The week that was: More pain, no gain -- except for OPEC

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The stock market looks like it dodged a couple of bullets today, but the modest rebound in the Dow Jones industrial average during the half-day session couldn’t salvage the week.

And take a guess which commodity closed at yet another record high.

The Dow added 73.03 points, or 0.6%, to 11,288.54, but lost 0.5% for the holiday-shortened week and stayed in bear-market territory, off 20.3% from its October peak.

The broader market was much worse, for the day and the week. Investors continued to unload some of the stocks that held up best for them in the second quarter, particularly smaller issues. The Russell 2,000 small-stock index lost 1% today and 4.6% for the week, and is down 22.2% from its all-time high reached nearly a year ago.

The slow-motion crash in bank stocks also continued, suggesting no easing of the latest jitters over the financial system. On the new-lows list today yet again: Bank of America, Wachovia, Comerica, U.S. Bancorp and Zions Bancorp, among others.

The government’s report of a net loss of 62,000 jobs in the economy in June nearly matched expectations, so that was a relief to some on Wall Street.

Should it have been? The debate over whether we are, or aren’t, actually in a recession will go on, but to some analysts there’s no question anymore.

Merrill Lynch & Co.’s econo-bear, David Rosenberg, says the lesson from history is that ‘you don’t have six consecutive monthly declines in payrolls and not be in an outright recession.’

For stock investors, the issue is what the slowdown/recession/whatever will mean for corporate earnings. Analysts have a dismal view of results for the quarter just ended: Operating earnings of the S&P 500 companies are expected to be down 12.4% from a year earlier, according to Wall Street estimates tracked by Thomson Reuters.

Yet those same analysts still believe the second half will bring a big turnaround. They’re expecting a 12.7% year-over-year gain in S&P earnings in the third quarter. . . .

But you have to wonder what will happen to that third-quarter estimate if oil stays where it is, or goes higher. Near-term crude futures in New York gained $1.72 to a record $145.29 a barrel today.

Not even a surprise rally in the dollar -- normally a drag on commodity prices -- could keep oil from doing what it does best, which is defying everyone who’s trying to talk it down.

The dollar, which had tumbled on Wednesday, rebounded after the European Central Bank sought to downplay the idea that it was on a sustained drive to raise interest rates.

The ECB, which has been yammering for weeks about the dangers of rising inflation pressures, lifted its benchmark short-term rate from 4% to 4.25%, as expected. It was the first increase in a year. But ECB President Jean-Claude Trichet hinted that one hike might be all for the near future, saying ‘I have no bias and we are never pre-committed.’

Somehow, that sounds so European.

Michael Woolfolk, senior currency strategist at Bank of New York Mellon, noted that the dollar’s renewed slide in recent weeks left the currency vulnerable to another sharp hit, had Trichet waved the flag for more rate increases.

‘Trichet could not have been expected to pre-commit to another rate hike lest he spark a further selloff in the greenback that he would just as soon avoid,’ Woolfolk said.

Make French champagne even more expensive for out-of-work U.S. mortgage bankers? Perish the thought.

Still, Woolfolk expects the dollar to resume its downtrend ‘until the Federal Reserve signals its intention to begin raising rates again to fight inflation.’

They can signal all they want. But as long as the economy is bleeding jobs, and the financial system keeps showing new cracks, it’s going to be very difficult for the Fed to actually do the deed.