* Payrolls data for June due on Thursday

* Swings in tech, semiconductor shares keep investors on

edge

* Rate-hike bets in focus following hawkish Fed meeting

By Lewis Krauskopf

NEW YORK, June 26 (Reuters) - Jobs data in the coming week

will shed light on the U.S. economy's strength, which could

raise prospects for near-term interest rate hikes, adding

potential volatility to a stock market already on edge from

swings in technology shares.

Major U.S. equity indexes next week are set to close out a solid

first half of the year, with the benchmark S&P 500 up

more than 7% so far in 2026. But equities have had a rougher

time in June. High-flying shares of semiconductor companies have

seen huge moves this week as investors calibrate their optimism

over AI-driven profits.

A Federal Reserve meeting this month revealed policymakers

were laser-focused on containing inflation. Investors said the

monthly jobs report due on Thursday could increase bets on rate

hikes if it indicates a hot economy. U.S. financial markets will

be closed on Friday for the Independence Day holiday.

"If we do get a really good jobs number, my guess is the

market's not going to treat that as good news," said Doug Huber,

deputy chief investment officer at Wealth Enhancement. "It's

going to treat it as the economy's hot and it's going to start

to probably price in even higher risks of potentially a hike."

Action in shares of tech companies and especially chip companies

was set to keep dominating Wall Street's attention. The

Philadelphia SE Semiconductor Index has soared 85% since

the market's late-March low for the year, but has pulled back

this week as investors assess if the trade is overheated.

Blowout results from memory chipmaker Micron Technology ( MU )

late on Wednesday gave support to the group, but the tech-heavy

Nasdaq Composite fell more than 4% on the week.

"The flavor of tech leadership for the last two months has

been semiconductor-related names ... concentrated in

memory-related equities," said Julia Hermann, global market

strategist at New York Life Investment Management. "The live

question is, are higher interest rates going to threaten the

more cyclical and volatile component of market leadership at

play?"

JUNE TO CONTINUE SOLID JOB GAINS?

The U.S. economy has posted three straight months of solid job

gains, with payrolls rising by 172,000 in May. June employment

is expected to rise by 110,000 jobs, according to a Reuters

poll.

Meanwhile, inflation has remained well above the Fed's 2% annual

target. The central bank said at its latest meeting it was

focused on delivering price stability, which investors took as

surprisingly hawkish. Data on Thursday showed inflation breaking

above 4% for the first time in three years, as the Middle East

conflict boosted energy prices.

"The Fed is very finely balanced," said Brad Conger, chief

investment officer at Hirtle & Co. Even if the jobs data is not

"a big surprise, it can tilt the Fed in one direction or the

other. ... If jobs are strong, interest rates could go back up,

and that challenges the market."

Fed funds futures indicate better-than-even odds of a hike by

the central bank's September meeting, according to LSEG data on

Friday, a reversal from the start of the year when investors

were banking on equity-friendly rate cuts by year-end.

"We've shifted from the sense that interest rate hikes were

this less-than-ideal way to cope with a supply shock, energy

specifically, to this sense that the Fed is now structurally

engaging with its inflation mandate in a new way," Hermann said.

Higher rates pose several potential headwinds for equity

performance, including by raising borrowing costs for companies

and consumers and slowing economic growth.

Investors will also watch earnings results next week from

sportswear company Nike ( NKE ). Second-quarter reporting season

ramps up later in July.

Developments in the Middle East remain in focus for Wall Street,

with energy prices easing amid a ceasefire in the region. Oil

has dropped to around $70 a barrel from $100 a month ago.

"We are trying to evaluate: is there staying power to a

truce in the Middle East and that impact on oil and the big

knock-through effect on inflation," Huber said.