Busy investment bankers and lawyers sacrificed their weekends to deliver a flurry of merger activity on Monday. But gains remained mild for the major indices as rising crude oil prices provided a powerful counterweight to the M&A bonanza.

Still, the market's uptrend of the past three weeks continued. On Monday, the

Dow Jones Industrial Average

rose 38.94 points, or 0.38%, to 10,384.39. The

S&P 500

added 7.49 points, or 0.64%, to 1178.84, and the

Nasdaq Composite

gained 12.32 points, or 0.63%, to 1979.67.

Merger news gave the market an initial jump start.

Duke Energy

(DUK) - Get Report

said that it would buy fellow utility

Cinergy

( CIN) for about $9.1 billion. Elsewhere,

E*Trade

(ET) - Get Report

formally said it is courting

Ameritrade

(AMTD) - Get Report

, which jumped more than 18%. Reports peg the offer at $5.5 billion.

And merger fever came back to

Qwest

(Q)

, which is reportedly trying to spur the shareholders of

MCI

( MCIP) to vote down

Verizon's

(VZ) - Get Report

bid. Another report said that merger talks between

US Airways

(UAIRQ.OB)

and

America West

( AWA)have picked up.

Trading volumes were very light Monday, with 1.4 billion shares trading on the

NYSE

and 1.5 billion on the Nasdaq. Advancing issues outpaced declining ones 11 to 5 on the NYSE and 19 to 11 on the tech-heavy index.

Rising crude prices, one of the main culprits behind slower growth in the first quarter, may have been one reason for the hesitation among some equity traders. Crude oil for June delivery added $1.09 to $52.05 in Nymex trading, amid OPEC chatter and after Friday's bullish employment report eased concerns of a U.S. slowdown.

Gunning for Stocks

The major indices have trended higher over the past three weeks and this, together with Friday's strong employment report, encouraged some of Wall Street's big guns to call for more equity allocation.

TheStreet Recommends

Mary Ann Bartels, Merrill Lynch's global equity trading strategist, says that the recent correction in the market is now completed and that the indices will test their previous highs of the year.

According to Bartel's models, the consumer discretionary sector flashed oversold readings last week, making it a good candidate for any short-term rally. She recommends stocks such as

Coach

(COH)

,

Gap

(GPS) - Get Report

, and

J.C. Penney

(JCP) - Get Report

, which have recently seen their earnings estimates revised upwards. But Bartel does give a time limit on her call about the consumer discretionary sector. "This sector is not exhibiting leadership and we expect this rally to be temporary," she wrote.

Below the surface, the April employment report has failed to reassure investors over the profit trends for the second half of this year. After initially cheering the data on Friday, investors remained unconvinced that this year's growth is enough to spur a profit bonanza yet is still strong enough to justify the

Federal Reserve's

inflation worries and rate-tightening schedule. The indices barely finished in positive territory on Friday, and the S&P 500 nudged lower.

The market clearly expects the Fed will continue to raise rates for the foreseeable future. Fed funds future peg the key borrowing rate at 3.75% by year-end, which would imply another three quarter-point rate hikes spread out over the Fed's five remaining rate-setting meetings this year.

And narrowing spreads between short- and longer-term Treasury maturities -- aka "the yield curve" -- also point to decelerating growth. On Monday, the yield of the 10-year Treasury bond rose to 4.28% and two-year note's yield edged up to 3.75%. On Friday, the price of the two-year note fell sharply while its yield surged 17 basis points, its biggest gain in more than a year.

It's hard to imagine businesses boosting their capital spending in that environment, especially as the

General Motors

(GM) - Get Report

and

Ford

(F) - Get Report

credit debacles are making credit more expensive for everybody.

Show Me the Money

As shareholders -- rightly or not -- fret about the economy, more and more are seeking guaranteed returns. And more and more companies, flush with cash, appear willing to give it to them in the form of dividends, according to the folks at PNC Advisors.

Although they're not the first to make the observation, PNC's market strategists have devoted their entire investment outlook report for May to what they call "the dividend revolution."

Year-on-year, earnings growth has slowed to 11% during the first quarter while dividends have surged 17%, marking the first time that dividends outpaced earnings since the beginning of the post-2002 uptrend.

And after closely tracking the S&P 500's performance since the beginning of the year, the

iShares Dow Jones Select Dividend Index

(DVY) - Get Report

has rebounded more convincingly from its April lows than the broad market average. The dividend-based ETF has risen 4.6% since its April 15 low, while the S&P has gained 3.6% since touching its low on April 20.

Jeffrey Kleintop, chief investment strategist at PNC Advisors, says that companies already offering dividends will likely boost them while more will join this year. Why? As stock options-expensing becomes more expensive, more companies are offering shares to compensate management and employees.

One of the sectors that could benefit the most is technology, where companies have heavily relied on stock options. But where options used to make up for lack of cash flows, a lot of companies have improved their balance sheets. "Software is one of the best sectors

most prone to boost dividends, where companies are full of cash and little debt," Kleintop says.

And as mentioned by

TheStreet.com's

Nat Worden, a substantial dividend also might be one of the factors still supporting GM shares, which sank last week after Standard & Poor's downgraded the automaker's credit rating to junk. GM was actually the biggest gainer on the Dow on Monday, gaining 1.85%; the automaker said it would pay its regular 50-cent quarterly dividend on June 10 to holders of record May 19.

To view Aaron Task's video update on today's market, click here.

In keeping with TSC's editorial policy, Godt doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send

your feedback.