* Tech shares rally, boosted by Cisco comments on outlook
* Oil continues to slide, falls to $118/bbl
* Freddie Mac posts loss, to slash dividend
* Dow, S&P flat, Nasdaq up 0.7 pct
(Updates to midday, recasts, changes byline)
By Steven C. Johnson
NEW YORK, Aug 6 (Reuters) - U.S. technology shares rose on
Wednesday, boosting optimism about future corporate spending
and profits, but the Dow and S&P were little changed due to
concerns about fallout from the mortgage crisis.
Tech stocks rose after Cisco Systems Inc <CSCO.O>, the
largest U.S. maker of equipment that directs Web traffic, said
it expects the weak economic environment to be relatively
short-lived. Shares jumped 6 percent, making the stock the
biggest percentage gainer on the Nasdaq 100 index and a leader
on the S&P 500.
The technology sector also got a lift from a report
Microsoft Corp <MSFT.O> may buy back as much as $20 billion of
its stock to boost its share price. Shares rose nearly 2
percent after the report by Bloomberg News, citing a UBS
analyst report. Microsoft could not be reached for comment.
Further declines in oil's price helped the broad market
recover from earlier losses sparked by a news of a fourth
straight quarterly loss from home finance company Freddie Mac
<FRE.N>, which was down 12 percent.
"People were encouraged by what Cisco had to say. There's a
different mind-set, even though the Freddie Mac news was pretty
bleak," said Dave Rovelli, managing director of U.S. equity
trading at Canaccord Adams in New York.
"All big-cap tech is seeing strength. What is also bullish
today is the talk that Microsoft might be buying back $20
billion worth of stock. That's a very good sign."
The Dow Jones industrial average <> was down 12.05
points, or 0.10 percent, at 11,603.72. The Standard & Poor's
500 Index <.SPX> was down 2.41 points, or 0.19 percent, at
1,282.47. The Nasdaq Composite Index <> was up 10.73
points, or 0.46 percent, at 2,360.56.
Shares of Cisco rose 5.8 percent to $23.96, while shares of
Microsoft rose 1.8 percent to $26.69. For details, see
[]
Investors also grew hopeful about future consumer and
business spending after oil <CLc1> touched a three-month low
below $118 a barrel before paring losses to trade at $119.10 --
still far below a record high above $147 in July.
On the Dow, shares of Caterpillar Inc <CAT.N> rose 2
percent to $69.51, boosted by lower oil prices. Aluminum
company Alcoa Inc <AA.N> shares rose 1.4 percent to $32.10.
Earlier, Freddie Mac's wider-than-expected loss pushed
stock prices lower and stoked concern about financial shares
and the ongoing U.S. housing slump.
Freddie Mac said it was setting aside twice as much money
for bad loans and made plans to slash its dividend by at least
80 percent. []. Its shares fell 14.1 percent to
$6.90, while Fannie Mae <FNM.N> declined 10.6 percent to
$12.16.
"I don't see much light at the end of the tunnel," said
Alan Lancz, president of Alan B. Lancz & Associates Inc, an
investment advisory firm in Toledo, Ohio. "I still think there
will be more problems, not only with Fannie and Freddie, but
also with a number of banks," he said.
(Additional reporting by Ellis Mnyandu; Editing by Kenneth
Barry)
