What a Week: Deal-Driven

M&A activity in the first quarter of 2007 is running 27% higher than 2006's first quarter, according to Thomson Financial. Deal activity amounted to $1.1 trillion, on pace to beat last year's record. Private equity firms announced $191.8 billion of deals in the first quarter of 2007, representing 17.4% of total M&A volume and showing a 47% rise on last year.

The dealmaking kept stocks in the black throughout the week. The strongest gains were made on Tuesday, when robust economic news trumped worries about the subprime mortgage and housing industries and weakening business spending. Waning tensions with Iran also helped cap oil prices. In turn, transportation-related stocks also finished strong on the week.

The Dow Jones Industrial Average ended the week up 1.7%. The blue-chip index is now up 0.8% for the year. The S&P 500 finished the week up 1.6% and is up 1.8% on the year. The Nasdaq Composite rose 2.1% on the week and is up 2.3% for 2007.

The Dow Jones Transportation Average gained 2.2% this week, as airline companies lifted off. Continental Airlines(CAL Quote) reported a jump in March traffic, sending its stock soaring 10% for the week. AMR(AMR Quote) rose 6%.

The utility sector made some new highs this week, suggesting to some that investors are transferring money out of financials and into utilities. The Dow Jones Utilities Index hit intraday highs this week and ended up 2% this week.