The Last Week in Review:

The stock market moved higher last week as investors saw renewed optimism that the Fed rate hike cycle may be close to an end. The Dow closed the week adding 161 points, raising its year-to-date gain to 4.0%. The S&P added 26 points to raise its year-to-date gain to 1.8%. The NASDAQ rallied 51 points for the week to narrow its 2006 loss to 1.5%. The Russell 2000 saw the largest gain during the week surging 35 points and increasing its year-to-date gain to 7.6%.

Factors that currently are bound to weigh on the market include the 10-year Treasury note which now yields 5.14% and is below the current Fed Funds rate of 5.25%. The dollar remains under pressure against other major currencies due to the fact that the rate increases may end soon. In the commodity markets, gold broke above the key resistance level of $600 an ounce, while crude oil reached $74 a barrel again.

On the plus side, the improved market tone from last week could be supported in coming weeks by good Q2 earnings reports. However third and fourth quarter earnings growth forecasts will probably come down a bit. Currently market valuations are now very reasonable, so this leaves upside potential through year end.

The Week Ahead

There are very few earnings of major interest this week as earnings season doesn't officially start until July 10th when Alcoa (AA) reports results. The conference calendar is also quiet this week as nothing is scheduled due to the holiday-shortened week. The stock market closes early on Monday (1 p.m. EST) and will be closed on Tuesday, July 4th.

The economic calendar is somewhat active this week, highlighted by Friday's June Employment Report. On Monday, the ISM manufacturing index for June and Construction Spending for May will be released. On Wednesday, the automakers will release sales figures for the month of June. Additionally, the May Factory Orders and the weekly Energy Inventories reports will be released on Wednesday. On Thursday, the ISM services index for June will be released.

In summary: keep an eye on the Employment Report on Friday..