As our nation's best spellers strutted their stuff last week in national competition, Wall Street could only spell C-O-N-F-U-S-I-O-N.

After the long weekend, stocks took a pounding Tuesday, caused by jitters over inflation, consumer confidence, and possibly the prospects of a new Treasury Secretary. The Dow sank over 184 points, while the Nasdaq slipped 2.1%. Volatile trading continued Wednesday, but equities regained their composure to end the month's final trading session up strongly. Despite the release of last month's Fed policy minutes, which indicated a likelihood of a further rate hike at their meeting later this month, month-end buying boosted the major indices. Advancing to the next round on Thursday, the ultimate prize of a fit economy appeared in sight. Stocks continued to rise on the strength of several economic reports showing weaker inflationary pressures and vigorous consumer spending.

Then came Friday's critical test: May's employment figures. The report revealed a much softer employment market than anticipated, with over 100,000 fewer jobs added than projected. While some market participants lauded the data as pointing toward a pause in rate hikes by the Federal Reserve, others fretted over the implications of a slowing economy. This perplexity stumped the major indices, which closed the session narrowly mixed, and the week closed without crowning a winner in the contest concerning the economy's condition.

This week's challenges in an otherwise sparse economic calendar include the ISM non-manufacturing survey for May, due out today, and April's trade data, to be released on Friday.

Corporations announcing earnings include Bob Evans today; Nortel on Tuesday; H&R Block and Vail Resorts on Wednesday; National Semiconductor, Neiman Marcus, FuelCell Energy, and Smithfield on Thursday; followed by Signet Group on Friday.

Stay market-tuned and Foolish!

Capital Markets Summary:

U.S. Equities:

6-2-06 Close Weekly Change
(%)
YTD Change
(%)
Dow 11,247.87 (0.3) 4.9
Nasdaq 2,219.41 0.4 0.6
S&P 1,288.22 0.6 3.2

Commodities:

Price
($)

Weekly Change
(%)
Crude Oil 72.75 2.03
Gold 643 (2.58)


Foolish Quiz:

1. This major index turned in May's worst performance:

__ (a). Dow

__ (b). Nasdaq

__ (c). S&P 500

2. True or False: Retail stocks benefited strongly from Friday's weak employment data.

3. Companies scoring top marks for earnings last week included:

__ (a).Costco (NASDAQ:COST)

__ (b). Freddie Mac (NYSE:FRE)

__ (c). Heinz (NYSE:HNZ)

__ (d). Tiffany (NYSE:TIF)

4. True or False: Deutsche Borse cleared the way for a merger between NYSE Group and Euronext.

5. A proposal to take energy provider Kinder Morgan private could:

__ (a). result in one of the largest LBOs ever.

__ (b). result in the largest management-led buyout ever.

__ (c). encourage a rival bidder.

__ (d). all of the above.

6. True or False: Shares of Goldman Sachs rose after President Bush tapped CEO Hank Paulson to replace Treasury Secretary John Snow.

7. Retailers reporting May gains included:

__ (a). Aeropostale

__ (b). Gymboree

__ (c). J.C. Penney

__ (d). Wal-Mart

8. True or False: June has historically been a losing month for stocks.

9. Last month's auto data showed these companies gaining:

__ (a). Ford

__ (b). General Motors

__ (c). Honda

__ (d). Toyota

10. True or False: If investing in IPOs, you'd be better off sticking with companies whose names you can pronounce.

Answers:
1. (b). The Nasdaq emerged from a melancholy May badly bruised, as techs struggled during the month and the index sank 5.5%. The Dow declined 1.5% and the S&P 500 lost 2.7%.

2. False. The weak employment data translated to declines in consumer retail, as companies such as Family Dollar Stores dropped 2.7% and Sears Holdings shed 1.3%. Fewer jobs generally mean fewer sales at the cash register.

3. (b). Blue-box jeweler Tiffany unwrapped first-quarter earnings growth of 8% on Wednesday, lifting its shares 5.2%. On the same day, big-box retailer Costco posted a 12% rise in its third-quarter profit on Wednesday, shy of Wall Street expectations, sending its shares down 1.2%. Freddie Mac dropped 2.5% the same day after it announced a 27% decline in net income for 2005 because of legal settlements, accounting changes, and costs relating to Hurricane Katrina. Tasty news from Heinz appeared stuck in the bottle as the company, under pressure from billionaire investor Nelson Peltz, reported Thursday that its fourth-quarter profit fell 19% and that it plans to embark on a job-reduction and plant-closing plan. Shares of the food manufacturer remained flat. (See Costco's Patience Pays and A Sale at Tiffany.?!?!).

4. False. While the Big Board and Euronext announced in Paris on Friday their $10 billion agreement to create the first trans-Atlantic linkage of stocks and derivatives, the German exchange operator isn't out of the picture yet. Deutsche Borse is still trying to jettison the deal and woo Euronext shareholders even though its chairman has declared a commitment to the NYSE. The deal remains subject to shareholder and regulatory approvals. Shares of NYSE Group gained 5.1% for the week. (See NYSE and Euronext: Dare We Dream?)

5. (d). The $13.5 billion proposal, which would require shareholder approval, could be all those things. Announced last Monday by Kinder's top management, the offer includes a $100 per-share purchase, representing an 18.5% premium over the stock's previous closing price. Shares ended the week 19.8% higher. (See The Private Side of Kinder Morgan.)

6. False. Shares of the brokerage, caught up in Tuesday's down market, were snowed under 2% following the nomination of Paulson to replace the outgoing Treasury Secretary. On Friday, in a widely anticipated move, Goldman named President Lloyd Blankfein as chairman and CEO, effective upon Paulson's confirmation. Shares closed up 0.8% for the week.

7. (b), (c), and (d). Same-store sales data for May revealed strength in department stores and retailers catering to young children, as other sub-sectors were mixed. Sales at J.C. Penney rose 11.1% and Gymboree enjoyed a 24% growth spurt, while Wal-Mart reported a 2.3% gain and sales at Aeropostale declined 1.1%

8. False. According to the Stock Trader's Almanac, the S&P 500 has gained an average of 0.8% in June since 1950.

9. (c) and (d). Once again, Japanese automakers drove past American counterparts, with Toyota reporting a 12.3% (adjusting for the difference in days for the month of May 2006 from May 2005) rise in monthly sales to a record monthly total of 235,708 vehicles sold. Honda tailgated with a 16.6% increase. In reverse gear, sales at Ford dropped 1.9%, while those at General Motors slowed down 12%.

10. True. The Wall Street Journal reported that Princeton University researchers have found that stocks with easy-to-pronounce monikers or ticker symbols generally fare better than those without such traits in the first few days of trading. Does FOOL sound good to anyone?

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!

Costco and Family Dollar are Motley Fool Stock Advisor picks. Heinz is a Motley Fool Income Investor selection. Wal-Mart is a Motley Fool Inside Value pick. Take the newsletter that best fits your investing style for a 30-day free spin.

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 Brothers, owns shares of Goldman Sachs and NYSE Group. She serves as an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy.