Dow flirts with 11000 but economy and earnings are depressants
As usual, the stock market indexes fluctuated sharply this past week. On days in which the Nasdaq composite posted declines, the Dow Jones Industrials picked up steam as investors opted for old economy standbys. Other days saw rotation and the Nasdaq composite outperforming the Dow Industrials. But the bottom line was negative earnings reports coupled with fears of further economic weakening. This depressed equity prices during the week. All the major indexes are down from a week ago, but note that the Dow and Russell 2000 lost the least.

All major market indexes, with the exception of the Russell 2000, are below year end levels. The Russell is up 2.8 percent from yearend. The Dow is just 0.1 percent below yearend, and the others are less than 0.5 percent below yearend. The previous two Friday's had a much better showing for the equity market.

Treasury securities rally on Fed action
The U.S. Treasury auctioned 5-year and 10-year notes as well as the 30-year bond this week. Auction results were not great. For the most part, the bid-to-cover ratio, which reflects demand for the issues, declined from the previous auction in November. Auction performance is often less than stellar in an uncertain environment - when the Fed is either in a rising rate or declining rate mode. Despite the fact that the equity market was gyrating this past week, Treasury yields remained fairly stable - until Friday. The continued decline in the stock market finally led to a bit of a rally in the long end of the Treasury yield curve. Both the 10-year note and the 30-year bond fell on Friday, while the yields on the 2-year and 5-year notes were virtually unchanged over the course of the week. Bond investors are anxiously anticipating Fed chairman Alan Greenspan's testimony before the Senate Banking Committee on Tuesday. Clearly, they are hoping for hints of further rate reductions in the near term.