A red ink week for stocks
Friday's slight rebound notwithstanding, it was a bad, bad week for the stock market. Economic data was not strong enough to suggest that the economy is on the verge of recovery and this kept equity investors in a deep funk. The psychologically important 10,000 level was passed (on the way down) on the Dow Jones Industrial Average. In fact, the Dow even sank below 9900, although it managed to close above that level on Thursday. Whether tech or blue chip, prices were generally in a falling mode throughout the week. The stock market will only see a positive breakthrough when economic data starts strengthening on a more consistent basis.

Friendly bond market
Sluggish economic activity is generally favorable for the bond market because a weak economy can translate into lower interest rates. Though worries the Fed's aggressive rate cuts would trigger inflation did surface in April and May, inflation news has been relatively positive and bond investors have come to enjoy the rate cuts. As stock prices rose slightly on Friday, bond prices dipped. Nevertheless, bond yields are down across the maturity spectrum relative to a week ago. Bond investors are factoring in another Fed rate reduction of 25 basis points at the next FOMC meeting in early October.