While some major technology vendors finally issued good news about orders this week, it was U.S. District Judge Vaughn Walker who may have helped stocks the most.

Walker concluded that

Oracle's

(ORCL) - Get Oracle Corporation Report

bid for competitor

PeopleSoft

(PSFT)

doesn't violate antitrust laws as the Justice Department had alleged. The merger still faces a host of challenges, not the least a European competition review. But the ruling appeared to open the door to more M&A activity in the industry.

Shares of Oracle gained 4.3% for the week to $10.46 while PeopleSoft jumped 12% to $19.79. A gaggle of others also rose on merger speculation, and the

Nasdaq Composite

finished the week up 2.7% to 1894.31.

Gains earlier in the week came on positive outlooks from

Nokia

(NOK) - Get Nokia Oyj Sponsored ADR Report

,

Corning

(GLW) - Get Corning Inc Report

and

Motorola

(MOT)

, among others, and despite less-than-bullish comments from

Texas Instruments

(TXN) - Get Texas Instruments Incorporated Report

and

National Semiconductor

(NSM)

.

In a sign the bad news was largely priced into chip stocks, the Philadelphia Stock Exchange Semiconductor Index rose 1.6% for the week after hitting a 52-week low on Wednesday.

Other major stock proxies didn't get any help from the federal court system, but falling oil prices and some positive economic reports helped overcome an earnings warning from

Alcoa

(AA) - Get Alcoa Corp. Report

on Friday.

The

Dow Jones Industrial Average

added 0.5% for the week to close at 10,313.07. The

S&P 500

posted a weekly gain of 0.9% to 1123.92. Both indices recorded a fifth consecutive weekly advance.

Judge Walker took pains to disagree with nearly everything that Justice Department lawyers had posited in trying to block Oracle's $7.7 billion bid for PeopleSoft.

Perhaps most importantly, he rejected the argument that a narrow and distinct market existed for corporate administrative software for huge companies based in the U.S. Taking a much broader view, Walker said competition for the customers served by PeopleSoft and Oracle could come from new players such as

Microsoft

(MSFT) - Get Microsoft Corporation (MSFT) Report

, smaller companies bulking up, or outsourcing firms like

ADP

(ADP) - Get Automatic Data Processing, Inc. Report

and Fidelity Information Services, a subsidiary of

Fidelity National Financial

TheStreet Recommends

(FNF) - Get Fidelity National Financial, Inc. - FNF Group Report

.

By taking the broad view, the decision may encourage big fish to start snapping up more little fish in the software business, according to Bill Whyman, an analyst with Precursor Group in Washington, D.C.

"The judge's wide market definition sets a precedent that will make software industry consolidation easier," Whyman wrote on Friday. Smaller players like

Siebel Systems

(SEBL)

,

Lawson Software

(LWSN)

,

GEAC Computer

(GEAC)

and

Epicor Software

(EPIC)

are more likely to "get gobbled up," he wrote.

The market appeared to agree. Shares of Siebel increased 9% for the week to $8.17; Lawson also gained 9% to $6.37; GEAC tacked on 13% to $6.60; and Epicor jumped 19% to $12.35.

Steeling for Inflation

Away from technology, the market struggled to sort out the state of the economy, with questions about consumer demand and inflation at the fore. Alcoa's profit warning on Friday, which appeared to be caused mostly by the company's labor struggles and strategic missteps, was seen as a sign of slackening demand along with the producer price index, which dropped 0.1% for finished goods. Oil finished the week at $42.81, down almost 3%.

Carmakers desperately trying to move inventory helped the PPI post the surprise decline. But looking below the headlines, prices for intermediate and crude-stage materials, which include everything from plumbing fixtures and plywood to fresh milk and base metals, rose at pretty heady rates.

Prices of intermediate materials rose at a 1% clip for August and gained 8.1% over the past 12 months. Excluding more volatile food and energy goods, intermediate prices still rose 1% in August and 7.3% over 12 months. For crude materials, prices fell 0.8% because of a 4.6% drop in foodstuffs. Still, over 12 months, crude materials prices are up 22.4%. Core crude materials prices gained 4.6% in August and a staggering 32.1% over 12 months.

No doubt, the rising steel prices seen here are behind Thursday's announcement from

Nucor

(NUE) - Get Nucor Corporation Report

that earnings will be higher this quarter. Competitor

AK Steel

(AKS) - Get AK Steel Holding Corporation Report

said Friday it was raising prices too. Nucor gained 10% on the week to close at $89.15 and AK added 16% to $7.17.

While the evidence doesn't show consumers and businesses having to pay up for finished goods yet, there are building inflationary pressures down the chain. Just last week,

Starbucks

(SBUX) - Get Starbucks Corporation Report

said it was going to have to raise prices an unspecified amount because of surging dairy and health care costs. And Tuesday,

Yellow Roadway

(YELL)

increased its earnings outlook on better pricing.

All of which bolsters the

Federal Reserve's

case for raising rates now, before price pressures expand.

The bond market is taking the opposite tack. The yield on the Treasury's 10-year note, which falls when its price gains, finished the week at 4.18%, down from 4.29% a week ago. Investors are betting the lack of inflation and a slowing economy may restrain the Fed's "measured" pace of rate hikes.

But the 10-year isn't trading at a level consistent with the evidence, according to Chris Molumphy, chief investment officer for fixed income at mutual fund giant Franklin Templeton.

He attributes the current rally, down from a yield of almost 4.90% in June, to signs of slower growth. Still, "the moves have been in excess of the fundamentals," he said. The Fed has to raise short-term rates despite the somewhat slower growth rates because the current rates are below inflation and could cause too much stimulation.

"Unless

Alan Greenspan and the Fed see significant, consistent data showing a much slower economy, they're going to keep moving to a more neutral

fed funds rate," he said.

And there are continued signals from the Fed saying the same thing. Cleveland Fed President Sandra Pianalto, speaking in New Mexico to several banking industry groups on Friday, said that while there were no signs of materials prices being passed on to consumers "to any significant degree," the Fed was likely to keep raising rates. The current low level of short-term rates, negative after factoring in inflation, could "unintentionally promote an inflationary environment down the road," she said.

When Fed chairman Greenspan spoke Wednesday, he did little to resolve the mystery and left analysts parsing his meaning, as usual. The economy has "regained some traction" after going through a soft patch, the chairman told Congress.

In keeping with TSC's editorial policy, Pressman doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send

your feedback.