Updated from 4:51 p.m. EDT

The Rolling Stones classic Let It Bleed would have been an apt soundtrack for this week, one in which the Nasdaq Composite slid to its lowest levels since October while the Dow fell below the psychologically significant 10,000 level. The acceleration of recent stock market weakness came amid some disappointing earnings news, hawkish comments by Federal Reserve Chairman Alan Greenspan, and concerns about terrorism ahead of the upcoming Democratic convention.

For the week, the Dow Jones Industrial Average fell 1.8%, closing Friday below 10,000 for the first time since May; the S&P 500 lost 1.4%, its sixth consecutive losing week; and the Nasdaq Composite shed 1.8% to 1849.09 on Friday, its lowest close since Oct. 2.

In the "Gimme Shelter" department, Rick Bensignor, chief technical strategist at Morgan Stanley, does not think this week marked the end of the decline, even though the S&P managed to hold above its year-to-date low of 1076, a minor technical victory Friday in an otherwise destructive week.

"We could get a bounce, but I don't think the downside game is over," said Bensignor, who forecast a harsh selloff two weeks ago, as reported here . "I think we're still going lower."

Bensignor's continued bearishness is based partly on a sense that skepticism remains the contrarian view. At recent market bottoms in March and May, he noted, the CBOE Market Volatility Index was in the high 19s; the VIX was under 14 this week and ended Friday at 16.44 after a 4.4% bounce. Similarly, the spread between bulls and bears in Chartcraft.com's Investors Intelligence survey was much narrower at those prior bottoms vs. the most recent reading of 52.6% bulls and only 20% bears.

"There's much more complacency about this selloff -- everyone is assuming we'll come to the low end of the trading range and pop up," he said. "It's as if people aren't that concerned."

Besnignor has been and remains concerned, suggesting the S&P 500 now has downside risk to 1056 and possibly 1025 beyond that. "Now is not the time to put money in," he said. "You should be able to buy at lower levels."

While fear remains elusive, presumably this week will move more people to the bearish, or at least cautious, camp. Clearly, it was a difficult week for those who've been expecting a summer rally, myself included.

They May Not Bet Giants

Microsoft ( MSFT) was the week's dominant corporate newsmaker. The software giant's $75 billion cash outlay announcement late Tuesday was larger and sooner than expected, but it failed to inspire a sustained rally Wednesday. Even more troubling for those long stocks, Microsoft's mixed earnings report after the close Thursday helped precipitate Friday's selloff in which the Dow fell 0.9% to 1996.22, the S&P lost 1% to 1086.20, its lowest level since mid-May, and the Comp fell 2.1% to 1849.09.

Microsoft rose 2% for the week but closed down 1% to $28.03 Friday and failed in its rally Wednesday to breach the $30 level, a resistance point since September.

Other names making news for producing disappointing earnings and or guidance this week included 3M ( MMM), eBay ( EBAY), Amazon.com ( AMZN), ImClone ( IMCL), Texas Instruments ( TXN) and Motorola ( MOT).

Heading into earnings season, the hope was the negative preannouncements would be swept aside by blockbuster results from bellwether companies. If prior results from names such as Intel ( INTC) and Yahoo! ( YHOO) dampened such hopes, this week's reports wiped 'em out.

"The earnings numbers aren't awful but you sew the seeds of investor discontent by raising the bar to levels that are difficult to achieve," said Tobias Levkovich, senior institutional U.S. equity market strategist at Citigroup Smith Barney.

Levkovich, who turned defensive in late January -- especially on tech -- and has been preaching caution ever since, said: "The big issue in the market this week is we ratcheted up earnings expectations in May/June to unsustainable levels."

Similarly in the "You can't always get what you want" department was Greenspan's midweek testimony. Despite market chatter that Greenspan was somehow "soothing", perhaps because he expressed optimism about the economy, the chairman also reiterated a view that interest rates could be adjusted "in a less gradual manner" if inflation were to accelerate further.

"Not only has economic activity quickened, but the expansion has become more broad-based and has produced notable gains in employment," Greenspan said. "The considerable monetary accommodation put in place starting in 2001 is becoming increasingly unnecessary."

Although many observers believe Greenspan is merely trying to 'jawbone' the market, his comments dampened hopes that the Fed's tightening cycle will be extremely measured.

Parting Thoughts

Notable this week was that equities were pretty much alone in moving dramatically. That's in stark contrast to last spring, when leveraged bets across the spectrum were being unwound , or certainly the summer of 1998.

"This time around, credit markets aren't really reacting," noted Mark Dow, co-manager of the ( MEDIX) MFS Emerging Markets Debt fund. "What seems to be happening is equity traders were extrapolating too much growth, and are now coming to realize otherwise. It's not the end of the world but this linear extrapolation of growth rates no longer works, and guys are pricing that in."

The impact is far greater on equities, he said, because debt holders "only care about the balance sheets," which have improved in recent years among corporate and sovereign debt issuers. Consumers, however, "have to increase personal savings," which is one reason Dow believes recent reports signal the start of an economy slowing to more modest levels vs. being "an anomalous set of data."

Similarly, Levkovich noted the negative hit to consumer spending from higher energy prices, which resumed this week as crude prices rose 1.7% to $41.71.

A curious aspect of Greenspan's testimony was his instance that higher energy prices are a "transitory" phenomenon, although price trends suggest otherwise and supportive evidence is lacking. But that is a story for another day.

In other markets this week, gold again moved in tandem with stocks, falling 3.9% to $390.50 per ounce.

As is more commonly observed, gold moved in opposition to the dollar, which rebounded this week, especially vs. the euro, which was quoted at $1.2096 late Friday vs. $1.2449 a week prior.

Elsewhere, the yield on the benchmark 10-year Treasury rose 8 basis points for the week to 4.43%.
Aaron L. Task is the assistant managing editor for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to atask@thestreet.com.

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