While Boeing launched its new Dreamliner last week, the market took investors on their own flights of fancy.

The week opened with stocks moving modestly higher on Monday, as investors awaited the start of the second-quarter reporting season. Worries about large downgrades in subprime mortgage bonds, profit warnings, and a falling dollar sent stocks lower on Tuesday. The Dow lost more than 148 points, or 1.1%, while the S&P 500 fell 1.4%, and the Nasdaq dropped 1.2%.

Prices soared over the next three days. Bargain hunters stepped in to recover some lost ground on Wednesday, aided by more deal news and lower oil prices. Stocks gained broadly, with the Dow rising 76 points. Then, on Thursday, a more powerful rally ensued.

Fueled by strong monthly chain-store sales figures and a blockbuster deal in the metals sector, blue chips skyrocketed 284 points. Both the Dow and the S&P set new closing highs, while the Nasdaq climbed 50 points and reached a multiyear high. Early-morning turbulence on Friday gave way to clear skies later, as strong consumer confidence data offset weak retail sales figures and rising import prices. Despite modest gains, both the Dow and the S&P flew higher into the record books.

Economic data scheduled for release includes the producer price index and industrial production tomorrow, the consumer price index and housing starts on Wednesday, and the Philly Fed index, leading economic indicators, and the June Fed policy meeting minutes on Thursday. Fed Chief Ben Bernanke will also give his semi-annual testimony on monetary policy before Congress on Wednesday and Thursday.

Earning season kicks into high gear this week. Corporations posting earnings include Mattel today, Coca-Cola, Johnson & Johnson, and Yahoo! tomorrow, Altria, eBay, and IBM on Wednesday, and Bank of America, Google, and Nasdaq on Thursday, followed by Citigroup, Caterpillar, and Schlumberger on Friday.

Stay market-tuned and Foolish!

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Foolish quiz
1. The Dow's weekly gain was the largest in:
(a) three weeks
(b) three months
(c) three years

2. True or false: The Dreamliner flew Boeing (NYSE:BA) to a new 52-week high.

3. Which event put more of a shine on shares of Alcoa (NYSE:AA): its earnings, or its rejection by Alcan (NYSE:AL)?

4. True or false: General Electric (NYSE:GE) powered higher on Friday, thanks to interest from Warren Buffett.

5. True or false: Genentech (NYSE:DNA) posted healthy earnings.

6. True or false: Shareholders of the Chicago Board of Trade approved the buyout plan of the Chicago Merc (NYSE:CME).

7. Which company is getting energized: Paychex or Playtex?

8. Which company issued disappointing earnings outlooks?
(a) D.R. Horton
(b) Home Depot
(c) Lexmark
(d) Sears
(e) all of the above

9. Which sector performed better last week: financials or retail?

10. Which company's CEO likes to chat online: Whole Foods or Wild Oats?

1. (b). The Dow's weekly advance was the largest in three months, as takeovers and stock buybacks helped push it and the S&P 500 to their third consecutive set of weekly gains.

2. True. Boeing shares hit $101.32 on Monday, just $0.13 shy of the company's 52-week high, when the company unveiled its new 787 plane. On Thursday, Boeing announced that its commercial plane orders remained on par with last year's record-breaking results, and that it had 677 firm orders for the Dreamliner, with an additional 20 expected. The next day, shares set a new 52-week high of $102.43, having flown 3% higher for the week.

3. Rejection. Sometimes it pays to be a loser. After Monday's bell, Alcoa kicked off earnings season by posting a 4% drop in its second-quarter profit. Earnings were hurt by outages at two plants, although revenue rose 3.8%. Shares slipped 1.7% on Tuesday, but rose 13.7% for the week because of later news that Alcan rejected Alcoa's offer in favor of rival suitor Rio Tinto. Speculation grew that Alcoa may now become an attractive takeover target, and the company also announced that it would restart its stock repurchase plan.

4. False. Shares of GE hit a new 52-week high of $40.17, rising 1.3% on Friday. The increase followed the company's report of a 9.6% boost in second-quarter profit, a doubling of its stock buyback program, and confirmation that it is selling WMC Mortgage, its subprime mortgage unit. There's no word that Mr. Buffett took notice, though. Instead, rumors circulated that the Oracle of Omaha may purchase a stake in homebuilder Hovnanian, whose shares jumped 12%.

5. True. Late Wednesday, Genentech posted a 41% increase in second-quarter profit, helped by strong sales of its cancer drug Avastin and eye-disease drug Lucentis. Shares slipped 0.9% the next day, however, amid concerns of slowing growth in the near term.

6. True. CBOT shareholders approved the $11.9 billion deal with the CME, which will create the world's biggest exchange. The pact ended CME's four-month bidding contest with Intercontinental Exchange. The new firm will be called CME Group, a Chicago Board of Trade company.

7. Playtex. Playtex is getting a charge out of its $1.16 billion purchase by Energizer, announced late Thursday and expected to close this fall. Shares of Playtex surged 15.8% on Friday, while those of Energizer gained 0.9%. Meanwhile, shares of Paychex rose 4.8% on Friday, the third-steepest advance in the S&P 500, after it raised its quarterly dividend and announced plans to repurchase up to $1 billion of its stock.

8. (e). These guys helped put the market on a shaky footing to start last week. On Monday, Lexmark lowered its second-quarter outlook. The next day, D.R. Horton forecast a loss for the third quarter, Home Depot lowered its earnings target for the second half, and Sears warned of disappointing second-quarter results.

9. Financials. The NYSE Financial Index advanced 0.6%, while the S&P Retail Index remained essentially flat. Both sectors recovered after enduring pressure early in the week as the subprime fallout flattened financials and retail stocks bore the brunt of negative outlooks. Retail remained holding a mixed bag of economic news as chain store sales came in stronger than expected on Thursday, but retail sales dropped 0.9% across the board in June as consumers kept their wallets shut.

10. Whole Foods. For eight years ending last August, Whole Foods co-founder and CEO John Mackey used the anagram of his wife's name, Deborah, as his identity on a Yahoo! message board. As "Rahodeb," Mackey posted messages bragging about his haircut and his company, and often bashing rival Wild Oats. The revelations came to light as the FTC seeks to block the Wild Oats takeover because of antitrust concerns. Although Whole Foods has stated that there's nothing illegal about Mackey's comments, since he only remarked on items of public knowledge, the SEC has now reportedly begun an informal inquiry into the matter. At the very least, Mr. Mackey appears guilty of disregarding that oft-lacking corporate executive trait: common sense.


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Coca-Cola, Intel, and Nasdaq are Motley Fool Inside Value picks. Yahoo!, eBay, and Whole Foods are Motley Fool Stock Advisor selections. Bank of America and Johnson & Johnson are Motley Fool Income Investor recommendations. 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.