Here is a look the cause of the volatility created this week by hedge funds, institutions, and those we call “traders”:

WASHINGTON CONTINUES TO DICTATE THE MOOD on Wall Street, but the deference is taking its toll.
Congress passed a $787 billion plan Friday that includes a half-trillion in government spending and nearly $280 billion in tax cuts, while President Obama promises a proposal to curb home foreclosures. Such big plans and big numbers managed to slow the wave of stock selling late last week, but failed to shake the show-me-the-money skepticism that is taking hold of the market.

Stocks' fifth loss in six weeks nudges the indexes closer to their Nov. 20 lows, setting up a much-anticipated re-test of that tenuous threshold. Last week's retreat was widely blamed on the lack of details in Treasury Secretary Tim Geithner's proposal for ridding banks of bad assets — even though that smacks of an excuse to sell, and overlooks the need to preserve flexibility and avoid his predecessor's market-rattling mistake of deviating from articulated plans.

The Dow Jones Industrial Average effectively gave up its gains from the prior week and fell 430 points, or 5.2%, to 7850. It is now less than 4% above the Nov. 20 low. Banks' deteriorating assets continue to haunt investors, even as the industry's impact on the price-weighted Dow shrivels: With Citigroup (C) and Bank of America (BAC) in the single digits, a trip to zero would shave only 72 points from the Dow.

The Standard & Poor's 500 fell 42, or 4.8%, to 827 on the week. The Nasdaq Composite fell 57, or 3.6%, to 1534, while the Russell 2000 index gave up 22, or 4.8%, to 448.

Last week's percentage decline was the biggest since the mid-November selloff jut before this latest bounce, but whether stocks will snap back once again is a big question. For now, the market remains susceptible to policy-inspired rallies, followed by buyers' remorse when government huffing and puffing doesn't scare up a quick payoff.

"In some ways, what the government says or does is becoming less important, since the market wants to see proof that stimulus is working and the economy is bottoming," says one chief investment strategist. There were glimmers of hope: January retail sales crept up 1%, the best showing in more than a year, but weekly jobless claims also continued to climb. And the specter of decimated Wall Street buying power sent Saks (SKS), whose New York flagship store drives 20% of sales, down 28% last week to an all-time low.

DON'T LOOK NOW, BUT DOES TECHNOLOGY STOCKS' stealth gain indicate the kind of economic recovery the market is hoping for? There are many reasons why the PowerShares QQQ (QQQQ), an exchange-traded fund that tracks the Nasdaq 100, is up 19% since the November lows, compared with just 3% for the Dow Diamonds (DIA). The Nasdaq 100 is blessedly devoid of banks. It is furthest from the housing and debt ills roiling the market. And companies have leaner inventories and cleaner books today than in the past. Big tech has also morphed into the market's consummate chameleon, capable of telegraphing both growth and stability to opposite fan bases.

In pricing power, technology boasts net-income margins second only to energy, says a managing director at a Wall Street private-wealth group. Earnings have held up, with roughly two-thirds of S&P tech stocks beating lowered estimates. Tech also has the lowest ratio of long-term debt to capital and healthier cash stashes. As a result, big tech companies have less urgent need to turn to the cringing credit market. When they do, debt investors have been accommodating, as Cisco Systems (CSCO) found when it raised $4 billion recently (Source: Barrons On-Line).