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Stocks rose for five straight days as the fog of the Greek debt crisis appeared to once again be lifted while better-than-anticipated economic numbers such as Friday's manufacturing data gave weight to the belief the U.S. economy was starting to recover from a soft patch.

"What we are looking at is a market that is going to focus on the economic numbers," said Peter Cardillo, chief market economist at Avalon Partners in New York.

"We had real good gains toward the end of the quarter so it wouldn't surprise me to see a little bit of profit taking before we get those numbers out during the course of the week."

Data expected for next week includes factory orders for May, the ISM services index and several indicators on the labor market, including Friday's report.

"It is a little bit early to declare victory over the mid-cycle slowdown we've had," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.

"On Friday, you have payrolls, unemployment rate -- the big Kahuna -- and there might be some trepidation going into it, especially with the market having already rebounded sharply here over several days."

Even with the economic data on the docket for next week, volume is expected to remain light due to the market holiday on July 4th, which could exacerbate swings in the market.

Aside from the additional spike in volume brought about by the final reconstitution of Russell Investments by its indexes on June 24, average weekly volume has been among the lowest of the year for several weeks.

BULLS AND THE BUDGET DEFICIT

The light volume may prove to be an advantage for the bulls, however, especially after the S&P 500 successfully bounced off the 200-day moving average, a key technical support level, and jumped back over the 50-day moving average, which represented a resistance point.

"The mindset is an opportunistic 'risk on' trade and it is giving a lift to the market in spite of the fact that most people are scratching their heads. But that is what happens, particularly when there is very light volume, momentum dictates trend, and that is what we find ourselves in," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.

For the week, the Dow Jones industrial average rose 5.4 percent, the S&P 500 gained 5.6 percent and the Nasdaq Composite Index climbed 6.2 percent -- marking their biggest weekly percentage gains since July 2009.

With Greece and the European debt crisis once again pushed to the back burner in the minds of investors, the focus has shifted to the rapidly approaching deadline for Congress to reach an agreement on the debt limit, presenting another headwind for stocks.

The U.S. Treasury on Friday kept up the pressure on Congress to strike a deal to raise the debt ceiling and prevent a default, repeating that it would run out of legal room to borrow on August 2.

"The big thing on the horizon is now back to the U.S. deficit issues," said Rick Meckler, president of LibertyView Capital Management in New York.

"The Greek (debt) situation was an appetizer for that, and I think you're going to see a lot of back and forth as people wonder how much brinkmanship is actually going to be played with the budget deficit."

Another overhang could be evident in the preannouncement of corporate profits before earnings season begins with Alcoa Inc's earnings on July 11. The global slowdown in the second quarter may result in some disappointing outlooks.

"We have had a soft patch in the economy here due to higher commodity prices, a little bit of weakness in the manufacturing side, because of Japan, Europe, China and various things. All that can really impact Q2 earnings and we may see some negative preannouncements, and that might really have a broader impact on the overall market," Ghriskey said.

(Reporting by Chuck Mikolajczak; Additional reporting by Edward Krudy; Editing by Jan Paschal)

Strauss-Kahn, 62, still faces charges that he sexually assaulted the woman in New York but questions about her credibility appear to be shifting the case in his favor in a twist that could upend French politics.

He smiled as he left the courtroom with his wife, Anne Sinclair, at his side.

Until his May 14 arrest, Strauss-Kahn had been a steward of the global economy and a leading contender in the 2012 French presidential elections. Jubilant supporters in the French Socialist party hoped he might rejoin the presidential race but some analysts saw him as too tarnished.

Amid the scandal, he was forced to resign as head of the International Monetary Fund on May 19. Christine Lagarde, who just stepped down as French finance minister, takes over the top IMF job on Tuesday.

Enjoying his first taste of freedom since being pulled off a Paris-bound jetliner hours after the purported attack, Strauss-Kahn emerged from the townhouse where he had been under house arrest on Friday evening and was driven with his wife and another couple to Scalinatella, a pricey Italian restaurant on Manhattan's Upper East Side.

Strauss-Kahn's lawyers want the charges dropped.

