The Nasdaq composite index, which initially fell on the news, gained 10.12 points to 2,074.74, and the Dow Jones industrial average fell 37.64 points to 10,434.84.
At 11:15 a.m. PDT, the Federal Reserve cut interest rates 25 basis points to 3.75 percent, a seven-year low. Many investors were hoping for a 50 basis-point cut.
This was the sixth cut to interest rates this year. In its statement, the Fed said it remains concerned about the sagging U.S. economy, adding that it sees conditions that indicate further deterioration.
Though technology stocks rose earlier in the day in anticipation of news from the Fed, most analysts said it would take more than another interest-rate cut to inspire a tech-sector recovery.
"The Federal Reserve can help the corporate sector return to profitability, and that will help the technology sector," said Gerald Cohen, senior economist with Merrill Lynch. "But patience is a virtue."
Palm was the most actively traded stock, up 83 cents to $6.02, as analysts upgraded the shares following the company's quarterly report. Competitor Handspring also got a boost on some upgrades, rising 99 cents to $6.40.
Semiconductor companies in the communications market took a tumble after Vitesse, up 84 cents to $17.41 and Xilinx, off $3.93 to $39.93, issued warnings for their current quarters. The news was especially foreboding since it followed a warning from communications chipmaker Applied Micro Circuits on Monday. Its shares were up 22 cents to $14.95.
CNET's Semiconductor Index was up 0.47 percent.
While technology stocks were mixed, it was a bad day for the exchange that most of these stocks trade on. The Nasdaq said it is laying off 137 employees, or about 10 percent of its staff. The company cited market conditions and a sharp decline in the number of initial public offerings.
Amazon.com rose 79 cents to $ 14.04, and Yahoo fell 41 cents to $18.73 after positive analyst comments for both companies. Merrill Lynch analyst Henry Blodget said that Amazon should have another solid quarter, and that many of its online competitors have fallen off the map. Morgan Stanley's Mary Meeker was bullish on Yahoo, saying that that the worst is over for Internet advertising.
AOL Time Warner dropped 17 cents to $52.68.
In other Internet news, Blodget said he dropped coverage of four companies as he continues to "refocus" on the sector. The analyst let go of Webvan, down a penny to 8 cents; CMGI, gained a penny to $2.95; iVillage, up 11 cents to $1.52; and LookSmart, down 2 cents to $1.16.
Technology bellwethers were mixed. Microsoft rose $1.00 to $71.14, Oracle dropped 40 cents to $18.04, Cisco Systems fell 9 cents to $17.93, and Intel dropped 32 cents to $28.65.
Staff and Reuters contributed to this report.