Wall Street: Wednesday close

MARKETS took a breather as the world's second biggest computer maker threw cold water on hopes for an immediate rebound in hi-tech spending.

Comment from Hewlett-Packard helped cool investor fervour following two days of strong gains. The Dow Jones Industrial Average retreated 54.32 points or 0.5% to 10,243.82 after running up nearly 400 points since Monday's opening bell. The Nasdaq Index rose 6.51 points or 0.4% to 1725.56, its third straight daily gain, as investors continued to nibble on beaten-down big name techs.

Hewlett, which has just completed its controversial merger with Compaq Computer, fell short of sales forecasts in quarterly numbers released after the close on Tuesday. And it dampened hopes of an early revival by saying that it did not see a meaningful recovery until next year. 'There's absolutely no recovery in demand from major corporate clients,' said Bob Wayman, chief financial officer, and consumer spending saw 'some softening as the quarter went on'. Hewlett slid $1.15 or 5.6% to $19.35.

IBM fell in sympathy, easing 87 cents or 1.2% to $84.50. Data storage equipment maker Network Appliances sagged $2.99 or 17% to $15.05 after it warned it would not meet analysts' expectations. Rival EMC lost 12 cents or 1.5% to $8.

The latest take on tech demand contrasted with upbeat forecasts from several companies including chip equipment maker Applied Materials, reported quarterly figures earlier in the week. Its shares, up roughly 10% in the past two days, rose fractionally to $26.75.

Bargain-hunting appeared to be behind the moves at software maker Oracle and Cisco Systems. Oracle jumped 38 cents or 4.3% to $9.19. It traded at $20 a year ago. Cisco, which traded at $60 within the last two years, gained 11 cents or 0.7% to $16.56.

Economic data seemed to help investor confidence. Measures of industrial production portrayed a continued recovery in manufacturing. Industrial production rose 0.4% in April, in line with economists' expectations. And consumer prices, while rising a higher-than-expected 0.5% last month, were not worrisome enough to force the Federal Reserve Board to raise official interest rates, economists said.

Media shares continued their recovery on hopes of a stronger advertising environment. News Corp followed up its 8% advance on Tuesday by gaining $1.98 or 7% to $30.43. MTV owner Viacom added $1.01 or 2% to $49.97. AOL Time Warner recovered another 30 cents or 1.6% to $18.85 on positive comments from Merrill Lynch.

Drug stocks were hit by negative news. Schering-Plough dropped $3.49 or 12% to $25 after it said a criminal investigation had been launched into its operations in Puerto Rico. Abbott Laboratories slumped $4.84 or 9.4% to $46.90 as it disclosed that an Illinois plant had failed a government inspection.