Bumping along the bottom?
The Dow Jones Industrial Average was headed higher early in the week, but succumbed to the general malaise by week's end. The previous week's surge in equity prices was mostly erased. Several high tech companies issued warnings that earnings would not meet expectations, and the Nasdaq composite index suffered most of all. Unless we get a holiday rally in the next week or so, this will turn out to be the first negative year in the stock market since 1994. The DJIA appears lost in the shuffle in the chart below. Actually it is running neck to neck with the Russell 2000. Both are down 9.2 percent relative to year end 1999. These are the least weak market measures.

Treasury yields drop on expectations of a friendly Fed
The rally that began in full force last week continued in the Treasury market. Some bumps were felt along the road early in the week, but Treasury prices rose and yields declined as economic figures confirmed moderating growth. Bond investors generally viewed the economic environment a friendly one since the slower pace of activity (without accelerating inflation) suggests that the Fed will be ready to ease monetary policy soon. The first step will take place at next week's FOMC meeting. The consensus is looking for a shift towards a neutral bias and away from the inflation-risk bias. Certainly bond market players will hope for a rate cut on Tuesday, but won't truly expect one until early 2001. The bond market also benefited by the bearish psychology in equities. A flight to quality generates demand for U.S. Treasury securities.