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Chip-sector optimism buoys techs

Talk that the semiconductor sector has hit bottom continues to drive technology stocks, despite bad news for Microsoft and the manufacturing sector.

Talk that the semiconductor sector has hit bottom kept the Nasdaq in positive territory Thursday despite bad news for Microsoft and the manufacturing sector.

The Nasdaq composite index rose 19 points to 2,087.38, and the Dow Jones industrial average was up 41.17 to 10,551.18.

A report on the manufacturing sector showed that the economy is still struggling. New orders for goods produced at U.S. factories fell 2.4 percent in June, much stepper than the 1.2 percent economists had expected.

Jobless claims painted a slightly brighter picture. Claims fell to their lowest level in five months. For the week ended July 28, 346,000 people filed for state unemployment benefits. The figure was also lower than the rise to 385,000 economists had predicted. But the decline was mostly attributed to seasonal factors, not a drop in the rate of layoffs.

The Federal Reserve Bank of Chicago made some worrisome comments about the economy. When announcing its monthly index of U.S. economic activity, it said the risk that the U.S. economy is in a recession rose in June to its highest level this year.

An industry report said semiconductor sales worldwide fell to $11.6 billion in June, an 8.8 percent drop from May. It blamed slowing economies, an overload of inventory and a chip slump.

Intel was the Nasdaq?s most actively traded stock, up $1.36 to $32.11, following President Craig Barrett's prediction for a rebound in PC sales in the second half of the year. Though Barrett said the rebound would be due to seasonal rather than fundamental factors, the comment helped feed a rally sparked Wednesday by Merrill Lynch?s report that chip stocks have hit bottom.

PMC-Sierra also helped boost the sector; the maker of communications semiconductors was up $2.53 to $36.87 on news it is joining the S&P 500 index.

CNET's Semiconductor index was up over 2 percent.

Microsoft moved up 98 cents to $67.45 after an appeals court said it won't reconsider its decision that Microsoft illegally tied its Windows operating system and Internet browser. The news is a setback for the software company in its four-year antitrust battle with the U.S. government.

In earnings news, Comcast, the cable operator that is bidding for AT&T's cable unit, was up 6 cents to $38.11 after its Wednesday report that second-quarter cash flow improved. The company said it got a boost from subscriber growth at its digital cable and high-speed data business, although net profit declined.

Among other heavily traded techs, Oracle fell a penny to $18.31, Cisco Systems slipped 5 cents to $20.25 and Sun Microsystems rose 82 cents to $18.17. fell 31 cents to $12.19, AOL Time Warner rose 92 cents to $47 and Yahoo rose 16 cents to $18.45.

Staff and Reuters contributed to this report.