One day does not a market week make. But Monday's upward surge was enough to make this a winning week on Wall Street, even if it didn't feel that way as the weekend beckoned. For the week, the Dow Jones Industrial Average rose 0.9%, the S&P 500 gained 0.7% and the Nasdaq Composite climbed 1.1%. Those gains notwithstanding, weakness on Thursday, intraday Friday and among momentum favorites throughout the week left some participants with that sinking feeling. "All rallies have to come to an end and some cracks are beginning to appear in this one," Martin Pring, editor of The Intermarket Report, commented Friday. Major averages are significantly overbought and sentiment "extremely bullish," he noted, leaving stocks vulnerable to "near-term technical damage." (On Wednesday, Chartcraft.com Investors' Intelligence survey showed bearish sentiment at a 16-year low.) However, Pring believes "pretty well all of the technical evidence points to a primary bull market and that any correction is likely to represent a good buying opportunity." (Most notably, major averages remain above their 200-day moving averages, and those moving averages are turning upward.) Still, a notable subplot to the week's action was waning strength in groups that previously had been leaders, including biotech, Internet, energy and broker/dealers. Additionally, homebuilding stocks fell sharply in conjunction with the bond market's slide. For the week, the yield on the benchmark 10-year Treasury note -- to which many mortgage rates are pegged -- rose 27 basis points to 3.38%. In conjunction, the S&P Homebuilding Index fell 5.6%, despite better-than-expected earnings from KB Homes ( KBH) and Tuesday's report showing strong housing starts and permits for May.
Limping to the Finish Line
On Monday, the Dow closed at its highest level since July 5, 2002, and the S&P 500 above 1000 for the first time since June 20, 2002. The Comp established its best finish since May 23, 2002.