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Tech stocks rise on bad economic news

Investors bet that the Federal Reserve will lower interest rates again, considering the day's negative economic report.

Bad news for the economy was good news for technology stocks Friday, as investors bet that the Federal Reserve will lower interest rates again, considering the day's gross domestic product report.

The Nasdaq composite index rose 6.11 points to 2,029.07, and the Dow Jones industrial average dropped 38.96 points to 10,416.67.

The government said gross domestic product, the broadest measure of U.S. economic activity, grew at a 0.7 percent annualized rate in the second quarter, less than the 0.9 percent economists had expected.

The news raised hopes that the Federal Reserve will make another interest-rate cut next month, but it wasn't exactly rosy for the economy. The 0.7 percent rate is the slowest in eight years, signaling that economic conditions worsened even after the weak 1.3 percent growth rate in the first quarter. The figures also indicate that consumer spending is slipping.

"The market was pretty much unscathed after the GDP number," said Harry Michas of "We were a little bit lower early, that was it."

JDS Uniphase was the Nasdaq's most actively traded stock, down 92 cents, or 9.71 percent, to $8.55. The supplier of fiber-optic components said slowing fourth-quarter sales would lead to more job cuts, and it reported a net loss of $7.9 billion for the quarter and added that it sees no signs of a turnaround ahead. Analysts lowered estimates for the company.

Cisco Systems was down 32 cents to $19.06 after news that it plans to buy Allegro Systems, a developer of virtual private network acceleration technology, for around $181 million in shares.

One of the Nasdaq's biggest gainers was VeriSign, up $6.93 to $54.10, a gain of more than 14 percent. The provider of security software and registrar of Internet domain names on Thursday evening reported second-quarter pro forma earnings that topped estimates, and it even raised earnings targets for the year.

In other upbeat news, Qualcomm rose $3.52 to $63.18 after announcing on Thursday evening that it expects to increase revenues and profits in 2002 thanks to the deployment of new technology and increased market share in the wireless market. However, the wireless technology company also reported that its fiscal third-quarter earnings fell 20 percent due to soft demand for its chips, and it lowered its 2001 earnings forecast.

CNET's Wireless index was the top-gaining index, up more than 4 percent.

Among technology bellwethers, Microsoft fell $1.12 to $65.47, Oracle lost 18 cents to $19.23 and Intel fell 56 cents to $29.22. fell 8 cents to $12.25, AOL Time Warner rose 23 cents to $45.14 and Yahoo rose 54 cents to $18.02.

Staff and Reuters contributed to this report.