Stocks began their play (after the long holiday weekend) with modest gains. The session's choppy trading reflected strong consumer confidence, but also soft housing market figures, sluggish deal activity, and lower oil prices. A sell-off in Chinese equities initially fouled U.S. stocks on Wednesday, though they soon shrugged off the news and started to score. The later release of the most recent Fed minutes set the game up for a slam dunk by leaving the door open to a possible future rate cut, and both the S&P 500 and the Dow closed at new highs.

A much quieter session ensued on Thursday. While the S&P 500 edged upward to notch a fresh closing high, the Dow fell slightly as investors weighed a lowered reading of economic growth, merger news, and a strong business activity report from the Chicago area.

On Friday, equities continued to notch victories. The S&P 500 and Dow again reached new closing highs amid benign employment data, good corporate earnings, and deal speculation.

Both the economic and corporate earnings calendars will be light this week. Data scheduled for release includes factory orders today, the ISM non-manufacturing report tomorrow, productivity on Wednesday, retail sales on Thursday, and international trade on Friday.

Corporations posting earnings include Krispy Kreme today, Bob Evans tomorrow, SAIC on Wednesday, and Smithfield Foods and National Semiconductor on Thursday.

Stay market-tuned and Foolish!

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Foolish Quiz
1. True or false: Until last Wednesday, the Dow and S&P 500 had never both reached record closing levels on the same day.

2. True or false: Shares of Dow Jones (NYSE:DJ) reached their highest level in nearly six years on Friday, after the company agreed to be acquired.

3. True or false: The acquisition of A.G. Edwards (NYSE:AGE) by Wachovia (NYSE:WB) will create this country's largest retail brokerage.

4. True or false: The buy-out of Archstone-Smith (NYSE:ASN) will be the largest privatization ever of a multifamily REIT.

5. Dell (NASDAQ:DELL) announced the following:
(a) higher profits
(b) higher revenues
(c) job cuts
(d) all of the above

6. True or false: Williams-Sonoma cooked up a delicious quarterly profit and raised its forecast for this quarter.

7. Which discount retailer reported a bigger quarterly profit: Costco or Sears?

8. True or false: Upscale retailers Polo and Tiffany both rang up strong quarterly earnings.

9. True or false: Shareholders of Borders read a fairy tale earnings story.

10. Which sector scored larger gains last week: REITs or retailers?   

1. False. It's been done before. Prior to last Friday, when the two indices again recorded fresh closing highs, they had done so most recently on Dec. 31, 1999.

2. False. Shares of Dow Jones gained 14.8% on Friday to close at $61.29, its highest level since July 2001. The news powering the shares, however, was not an agreement to be acquired by News Corp. or anyone else at this time, but simply an agreement by the controlling Bancroft family to meet with Mr. Murdoch's company and discuss the bid.

3. False. The $6.8 billion acquisition of A.G. Edwards by Wachovia will provide the combined entity with a client asset base of $1.147 billion and rank as the second largest U.S. retail brokerage in terms of advisors (assuming the unlikely scenario that nobody will jump ship), behind Merrill Lynch and ahead of Citigroup. Following the announcement on Thursday, shares of Wachovia closed 0.7% lower and those of A.G. Edwards surged 14.3%.

4. True. The $22.2 billion buyout of Archstone-Smith by Tishman Speyer and Lehman Brothers announced on Tuesday represents the largest such REIT privatization yet. Shares of Archstone-Smith gained 11.2% on the news.

5. (b), (c). Late Thursday, Dell posted flat first-quarter earnings and 2.8% revenue growth from a year ago, while remaining silent on its outlook for the current quarter and announcing a 10% reduction in its workforce over the next year. For the week, shares rose 5%.

6. False. Williams-Sonoma served up a 21% drop in first-quarter profit and lowered its outlook for the current quarter, citing competition and higher raw materials costs as concerns.

7. Sears. Net income at Sears rose 20% on one-time gains, as U.S. store sales dropped and revenue fell 5%, citing higher energy costs and a slowing housing market. On the surface, big box retailer Costco fared worse, reporting a 4.9% decline in profit, brought on by a more stringent electronic return policy. Still, the company saw same-store sales growth domestically and abroad, plus increases in sales and membership fees.

8. True. High spenders helped high-end retailers ring up strong quarterly profits. Polo posted a 17% increase in fourth-quarter earnings, helped by a lower tax rate and wholesale purchases. Meanwhile, Tiffany unwrapped a 15% increase in first-quarter profit, due to sales growth in the U.S. and abroad, despite continued weakness in Japan.

9. False. Investors in Borders probably wished for a happier ending; the bookseller posted a near doubling of its quarterly loss, as promotional discounts didn't translate into any magic potion. Can fairy tales still come true? Management believes that continued progress on its turnaround plan will result in a profitable 2008.

10. REITS. Both sectors put in winning performances last week, but REITS scored higher on enthusiasm from the Archstone-Smith takeover and speculation over other possible targets. The BBG REIT Index jumped 6%, while the S&P Retail Index gained 2.6%.

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!

SAIC, Dell, and Borders are Motley Fool Inside Value picks. Dell and Costco are Motley Fool Stock Advisor selections. 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 is a 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.