The Dow Jones industrial average rose 109.99 to close at 10,976.89, led by Microsoft. The software giant closed up $4.13, or nearly 6 percent, at $74.13, on a volume of about 69 million shares, making it the most actively traded stock on the Nasdaq. Intel fell $1.31 to $61.63.
The Nasdaq composite index fell 14.44 to 3,848.55, and the Standard & Poor's 500 index rose 3.49 to 1,482.81.
The Labor Department reported today that worker productivity rose 5.3 percent in the second quarter, compared with a first-quarter increase of 1.9 percent. Economists and analysts had expected a gain of 4.5 percent. In the past 12 months, productivity has risen 5.1 percent, the biggest jump in about 17 years.
The government also said today that unit labor costs fell 0.1 percent in the second quarter, compared with a first-quarter increase of 1.9 percent. The Labor Department defines unit labor as the output per hour of all workers.
The combination of lower labor costs and higher productivity permits economic growth without necessarily sparking inflation. As a result, the Federal Reserve may be less inclined to raise interest rates when it meets later this month.
"The economy is not getting inflation pressure from the labor market," said Peter Kretzmer, an economist at Banc of America Securities. The data "reinforces the positive picture of a lack of increases in labor demand."
Of the 18 sectors tracked by CNET Investor, PC software companies posted strong gains today, climbing about 4 percent. Providers of communication services were the day's largest sliders, slipping about 3 percent.
The initial public offering of Active Power was the biggest percentage gainer on the Nasdaq. The shares jumped $35.75, or 210 percent, to $52.75 as volume topped 16.7 million shares. Active Power makes batteries that ensure a constant electrical supply to computers.
Applied Science & Technology was the largest percentage loser on the Nasdaq. The shares fell $5.50, or 30 percent, to $12.63.
The company, which makes reactive gas modules and power supplies used to etch thin films during the manufacturing of semiconductor devices, reported fourth-quarter earnings of 32 cents a share, slightly less than the 33 cents expected by eight analysts surveyed by First Call/Thomson Financial.
Among members of the CNET tech index, Verizon Communications fell $5.81, or 12 percent, to $42.06.
The telecom giant announced it will invest in Internet access provider NorthPoint Communications and also said earnings for the year will be lower than Wall Street expectations. NorthPoint shares fell $2.25, or nearly 14 percent, to $14.25.
Broadcom fell $6.19 to $241.75, while DoubleClick slid $3.81, or nearly 10 percent, to $34.81.
Shares of Lernout & Hauspie Speech Products, a Belgian software maker, fell $7.19, or 19 percent, to $29.81. The Wall Street Journal reported that the company may have given incorrect information about its Korean customers.
Among other big movers: Citrix Systems rose $2.13, or 13 percent, to $18.25; Electronic Data Systems climbed $3.75 to $49.50; chipmaker PMC-Sierra gained $12.13 to $207.19; and Siebel Systems added $10.19 to $174.38.
The Philadelphia semiconductor index fell 3.22 to 950.78, led by chip maker Advanced Micro Devices, which lost $3.50 to close at $61.50.