On the surface there are reasons to be bearish about the market next week, with a light economic calendar and a host of earnings reports due from the struggling retail sector.

But if the market's wild ride up the past two months has taught investors anything, it's to temper conventional wisdom and to take care not to miss out on the next multibillion dollar deal.

"The Dow continues to soar to new highs, and it's all stemming from M&A activity," says Peter Cardillo, chief market economist with Avalon Partners. "I suspect that, unless there is some extremely negative news, the party is going to extend."

Cardillo notes there are certainly negatives, like the rise in commodity prices and yield rates, but predicts the market will ignore them. The major indices'

action last week supported that hypothesis.

The

Dow Jones Industrial Average

, in choppy trading over the week, ended Friday at another record close of 13,556.53. The

S&P 500

inched toward a seven-year-old record of 1527.46, ending the week at 1522.75. Even the tech-heavy

Nasdaq

fought through losses Monday and Tuesday to finish the week down only fractionally.

Torrid dealmaking played no small part in boosting investor confidence, with billions of dollars being laid out for purchases.

On Friday,

Microsoft

(MSFT) - Get Report

agreed to pay $6 billion for digital marketing company

aQuantive

(AQNT)

, and it wasn't even the biggest deal of the week. Private equity giant Blackstone Group on Thursday agreed to pay $7.8 billion for

Alliance Data

(ADS) - Get Report

, the marketing services company.

That just topped the $7.4 billion Cerberus Capital Management agreed to pay for an 80% stake in

DaimlerChrysler's

(DCX)

U.S. unit.

By comparison to those monsters, yet another private equity deal, Warburg Pincus' $3.7 billion purchase of

Bausch & Lomb

(BOL)

seems downright quaint.

"There's no reason to believe that these deals are going to stop," said Paul Mendelsohn, chief investment strategist with Windham Financial. "The assumption underlying the market is that these deals will keep happening indefinitely, and that's been the floor underneath us."

Expected economic data next week is sparse. One of the key reports will be the Census Bureau's durable goods orders for April, due out Thursday. The report, which measures the value of orders and shipments of products expected to last three years or more, is of interest to investors as an indication of manufacturing output and capital spending.

"The durable goods number will be interesting," said Robert Pavlik, chief investment officer with Oaktree Asset Management. "We've seen some improvement in manufacturing indexes, so hopefully that can translate over into the durable goods number."

March durable goods rose unexpectedly quick at 3.4%, or 1.5% when excluding the transportation sector, where huge purchases of products like airplanes can skew the overall figure. Pavlik, however, notes that April's forecast is expected to be lower because of weak business spending. Analysts predict an overall 1% rise in April.

Also due out next week are two housing reports, the National Association of Realtors' measure of existing-home sales and the Census Bureau's tally of new-home sales. Investors may eye these figures carefully, being mindful of

Federal Reserve

Chairman Ben Bernanke's comments in Chicago on Thursday.

The Fed chief said he did not think the problems in subprime mortgage lending that have weighed on the housing market since late last year would affect the overall sector. He also cautioned Congress and state lawmakers, who are considering various forms of regulation of subprime lenders, that excessive controls could be a further drag on the housing sector.

Perhaps of more concern is the damage poor retail earnings could potentially do to the broader market. It was just a little more than a week ago when details of

dismal April same-store sales rattled the sector.

At the same time, the damage might already have been done. Last month's sales were expected to be poor, given that Easter fell in March this year, strengthening that month's numbers. Plus, Pavlik says, investors have already factored in weakness in retail and discounted it in the market.

Retail names set to report include stores like

Target

(TGT) - Get Report

and home-improvement giant

Lowe's

(LOW) - Get Report

, whose rival

Home Depot

(HD) - Get Report

missed analysts' first-quarter targets on Tuesday. Home Depot blamed the housing slump and erratic weather for the underwhelming performance.

Clothing retailers also report in abundance, including

Gap

(GPS) - Get Report

and

Limited

(LTD)

and other youth-oriented stores like

Abercrombie & Fitch

(ANF) - Get Report

and

Pacific Sunwear

(PSUN)

.

Toll Brothers

(TOL) - Get Report

, a major housing builder set to report earnings Thursday, could weigh on the market in companion with the housing data, if it signals more bad news.

But, then again, who was predicting more than $25.3 billion in M&A deals last week? Mendelsohn, like Pavlik and Cardillo, was bullish about the prospects for more.

"There is nothing on the horizon that we can forecast as being a negative catalyst," Mendelsohn said. "Given what's on the tape, short of something dramatic happening, there's nothing that will stop the market."