What a Week: Fade to Green

"The tame core CPI data will temper but not erase the FOMC's 'predominant concern' about the risk of faster inflation at their meeting on June 27-28," writes Stuart Hoffman, chief economist at PNC. "I believe the next FOMC move will be to lower the funds rate but not until nine to 12 months from now when the ongoing stalemate between their 'predominate concern' about the risks of faster inflation vs. their lesser concern about subpar economic growth finally ends in 2008."

M&A Here to Stay

The Nasdaq's relative strength for the day -- and the week -- was spurred by chip stocks, which rallied despite disappointing guidance Tuesday from Texas Instruments (TXN Quote), followed by the Semiconductor Industry Association lowering its growth forecast midweek. Most notably, Intel (INTC Quote) rose 4.4% Friday after a Goldman Sachs upgrade, gaining 11% for the week.

Friday's gains were further fueled by merger activity involving Penn National Gaming (PENN Quote) and speculation of a possible bidding war for NYMEX (NMX Quote).

Germany's Deutsche Boerse, the NYSE Euronext(NYX Quote) and Chicago Mercantile Exchange (CME Quote) have held talks with NYMEX, Bloomberg reported. Meanwhile, CME separately sweetened its bid for the Chicago Board of Trade (BOT Quote), which has a competing bid from the IntercontinentalExchange (ICE Quote).

These deals and speculation of more to come belie recent fears that higher interest rates would choke off private-equity buyouts and corporate M&A. As detailed here, such fears overlooked the ample liquidity still circulating to do deals and the continued tight spreads between corporate and Treasury yields, which keep leverage buyouts attractive.