CNBC's Domm: The Week Ahead -- Mergers, Fake Mergers, Fed Speak and Earnings

Driven by soothing words from the Fed Chairman and the market's own mania for deals, stocks closed out last week on a high note.

This week, traders will be ready to pounce on any news that will reinforce the view that the Fed might cut rates this year after all. This is an idea gathering followers on Wall Street, and in fact comes in part from Fed Chairman Ben Bernanke's own indication before Congress last week that how the Fed has handled inflation seems to be working.

And deals, real, rumored, and even the most far-fetched will attract buyers in this market. The market is looking for every reason to pull some of that free cash in and use it to push stock prices higher.

A few Fed speakers, minutes from the Fed's last meeting, consumer inflation data and some big earnings from retailers and Hewlett Packard are among the big trading events in the shortened President's holiday week. Also worth noting this week are Mardi Gras, the Oscars and of course, spring training.

Despite a dull Friday, the Dow closed out its third week of gains, up 1.5%. The S&P 500 rose 1.2% and the Nasdaq finished out the week up 1.5%. The Wilshire 5000 was up 1.2%, ending the week at a 7-year high.

Fed And The Markets

One of the places traders will be looking next week is at the Fed's meeting minutes, to be released Wednesday afternoon. "The next step for the Fed is neutral, and we'll be looking to the minutes for signs of neutral support," says our Steve Liesman.

The stock market though is looking beyond the present and into the second half of the year, when traders see a possible rate cut and, of course, the move of money into stocks because of it. "The general feeling is that the next rate move, when it comes, will be a cut, and that's one of the reasons the market's been holding up so well." says our Bob Pisani, who spends his days on the floor of the New York Stock Exchange. "They've been anticipating that."

Pisani said many stock traders also saw a bright side in January's 10-year low in new home construction, reported Friday. (see Diana Olick's "The News on Housing Market Isn't All Bad")

"The street looked at this very differently than the economists. The street's position was we
are seeing a reduction in the production of new homes and that's what they want." Pisani said with sales holding up and construction down, "This means inventories are coming down."

Speaking of real estate, and therefore mortgages, we'll be paying attention to one problem area aggravated by the weak real estate market - the mine field in the sub-prime mortgage market.

Lenders have been talking about their problems, and now we'll hear from outgoing Fed Governor Susan Schmidt Bies Tuesday when she talks at Duke University on "Risk Management in Mortgage Markets." She will speak at 1030 a.m. ET and take questions from the audience. Our Steve Liesman, who has followed the issue in mortgage markets closely, will be there.

Stock traders may be watching too. For the bears on Wall Street, the sub-prime market could be the "canary in the coal mine," and they watch to see if it is spreading, says Pisani. Other Fed speakers on the circuit next week include San Francisco Fed President Janet Yellen, who speaks Wednesday on good government and on Friday on the economy. Fed Vice Chairman Donald Kohn speaks Wednesday in Washington.

Data due this week includes CPI and leading economic indicators, both released Wednesday.

Oil Check

Crude oil rose 2.4% last week, ending at $59.39 a barrel. Yep, it's still hanging under $60 a barrel despite the winter's chill. Inventory data is due Thursday at 1030 a.m. ET. On Tuesday morning, see Sharon Epperson's report in the 8 a.m. hour of Squawk Box on the increased interest in long term crude contracts and what you could learn about oil prices.

Merger Mania

Rumors and speculation flew fast and furiously in the markets last week, and some big names came into play (or fake play). including AMR and Alcoa . Stemming from press reports about interested suitors, both stocks went on a ride but nothing firm ever surfaced. Barron's this weekend keeps Alcoa rumors alive with a story that analyzes the price for Alcoa and the fact that possible suitors would have to pay far more than the $40 billion rumor price.

There is however something real going on with Chrysler, and that is DaimlerChrysler's decision to study its options for the money losing unit. Our Phil Lebeau will be covering the story and will continue to explain the possible scenarios that could develop for Chrysler as Daimler struggles with its future.

Earnings Central

This is it. The official bell-ringing, grand finale end to the quarterly earnings reporting season is upon us. This quarter promises to go out with a bang as a lot of companies report this week.
Wal-mart's report Tuesday is the unofficial, official end to the season that started in early January with Alcoa's quarterly report. Home Depot also reports Tuesday. Our Margaret Brennan will be covering the retailers for us.

Hewlett-Packard reports after the bell that day. Abercrombie and Fitch reports Wednesday. On Thursday, JC Penney, the Gap, Williams Cos,Keyspan and Newmont Mining all report. Clear Channel and Lowe'sreport Friday.

We could also see some newsworthy headlines Wednesday when several dozen companies attend the two day Bank of America Technology conference in New York.

Jet Blues

The delays and cancellations plaguing JetBlue since Wednesday are not over. JetBlue's luck is in a tailspin as flights continued to be cancelled over the weekend, raising the question of whether some analysts' early interpretation is wrong and this could be bigger than one unfortunate day's public relations mess.

Going Hollywood

Bill Griffeth is definitely going Hollywood this week when he takes us to the Oscars on Power Lunch Friday. Julia Boorstin will be with him, reporting on what we can expect.

We are not the only ones going to Hollywood. Illinois Sen. Barak Obama's having a big event with producer Steven Spielberg and other Hollywood celebs this coming Tuesday night. His Democratic rival for the White House, New York Sen. Hillary Clinton's already swung through LA once and she has another big event in a month. We'll tell you about that too.

China's markets are closed next week for New Year's celebrations as they usher in the Year of the Pig.