The coming week is light on economic data, but will be big in determining whether Wall Street's bulls are back in charge.

Wall Street's wild ride last week was punctuated by high anxiety over rising interest rates, but the stock market swooned just one day before pulling off its best three-day point gain in 2-1/2 years. This week, investors are hoping for a resurgence of merger activity, but there will be wariness over the rate picture, housing data and an inching up in crude oil prices.

"The bulls have been right. Now they have to figure out how to keep it going. The whole name of the game is to keep interest rates moving sideways and get growth gently accelerating, off the first quarter bottom," said CNBC's Bob Pisani from his booth at the New York Stock Exchange.

The Dow gained 1.6% for the week, or 215 points, and is just 36 points away from its record close. Year to date, the Dow is up 9.4%. The S&P 500 gained 1.7%, and the Nasdaq rose 2% for the week, setting a new 6-1/4 year high. The S&P is up 8.1% for the year and is six points below its all-time record close. The Nasdaq is up 8.8% for the year. The 10-year Treasury closed out the week with a yield of 5.166% after a week in which it crossed 5.3%, its highest level in five years.

Told You So

Larry Kudlow could say that if he wanted to. His prediction last week was that the rate move in world bond markets was not all about inflation, and this last week's data proves him right. He said stocks would head toward a record if CPI was tame. Now he's saying, "We're on cruise control for (Dow) 14,000. Buy America, and for that matter, buy the world. That's how bullish I am."

"It really is Goldilocks. Tame inflation, modest growth," he said.

Merger Mystery

There's no question there's been a drought on the merger front as the Street recalibrates deal-making to account for a higher rate environment. A $6 billion private equity deal Friday for Penn National Gaming brought some relief. A big question is whether merger Monday will return this week.

"There's a little bit of a chill," says CNBC's merger expert David Faber. One major investment banker "told me this could be the seventh or eighth inning" for the current deal wave. "It's starting to slow down. Meanwhile at the same time, everybody's working on deals still."

Another scare for the deal world was a proposal from two senators Thursday to tax private equity partnerships at corporate rates when they go public. The bill was floated just weeks before Blackstone's public offering is due to price. Pisani says traders, who worried merger activity would slow as rates rose, are now more optimistic that merger activity can continue and only marginal deals will be derailed.

"The thing that's throwing a monkey wrench into it is the Senate bill," he said.

Housing Blues

Housing data dominates next week. The National Association of Home Builders survey is released Monday afternoon, and housing starts data for May and building permits are reported Tuesday. On Thursday, initial jobless claims, leading indicators for May and the Philadelphia Fed's survey are due.

"We're going to get home builder sentiment, which always moves the home builders stocks," said CNBC real estate correspondent Diana Olick. "Housing starts are kind of weird because sometimes they go up because they tend to be seasonal. They fell almost 9% last month. Down would be good for the housing market because builders are trying to clear inventory."

Fed speakers include San Francisco Fed President Janet Yellen, who speaks on the Asian financial crisis revisited Wednesday in San Francisco. New York Fed President Timothy Either gives the keynote speech at the Asian Financial sectors conference in San Francisco Wednesday.

On Friday, Federal Reserve Governor Frederic Mishkin speaks to the Econometric Society at Duke University.

Oil Drill

After a hiatus, stock traders are keeping a closer watch on an upward move in the oil market. Energy stocks rose 4.6% for the week, following a 5% move higher in crude oil. It closed out the week at $68 a barrel, up $3.24. Gasoline rose 6.4% on the week to $2.46 per gallon. Gasoline is up 41% on the year, while crude is up 11%.

"I think there's a pretty good shot that we're going to see $70 oil next week," said John Kilduff, senior vice president at Man Financial. There's just no shortage of geopolitical worries with Iran and the situation in Lebanon."

He said the oil market is also focused on rising rates and the global economy just as stock traders have been. "The stock market is able to shrug off these high interest rates," said Kilduff, who is a contributor to CNBC. "It's a sign the global economy is strong, and we're not going to get the demand break we had expected, and that will feed into higher prices."

Kilduff said for now his prediction that Memorial Day weekend could have been the peak for gasoline is holding, but it could change if the refining situation doesn't improve. "The refiners continue to struggle mightily in their effort to return to full operation. The import resource in terms of refined products is strained to the limit, so we're in just as bad shape as we were coming into the driving season. It doesn't look like there's any recovery as far as next week is going to show, so it looks like another up week for gasoline and crude oil, and in fact the whole complex. I thought for sure by now we'd be seeing refining capacity up above 90%," he said, noting it is at 89.1% currently.

Earnings Central

Wednesday is the big day for earnings reports: FedEx, Morgan Stanley and Circuit City turn in quarterly numbers that day.