"We are absolutely convinced that while today is a first giant step in the right direction, the next step will lead to a complete dismissal of the charges," his lawyer, Benjamin Brafman, said.

The judge said prosecutors will reexamine the evidence after they revealed the housekeeper lied to a grand jury about her actions after the alleged attack and on tax and immigration documents.

The woman initially said that after Strauss-Kahn assaulted her, she had cowered in the hallway outside his room until he left and she felt safe to seek help. Now, prosecutors say, she admits she cleaned a nearby room and then returned to start cleaning Strauss-Kahn's suite before reporting the incident.

As Justice Michael Obus released Strauss-Kahn, he told the court: "I understand that the circumstances of this case have changed substantially and I agree the risk that he would not be here has receded quite a bit.

"There will be no rush to judgment. The people will continue to investigate and reexamine the matter as appropriate."

Strauss-Kahn, whose house arrest had included electronic monitoring and an armed guard, agreed to return to court as needed, including for a July 18 hearing.

His bail payment of $1 million and bond of $5 million were returned to him but his passport was not.

QUESTIONS EMERGE

The case has hinged on the accuser, a 32-year-old Guinean immigrant who cleaned the $3,000-a-night suite at the Sofitel hotel in Manhattan where Strauss-Kahn was staying.

Prosecutors found issues with her asylum application, tax return and statements to the grand jury investigating the assault case, court documents showed.

Prosecutor Joan Illuzzi-Orbon told the court "the facts of the sexual encounter was and is corroborated" but some details appear to have changed.

The woman's brother told Reuters in Guinea that she was the victim of a smear campaign.

Her lawyer, Kenneth Thompson, said after the hearing his client's story had never wavered and that Strauss-Kahn had bruised her badly and tore a ligament in her shoulder.

"The claim that this was consensual is a lie," Thompson told reporters. "She made some mistakes but that doesn't mean she is not a rape victim."

The New York Times said forensic evidence did show there had been a sexual encounter between Strauss-Kahn and the maid but it also quoted law enforcement officials as saying prosecutors had found possible links between the accuser and people involved in drug dealing and money laundering.

They also discovered the woman made a phone call to a jailed man within a day of her encounter with Strauss-Kahn in which she discussed the possible benefits of pursuing the charges against him, the paper said.

The conversation was recorded. The man was among a number of people who had made multiple cash deposits, totaling around $100,000, into the woman's bank account over the last two years, The New York Times said.

Some commentators suggested that Strauss-Kahn, known as the "great seducer" of French politics, could have been set up.

His arrest opened the field for several other Socialist candidates for next April's presidential election, including party leader Martine Aubry, who trails colleague Francois Hollande in opinion polls.

Sarkozy, who nominated Strauss-Kahn for the IMF job, has not commented on the affair since his arrest. The case has prompted debate in France on gender equality and a media tradition of respecting the privacy of politicians' sex lives.

Nina Mitz, a former senior adviser to Strauss-Kahn at the French Ministry of Finance, said: "Today's stunning news can only make us regret that so much talent may have been wasted at a time when we all very much needed it."

(Additional reporting by Allison Joyce, Grant McCool, Christine Kearney, Paula Rogo and Bernd Debussmann Jr in New York, Mark Hosenball in Washington, Marie Maitre, Catherine Bremer and Geert De Clercq in Paris and Saliou Samb in Guinea; Writing by Mark Egan; Editing by John O'Callaghan and Sandra Maler)

Equities have rallied for four straight days, rebounding from a spate of weakness over the last two months. Moves to avert a debt crisis in Europe and surprisingly strong regional business data helped lift some of the gloom on Wall Street.

The ISM's index of national factory activity at 10 a.m. EDT is expected to show the economy slowed in June, slipping to 51.8 from 53.5 in May. But investors will be on the lookout for a positive surprise after Thursday's Chicago PMI index beat forecasts.

"What you are seeing is investors are realizing that the economy is not going to recover as they hoped, but it's not going to be as bad as they fear," said Rick Meckler, president of investment firm LibertyView Capital Management in New York.

"You're starting to settle into a realization that stocks are probably priced somewhere around where they should be, and I think you are going to continue to have this back and fourth movement," said Meckler.

