An unexplained odor blanketed New York City at the beginning of last week, but stocks finished the week higher as investors breathed in a whiff of solid corporate earnings and tech strength.

For most of last week, stocks followed a pattern of overcoming early declines to finish higher in afternoon trading. After recovering from early losses, stocks closed higher on Monday, amid enthusiasm over dovish Fed chatter and merger activity. On Tuesday, sliding oil prices dragged down energy shares, but otherwise the market closed little changed.

After another early-morning fall on Wednesday, the major indexes showed modest gains from strong start to earnings season, lower oil prices, and higher tech stocks. Tech strength and oil weakness again defined market action on Thursday, with the Dow reaching a record close.

Higher oil prices and strong December retail sales figures pushed the market up broadly on Friday, with the Dow finishing at another new high.

Economic data scheduled for release this week includes the Producer Price Index, industrial production, the housing market index, and the Beige Book on Wednesday; the Consumer Price Index, housing starts, leading indicators, and the Philly Fed Survey on Thursday; and preliminary January consumer sentiment on Friday.

Corporations releasing earnings include TD AMERITRADE, Intel, US Bancorp, and Wells Fargo today; Apple, JPMorgan Chase, Lam Research, Lennar, Logitech, Sony Ericsson, Southwest Airlines, State Street, and Washington Mutual on Wednesday; Continental Airlines, Harley-Davidson, Merrill Lynch, Novartis, Bank of New York, UnitedHealth, and Xilinx on Thursday; and Citigroup, KeyCorp, Motorola, Republic Bank, Schlumberger, SunTrust, and Wilmington Trust on Friday.

Stay market-tuned and Foolish!

Capital Markets Summary

U.S. Equities

1/12/07 Close

Weekly Change (%)

YTD Change (%)

Dow

12,566.08

1.4

0.8

Nasdaq

2,502.82

2.8

3.6

S&P

1,430.73

1.5

0.9



Commodities

Price ($)

Weekly Change (%)

Crude oil

52.88

-6.06

Gold

628.00

3.19



Foolish Quiz
1. The Nasdaq's percentage gain last week was the largest in about:
(a) six days
(b) six weeks
(c) six months
(d) six years

2. True or false: Stocks recorded their best daily performance so far this year on Thursday.

3. True or false. Alcoa (NYSE:AA) got earnings season off to a sparkling start.

4. True or false: Genentech (NASDAQ:DNA) engineered bionic earnings.

5. True or false: Shares of Cablevision (NYSE:CVC) gained after the Dolan family increased their private takeover bid on Friday.

6. True or false: Cisco (NASDAQ:CSCO) can't wait to have one of Apple's (NASDAQ:AAPL) new iPhones.

7. What kind of effect did falling oil prices have on the market: chilling or warming?

8. True or false: Stem-cell stocks experienced steady growth last week.

9. What kind of forecast did the Dow's first five trading days of the year indicate: bullish or bearish?

10. True or false: New York continues to raise a stink over former Big Board Chairman Dick Grasso's actions.

Answers
1. (c). The Nasdaq posted its best weekly percentage gain since mid-September, while also hitting a six-year high as investors embraced the tech sector.

2. True. Besides the Dow's gain of more than 72 points to reach a new closing high of 12, 514.98, the broader market rallied with the S&P 500, which moved up close to nine points, and the Nasdaq charged ahead by more than 25 points to a six-year closing high of 2,484.85.

3. True. Alcoa reported after the closing bell on Tuesday and revealed a stronger-than-expected 60% increase in fourth-quarter profits due to higher prices and demand. Shares rallied 6% in the next trading session.

4. True. Following Wednesday's closing bell, Genentech reported a 75% jump in fourth-quarter profits due to strong sales for several drugs. Shares rose 4.4% the next day.

5. False. Shares of Cablevision fell 4.1% following a $3 per-share increase in the Dolan family's takeover bid, which values the company at $8.9 billion. Stay tuned while the board evaluates the Dolans' "final offer," still believed to be too low to accept.

6. False. Well, at least not with that name. Shares of Apple rallied 13.5% for two days after the company unveiled a new combined phone and iPod gizmo at the Macworld expo on Tuesday. The party fizzled on Thursday, with shares losing 1.2%, when Cisco sued Apple for trademark infringement, claiming that it is the true owner of the "iPhone" moniker. On Friday, Apple's shares dropped a further 1.2% amid reports that federal prosecutors are investigating a backdated stock options grant to CEO Steve Jobs.

7. Chilling. Most directly affected, the Amex Oil Sector and the Philadelphia Oil Service Sector Index initially fell 1.7% and 1.3%, respectively, on Wednesday, and fell further on Thursday before recovering on Friday as oil prices gained. For the week, both indexes slipped 0.5%. On a broader scale, investors worried that falling commodity prices signaled the possibility of an economic slowdown, instead of focusing on potential benefits arising from consumers' fattened wallets.

8. False. Although stem-cell stocks rallied on Monday on evidence that stem cells had been found in amniotic fluid (fueling hopes that this finding could help avoid the controversial political debate), most finished the week weaker after the House of Representatives on Friday passed a bill expanding funding of stem-cell research without enough votes to override a likely veto from President Bush. Companies such as Aastrom Biosciences, StemCells, and Geron felt the pain.

9. Bearish. The first five trading days of the year ended on Tuesday with the Dow down 0.4%. Market stats indicate that the Dow has pulled out annual gains only 49% of the time when the index is in the red for that period.

10. True. The Big Apple is claiming that Grasso owes $1.8 million in unpaid city income taxes. For his part, Grasso claims that he actually was not a city resident during the period in question. Not that we're taking sides, but when a guy has five homes and 14 cars, while it might not be hard to see how he spent his money, it might be a little more difficult to remember where he spent his time.

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!

Intel and UnitedHealth are Motley Fool Inside Value picks. US Bancorp, JPMorgan, and Washington Mutual are Income Investor picks. UnitedHealth is also recommended in Stock Advisor. Whatever your investing style, the Fool has a newsletter for you.

Fool contributor S.J. Caplan, a former vice president and assistant general counsel of Goldman Sachs and a former vice president and derivative finance specialist at Lehman Brothers, does not own shares of the companies mentioned in this article. She is an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy.