(Updated from 1:08 p.m. EDT)

The bulls tried to make a comeback this morning after a brief respite over the past week, but by coffee-break time in Silicon Valley the

Nasdaq had slipped back to near unchanged and the

Dow Jones Industrial Average's rally was losing some of its luster.

Bullish sentiment that abounded this morning was being tempered by concerns a sharp rally in April got ahead of itself, doubts about the viability of a second-half turnaround in corporate earnings and caution ahead of a rash of economic data tomorrow and the

Federal Reserve's meeting on May 15.

The Dow and the Nasdaq are also fighting resistance levels on the upside -- technical levels that are hard to exceed. That's

11,000 on the Dow and 2200 on the Nasdaq. There have been several times recently when the Dow has approached 11,000, only to then turn lower. "Gains are being capped by resistance and because there is a ton of stuff coming out between now and Tuesday," said Todd Clark, head of listed trading at

W.R. Hambrecht

. "We've got retail sales, wholesale prices and consumer sentiment tomorrow, and then the FOMC meeting Tuesday."

A steady stream of good news last night and this morning inspired the initial bounce in stocks this morning and was still helping to buoy some sectors: storage giant



announced a share buyback and issued an optimistic outlook for spending on information technology in the second half of 2001;

Morgan Stanley

upgraded a slew of large-cap semiconductor capital-equipment makers; several retailers reported

strong same-store sales for April; and the

European Central Bank

unexpectedly cut interest rates, dropping its

benchmark lending rate by a quarter point to 4.5%.

The biggest gains in morning trading were in the retail and chip sectors.


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, which both posted better-than-expected same-store sales, were among retail's winners. The

S&P Retail Index

was recently rising 2.8%.

Chip-equipment maker

Applied Materials

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, one of six stocks upgraded this morning by Morgan Stanley, was up 1.7% in heavy trading volume. The

Philadelphia Stock Exchange Semiconductor Index

was gaining 1.2%.

The Dow was getting a lift from a wide range of old economy and retail stocks, particularly Wal-Mart and home improvement retailer

Home Depot

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A bull run that started in early April had paused this month as Wall Street digested the market's recent gains. The Nasdaq has been flat since the beginning of May, while the Dow and the

S&P 500 have closed slightly lower each day this week. Yesterday's moderate selloff was helped by an unenthusiastic outlook from networker


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, which also reported its

first ever quarterly loss. It was off 0.7% to $19.01.

Wall Street bears fear April's stellar run-up may have priced in a third-quarter earnings rebound, as well as a half-point interest rate cut.

Federal funds futures indicate bond traders are expecting the Fed to cut short-term rates by a half-percentage point, to 4%, at next week's meeting. If either or both fail to materialize, the markets could feel the pain, bears say. Bonds were trading lower today, pushing their yields higher.

A rush of less-than-dismal corporate earnings news released during the recent earnings season inspired optimism about the third-quarter rebound. But corporate America, as Cisco reminded investors yesterday, has still been unable to give a clear outlook about how business will be in coming quarters.

Some market-watchers expect stocks to go nowhere between now and the Fed meeting, and predict a selloff in its wake -- whether Fed head Greenspan cut rates by a half-point or not.

Whether the market can extend April's rally may depend in part on whether the indices can break through their resistance levels. "Unless we can overcome 11,000 on the Dow and 2252 on the Nasdaq, I would argue that we're going to sell-off following the FOMC announcement," said Clark. Still, that doesn't mean he's bearish. Any selloff, he says, will just be more digesting of the April rally. "I don't expect a major selloff, just a bit of pullback," he said.

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