THE WEEK AHEAD: Slowing economy sets up summer rally

Technology stocks figure to move higher next week after some very positive employment data was released Friday. After spending much of the past two months watching their stocks plummet, investors now can resume buying with a measure of confidence.

There's even talk of the Fed leaving interest rates unchanged later this month now that the economy seems to be slowing up a bit.

For the week, the Dow Jones industrial average moved up 495 points to 10,794.76 while the Nasdaq exploded up 608 points, or 19 percent, to 3,813.33.

All of this enthusiasm came Friday when the Labor Department said the May unemployment rate rose to 4.1 percent from a 30-year low of 3.9 percent. The uptick in the jobless rate suggests that the six interest-rate boosts by the central bank since June 1999 are beginning to cool the hot economy.

"There is less of chance of a Fed tightening in June," said Guy Truicko, portfolio manager at Unity Management. "There's a feeling that the Fed may not have to do anything to combat inflation in the near term. This just relieves a lot of pressure on equity valuations."

Friday's 230-point rally in the Nasdaq was especially encouraging because the strength came from Internet, hardware, software and networking firms.

The jobs report also showed that hourly earnings -- an indicator of wage-level inflation -- rose only 0.1 percent to $13.65 while a 0.4-percent boost had been expected.

"This is unrelentingly soft data," said Ethan Harris, senior economist at Lehman Brothers. "A few things the Fed is going to take away from this: the whole tight labor market story is looking a lot less ominous with a 4.1 percent unemployment rate and average hourly earnings up 3.5 percent year over year. That to me is a pretty friendly sign for the new paradigm story. We can grow pretty fast without real signs of labor market distress."

In a separate report, April's factories orders fell 4.3 percent, the sharpest drop since 1990, due to lessening demands in electronics. April's decline is compared to the 2.7 percent March increase.

Looking ahead to next week, more Microsoft (Nasdaq: MSFT) developments will keep investors on their toes.

On Thursday, Judge Thomas Jackson asked the government to file legal papers Monday specifying areas of agreement. Microsoft attorneys will have until Wednesday.

The moves provided a temporary breather just as tension mounted with a ruling appearing imminent. By Wednesday, the case once again could reach the stage where Jackson is ready to administer punishment for the anticompetitive practices he found in April.

Microsoft spokesman Jim Cullinan said the additional time was sought to address questions such as how to deal with foreign governments and how tax issues should be handled in any breakup. Microsoft already has said it will appeal the entire case.

On the earnings front, Tech Data Corp. (Nasdaq: TECD) will report its first-quarter results next week with analysts' expecting a profit of 64 cents a share.

Last quarter, it hurdled analysts' estimates, earning $37.1 million, or 67 cents a share, on sales of $4.8 billion.

Also, National Semiconductor Corp. (NYSE: NSM) will check in with its fourth quarter results.

First Call Corp. consensus expects the chipmaker to earn 63 cents a share in the quarter, up from 51 cents a share in the third quarter.

Reuters contributed to this report.