S&P 500 futures added 0.6 point and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 15 points, and Nasdaq 100 futures rose 2 points.

Meckler said volume would likely be low on the last day before a holiday-shortened week, which could increase volatility. Markets are closed on Monday for the U.S. Independence Day holiday.

Investors are looking ahead to second-quarter earnings, which get underway in the second week of July. They will pay close attention to corporate forecasts, given the weakness in the economy.

Other data scheduled for release later in the day include the Reuters/University of Michigan consumer sentiment survey for June at 9:55 a.m. EDT and construction spending at 10 a.m. EDT. Consumer sentiment was seen little changed at 71.9, while construction spending is expected to be flat in May.

U.S. stocks ended a volatile quarter Thursday with their biggest four-day rally since September as positive economic data and a temporary resolution of Greece's debt crisis indicated further gains in July. Major indexes were on course for their best week since the middle of July 2010.

The S&P 500 .SPX climbed above resistance at its 50-day moving average at 1,317, establishing another floor in the market after the index moved above a number of technical resistance levels.

In company news, Apple Inc (AAPL.O) and Research In Motion Ltd (RIM.TO)(RIMM.O) are part of a winning consortium of six companies buying bankrupt Nortel Networks Corp's remaining patent portfolio for $4.5 billion in a hotly contested auction that saw Google Inc (GOOG.O) and Intel Corp (INTC.O) lose out.

Oshkosh Corp (OSK.N) jumped more than 8 percent in extended trade Thursday after Carl Icahn said he wants to meet with the management at the specialty truck maker to discuss enhancing shareholder value. The billionaire investor owned about 9.5 percent of Oshkosh shares as of June 20.

In Europe, the pan-European FTSEurofirst 300 index of top shares .FTEU3 were nearly flat. The Nikkei .NK225 share average climbed to a seven-week high, rising 0.5 percent.

(Reporting by Edward Krudy; editing by Jeffrey Benkoe)

Strauss-Kahn, 62, was a steward of the world economy and a leading candidate for next year's French presidential election until he was arrested on May 14 and charged with the attempted rape and sexual abuse of a hotel maid in New York.

A source familiar with the probe told Reuters that prosecutors now had doubts about the maid's credibility as a witness.

The arrest forced his resignation from the International Monetary Fund and ended his presidential hopes, weeks before he had planned to declare his candidacy.

Strauss-Kahn's supporters in the French Socialist party voiced delight at the apparent reversal and some said they hoped he might re-enter the 2012 presidential race.

But political analysts said his reputation had been too tarnished for him to be a presidential contender, although he could play an influential political role if cleared.

"Even if what he did was not criminal, all this is going to take time," said Christophe Barbier, a political commentator and editor of L'Express weekly.

"There is everything we have learned about him, the damage to his reputation. All this makes the idea he could be a candidate very hypothetical, it's science fiction."

From the start, the case hinged on the purported victim, a 32-year-old Guinean immigrant who cleaned the $3,000-a-night suite at the Sofitel hotel in Manhattan where Strauss-Kahn was staying.

The New York Times quoted a source close to the investigation as saying the housekeeper had lied repeatedly and prosecutors no longer believed her account of the circumstances of the sexual encounter or of her own background.

Police and prosecutors initially trumpeted her credibility, confident in the woman's story that the former IMF chief emerged naked from the bathroom, chased her down the hall and forced her to perform oral sex on him. Evidence showed that semen was found on her uniform collar, a source close to the investigation said.

But defense lawyers challenged the claim of a violent assault, suggesting a defense built on consensual sex.

Another source close to the case said that the district attorney's office took the case to a grand jury without fully checking out the woman's bona fides.

"Just about everything that was reported on this woman early on was untrue but no one checked or wanted to believe anything else," the source told Reuters.

FREE SOON?

The New York Times reported that prosecutors met with Strauss-Kahn's lawyers on Thursday and the parties were discussing whether to dismiss the felony charges.

It said Strauss-Kahn could be released on his own recognizance and freed from house arrest.

