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Markets in holding pattern; Solectron sinks

Solectron's warning rips through the contract equipment-manufacturing sector, causing a brief distraction on Wall Street from the Federal Reserve vigil.

    Solectron's warning ripped through the contract equipment-manufacturing sector Tuesday, causing a brief distraction on Wall Street from the Federal Reserve vigil.

    The Nasdaq composite index rose 13.51 points to 1,964.69, and the Dow Jones industrial average gained 39.90 to 9,999.01.

    The markets were treading water at midday as investors held out for news from the Federal Reserve's meeting on interest rates. Economists expect either a half- or a three-quarter-point cut to interest rates to be announced when the Federal Open Market Committee closes its meeting at 2:15 p.m. EST. Though expectation of a half-percentage-point cut has been built into stocks already, a slightly larger cut could mean good news for the beleaguered indexes.

    Solectron on Tuesday fell $2.19 to $19.31 after Monday's announcement that it expects to miss analysts' third-quarter estimates by more than half and plans to cut more than 8,000 jobs. Analysts said the company's sudden reversal of fortune doesn't bode well for its competitors.

    Other contract equipment manufacturers to get downgraded by analysts Tuesday included Flextronics, down $3.56 to $19.81; Celestica, down $5.99 to $31.66; Jabil Circuit, down 91 cents to $19.5; Plexus, off $1.88 to $27.69; Sanmina, down $2.69 to $25.81; and SCI Systems, down $1.66 to $18.28.

    In other profit warnings, analysts revised earnings estimates for semiconductor equipment maker KLA-Tencor. Its shares were down 81 cents to $40.94 after the company's fiscal third-quarter profit warning, but analysts noted that the company can work through an economic slowdown.

    Progress Software, down 38 cents to $14.56, on Tuesday reported first-quarter earnings in line with analysts' expectations, but said revenue fell short amid a slower economy.

    Amazon.com rose 6 cents to $10.56, AOL Time Warner rose 63 cents $ 40.53, and Yahoo gained 13 cents to $15.06.

    Cisco Systems rose 75 cents to $21.56, Intel fell 44 cents to $26.63, Oracle rose 25 cents to $15.69, and Microsoft was up 63 cents to $54.93.

    Staff and Reuters contributed to this report.