What a Week: Green Apple

Excluding autos, retail sales in December rose 1%, double the consensus estimate of 0.5%. The December figure followed a surprising 1.1% gain in November. The trade deficit narrowed to $58.2 billion in November, from $58.2 billion in the prior month, and initial jobless claims plunged 26,000 to 299,000 claims in the month.

Credit Suisse's chief economist Neil Soss increased his fourth-quarter GDP estimate to 3% from 2.4% last week. GDP in the third quarter of 2006 grew at 2%. "The message from the December retail sales report resonates loud and clear: The housing slowdown and cratering in mortgage equity withdrawal did not cause consumer spending to roll over in 2006, contrary to the fears of many market commentators."

The bond market is facing the Goldilocks reality with some pain. Treasury bond yields rose throughout the week, leaving the 10-year note yielding 4.77%, up 12 basis points from last week.

The booming M&A and private equity industry also supported stocks this week. Bidders were upping their antes.

Rumors swirled about a competing private equity bidder for real estate investment trust Equity Office Properties(EOP Quote). The Dolan family increased its bid for Cablevision(CVC Quote), and US Airways(LCC Quote) increased its bid to take over Delta Air Lines(DALRQ.PK Quote).

Next week brings Fed Chairman Bernanke's testimony to the Senate Budget Committee and a heavy slate of economic data, including the producer and consumer price indices. Barring a sour batch of earnings reports, don't expect the bulls to loosen their grip on stocks -- the data are expected to be benign, and the Fed chairman is likely to stay on message: vigilant on inflation and data-dependent.