Strauss-Kahn was due back to court in New York on Friday to seek changes to his bail conditions, defense attorney Benjamin Brafman said.

Strauss-Kahn resigned from the IMF on May 19 and pleaded not guilty on June 6, vehemently denying the allegations. He faces up to 25 years in prison if convicted.

With his resignation, Strauss-Kahn severed all his ties to the IMF. Christine Lagarde, who has just stepped down as French finance minister, takes over the top IMF job on Tuesday.

His arrest prompted agonized debate in France on gender equality and a media tradition of respecting the privacy of politicians' sex lives.

PERP WALK IRKED FRENCH

After his arrest, Strauss-Kahn was paraded handcuffed before cameras in a "perp walk" that drew outrage in France, where the American tradition was viewed as barbaric.

Some commentators suggested that Strauss-Kahn, known as the "great seducer" of French politics, could have been set up by opponents or in a extortion bid. An opinion poll found half the French public initially believed he was the victim of a plot.

The front-runner in the polls for the April 2012 presidential race before his arrest, Strauss-Kahn had been widely expected to challenge President Nicolas Sarkozy.

His arrest opened the field for several other Socialist Party candidates, including party leader Martine Aubry, who trails fellow socialist Francois Hollande in opinion polls.

"This is amazing news for Dominique, for (his wife and former television journalist) Anne Sinclair, for his family. I think they must have the impression this morning that they are waking up from a terrible nightmare," Socialist lawmaker Jean-Marie Le Guen, who is close to Strauss-Kahn, told French television on Friday morning.

"All those who believed in Dominque's innocence, and in the fact that the elements as they were reported were incompatible with his personality, will feel vindicated," he said.

Some analysts said that if fully cleared, Strauss-Kahn could lend economic credibility as an adviser to a Socialist candidate and might eventually emerge as a contender to be prime minister or finance minister.

The New York Times quoted two well-placed law enforcement officials as saying prosecutors had found issues with the asylum application of the accuser and possible links to criminal activities, including drug dealing and money laundering.

They had also discovered that the woman had made a phone call to an incarcerated man within a day of her encounter with Strauss-Kahn in which she discussed the possible benefits of pursuing the charges against him, the paper said.

The conversation was recorded. The man was among a number of individuals who had made multiple cash deposits, totaling around $100,000, into the woman's bank account over the last two years, the New York Times said

After a few nights in New York's notorious Rikers Island jail, Strauss-Kahn was allowed to post $1 million cash bail and a $5 million bond. He is now under house arrest in Manhattan, equipped with an electronic monitoring device and under the 24-hour watch of armed guards.

(Additional reporting by Mark Hosenball, Marie Maitre and Geert De Clercq; Writing by Daniel Trotta and Paul Taylor, Editing by Janet McBride)

Europe's largest wealth manager in terms of assets said its board of directors would nominate Weber to the board at the annual general meeting in May 2012 and, if elected, it expected him to succeed Villiger after his first year in office.

"I think it's positive that they were able to announce it two years in advance. He's a strong candidate who was also in talks to become chairman of the management board at Deutsche Bank (DBKGn.DE), so it's very good news," said Cheuvreux analyst Christian Stark.

"Villiger was always seen as a temporary solution to help UBS get through the crisis and Axel Weber's clearly got more of a connected network into the international banking industry."

Along with Chief Executive Oswald Gruebel, former Swiss Finance Minister Villiger was coaxed out of retirement to help restore market confidence and turn around UBS after the bank suffered the worst annual loss in Swiss corporate history during the financial crisis.

Weber's nomination scotches speculation he could succeed Deutsche Bank's long-time chairman Josef Akermann whose own tenure expires in 2013.

Weber, aged 54, was president of Germany's Central Bank, the Bundesbank, from April 2004 to April 2011 and was a member of the governing council of the European Central Bank.

He was seen as a likely successor to Jean-Claude Trichet as head of the European Central Bank but ruled himself out of the race in February. He was recently appointed economics professor at the University of Chicago Booth School of Business.

Weber taught monetary policy and international economics in Germany before he was chosen for the Bundesbank in 2004.

(Editing by Mike Nesbit)