MARKET CLOSE: Early tech rally fizzles

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Technology stocks started strong Wednesday but lost their steam in late trading as the Nasdaq composite closed off 27 points to 3,658.47. The Dow Jones industrial average moved up 81 points to close at 10,687.53.

Blue-chip investors were encouraged by a government report showing that sales of U.S. homes dropped to their lowest level since 1998, indicating that more than a year of Federal Reserve interest rate hikes may be taking effect.

"There's a sense that maybe the downtrend in the Nasdaq has created some buying opportunity, and the economic reports are pretty encouraging for the 'soft landing' scenario," said Alan Skrainka, chief market strategist at Edward Jones.

Internet stocks battled through some choppy trading as Yahoo! (YHOO) and America Online (AOL) fell 5/16 and 1/16 a share, respectively. Lycos (LCOS) dropped 1 1/4 to 58 1/16 while Amazon.com (AMZN) and eBay (EBAY) rose 9/16 and 5/16 a share, respectively.

Vignette (Nasdaq: VIGN) hustled up 6 1/16 to 35 1/8 after the company signed a deal with Arthur Andersen to provide the consulting firm with its eBusiness design, Internet marketing and web technology services.

Caldera Systems Inc. (Nasdaq: CALD) and Santa Cruz Operations (Nasdaq: SCOC) finally closed the door on their much rumored deal that combines the worlds of Linux and Unix. Caldera will take over SCO's server software division and professional services division, both of which will become part of a new holding company, Caldera Inc. Caldera shares closed off 13/16 to 6 1/8 while Santa Crux Operations shares closed unchanged at 3 1/4.

Dell Computer Corp. (Nasdaq: DELL) fell 2 to 39 9/16 after the company was downgraded by Piper Jaffrey analyst Ashok Kumar. Kumar said the company "does not have adequate earnings power in notebooks, server and non-system revenue to offset the secular weakness in consumer and commercial desktops."

Apple Computer (AAPL) shares slid 2 1/16 to 47 1/4 while Gateway (GTW) and Compaq (CPQ) shed 1 13/16 and 7/16 a share, respectively.

Microsoft (MSFT) shares moved up 11/16 to 69 3/8. Oracle (ORCL) ended unchanged at 73 1/8 and Sun Microsystems (SUNW) closed off 2 1/16 to 101 1/4.

Intel (INTC) fell 1 5/16 to 63 5/16. Advanced Micro Devices (AMD) lost 6 to 61 3/4 and IBM (IBM) gained 4 3/16 to 114 11/16.

Cisco Systems (CSCO) dropped 2 1/4 to 60 15/16. 3Com (COMS) gained 3/4 to 14 7/16 and Lucent Technologies (LU) ended up 7/16 to 45 3/16.