By LISA SINGHANIA

Associated Press

NEW YORK – Technology issues fell sharply today, pushing the Nasdaq composite index to its lowest close in more than four months, after the Federal Reserve decided against raising interest rates but expressed concern about inflation.

The central bank’s decision did little to reassure a market already worrying about third-quarter earnings reports coming out this month. Instead, investors, concerned that the Fed’s credit tightening might not be over, sold off stocks they believe to be too expensive in the current economic environment.

The Nasdaq fell 113.07 to 3,455.83, after rising 60 points in early trading. The close was the lowest since May 31, when the index hit 3,400.91. The decline also marked the Nasdaq’s eighth drop in nine trading days.

The Standard &Poor’s 500 index fell 9.77 to 1,426.46.

The Dow Jones industrial average closed up 19.61 at 10,719.74, after rising more than 140 points earlier in the day.

“I think what’s going on today is specifically Fed-related,” said James Meyer, research director at Janney Montgomery Scott. “What the market would have wanted is for the Fed to move back to a neutral bias, which would have been a prelude at some point down the road … to lowering rates in order to stimulate the economy. That didn’t happen.”

Technology issues advanced earlier in the day on bullish comments by influential Goldman Sachs analyst Abby Joseph Cohen. But, repeating what has become a pattern this fall, many stocks failed to hold their gains.

Stock prices were higher early in the day, but tumbled after the Fed’s 2:15 pm EDT announcement. In its statement, the Fed’s Open Market Committee said the economy appears to be slowing, but the FOMC left the door open to future rate increases, citing the tight labor market and higher energy costs as potential inflationary pressures.

Tech stocks still seen as high-priced bore the brunt of investors’ angst.

Telecommunications company Ciena fell $11.25 to $110.13, and Microsoft fell $2.56 to $56.56. Software maker Oracle dropped $9.50 to $69.25.

IBM, a Dow component, fell $7.25 to $110.56.

Earnings news remained a focus as investors awaited third-quarter reports.

Xerox was off $3.94 at $11.38 after warning late Monday that its results would fall below expectations.

But Schering-Plough, maker of the allergy pill Claritin, said it remains comfortable with Wall Street’s predictions for its full-year profits. Investors rewarded the drug maker by bidding it up $1 to $46.75.

Boeing led the Dow higher, rising $1.44 to $59.88. But Wal-Mart fell 63 cents to $45.63 after its CEO expressed concerns that higher fuel prices could cut into consumers’ buying power.

Not all technology issues suffered. Canadian software company Corel was up $2.09 at $5.78, a 57 percent jump, on news that Microsoft was acquiring a $135 million stake in it.

The fluctuations in the market are understandable, given the spate of earnings warnings the past few weeks and worries about the effect the moderating economy will have on companies’ future results, analysts said.

“This is part of the bottoming out process,” said Al Goldman, a market analyst with A.G. Edwards &Sons in St. Louis. “The market goes up early on optimism and buyers look over their shoulder and there’s no one behind them – and boom, we sell off.”

In the early going, stocks rose on expectations the Fed would not hike rates, as it has six times since the summer of 1999. Most market watchers believed the combination of the slowing economy and the presidential election next month would be enough for the central bank to leave rates unchanged.

Helping to affirm this outlook, for the fourth consecutive month, a key measure of U.S. economic activity fell slightly, the latest sign that economic growth is continuing to slow. The Index of Leading Economic Indicators declined by 0.1 percent in August to 105.7, according to the New York-based Conference Board.

But the Fed, in reiterating its concern about inflation, let Wall Street know that recent data isn’t lulling the central bank into a bias against raising rates. That stand unnerved Wall Street, forcing stocks to give up their earlier gains.

Declining issues outnumbered advancers by a narrow margin on the New York Stock Exchange, where volume came to 1.08 billion shares, ahead of the 1.05 billion in the last session.

The Russell 2000 index was off 7,00 at 504.67.

Overseas, Japan’s Nikkei stock average rose 0.06 percent. Germany’s DAX index was up 0.95 percent, Britain’s FT-SE 100 was up 0.96 percent, and France’s CAC-40 was up 0.81 percent.

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