It was three cheers for the bulls last week. Just when we thought we had seen the end of the rally, the market came roaring back to make new highs. The Dow closed at a new high for the year and is up almost 50% from its lows. For the week ended Aug. 21:

  • Dow: Up 2% to 9,505.96
  • S&P 500: Up 2.2% to 1,026.13
  • Nasdaq: Up 1.8% to 2,020.9

Last week saw a bigger-than-forecast leap in existing home sales and positive manufacturing data for the first time in almost a year from the Philadelphia region. On the flip side, one in every eight homeowners is late on mortgage payments or facing foreclosure. Fed Chairman Ben Bernanke kept optimism alive, confirming brewing hopes that an economic recovery is indeed in sight.

Economy continues to weigh on companies
Target (NYSE:TGT) saw net income slip 6.4%, marking the retailer's eighth straight quarterly decline in profit. Despite the decline, earnings managed to beat expectations thanks to inventory management and cost-cutting. Revenues edged down 2.6%, while same-store sales -- a telling metric for retail -- fell 6.2%. Target said consumers are still cautious and traffic was light in the quarter.

Heinz (NYSE:HNZ) reported better-than-expected net income for the first quarter of fiscal 2010, helped by more people who are eating at home to shore up their finances, as well as price increases and strong demand from emerging markets. Though results were better than expected, the stronger dollar caused a 7% slide in earnings per share and a 4% drop in revenue.

Deere (NYSE:DE) posted better-than expected earnings, but issued a disappointing outlook. The world's largest maker of tractors said it would only break even in the current period, and that production would be slashed by nearly a third on account of lackluster demand for construction equipment and a decline in overseas orders for farm tractors.

Hewlett-Packard (NYSE:HPQ) saw profit tumble 19% in the second quarter, hampered by revenue declines across almost all its business segments. A decline in corporate spending and lower PC prices continued to weigh on HP for the quarter. Total revenue slipped 2%, marking the second straight quarter of falling revenue. The tech giant said the market was stabilizing, implying that perhaps we've seen the bottom.

Home Depot (NYSE:HD) said profit declined 7% in the second quarter, as sales slipped 9%. In particular, a decline in purchases of big-ticket items, the recession, and a weak housing market that hampered demand for remodeling projects dragged on sales. Though results slipped, Home Depot has managed to keep declines at bay, as it benefits from cost cuts and a strategy that centers on getting back to its core business, as well as upping its service and product selection to steal market share from rival Lowe's (NYSE:LOW).

In contrast, Lowe's clocked a 19% decline in profits, as the recession and unseasonably cold and wet weather in the Northeast -- a key market for Lowe's -- caused consumers to put off remodeling projects. The company also issued a weak forecast, stating it will taper expansion plans for North America.

Rio Tinto (NYSE:RTP) and TJ Maxx also reported results last week. Click the links to get a Foolish take on the news.

What's ahead
As earnings season winds down, it could be quiet this week. Volume is typically light in the last weeks of August. Investors will look to economic data for continued signs of a recovery. This week brings consumer confidence and sentiment reports, the S&P Case-Shiller home price index, durable goods orders, a second reading on second-quarter GDP, and personal income data.

Related Foolishness:

Jennifer Schonberger owns shares of Home Depot, but does not own shares of any of the other companies mentioned in this article. Home Depot and Lowe's are Motley Fool Inside Value recommendations. Heinz is a Motley Fool Income Investor pick. The Motley Fool has a disclosure policy.