Deal activity drove the broad market ahead again last week, and gave the green light to a continued run-up in the Dow.

Despite the news of a large buyout in the auto sectors, stocks turned in a mixed performance on Monday. The Dow rose more than 20 points, while the S&P 500 slipped more than two points, and the Nasdaq slid by more than 25 points. An early rally Tuesday morning, sparked by a tame consumer price index report, later stalled following soft housing market data and weak retail earnings. The Dow finished up more than 37 points, while the S&P 500 and Nasdaq closed in the red.

After a choppy start on Wednesday, the market revved its engine. Empowered by better-than-expected industrial-production and housing-start figures, as well as significant investor purchases, each of the three major indices rose, with the Dow rallying more than 103 points.

Stocks ran out of gas the next day, dipping slightly amid continuing deal activity and higher oil prices. On Friday, stocks hit the accelerator again, fueled by share buybacks and the latest round of dealmaking. The Dow rose more than 79 points to close at a new record, while the S&P 500 added 10 points, and the Nasdaq gained 19.

Housing data will be the driving economic force this week. Other data scheduled for release includes April housing starts and industrial production on Wednesday, durable goods and new home sales on Thursday, and existing home sales on Friday.

Corporations reporting earnings include Campbell Soup, Lowe's, and Saks today, BJ's, Medtronic, and Staples tomorrow, Target on Wednesday, and Barnes & Noble, Gap, and Toll Brothers on Thursday.

Stay market-tuned and Foolish!

Capital Markets Summary

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Foolish Quiz
1. Which indices posted their seventh consecutive week of gains?
(a) the Dow
(b) the Nasdaq
(c) the S&P 500

2. Which company benefited from well-known investor interest on Wednesday?
(a) Citigroup (NYSE:C)
(b) Johnson & Johnson (NYSE:JNJ)
(c) both

3. True or false: DaimlerChrysler (NYSE:DCX) is making money on the sale of its Chrysler division.

4. Shares of which automaker powered the Dow higher on Monday: Ford (NYSE:F) or General Motors (NYSE:GM)?

5. True or false: Home Depot reported a quarterly profit gain.

6. True or false: Wal-Mart reported a quarterly profit gain.

7. True or false: The controlling shareholders of Dow Jones approved its merger with Reuters.

8. True or false: Bausch & Lomb prefers to see things privately.

9. Which retailer posted stronger quarterly earnings: Federated or J.C. Penney?

10. Which sector accelerated more last week: autos or energy?

1. (a), (c). While the Nasdaq faltered again last week, both the Dow and S&P 500 rose for their seventh straight week, continuing their longest streaks since 2003.

2. (c). News on Wednesday that hedge fund manager Eddie Lampert had purchased an $800 million position in Citigroup, and that Warren Buffett had nearly doubled his stake in Johnson & Johnson, sent shares of those companies higher by 3.9% and 1.9%, respectively.

3. False. The sale of an 80% stake in its Chrysler division to Cerberus Capital Management for $7.4 billion comes at a hefty discount to the $36 billion Daimler paid for the business in 1998. Shares of DaimlerChrysler gained 2.6% on Monday's news, as investors cheered the sale and its ridding the company of pension liabilities.

4. GM. Automakers celebrated the Chrysler sale, and GM rallied 3.9% on Monday, contributing more than nine points to the Dow. Ford, while not a Dow component, gained even more, rising 4.1% while the company's founding family denied a report that it may sell a controlling stake.

5. False. On Tuesday, Home Depot posted a 30% drop in first-quarter profit, because of operational errors and a bleak outlook for the home-improvement sector. The weak housing market continues to drag that segment down. Shares fell 1.8%.

6. True. On Tuesday, Wal-Mart posted an 8.1% increase in first-quarter profit, but voiced concern about U.S. sales in the summer. Shares declined 0.5%.

7. False. The headlines proclaiming various potential media mergers can become confusing. In fact, Reuters and Thomson agreed on a deal valued at $17.2 billion, while Rupert Murdoch and News Corp. remain in an uphill battle to convince the controlling shareholders of Dow Jones, the Bancroft family, that acceptance of Murdoch's takeover bid is an appealing decision.

8. True. Bausch & Lomb announced on Wednesday that it had agreed to a $3.67 billion takeover deal from private equity firm Warburg Pincus, which would value the shares at $65. The company can still consider better offers over the next 50 calendar days. Shares traded higher for the rest of the week, closing at $67.10 on Friday.

9. J.C. Penney. The retailer reported a 13% hike in profit, helped by strength in women's apparel, accessories, and jewelry, and raised its fiscal-year outlook. Although Federated swung to a first-quarter profit from its prior year's loss, the company missed its forecast and lowered its outlook for this quarter. Perhaps it's all in the name and the ticker symbol; things may improve once the company begins operating under its new corporate name. The change to "Macy's Inc." was approved by shareholders on Friday, along with its iconic new ticker, "M."

10. Energy. The DJ U.S. Integrated Oil and Gas Index drove past the DJ U.S. Automobiles Index with a 3.5% gain last week, as gas prices hit record highs. Just what you wanted to hear prior to the summer driving season ...


  • 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!

Gap, Home Depot, and Wal-Mart are Motley Fool Inside Value picks. Gap is also a Motley Fool Stock Advisor selection. Johnson & Johnson is a Motley Fool Income Investor pick. Whatever your investing style, the Fool has a newsletter for you.

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