The Nasdaq rose 13.75 points to 2,064.62 after sliding in midsession trading. The Dow Jones industrial average dropped 31.74 points to 10,472.48.
The day's economic report--the Conference Board's closely watched barometer of U.S. consumer confidence--indicated positive news for the economy. Consumer confidence rose to 117.9 points in June from an upwardly revised 116.1 points in May. But the report, which was bad news for those looking for continued interest rate cuts, may have contributed to the Nasdaq's losses.
It's widely expected that the Federal Reserve will cut rates by 50 basis points Wednesday, when it announces the result of its two-day meeting.
"Our forecast is for a 50 (basis point) rate cut," said BMO Nesbitt Burns analyst Douglas Porter. "Chairman Greenspan's testimony leaned in a direction we thought suggested a likely 50bp, emphasizing the squeeze on profits lately, the impact of that squeeze on capital spending, and the likely restraint on consumption if job growth slips further."
But the consumer confidence index suggests the Fed may be near the end of its slashing cycle.
"It's the sort of report which encourages the idea that the Fed may be almost done," said Jim O'Sullivan, senior economist at UBS Warburg. But he added, " I don't think we've seen enough strength to change the view that they're going to do 50 (basis points) instead of 25."
Analysts' outlook for the technology sector was in stark contrast to the day's upbeat economic news. Goldman Sachs lowered its estimates for the whole tech sector, based on predictions that economic recovery won't be as strong as expected. Despite the glum outlook, the brokerage cited Internet stocks as a potential bright spot in the sector.
Goldman's upbeat note on Internet stocks didn't seem to be helping shares: After the report, Amazon.com rose 44 cents to $13.25; AOL Time Warner dropped 15 cents to $52.85; and Yahoo shed 63 to $ 19.14. CNET's Internet Content Index was off 0.83 percent, and its Internet E-tailers Index was down 1.18 percent.
In a separate note, Merrill Lynch analyst Steven Milunovich gave a negative forecast for the technology sector Tuesday. "The trough in the tech profit cycle should occur in either the second quarter or third quarter," Milunovich predicted. Earnings are forecast to be down 45 percent this year and up 52 percent next year, he said.
In company news, Computer Associates was up 66 cents to $32.66 after news that Texas investor Sam Wyly took his fight for control of the company to shareholders Tuesday, telling investors on a conference call that their "liberation day" was coming.
Borland Software made gains after Bear Stearns gave its stock a "buy" rating and became the first major brokerage to begin covering the development tools maker again after Wall Street had written it off as dead.
Shares in Level 3 Communications rose on an agreement with Microsoft that will make it one of the primary providers of the software company's broadband services.
Most technology bellwethers turned around from earlier losses. Microsoft rose $1.23 to $70.08. Oracle gained 67 cents to $18.44. Cisco Systems fell 49 cents to $18.02, and Intel rose 39 cents to $28.97.
Staff and Reuters contributed to this report.