MIDDAY MARKETS: Investors eye Solectron, Fed decision

Solectron's warning ripped through the contract equipment-manufacturing sector, causing a brief distraction from the Federal Reserve vigil.

The Nasdaq composite index rose 13.51 points to 1,964.69, and the Dow Jones industrial average gained 39.90 points to 9,999.01. The Inter@ctive Week @Net Index stepped up 1 point to 190.81.

The markets were treading water at midday as investors held out for news from the Federal Reserve's meeting on interest rates. Economists expect either a half or a three-quarter-point cut to interest rates to be announced when the Federal Open Market Committee dissolves its meeting at 2:15 EST Tuesday. Though expectation of a half-percentage point cut has been built into stocks already, a slightly larger cut could mean good news for the beleaguered indices.

Solectron (NYSE: SLR) on Tuesday fell $2.19 to $19.31 following Monday's announcement that it expects to miss analysts' third-quarter estimates by more than half and plans to cut over 8,000 jobs. Analysts said the company's sudden reversal of fortune didn't bode well for its competitors.

Other contract equipment manufacturers to get downgraded by analysts Tuesday include Flextronics (Nasdaq: FLEX), down $3.56 to $19.81, Celestica (NYSE: CLS), down $5.99 to $31.66, Jabil Circuit (NYSE: JBL), down 91 cents to $19.5, Plexus (Nasdaq: PLXS), off $1.88 to $27.69, Sanmina (Nasdaq: SANM), down $2.69 to $25.81, and SCI Systems (Nasdaq: SCI), down $1.66 to $18.28.

In other profit warnings, analysts revised earnings estimates for semiconductor equipment maker KLA-Tencor (Nasdaq: KLAC). It's shares were down 81 cents to $40.94 in the wake of the company's fiscal third-quarter profit warning, but analysts noted that KLA-Tencor can work through an economic slowdown.

Progress Software (Nasdaq: PRGS), down 38 cents to $14.56, on Tuesday reported first-quarter earnings in line with analysts' expectations, but said revenue fell short amid a slower economy.

Amazon (Nasdaq: AMZN) rose 6 cents to $10.56, AOL Time Warner (NYSE: AOL) rose 63 cents $ 40.53 and Yahoo (Nasdaq: YHOO) gained 13 cents to $15.06.

Cisco Systems (Nasdaq: CSCO) rose 75 cents to $21.56, Intel (Nasdaq: INTC) fell 44 cents to $26.63, Oracle (Nasdaq: ORCL) rose 25 cents to $15.69 and Microsoft (Nasdaq: MSFT) was up 63 cents to $54.93.

ZDII staff and Reuters contributed to this roundup.