During his semiannual Congressional testimony last week, Federal Reserve Chief Ben Bernanke sent stocks a valentine when he noted signs of moderating inflation.

The market opened on Monday with stocks continuing their downward trend in lackluster trading. But on Tuesday, solid earnings and merger speculation fueled a triple-digit rise in the Dow as stocks gained broadly.

Bernanke then played Cupid to the market over the next two days. On Wednesday, stocks cheered his comforting comments regarding inflation and the economy, and the Dow set a new closing record. Thursday brought continued romance as he echoed his previous comments. The market, in response, shrugged off disappointing retail housing data. The major indices chugged higher, and the Dow set a fresh closing high of 12,765.01.

On Friday, worn out from their romantic run, stocks retreated in a narrowly mixed market amid weak housing and other economic data. Still, the Dow beat its previous record close.

Financial markets were closed on Monday for Presidents Day.

Economic data scheduled for release in this abbreviated week includes the State Street Investor Confidence Index, the consumer price index, leading indicators, and release of the January FOMC minutes on Wednesday.

Corporations reporting earnings include Hewlett-Packard, Home Depot, and Wal-Mart on Tuesday, Abercrombie & Fitch on Wednesday, Barrick Gold, J.C. Penney, and Toll Brothers on Thursday, and Clear Channel and Domino's on Friday.

Stay market-tuned and Foolish!

Capital markets summary

U.S. equities

2/17/07 Close

Weekly Change

YTD Change

Dow

12,767.57

1.5%

2.4%

Nasdaq

2,496.31

1.5%

3.4%

S&P

1,455.54

1.2%

2.6%



Commodities

Price

Weekly Change

Crude oil

$59.12

(1.29%)

Gold

$673.10

0.21%



Foolish quiz
1. True or false: The Dow enjoyed its best weekly run in three months.

2. What was so special about last Wednesday: (a) the Dow, the Dow Jones Utility Average, and the Dow Jones Transportation Average all hit record highs; (b) Microsoft (NASDAQ:MSFT) forecast a lovely outlook for Vista; (c) Valentine's Day?

3. Which reported stronger earnings: Campbell Soup (NYSE:CPB) or Goodyear Tire (NYSE:GT)?

4. Shares of which company rose on speculation of a buyout: 3M (NYSE:MMM) or Alcoa (NYSE:AA)?

5. Whom did Hershey kiss last week: its employees or its shareholders?

6. True or false: Nasdaq was brokenhearted over its rebuffed hookup with the London Stock Exchange.

7. True or false: Checking into the Four Seasons may no longer be a public affair.

8. On which did shoppers spend more money in January: (a) apparel, (b) electronics, (c) furniture, (d) motor vehicles.

9. True or false: James, the Westminster Kennel Club Dog Show champ, foretells a winning market.

10. True or false: Goldman Sachs sent a valentine to 1-800-Flowers.com.

Answers
1. True. The Dow's weekly gain, supported by declining inflationary fears and merger talk, was its best since last November.

2. (a), (c). The market sent a love note to Dow theorists on Valentine's Day, when each of the indices closed at record highs, for the first time in almost nine years. Two days later, Microsoft downplayed hyped forecasts for its new Vista operating system, and shares declined 2.5%.

3. Campbell Soup. The food company spooned out strong earnings on Friday, when it reported a 12% increase in its second-quarter profit caused by strong international revenues and the sale of a production facility. Campbell raised its forecast despite weak domestic sales, and shares heated up 6.9%. On the same day, shares of Goodyear Tire deflated by 0.9% after getting stuck in the mud with a disappointing earnings report. It turns out that Goodyear had a bad quarter. Its Q4 net loss widened because of a 12-week strike and cost increases in raw materials.

4. Alcoa. Shares of the aluminum producer rose by a sparkling 6.4% on Tuesday, because of reports that Rio Tinto and BHP Billiton, two Australian companies, were each working on separate $40 billion offers for Alcoa. No merger talk emerged for 3M. Instead, the company announced late Monday a $7 billion share buyback, its largest ever, to occur over the next two years. Shares gained 2.5% the next day.

5. Shareholders. Hershey kissed off employees by announcing on Thursday a three-year plan to cut 1,500 jobs, close several plants, and relocate some production to Mexico. The company anticipates savings of up to $190 million a year. Shares tasted sweeter by 1.6%.

6. True. Breakups are never easy, even if the relationship was only hypothetical. Shares of Nasdaq were depressed by 13.1% over the week after it announced the prior Saturday that its $5.3 billion hostile bid had failed to entice the London exchange. Not helping matters was its own weak forecast for the year, despite strong fourth-quarter earnings.

7. True. The luxury-hotel chain announced on Monday its agreement to accept a $3.4 billion buyout offer from a group involving its CEO and companies owned by Bill Gates and Saudi Price Alaweed bin Talal. The $82-per-share offer price represents a 28% premium over the closing price on Nov.3, just before the announcement of the bid. Shares fell 3% to close at $81.36.

8. (a), (c). Overall retail sales for last month came in essentially flat. Apparently, consumers still want themselves and their homes to look good -- apparel and department stores rose 1% on the strength of gift-card redemptions and sales of furniture, building materials, and garden equipment gaining 0.8%. Electronic and appliance stores buzzed in with a 1.2% decline, and motor vehicles and parts dealers reversed course by 1.3%.

9. True. The top dog at this year's show was James, an English springer spaniel. The Wall Street Journal reported that the S&P 500 typically gains 8.5% during years in which an English springer spaniel has been named Best in Show.

10. False. In quite an unromantic move, the investment bank downgraded the online florist from "neutral" to "sell" on Tuesday, the day before Valentine's Day. Shares of the online florist wilted by 8%.

Scoring

  • 8-10 correct: Foolishly impressive.
  • 6-7 correct: Almost Foolish.
  • 1-5 correct: OK, but just barely.
  • 0 correct: Really?! Keep reading the Fool, and watch your scores improve!

Home Depot, Wal-Mart, 3M, and Microsoft are Motley Fool Inside Value picks. Whatever your investing style, the Fool has a newsletter for you.

Fool contributor S.J. Caplan, a former vice president and assistant general counsel of Goldman Sachs and former vice president and derivative finance specialist at Lehman Brother, owns shares of Goldman Sachs. She serves as an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy.