NEW YORK (CNNfn) - Technology stocks recouped their losses in afternoon trade Monday, though trading was very thin as investors awaited the Federal Reserve's decision on interest rates.
Dot.coms and semiconductor-related issues posted the sharpest gains.
Shares of Internet portal Lycos (LCOS: Research, Estimates) ended the session 7-1/2 higher at 61-5/8, a 13.9 percent gain on the day. The company is in merger talks with Spanish Internet access provider Terra Networks, a combination that several analysts said would yield substantial benefits for both companies.
Internet investment firm CMGI (CMGI: Research, Estimates), which holds a roughly 17 percent stake in Lycos, added 5, finishing the session 9 percent higher at 60-3/16.
Internet domain-name registrar Network Solutions (NSOL: Research, Estimates) finished 13-3/16, or 10.5 percent, higher at 138-5/8. The company, which is set to be acquired by Internet services firms VeriSign (VRSN: Research, Estimates), said Monday that it has teamed with Yahoo! (YHOO: Research, Estimates) to offer its domain-name registration services through a new Yahoo! Web channel.
Yahoo! shares ended the session up 4-5/16, or 3.4 percent, at 130. VeriSign added 12-9/16 to finish 10.7 percent higher at 129-13/16.
 America Online (AOL: Research, Estimates) shares finished 3-1/8, or 5.6 percent, higher at 58-1/2. The company on Monday settled charges that it improperly accounted for certain advertising costs and agreed to pay a $3.5 million civil penalty. America Online currently has a pending merger agreement with Time-Warner, CNNfn's parent company.
The Dow Jones composite Internet index, which slogged through the early part of the session in negative territory, finished 12.62 higher at 271.88, a 4.9 percent gain on the day.
But trading was thin across the board, as investors awaited the outcome of Tuesday's meeting of the Federal Reserve's policy-making body. Most economists are expecting the Fed to raise borrowing costs by a half percentage point to reign in the nation's vibrant economy.
 The tech-laden Nasdaq composite index ended the session 78.62 higher at 3,607.68, a 2.2 percent gain on the day. Roughly 1.15 billion shares changed hands.
I think that there are some investors who continue to see good values out there," said George Rodriguez, senior vice president at Guzman & Co. "There's the thought that even if the Fed comes in with a half-percentage-point hike, the market is already trading with that built in."
Chip makers post solid gains
A strong showing by Intel helped fuel the Nasdaq's rise as well as the broader semiconductor segment.
Shares of Intel (INTC: Research, Estimates), the world's largest supplier of computer chips, ended the session 3-1/8 higher at 118-1/8, a 2.7 percent gain on the day. Meanwhile, Advanced Micro Devices (AMD: Research, Estimates), Intel's chief rival in the market for PC microprocessors, slipped 1-3/8 to finish 1.6 percent lower at 84-5/16.
 Most other chip makers headed higher, driving the Philadelphia Stock Exchange's semiconductor index, or Soxx, 27.03 higher to 1009.18, a 2.8 percent gain on the day.
Communications-chip maker PMC-Sierra (PMCS: Research, Estimates) rose 9-1/2 to finish 6.5 percent higher at 155-7/16. Xilinx (XLNX: Research, Estimates) added 4-5/16 to 64-1/16, a 7.2 percent gain on the day. LSI Logic (LSI: Research, Estimates) shares finished 3-7/16, or 6.9 percent, higher, at 52-15/16.
Computer memory-chip maker Micron Technology (MU: Research, Estimates) got a boost from ABN Amro analyst David Wu, who repeated his top-pick rating on the company and reiterated a 12-month price target of 120. Shares added 2-3/8, or 3.9 percent, to 63-1/8.
Analyst Erika Klauer at Deutsche Banc Alex. Brown initiated coverage Monday of C-Cube Microsystems (CUBE: Research, Estimates) with a "strong buy" rating and a price target of 27. Shares ended the session 1-1/4 higher at 19-3/8, a 6.9 percent gain on the day.
Milpitas, Calif.-based CUBE two weeks ago announced plans to spin off its semiconductor business into an independent company, listed on Nasdaq under the C-Cube Microsystems name and the stock symbol CUBED.
EDS backs out of purchase
Business software and services provider Electronic Data Systems (EDS: Research, Estimates rose 1-7/8, or 3 percent, to 63-1/8. The company said it is withdrawing its offer to acquire insurance software company Policy Management Systems (PMS: Research, Estimates) after completing due diligence.
A spokeswoman for Plano, Texas-based EDS said the company would offer no other specifics for the withdrawal. Policy Management Systems shares plummeted 5-3/8 to 10-9/16, a 33.7 percent slide.
Microsoft (MSFT: Research, Estimates acknowledged a flaw in its Internet Explorer browser that allows hackers to steal "cookies," or files e-commerce sites use to track and do business with customers online, according to an article in Monday's Wall Street Journal. Shares of Microsoft edged up 9/16 to 69-3/8.
IBM (IBM: Research, Estimates) shares slipped 1/4 to 104-3/16. Computer storage-system maker EMC (EMC: Research, Estimates) on Monday said it has dropped a $3 billion commitment to buy advanced disk drives from IBM, saying that Big Blue has fallen behind in the development of that technology.
EMC shares added 4-3/8, closing 3.4 percent higher at 131-7/8.
Seagate Technology (SEG: Research, Estimates), from which EMC has been buying the disk drives it said IBM has been unable to deliver, added 2-1/32, or 4.5 percent, to 47-1/16. 
-- from staff and wire reports
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