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From Briefing.com: 4:30 pm Weekly Wrap

The major indices logged big gains in the holiday-shortened week, driven by leadership from the technology sector, some supportive economic data and another wave of big-ticket buyout activity.

The gains came despite a jump in oil prices above $72 and the yield on the benchmark 10-Year Treasury note rising from 5.03% on Monday to as high as 5.20% on Friday.

Trading volume was relatively light, however, with many fund managers and traders away on vacation. The major U.S. stock exchanges and bond market closed early on Tuesday and remain closed on Wednesday in observance of Independence Day.

The Labor Department's June employment report on Friday highlighted the flow of incoming data for the week, painting a picture of solid job growth that has been accompanied by rising wages. While the latter proved unsettling to the bond market, the stock market took some solace in the view that the combination supports a pickup in economic activity and continued strength in consumer spending.

The latest employment results were in line with analysts' expectations in just about every respect. Nonfarm payrolls rose 132,000 (consensus 125,000), the unemployment rate was 4.5% (consensus 4.5%), hourly earnings rose 0.3% (consensus +0.3%) and the average workweek was 33.9 hours (consensus 33.9). Upward revisions to payroll numbers for April and May added to the understanding that the labor market is looking solid.

In other economic news, the Institute for Supply Management's manufacturing index for June showed increased activity and added to optimism about the economy.

Unlike recent weeks, the M&A news was indeed a bullish catalyst as we saw a return of some big-money transactions. Specifically, Canada's largest phone company, BCE Inc. (BCE), received a $49 billion offer from an investor group led by the Ontario Teachers Pension Plan and Providence Equity Partners that qualifies as the largest private equity deal ever.

On a related note, the Blackstone Group (BX) made a $26 billion offer to acquire Hilton Hotels Corp. (HLT); meanwhile, the Carlyle Group plans to buy Manor Care (HCR) for $6.3 billion while Apollo Management is going to take Huntsman Corp. (HUN) private for $6.3 billion as well.

AT&T (T) for its part is going to buy Dobson Communications (DCEL) for $2.8 billion and Kraft (KFT) is going to spend $7.2 billion for Group Danone's biscuit business.

Separately, KKR & Co., the private equity firm responsible for the historic leveraged buyout of RJR Nabisco in 1988, said it plans to go public. The announcement, which was not unexpected, comes just days after rival Blackstone Group made its highly-anticipated public debut on the New York Stock Exchange.

There were only three companies on the earnings calendar. None of the reports had a bearing on the overall market. Things will pick up on the earnings front next week when Alcoa (AA) kicks off the second quarter reporting season with its results after the close on Monday.

--Richard Jahnke, Briefing.com

 
 Index      Started Week Ended Week Change % Change  YTD  
 DJIA         13408.62    13611.68  203.06    1.5 %  9.2 %  
 Nasdaq        2603.23     2666.51   63.28    2.4 % 10.4 %  
 S&P 500       1503.35     1530.44   27.09    1.8 %  7.9 %  
 Russell 2000   833.70      852.31   18.61    2.2 %  8.2 %

4:20 pm : After initially looking indecisive about how much influence today's jobs report will have on Fed policy, stocks finally garnered enough momentum to close out an abbreviated week to the upside.

Limited participation, however, as the NYSE barely saw 1.0 bln shares exchange hands, indicated there was little conviction on the part of buyers. It also raised questions about the sustainability of recent gains heading into the start to the Q2 earnings season on Monday.

With the Fed still concerned about the high level of resource utilization and its potential to sustain inflation pressures, all eyes Friday were fixated on the June jobs report. Before the bell the Labor Dept. said nonfarm payrolls rose 132K last month, which was relatively in line with economists' forecasts.

Payroll figures for May and April, though, were upwardly revised to account for a net gain of 75K new jobs, which further eased worries about slowing growth but hardly cleared the way for policy makers to justify a rate cut anytime soon. As a result, Treasuries extended their worst weekly performance in about a year, lifting the 10-year yield to 5.18% and stirring up borrowing concerns that pressured the influential Financial sector throughout most of the session.

However, a late-day turnaround in Financials, coupled with the Health Care sector turning positive and Energy taking full advantage of oil prices hitting 11-month highs, gave stocks a second wind.

Another day of deal making, earmarking this holiday-shortened week as the biggest of the year so far, fueled the belief that Monday will be accented by another round of M&A activity and acted as another source of market support.

