NEW YORK -- After two months of spectacular gains followed by a week of sharp losses, Wall Street is suffering from a case of deja vu.
Amid negative earnings outlooks and concerns about a Chapter 11 filing for United Airlines, investors sold stocks off this past week, leaving some market watchers wondering if prices had gone too high too fast -- and repeated a scenario seen during the summer.
"The market may go back down to test its lows," said Alan Ackerman, executive vice president of Fahnestock & Co.
The Dow Jones industrials broke an eight-week winning streak this past week and the broader market also finished lower, having risen for seven of the previous eight weeks.
"I think this was another bear market rally and investors are being taken on another ride to new lows," said Christopher Johnson, manager of quantitative analysis at Schaeffer's Investment Research in Cincinnati.
"What you saw this past week was the ugly fundamentals rearing their heads. ... Ugly fundamentals compared with where our expectations were going," Johnson added.
Indeed, just as investors were growing more confident believing that earnings and the economy were recovering and even strengthening, they were handed a series of disappointments including lackluster retail sales for November, profit warnings from Disney and Hewlett-Packard and the possibility of bankruptcy at United Airlines parent UAL Corp.
And, the Labor Department reported Friday that the nation's unemployment rate unexpectedly rose to 6.0 percent in November, the highest level in almost nine years. Analysts expected a slight increase from the 5.7 percent in October.
"This is a real psychological blow," said Arthur Hogan, chief market analyst at Jefferies & Co. "We have been concerned that the economy is not stabilizing ... We have been able to fall back on the fact that the consumer is hanging in, but then we get shaky, at best, retail sales and a jump in unemployment."
The spate of bad news had analysts cautioning that the market could retreat back to the lows made in October when the Dow sank to a five-year low and the Nasdaq composite and Standard & Poor's 500 indexes sank to six-year lows.
"I don't think we saw the bottom in October. We still expect the market to break the October lows and go a bit further down," Johnson said.
Still, the past week saw some good news that might help the market. For example, Intel issued an upbeat fourth-quarter revenue outlook and the Labor Department reported that productivity grew at an annual rate of 5.1 percent in the third quarter, faster than the government's previous estimate of 4 percent and better than the 4.5 percent rate analysts were expecting.
Another factor that could work in the market's favor, analysts said, is that the Bush administration is revamping its economic team. On Friday, Treasury Secretary Paul O'Neill and economic adviser Larry Lindsey resigned amid concerns about the flagging economy. The news allowed the market to recover from its concerns about unemployment and post a modest advance.
Analysts are also encouraged by the fact that the most recent rally had positive aspects not seen in previous surges that fizzled Hogan noted that this last upturn was longer than the late July-August climb and that it was broader, with the long-battered technology sector enjoying some of the biggest gains.
"Bear in mind that the path of least resistance has been to the upside," Hogan said. "We may be able to shake this off without doing too much collateral damage."
For the week, the Dow fell 250.32, or 2.8 percent, to close at 8,896.09.
The Nasdaq had a weekly loss of 56.34, or 3.8 percent, and the S&P had a weekly loss of 24.08, or 2.6 percent. For the week, the Russell 2000 index, which tracks smaller company stocks, lost 9.64, or 2.4 percent.
The Wilshire 5000 Total Market Index, which tracks more than 5,700 U.S.-based companies, ended the week at 8,629.16, down 217.55 from last week. A year ago, the index was 10,745.37.