THE WEEK AHEAD: Investors desperate for direction

Despite generally positive earnings reports and the expected half-point increase in interest rates, technology stocks continued to struggle this week. All signs point to sideways trading while investors wait for some bit of news to give the market some direction.

For the week, the Dow Jones industrial average gained 17 points to 10,626.85, while the Nasdaq shed 139 points to close at 3,390.61.

On Tuesday, the Fed delivered its anti-climatic news, raising the federal funds rate to 6.5 percent from 6 percent and the discount rate, or the rate for bank loans from the Fed, to 6 percent from 5.5 percent. In that announcement, the Fed also said it saw inflation risks ahead.

"This demonstrates the Fed is clearly and aggressively intensifying its fight to combat both excessive growth in the economy and inflationary pressures," said Philip Orlando, chief investment officer of Value Line's asset management division.

Most analysts concede that more interest-rate hikes loom in June and August, depending of course on unemployment figures, retail spending and labor costs.

Technology stocks were unable to maintain the momentum they generated in the wake of the interest-rate announcement. Simply put, investors are unwilling to pay the lofty premiums attached to some of the industry's biggest names.

Even better-than-expected sales and earnings from Hewlett Packard (NYSE: HWP) weren't enough to slow the selling bias.

HP reported second quarter earnings of 87 cents a share, a nickel better than First Call Corp. consensus estimates. The results exclude one-time items such as equity gains and charges.

"The pendulum is swinging in the right direction," Chairman and CEO Carly Fiorina said, during a conference call with analysts.

Revenue from continuing operations jumped 15 percent for the quarter ending April 30. Revenue from continuing operations was $12 billion, up from $10.5 billion a year ago. More importantly, HP put together two consecutive quarters of good growth.

Including one-time items, the company reported earnings of $899 million, or 79 cents a share. Charges included expenses related to HP's early retirement program, the spin-off of Agilent Technologies (NYSE: A) and equity gains.

Lycos (Nasdaq: LCOS) created quite a bit of news this week, announcing that it would merge with Terra Networks in a $12.5 billion stock swap.

After initially rising on the news, Lycos shares were pummeled Wednesday after a slew of analysts downgraded the portal, essentially saying the deal was a marriage between two also-rans in the competitive Internet service and portal market.

Fortunately, Lycos was able to slow the descent a bit when it announced better-than-expected earnings of $7.9 million, or 7 cents a share.

Analysts were predicting a profit of 5 cents a share.

Looking ahead to next week, the earnings onslaught slows to a trickle with VA Linux (Nasdaq: LNUX) headlining a series of minor earnings report.

First Call consensus expects VA Linux to lose 23 cents a share in its third quarter.

Last quarter, VA Linux posted a loss of $11.5 million, or 50 cents a share, on sales of $20.2 million.

Also keep an eye out for Intuit's (Nasdaq: INTU) third-quarter earnings report.

Analysts expect the financial software developer to earn 33 cents a share this time around, down from the 44 cents a share it pocketed in the second quarter.