NEW YORK ( TheStreet) -- Contagion's back! Through Thursday's close, the market had put together another impressive week. The cracks that had started to appear were getting short shrift as earnings season picked up steam, and high-fliers like Caterpillar ( CAT) (the Dow's top performer in 2010) and Netflix ( NFLX) (the same for the S&P 500) delivered strong results. The Federal Reserve delivered a very dovish message on Wednesday -- once again validating "QE2" -- and doing so with a complete lack of dissent, so it looked like 2011's non-stop bull run still had some legs. The Dow Jones Industrial Average spent a few sessions crisscrossing 12,000, and the S&P 500 did the same with 1,300, and each index closing above those levels in the near future seemed a foregone conclusion.
Then Cairo caught fire, and it all fell apart. Add in Ford Motor's ( F) confounding fourth quarter, which was so far off of Wall Street's consensus view that executives acknowledged they needed to do a better job of communicating their outlook to investors, confusion over the Nasdaq's technical problems at the open, and a pedestrian read on fourth-quarter gross domestic product, and the rally has officially stalled. When the closing bell clanged on Friday, the Dow's eight-week winning streak was history, and the VIX, Wall Street's so-called fear gauge, had leapt more 24% to close at 20.04 for its first finish above 20 since Dec. 1, right around when the Dow's streak began. Maybe we should have paid more attention when AdvisorShares Investments launched the Active Bear ETF ( HDGE), billed as the first actively managed ETF that shorts stocks, on Thursday, as being a sign of a top. It could turn out to be an incredible coincidence, at the very least. Suddenly a relatively good earnings season -- 207 of the companies in the S&P 500 have reported so far and according to the latest Thomson Reuters data, 71% have beat analyst expectations -- is taking a backseat to Hosni Mubarak's teetering regime, and the word "contagion" is already making a comeback with market watchers. "For the start of the week ahead, market participants will be watching to see how events in the Arab world continue to play out," writes Robert Pavlik, the chief market strategist with Banyan Parnters, in his weekly commentary email. "Should the Egyptian situation unravel to the point of contagion into neighboring countries, the market will certainly react negatively."