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Low-key rally follows rate cut

After spikes and dips in the stock market earlier in the day, investors celebrate the Federal Reserve's fifth interest-rate cut this year.

After jagged spikes and dips in the stock market earlier in the day, investors celebrated the Federal Reserve's fifth interest-rate cut this year, creating a restrained tech rally Tuesday.

The Nasdaq inched up 3.80 to 2,085.72, and the Dow Jones industrial average fell 4.36 to 10,872.97.

The Federal Reserve did what was expected of it Tuesday and cut interest rates by a half percentage point.

Along with making the cut, Fed policy-makers doled out news that made investors happy, saying they will maintain their aggressive stance to ward off more economic weakness.

"The erosion in current and prospective profitability, in combination with considerable uncertainty about the business outlook, seems likely to hold down capital spending going forward," the Fed said in its statement.

The Fed also chopped the discount rate--the interest rate charged on direct loans to commercial banks--by a half-point to 3.5 percent.

After investors' initial burst of buying and technology stocks' brief dip earlier in the day, stocks slowly crept up by the close of the markets.

One of the day's biggest movers was Ciena, which fell $4.50, or 8 percent, to close at $55.44. Earlier in the day Lehman Brothers analyst Steven Levy said he expects the company to meet estimates when it reports quarterly results Thursday, but he said the company could have a "cautious" stance on its outlook.

Levy said he would "not be surprised if management even suggests that actual sales performance for this fiscal year and next could end up at the middle to lower end of the current guidance range."

In other company news, Rolex filed suit against eBay's German subsidiary, accusing it of trademark infringement and unfair competition, the auction company revealed in a Securities and Exchange Commission filing. eBay shares rose 84 cents to $56.05.

On the world's PC market, growth is slowing even more, according to Merrill Lynch, which reduced its forecasts for the current year from 7 percent growth to 3 percent growth. But Merrill Lynch analyst Steve Fortuna said in a research note that while this year could be weak, the outlook for next year is looking up.

Gateway fell 6 cents to $17.69, Dell Computer rose 30 cents to $24.49, and Compaq Computer slipped 44 cents to $15.78.

Struggling telecommunications equipment company Lucent Technologies signed two major equipment deals Tuesday. Shares slid 6 cents to $9.65.

Semiconductor equipment maker Silicon Valley Group, down 40 cents to $31.30, said third-quarter sales will be lower than expected, and it will cut its work force by about 400 people, or 10 percent.

Amazon.com rose 21 cents to $13.54, AOL Time Warner fell 85 cents to $50.75, and Yahoo rose 95 cents to $18.05.

Intel lost 21 cents to $27.20, Microsoft slipped 45 cents to $68.45, and Oracle slipped 11 cents to $15.93.

Staff and Reuters contributed to this report.