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Semiconductor rally catapults Nasdaq

Techs are back in favor with investors, who lift the Nasdaq 2 percent on upbeat chip and dot-com news.

A semiconductor rally along with good news from the dot-com sector helped catapult the Nasdaq to 2 percent gains Wednesday.

The Nasdaq composite index rose 41.25 points to 2,068.38, while the Dow Jones industrial average fell 12.80 points to 10,510.01.

The rally was started by new research from Merrill Lynch that the semiconductor sector may have finally hit bottom. The brokerage house unveiled a slew of upgrades to semiconductor and semiconductor-equipment stocks, saying that the tide may have finally turned.

CNET?s Semiconductor index was up almost 5 percent. Applied Materials was up $2.44 to $48.30, KLA-Tencor added $2.71 to $57.10 and RF Micro Devices gained $3.60 to $30.96. Texas Instruments gained $2.31 to $36.63.

The storage sector was also faring well, led by Network Appliance, up $2.71, or 22 percent, to $15.21. EMC was up $1.18 to $20.90. CNET's Storage index was up 6.62 percent.

While no one is suggesting a return to the dot-com heyday, there was one positive sign for the Internet sector. Priceline.com reported a second-quarter pro forma profit of $11.7 million, or 5 cents a share, topping First Call consensus of a penny per share. Sales of $364.8 million topped the consensus forecast by 21 percent. Priceline was up 65 cents to $9.52.

Electrical component maker Vishay Intertechnology, down 88 cents at $23.17, said it will snap up rival General Semiconductor for $512.5 million in stock.

Among technology bellwethers, Microsoft rose 28 cents to $66.47, Oracle rose 28 cents to $18.32, Cisco Systems gained $1.08 to $20.30 and Intel rose $1.15 to $30.96.

Amazon.com rose a penny to $12.50, AOL Time Warner rose 63 cents to $46.08 and Yahoo gained 67 cents to $18.29.

Staff and Reuters contributed to this report.