It was confirmed that Advanced Medical Optics (EYE 35.81 -0.08) will offer $4.3 bln for Bausch & Lomb (BOL 71.96 -0.04), trumping the $3.7 bln offer made by Warburg Pincus in May. Chicago Mercantile Exchange Holdings (CME 575.50 +19.81) sweetening its bid for CBOT Holdings (BOT 224.84 18.69) was also noteworthy.

From a sector standpoint, Energy paced the way (+1.0%) but Consumer Discretionary wasn't far behind, especially considering the very catalyst that boosted Energy -- higher oil prices.

General Merchandise (+5.1%) was one of the day's top performers following reports that Target (TGT 68.11 +3.90) may sell its credit card business. Department Stores (+2.2%) got a lift from Macy's (M 41.91 +2.14) amid renewed takeover speculation while some short covering activity helped boost the Homebuilders (+2.7%).

Technology, which is expected to be a significant contributor to aggregate operating EPS growth on the S&P 500 this year, also provided some influential leadership to the upside. The heavily weighted sector got its biggest lift from strength in chip stocks. The PHLX Semiconductor Sector Index closed at a new 52-week high. DJ30 +46.01 NASDAQ +9.86 SP500 +5.05 NASDAQ Dec/Adv/Vol 1261/1740/1.63 bln NYSE Dec/Adv/Vol 1301/1960/1.24 bln

3:52PM Market View: Modest low volume gains (TECHX) : The stock market averages topped off the impressive holiday week performance with modest lower volume gains leaving all the averages higher (except the Dow) for the fourth session in a row. The Nasdaq indices were the top performers this week (Nasdaq 100 up for fifth month in a row as well) as they continued to distance themselves from Jun highs to establish new multi-year highs while the other averages are still within their two month trading ranges below similar peaks. An impressive bounce in Home Construction +3.4%, along with gains in Gold/Silver +3.5%, Energy (Coal +3%, Oil Service +1.5%, Oil +1.3%) and Retail +1.9% paced the way higher with losses noted in Biotech HOLDRs -1.2%, Telecom HOLDRs -0.5% and Utility -0.3%.

3:24PM Semi HOLDRs -SMH- notches new session high to test short term resistance (TECHX) 39.16 +0.27 : The sector ETF (SMH) has extended yesterday's break above its June peak to set a fresh 52-wk high with it testing resistance in the 39.20/39.25 area (congest/Fib extension) in recent trade (session high 39.21). Next resistance is in the 39.50 area with short term support at 39.08/39.00. Takes a dip under 38.84/38.73 to inflict any short term chart damage. Top performers today include: MU +4.7%, BRCM +1.8%, ADI +1.4%, NVLS +1.4%, XLNX +1.2%, SNDK +2.1%, LLTC +1.3%, AMD +1.2%, ALTR +1.2%.

8:00AM Transmeta says AMD makes strategic investment in co (TMTA) 0.70 : TMTA and AMD (AMD) announce that AMD has invested $7.5 mln in Transmeta in exchange for TMTA preferred stock.

07:48 am Microsoft (MSFT)

Last night, Microsoft (MSFT, 29.88) announced it will take a $1.05-$1.15 billion pretax charge to account for an extension of the Xbox warranty program. The stock will likely tick lower as a result of the news, but the downdraft will be short-lived. Microsoft is in the midst of a major product cycle across its entire business, driving revenue growth and margin gains. We maintain our positive view.

The move came in response to hardware issues that have been identified and addressed. The financial impact will be confined to the recently concluded June quarter and will not impact FY08 estimates or its goal of breakeven profitability for the Entertainment division. Separately, Microsoft indicated it will fall short of 12 million Xbox 360 shipments by the end of the calendar year by approximately 400,000 units.

The increased warranty protection is the right thing to do as a consumer electronics manufacturer. The sales impact is likely to be limited to the near-term during the summer, which is seasonally a slow period. The release of Halo 3 and Grand Theft Auto IV ahead of the FY07 holiday season will be a major event for the Xbox.

--Kimberly DuBord, Briefing.com

09:50 am Microsemi: Caris & Company upgrades Above Average to Buy. Caris upgrades MSCC to Buy from Above Aberage saying they have increased conviction that their investment thesis of accelerating top-line expansion coupled with ongoing cost rationalization will drive meaningful leverage to the bottom line. With a healthy backlog and long lead-times, visibility is a key comparative differentiator and the primary catalyst for making Microsemi our favorite analog stock