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THE WEEK AHEAD: Retail sales figures, earnings on deck

A dose of acceptable economic news might be enough to carry the market through some heavyweight earnings reports next week. With any luck, the Internet might ride this burst of optimism to some decent gains.

Thanks to a stable Producer Price Index report, the market rebounded some Friday and appears prepared for a likely one-quarter point bump in short-term interest rates.

In July the PPI rose by only 0.2 percent, smaller than most analysts had expected. The so-called "core" PPI, which excludes food and energy prices, was unchanged.

"The bond market reacted well and the equity markets responded in kind," said Doug Myers, vice president of equity trading at Wachovia Securities in Atlanta. "That's what we're hoping, that it will change the assumptions."

On Tuesday, the Labor Department will release the July Consumer Price Index figures.

For the week, the Dow Jones industrial average shot up 260 points to close at 10,973.65 while the Nasdaq tacked on 87 points to end at 2,635.14.

For a market that had already discounted for a slight interest-rate increase, the PPI numbers serve as a reminder that the economy is just fine and investors needn't panic.

"There is no inflation. The Fed won't be doing more than a 25-basis-point rate hike, and that's it for the year," said Arthur Hogan, chief market analyst at Jefferies & Co. "This (Dow) is going to 12,000 ... by the end of the year."

After two weeks of sporadic and insignificant earnings reports, Wall Street eagerly awaits quarterly results from some of the big names in technology.

Applied Materials Inc. (NYSE: AMAT), Dell Computer Corp. (Nasdaq: DELL), Hewlett-Packard Co. (NYSE: HWP) and Lycos Inc. (Nasdaq: LCOS) are due out next week.

Coming off a spectacular second quarter, Applied Materials looks to build on the momentum that's helped its stock triple in the past 10 months.

Last quarter, the world's largest chip-equipment maker raked in $141.6 million, or 36 cents a share, on sales of $1.1 billion. That was 9 cents better than First Call estimates.

With chip sales expected to grow by 20 to 25 percent this year, Applied appears to be in good shape through the end of the calendar year.

Its shares peaked at 19 15/16 in July after bottoming out 21 9/16 in October.

First Call consensus expects it to earn 53 cents a share in its third quarter and $1.61 a share in the fiscal year.

Dell's story is a bit different. Some analysts are worried that intense pricing pressure in the PC industry will derail any great explosion in its earnings or stock price.

First Call consensus is looking for a profit of 17 cents a share in its second quarter, up from the $434 million, or 16 cents a share, it earned in the first quarter on sales of $5.54 billion.

Despite those concerns, Dell's stock isn't exactly hurting.

Shortly before splitting 2-for-1 in March, Dell shares were hovering at $55 a share. On Friday, it closed up 1 3/16 to 41 7/16.

Twenty of the 33 analysts following Dell rate it either a "buy" or "strong buy."

Those same pricing pressures will test H-P's third-quarter results. However, most analysts are predicting solid sales and earnings growth this quarter.

First Call consensus expects it to make 80 cents a share in the quarter.

Finally, there's a chance that Lycos might post its first profit in history.

First Call consensus expects it to break even in its fourth quarter, but most analysts are looking for an upside surprise.

If all four of these leading technology companies can meet or beat estimates this time around, it could spark a sustained rally in the sector until the Fed's Aug. 24 policy meeting.

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