of this 14-month-old bull market, although buyers stepped in when the market fell to its lowest level of 2010 and helped stocks rebound Friday from a harrowing three-day slide.

Investors’ apprehension can be traced to escalating concerns about Europe’s belt-tightening, China’s credit constriction and the still-fresh memory of the synchronized market meltdown in 2008. An uptick in weekly U.S. jobless claims, a downtick in leading indicators and renewed tension in the credit market only exacerbated the worry that our recovery may have peaked.

The flight from risk pummeled all assets, sending crude oil down 7.2% last week. Not even gold was spared, as the precious metal retreated 4.2% to snap a four-week winning run. The exception was Treasuries, with safety seekers lowering the yield on 10-year Treasuries to 3.2%.

The Dow Jones Industrial Average absorbed its third loss in four weeks, closing down 427, or 4%, to 10,193. The steady, almost methodical selling drove the Standard & Poor’s 500 below its 200-day average, and the breach of that threshold brought more selling. Buyers surfaced as the benchmark approached its early-February low of 1057, and Friday’s 1.5% rebound cut last week’s loss to 48 points, or 4.2%. At 1088, the S&P 500 has pulled back 10.7% since April 23, meeting the technical definition of a correction. The Nasdaq Composite Index ended last week down 118, or 5%, to 2229, while the Russell 2000 gave up 45, or 6.4%, to 649.

Is the market overreacting? The stronger greenback makes American exports less competitive and eats into foreign profits that are translated back into dollars, but U.S. exports to Europe make up just 1.4% of our gross domestic product. Even if the euro were to fall to $1, the direct hit to our GDP is less than 0.5%, notes Société Générale. Meanwhile, the pressure on manufacturing and the inconvenient surge in the dollar exchange rate can only encourage our already benevolent central bank to hold interest rates down longer.

Before Friday’s rebound, only 6% of stocks in the S&P 500 were trading above their 50-day average — the most oversold level since March 2009. Deutsche Bank chief strategist Binky Chadha thinks the market “is pricing in too high a probability of the worst-case scenario” — assigning a 37%- 48% likelihood to a tail risk when it should be less than 10%.

Europe’s fiscal crisis also should prove less opaque than the subprime crisis that triggered the prior recession. Among other things, “Europe’s toxic assets haven’t been buried into blind pools of collateral debt obligations, so there should be less collateral risk in the current turmoil,” notes Ed Yardeni of Yardeni Research. Core inflation is already increasing at the slowest pace since the 1960s, and crude oil’s 19% decline in the past three weeks should give consumers another break.

Stocks are trading at roughly 13.5 times projected profits, below the median 16 multiple in the past decade. It may be damning praise, but “the U.S. economy, stock market and currency are all likely to remain the best of a dodgy breed,” Yardeni says (Source: Barrons Online).