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The market sputtered into negative territory today (Monday), with the S&P 500 closing at 1142 (-0.57%). Still, the index is well above the 50-day and 200-day moving averages.

There was no economic news of any consequence today, but M&A activity continued, with Southwest Airlines (LUV) agreeing to buy rival carrier AirTran Holdings (AAI); Unilever (UN) acquiring Alberto-Culver (ACV); and IBM acquiring privately-held Blade Network Technologies, after its purchase of Netezza (NZ) last week.

Last week’s rally. Last week, the S&P 500 climbed through heavy resistance to close at 1148 on Friday (+2.1% for the week). That rally was led by small-cap growth (+3.9%), but even the worst performer, large-cap value, was up +1.46%. As for sectors, Industrials led the way, up +3.35%, closely followed by Technology, up more than +2%. Financials trailed, but still gained +0.76%.

The rally was bolstered by M&A activity and increased dividends from corporate America, led by Microsoft (MSFT) which raised dividends by 23% over the previous quarter. Economic news had relatively little impact. FMOC was a non-event, with everything pretty much status quo. Initial jobless claims increased, which certainly wasn’t good news, but it was offset by strong housing data throughout the week — strong, at least, compared to the disastrous weeks of the past year. The dollar was down fairly sharply for the week against strong European currencies.

Looking forward. We’ll see a lot of economic reports this week. The main consumer confidence number comes out tomorrow, and the third estimate of the GDP for Quarter 2 is due Thursday, along with the weekly initial jobless claims. Friday is packed with reports, including personal income, construction spending, auto and truck sales, and the Michigan consumer sentiment index. That news-packed day should give us a good sense of whether or not the economy is continuing to creep forward, and perhaps the market will find a new catalyst.

Our forward-looking sector model is the most bullish on Industrials, Health Care and Technology, and least bullish on Energy, Materials and Consumer Services.

4 Stock Ideas for This Market

This week, I again used Sabrient’s Small Wonders preset search on MyStockFinder (http://MyStockFinder.com) to identify some interesting Small and Micro Cap stocks. I also upweighted Technicals and Insider Buying, and limited choices to the top-ranked sectors. Here are 4 stock ideas to consider (including two Chinese stocks):

China Valves Technology (OTC:CVVT) – Basic Industries
Chelsea Therapeutics (Nasdaq: CHTP) – Healthcare
Deer Consumer Products (Nasdaq: DEER) – Consumer Durables
AXT, Inc. (Nasdaq: AXTI) – Technology

Source: Seeking a New Catalyst for the Market, With 4 Quick Stock Ideas