said John Roque, senior analyst at Arnhold & S. Bleichroeder. "Figure out what consensus is and fade it, that's the best thing to do."

Roque, an occasional contributor, referred specifically to hope for a "Santa Claus" rally, as well as expectations that robust consumer spending would salvage the holiday shopping season and make retailers good buys. Instead, retailing shares plummeted as industry giants Wal-Mart ( WMT) and Target ( TGT) as well as smaller players such as Tweeter Home Entertainment ( TWTR) and Ultimate Electronics ( ULTE) announced disappointing December sales and/or warned fourth-quarter results will not meet expectations. For the week, the S&P Retail Index fell 3.6%.

Less obviously, while most traders "want to focus on the semis, the banks are ultimately the most important sector," Roque said, noting Citigroup ( C) was particularly weak Friday, when stock proxies suffered their worst declines of the week. Citigroup fell 2.4% Friday while the Dow fell 1.5%, the S&P shed 1.6% and the Comp slid 1.4%. (Major averages also ended Friday's session below their respective 50-day moving averages, a negative development according to devotees of technical analysis.)

"Right here, Citigroup is the most important stock in the S&P 500," he said, suggesting the financial giant "has risk to $30," which means 850 is "fait accompli" for the S&P 500 and that 800 is quite possible in the near-to-intermediate term.

If financial stocks "are going down, absolutely, it's virtually impossible to make money long," he said, noting brokerage stocks such as Goldman Sachs ( GS) also were notably weak on Friday. For the week, the Philadelphia Stock Exchange/KBW Bank Index fell 3.6% and the Amex Broker/Dealer Index lost 4.5%.

Early in the week, financial shares were hit by ongoing reverberations from scandals, and announcements of huge set-asides by Citigroup and Bank of America ( BAC). On Friday, executives at both Morgan Stanley and J.P. Morgan forecast continued tough times for investment banking in 2003 and no signs of a rebound, Bloomberg reported.

Should've Stayed in Bed

Beyond bucking consensus, the best thing to have done this week was short the major averages. That, or just take off the entire week of Christmas, as many market participants apparently did. Volume was anemic this week with several of the year's lowest sessions occurring. On Friday, for example, just 751 million shares were exchanged on the Big Board.

Some observers will dismiss the declines because of the low volume but almost 87% of the New York Stock Exchange volume was to the downside Friday, indicating a definitively negative bent among participants. (In over-the-counter trading, about 78% of the 682 million shares were to the downside.)

Such sentiments, on Friday and for the entire week, were fueled in large part by geopolitical concerns. By week's end, concerns about North Korea's nuclear ambitions had supplanted -- or at least equaled -- Wall Street's consternation about the pending conflict with Iraq, which appears almost inevitable at this point.

North Korea's decision to oust United Nations inspectors and remove monitoring equipment at a nuclear reactor believed capable of making weapons-grade plutonium, raise the specter of potential war with the Communist nation and of the proliferation of nuclear weapons in that region.

Such developments relegated the ongoing strike and civil unrest in Venezuela, as well as Iran's plans to build a nuclear power plant of its own to mere background noise, at least as far as equity markets were concerned.

The confluence of disconcerting world events did roil commodity and currency markets this week. Crude futures finished Friday at $32.72, ending the week up 7.5%. Gold reapproached $350 per ounce on Friday, ending the session at $349.70 and up 2.3% for the week. Meanwhile, the dollar fell to its lowest level vs. the euro since November 1999 on Friday, while also hitting multiyear lows vs. the Swiss franc and sliding vs. the Japanese yen as well.

The U.S. Dollar Index fell 0.36 to 102.46 on Friday, ending the week down 1%.

Amid the dollar's weakness, U.S. Treasury securities continued to benefit from investors' search for presumed safe havens, most notably on Friday. The yield of the benchmark 10-year Treasury note, which moves in the opposite direction of its price, fell 15 basis points this week to 3.81%.

The greenback's slump and rally in Treasuries came despite some upbeat economic data, which presumably should aid the former and hamper the latter. That didn't occur this week partially because of thin trading volume and year-end machinations, but also due to the predominance of geopolitical fears and weakening sentiment about the economy's outlook.

Negative sentiment notwithstanding, on Friday the government said new home sales rose 5.7% last month to a record seasonally adjusted 1.069 million units vs. an upwardly revised 1.011 million in October. Earlier in the week, the Commerce Department reported consumer spending rose 0.5% in November, its biggest increase in four months, and weekly jobless claims fell further than expected. However, durable goods orders for November slumped 1.4%.

The Economic Cycle Research Institute (ECRI) reported Friday that its weekly leading U.S. economic index rose to 119.1 for the week ended Dec. 20 from 118.2 the prior week. The index's six-month growth also rose, but remains below break-even at negative 1.7%.

"If the index continues to recover, then we are likely to avert a new recession," ECRI managing director Lakshman Achuthan said in a statement.

However, the performance of financial markets this week suggested otherwise.
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.