Best of some
bad weeks

Corporate arrests hand
stocks their best week
in the last 10

---

By Lisa Singhania
Associated Press

NEW YORK >> Adelphia Communications Corp. and other former executives of the cable television company taken away in handcuffs. And the images repeated over and over on TV news channels this past week helped the stock market snap back smartly, by reassuring demoralized investors that something is being done to curb corporate abuses.

But market watchers say it likely will be months -- if not longer -- before faith in the market is fully restored, and Wall Street can enjoy a sustainable recovery.

"There's some visceral satisfaction in seeing these executives being led away in handcuffs but it doesn't necessarily solve the problem: Are the systemic issues that caused this being addressed?" said Russ Koesterich, U.S. equity strategist, State Street Corp.

"Corporate America and chief executives need to restore the sense to investors that the numbers they're looking at are robust and vigorous in that they're real. Until that happens its going to be difficult."

Indeed, stabilizing and then bolstering consumer and investor confidence remains key to any market recovery. The University of Michigan consumer sentiment index released Friday stood at 88.1, its lowest level in six months and down from 92.4 at the end of June. Although the figure was better than expected, it suggested consumers are feeling the pressure of the market's steep declines.

Analysts say prosecution of corporate wrongdoing might cheer some investors, as should legislation designed to curb fraud, but it's equally important that the market start to see a dropoff in the number of scandals being reported.

"The hope is that if good news continues to come consistently, the sentiment of the market will change and that will signal the beginnings of a recovery," said Brian Bruce, director of global investments, PanAgora Asset Management.

So far that hasn't happened. This past week, for example, Citigroup and J.P. Morgan Chase fell sharply on reports that the banks helped Enron distort its earnings -- a contention both companies deny.

Also, AOL Time Warner said the Securities and Exchange Commission was looking at its accounting practices. No charges have been filed and the media conglomerate stands by its ledgers, but the news was another reminder to investors that the issue of corporate accountability is still a potential spoiler.

Earnings also need to stay solid. Although some sectors have shown improvement in the current batch of second-quarter earnings reports being released, the technology sector continues to struggle.

And there are fears that any downturn in consumer spending, which accounts for two-thirds of the economy, could further hamper any recovery. Many analysts believe consumer spending is what has kept the economy afloat in recent months as corporations curb their purchases.

As far as this past week's rally is concerned, analysts believe many other factors were at work, including the fact that stock prices had fallen so sharply -- to multiyear lows in some cases -- and that buying started to feel a little less risky. The Dow Jones industrials had fallen 840.14 during the four sessions preceding their 488.95-gain Wednesday, with similar steep losses in the Nasdaq composite and Standard & Poor's 500 indexes.

Technical buying, in what's known as short covering, might also have fed the rally. In short trading, investors borrow stock and sell it on the expectation that the market will fall; once the market rises, they have to buy stock to pay back the debt.

"There was a fair amount of asset allocation going on, as investors shifted their portfolios around," said Todd Clark, head of listed equity trading at Wells Fargo Securities. "As I've said before, I'm still skeptical that the selling is over."

It was a mixed week on Wall Street.

The Dow ended the week up 245.13, or 3.1 percent, at 8,264.39, its first weekly gain since July 5. Yesterday, the Dow advanced 78.08.

The Nasdaq had a weekly loss of 57.03, or 4.3 percent, although it rose 22.04 to 1,262.12 yesterday.

For the week, the S&P 500 rose 5.08, or 0.6 percent. Yesterday, the index rose 14.16 to 852.84.

The Russell 2000 index suffered a weekly loss of 3.94, or 1.0 percent, despite gaining 4.15 to 382.26 yesterday.

The Wilshire Associates Equity Index, which represents the combined market value of all New York Stock Exchange, American Stock Exchange and Nasdaq issues, ended the week at $8.091 trillion, up $8.64 billion from the previous week. A year ago, the index was $11.165 trillion.