Stocks have rallied sharply over the past few weeks. But just as good companies are kicked to the curb when the market sinks, plenty of bad companies get unjustly rewarded when the market bounces.

Look, we're still in the midst of a credit crunch. The number of newly unemployed people applying for jobless benefits recently reached a six-year high. The neverending housing crisis could actually be much worse than we think. We could be heading into a serious and prolonged economic slowdown.

Bottom line, there are plenty of reasons to think the stock market's recent rally is nothing more than a dead-cat bounce.

Right now, my trusty Motley Fool CAPS screen is coming up with a slew of companies whose stock prices have soared over the past several weeks. Yet these companies probably don't deserve the market's generosity, since they also have:

  • Negative three-year earnings growth rates.
  • One- or two-star ratings (out of five) from our CAPS community.

Here are some potential dead cats that might deserve to be sold:

Company

CAPS Rating

Recent Price

4-Week Stock Return

Average 3-Year Earnings Growth Rate

Home Depot (NYSE:HD)

**

$27.51

22.2%

(2.4%)

Masco (NYSE:MAS)

**

$18.14

23.8%

(33.6%)

Morgan Stanley (NYSE:MS)

**

$45.39

34.7%

(35.8%)

Sears Holdings (NASDAQ:SHLD)

**

$91.80

26.8%

(15.8%)

SunTrust Banks (NYSE:STI)

*

$46.26

43.2%

(9.2%)

Wachovia (NYSE:WB)

 **

$18.21

55.4%

(10.9%)

Zale (NYSE:ZLC)

*

$24.74

36%

(34.5%)

Source: Motley Fool CAPS, return from July 11 through Aug. 8, 2008.

Remember, since we launched CAPS in late 2006, one-star companies underperformed the S&P 500 by 11 percentage points, annualized. Two-star companies underperformed by five points.

Don't settle for these potential losers. Come hang out with us on Motley Fool CAPS, and let our 115,000-strong (and counting) CAPS community help you find some winners.

More Foolishness to digest:

Matthew Argersinger doesn't own shares in any of the companies mentioned. Masco is a Motley Fool Income Investor selection. Sears Holdings and Home Depot are Motley Fool Inside Value recommendations. Try any of our Foolish newsletters today, free for 30 days.The Fool has a delicious disclosure policy.