Updated from 4:04 p.m. EDT

The Nasdaq clawed its way back above the 2000 mark in the last hour of trading Thursday, but still suffered its third losing day in a row after concerns about demand at Cisco ( CSCO) compounded an already rough day for semiconductor shares.

The index closed off 22.68 points, or 1.12%, to 2002.17, dragged down by a 2.8% decline on the Philadelphia Semiconductor Index. The Dow Jones Industrial Average rebounded to a gain of 19.51 points, or 0.19%, to 10,397.46, while the S&P 500 ended basically flat, adding 0.66 points, or 0.06%, at 1128.83. The Nasdaq took the broader market down as it tested resistance at 1990, but its bounce with just under two hours left in the trading day resulted in tech stocks narrowing their losses, while coinciding with the Dow's ultimate return into positive territory. The Nasdaq has not closed below the 2000 level since March 31.

Mark Arbeter, chief technical analyst at Standard and Poor's, noted at the time that the Nasdaq broke through technical barriers -- like its 50-day moving average -- and hit a support level in the 1990 area. "If we break that level, I think we'll have a full retest of the lows that we saw later in March back down near 1900," Arbeter said. "We've had a terrific run off the March lows and we don't normally see V-bottoms. From a technical standpoint, this is normal action."

Selling in tech issues snowballed after executives of Cypress Semiconductor ( CY) were asked about orders at one of their customers, Cisco Systems.

"We are just not seeing any growth in orders from Cisco," said Cypress CEO T.J. Rodgers. "I don't think there is a market share shift but there could be some softness or weakening in the current quarter in demand at Cisco."

Cisco closed down 46 cents, or 2%, to $22.80, while Cypress plunged $2.45, or 12%, to $17.90.

Breadth on the New York Stock Exchange, where volume nearly hit 1.6 billion shares, showed underlying weakness, as decliners outnumbered advancers by a small margin. Over 1.9 billion shares changed hands on the Nasdaq, where decliners outpaced advancers by about 3 to 2.

Market watchers attributed the session's broad weakness to uncertainties that have kept investors from celebrating a generally positive earnings season so far this week, such as rising interest rates in light of recent economic news and instability in Iraq.

"You have two different camps fighting against each other here," said Robert Pavlik, portfolio manager at Oaktree Asset Management, "those that believe that an interest rate hike is imminent and needed, and those of us that believe that a rate hike could probably be put on a backburner until we get a confirmation that the unemployment scene has really turned a corner."

"I think traders are trying to hedge the move that might be occurring and move into noncyclical sectors," Pavlik added. "They're getting out of things that might eventually be hit by a rate hike, like financials and gold."

An immediate beneficiary of the rotation were drug stocks, as evidenced by the 3.6% gain Thursday in the Amex Pharmaceuticals Index and a 3.3% run-up in the Amex Pharmaceuticals ( PPH) exchange-traded fund. Another strong sector was health care, where the iShares Dow Jones U.S. Healthcare ( IYH) basket closed up 1.7%.

Among well-known names, Pfizer ( PFE) closed up over 4%, while Merck ( MRK), Johnson & Johnson ( JNJ) and Eli Lilly ( LLY) all closed with gains above 3%.

On the economic front, the Labor Department said weekly initial jobless claims rose 30,000 in the week ended April 10. Economists had expected claims to total 335,000. The previous week's claims were revised slightly higher to 330,000.

Also, two gauges on regional manufacturing activity gave surprisingly strong readings. The New York Fed's manufacturing index jumped to 36.05 in April from the 25.33 reading in March, after economists predicted a rise to only 26.8. That marks its 12th straight gain. Separately, the Philadelphia Fed said its manufacturing index weighed in at 32.5 in April, up from 24.2 the previous month, after economists were expecting a reading of 26.

Citigroup ( C) said it earned $5.27 billion, or $1.01 a share, in the first quarter, compared to earnings of $4.10 billion, or 79 cents a share, last year. Excluding a gain, the company earned 98 cents in the most recent quarter, eclipsing estimates by 4 cents a share. Revenue shot up 16% to $21.5 billion, beating the First Call estimate of $21.04 billion. However, Citigroup shares closed down $1.03, or 2%, to $49.92.

Citi was one of a handful of large banks reporting strong earnings. Others were Fifth Third ( FITB), Comerica ( CMA) and National City ( NCC).

Elsewhere, EMC ( EMC) said first-quarter earnings were $140 million, or 6 cents a share, including a 1-cent charge. The data storage company earned $35.2 million, or 2 cents a share, last year. Revenue rose to $1.87 billion. Analysts had been forecasting earnings of 6 cents a share on revenue of $1.82 billion. Its shares closed down 18 cents, or 1.4%, to $13.02.

Continental Airlines' ( CAL) first-quarter loss narrowed to $124 million, or $1.88 a share, in the latest first quarter from $221 million, or $3.38 a share, last year. The loss came out to $1.36 a share before charges, 3 cents narrower than forecasts. Its shares closed down 11 cents, or 0.9%, to $12.25.

Thursday morning's earnings followed a round of almost uniformly positive reports from technology companies after Wednesday's bell. Apple ( AAPL) and Advanced Micro ( AMD) both blew away quarterly profit estimates, while Texas Instruments ( TXN) guided future earnings to a range above forecasts.

Overseas markets also were mixed, with London's FTSE 100 closed up 0.4% to 4505 and Germany's Xetra DAX down 0.2% to 4005. In Asia, Japan's Nikkei fell 2.5% to 11,800, while Hong Kong's Hang Seng fell 1.5% to 12,479.

Before Friday's opening bell, first-quarter earnings releases are scheduled from Nokia ( NOK) expected to report profits of 22 cents a share, up from last year's 18 cents a share; Delphi ( DPH), expected to report profits of 20 cents a share, down from last year's 23 cents a share; Regions Financial ( RF), expected to report profits of 74 cents a share, up from last year's 70 cents a share; and E*Trade Financial ( ET), expected to report profits of 20 cents a share, up from last year's 10 cents a share. Investors also will consider mostly positive earnings reports issued after Thursday's close, including IBM ( IBM), and PMC-Sierra ( PMCS).

On the other hand, Sun Microsystems' ( SUNW) third-quarter earnings report narrowly missed analysts' revenue and earnings forecast.

Friday promises to be a busy day on the economic data front, beginning at 8:30 a.m. EDT, when the Census Bureau is expected to report that housing starts rose to 1.9 million in March, up from 1.885 million in the previous month, and building permits totaled 1.91 million in March, up slightly from February.

At 9 a.m. EDT, Fed Chairman Alan Greenspan will address the Fed Bank of Atlanta's Financial Markets Conference, in Sea Island, Ga.

At 9:15 a.m. EDT, the Fed is expected to report that industrial production rose 0.3% in March, down from its 0.7% jump in February. Economists think American factories were operating at 76.8% of capacity during the month, up slightly from February's 76.6%.

In addition, the University of Michigan is expected to report that the preliminary reading on consumer sentiment in April shows an increase to 97 from March's reading of 95.8, and at 10:30 a.m. EDT, the Economic Cycle Research Institute will release the results of its index of leading indicators for the week ended April 9. The index added 10.3% in the previous week.