(Updated from 3:14 p.m.)

An Old Economy stock turnaround continued charged the

Dow to a positive close, while the

Nasdaq remained in the red, feeling the heat from a tech giant's downgrade.

Thanks to a midday comeback from its defense and financial components, the blue-chip index overcame big losses from tech and drugs stocks and struck up a rally.

The Dow finished the day up 21.83 11,260.61.

Intel

(INTC) - Get Report

fell 6.3% after

US Bancorp Piper Jaffray

analyst Ashok Kumar cut his rating on the semiconductor company to buy from strong buy. Drugs also were under the weather on news that

Banc of America

downgraded the group.

Merck

(MRK) - Get Report

was lost 1.6%.

The

American Stock Exchange Pharmaceutical Index

was lately 2.7% lower.

The Nasdaq was shed 91.1 to 4143.2, with big losses from biotech.

Ciena

(CIEN) - Get Report

was sliding 6.6% after it said it would take on a fourth-quarter charge.

The

Nasdaq Biotechnology Index

was down 3.1%.

And with tech and drug stocks losing ground, retailers were receiving some investor attention.

Wal-Mart

(WMT) - Get Report

was 2.6% higher, while

Home Depot

(HD) - Get Report

was lifting 3.99%. The group has been hit hard in recent weeks after a slowdown in consumer spending made for some lackluster August retail sales numbers.

Oil stocks were also ticking ahead, after slipping earlier in the session. This morning, oil-service giant

Schlumberger

(SLB) - Get Report

came under pressure after

Donaldson Lufkin & Jenrette

lowered its rating because of its recent run-up. The group has seen big gains in recent weeks with the high price of crude oil.

Elsewhere, the broad

TST Recommends

S&P 500 lost13.68 to 1507.09, while the small-cap

Russell 2000

shed 2.89 to 539.02.

TheStreet.com Internet Index

was higher by 22.14 to 868.84.

Sector Watch

The

Dow Jones Utility Average

was popping 1.3% to 369.68 after earlier reaching a new intra-day trading high of 371.23.

Broker investors were taking some of last week's profits, after merger speculation instigated a huge run-up.

Merrill Lynch

(MER)

,

Lehman Brothers

(LEH)

and

Goldman Sachs

(GS) - Get Report

were all posting losses, but the

American Stock Exchange Broker/Dealer Index

remained up fractionally.

Big movers included

America Online

(AOL)

, which was off 2.2%. Over the weekend, news came out that the

Federal Trade Commission

likely will block AOL's $129 billion acquisition of

Time Warner

(TWX)

unless the companies agree to let competitors use their cable lines.

TheStreet.com

wrote about the

FTC's concerns in a separate story.

Meanwhile,

WorldCom

(WCOM)

was the big noise in telecom. The company confirmed this morning that it will buy telecom provider

Intermedia Communications

(ICIX)

for close to $3 billion in cash as well as payment of more than $3 billion in Intermedia's debt.

Treasuries were flat, with the benchmark 10-year note at 100 15/32, yielding 5.689%.