It was an exciting week as market players tried to decipher comments made by Federal Reserve officials and also make sense of economic news. On the whole, news can be described as mixed. More declines than increases were recorded for the various economic indicators. However, the rate of decline moderated in many cases (retail sales, industrial production, jobless claims). In addition to monthly economic indicators, the Fed's Beige Book reflecting anecdotal evidence of business activity also showed a mixed bag with some signs of improvement in various regions.

Treasury markets traded all over the board this week, rising and falling with each indicator and Fed comment. Equity prices were more negative than positive, as early earnings reports were still pretty soggy.

Market players are less convinced about the direction of Federal Reserve policy in the first half of this year. Some economists are predicting a 25 basis point rate cut at the January meeting, although most economists generally agree that rates will probably be stable for the balance of this year. Even with economic recovery, growth is not expected to be very robust in 2002. Economists are also in agreement that the outlook for corporate profits is not very bullish. In fact, while the economy may start growing as early as the first quarter of 2002, corporate profits aren't likely to be positive until the second half of the year.

All eyes and ears will be on Fed chairman Alan Greenspan on Thursday when he testifies before the Senate Budget Committee.