NEW YORK (CNN/Money) - Stocks showed some muscle Thursday, as a resilient tech sector kept chipping away at the economic woes that had dogged the broader market, pushing the Dow Jones industrial average off of its lows for the day and propelling the Nasdaq composite to a higher close.

Late-day gains in Microsoft and Intel lent strength to the broader market, while news involving Philip Morris helped boost the Dow.

The Dow lost 21.73 to close at 10,479.84, but the blue-chip indicator was down as much as 146 points before bouncing back. The Nasdaq closed up 35.96 at 1,868.83. The Standard & Poor's 500 added 1.74 to end the day at 1,153.59.

For most of the morning, weakness in the Philly Fed, an influential regional measure of economic activity, along with stagnation in the forward-looking index of leading economic indicators, spooked investors, as the reports seemed to counter signs of economic recovery.

Adding pressure on the corporate side, shares of General Electric (GE: down $1.35 to $37.45, Research, Estimates) were sharply lower on the Dow after Bill Gross, prominent manager of PIMCO's total return bond fund, criticized the company, saying he will not buy GE's short-term debt. PIMCO also reportedly has dumped $1 billion of GE debt in recent days.

But the Dow gained some momentum from a late-day announcement that a federal jury returned a verdict in favor of tobacco and other consumer products producer Philip Morris (MO: up $1.28 to $53.31, Research, Estimates), denying compensation to the family of a man who died of cancer. The jury ruled that the danger of smoking was made sufficiently clear by the company.

Institutional buyers also swooped in late in the day on big-cap tech names hurt hard in the morning, and finding good buys, as part of a larger rotation out of blue chips, said Donald Selkin, chief investment strategist at Joseph Gunnar.

"The Nasdaq was resilient. Even when the Dow was down 100, the Nasdaq was still on the positive side," Selkin said. "The Nasdaq stuck it out, some of the selling in GE dried out, and the beaten-down stocks came back."

Treasurys were a little higher, pushing the 10-year note yield down to 5.38 percent.

Markets in Europe were mixed at the close, while Asian markets closed lower on tech weakness. The dollar was stronger against both the yen and the euro. Light crude oil futures fell 15 cents to $24.80 a barrel in New York.

Market breadth was positive. On the New York Stock Exchange, advancers edged decliners as 1.31 billion shares traded. On the Nasdaq, winners beat losers 3-to-2 as 1.58 billion shares changed hands.

Putting a damper on recent signs of improvement in the economy earlier in the day, the Federal Reserve Bank of Philadelphia's report on regional manufacturing activity fell in March to 11.4 from 16 in February. The closely watched survey was expected to rise to 18.

A forward-looking report, the Conference Board's index of leading economic indicators, showed no change in February after a rise of 0.6 percent in January. LEI had been up for four straight months prior to Thursday's report. Economists had been looking for a 0.1 percent gain.

The two reports put a crimp in the notion that the economy is recovering from its recent downturn. Speculation about a rebound has fueled stock gains since the week after the Sept. 11 terrorist attacks.

Speculation that the Federal Reserve may soon be raising interest rates after a prolonged period of cuts also added to the pressure earlier in the day, according to analysts. While a raising of rates would hardly be a surprise -- the overnight bank lending rate currently stands at a 40-year low -- an end to the easing cycle may be taken as no new stimulus for the economy.

"The Philly Fed says that the economy is maybe kind of wimpy. And if you're not gonna get stimulus from the Fed and things are going to be moving forward slowly, that's not good for stocks," Arthur Cashin, director of floor trading at UBS Paine Webber, told CNNfn's Halftime Report.

There were some positive signs. The Labor Department said the Consumer Price Index, the main inflation gauge, rose only a modest 0.2 percent in February. That was in line with estimates and followed a rise of 0.2 percent in January. Excluding the volatile food and energy sectors, the core CPI rose 0.3 percent, a little higher than what economists were expecting.

In addition, the number of Americans filing new jobless claims declined last week to 371,000 from a revised 383,000 claims the previous week, showing a bigger decline than analysts expected.

Gains in biotech and networking issues kept the Nasdaq higher, tempering some losses in telecom and Internet names.

Particularly weak Dow issues included American Express (AXP: down $0.82 to $41.02, Research, Estimates), International Paper (IP: down $1.18 to $43.17, Research, Estimates), General Motors (GM: down $0.91 to $59.42, Research, Estimates), and 3M (MMM: down $1.60 to $118.30, Research, Estimates), while IBM (IBM: up $1.28 to $106.78, Research, Estimates), Microsoft (MSFT: up $1.26 to $61.36, Research, Estimates), and Intel (INTC: up $0.87 to $31.40, Research, Estimates) added strength.

Lehman Brothers lowered its first-quarter revenue estimate on CNN/Money parent AOL Time Warner (AOL: down $0.55 to $24.65, Research, Estimates), citing concerns about a depleted advertising spending environment. The firm expects the media company to take in $9.4 billion, down from its original estimate of $9.7 billion.

Morgan Stanley upgraded biotech developer Protein Design Labs (PDLI: up $3.28 to $18.30, Research, Estimates) to "overweight" from "underweight" a day after the company said its psoriasis treatment failed to meet its main goals in trial. The firm said the failure removes a dark cloud that's been hanging over the stock for the last month, creating an attractive entry point. However, UBS Warburg cut the company's price target, and second-, third- and fourth-quarter earnings-per-share estimates.

J.P. Morgan lowered its second- and third-quarter results forecasts on Apple Computer (AAPL: down $0.65 to $24.27, Research, Estimates), saying the personal computer maker raised the price on its iMac desktop computer by $100 due to rising component costs.

Shares of PeopleSoft (PSFT: up $0.51 to $36.56, Research, Estimates), a business software maker, were under pressure after a Wall Street Journal article rehashed earlier concerns about the company's relationship with Momentum Business Applications. Following the report, CIBC World Markets issued a note defending the company, saying nothing new has been revealed and that they expect the company to meet guidance.

Goldman Sachs downgraded drug store chain Rite Aid (RAD: down $0.19 to $3.43, Research, Estimates) to "market perform" from "market outperform," saying that based on its evaluations, the company's shares should only see upside of between 2 percent and 3 percent in the next 12 months.

"We're in a scaling back mode after two or three weeks of gains. We need some kind of strong economic report to push us higher," said Alfred Kugal, senior investment strategist with Stein Roe & Farnham. "This may go on for a few sessions, but the fundamentals overall are good."