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Techs slip despite chip-equipment rally

Technology investors lose their enthusiasm by market close, even after a chip-equipment rally and good economic news inspire gains earlier in the day.

Technology investors lost their enthusiasm by market close Thursday, even after a chip-equipment rally and good economic news helped them shake off Cisco Systems-inspired blues earlier in the day.

The Nasdaq fell 27.81 points to 2,128.82 at market close, and the Dow Jones industrial average gained 43.46 points to 10,910.44.

The late-day downturn occurred as investors were looking ahead to more economic reports due Friday, including the PPI, or Producer Price Index, which will set the tone for the Federal Reserve's meeting on interest rates next week. The PPI is an index of wholesale price changes.

Thursday's economic news was upbeat across the board. The number of Americans lining up for first-time unemployment benefits last week fell sharply to a level not seen in more than a month, the government said Thursday.

In addition, the European Central Bank announced a surprise interest-rate cut, and retailers said there were strong sales last month.

"The surprise rate cut by the ECB makes it easier for the Fed to lower rates," Graham Tanaka, president of Tanaka Capital Management told Reuters.

"The retailers' sales figures were coming in greater than expected, and then there was the call from Morgan," Prudential Securities' Larry Wachtel said about the rally's determining factors.

Morgan Stanley's Jay Deahna was the little engine that could for chip-equipment stocks. In an upbeat report, the analyst told investors that the semiconductor capital equipment express is now boarding, and he upgraded six stocks.

CNET's Semiconductor Capital Equipment index was up just 1.54 percent after gaining almost 6 percent earlier in the day. Among the bigger gainers were Lam Research, up $1.97 to $29.95, and Teradyne, up $2.15 to $38.40.

Struggling Web hosting company Digital Island soared $1.69 to $3.69, or 81 percent in afternoon trading after announcing a deal to host Microsoft Network's advertising.

Software giant Microsoft, down 40 cents to $70, sees big revenue growth from server software over the next few years and is not worried about its cost structure in the current industry downturn, Chief Executive Steve Ballmer said Thursday.

Internet services company Proxicom, up 11 cents to $7.64, has given potential acquirer Compaq Computer, down 21 cents to $16.10, an ultimatum: Up its bid or it will take another offer. was down 39 cents to $14.62. AOL Time Warner gained 49 cents to $52.45, and Yahoo fell 63 cents to $18.23.

Intel lost 92 cents to $29.01. Microsoft fell 40 cents to $70.00, and Oracle was down 67 cents to $16.39.

Staff and Reuters contributed to this report.