NEW YORK (CNN/Money) - Are investors setting themselves up for disappointment again?

Tech stocks have been on fire the past few days but the outlook for the technology sector hasn't changed that much as of late.

Several money managers think that the latest tech rally -- the Nasdaq is up 6 percent since Tuesday -- will be short-lived. A combination of program trades by large institutions (the automatic dumping of big bond positions in favor of stocks) and short-covering were probably two big factors fueling the surge. On days when the market is heading higher, shorts typically rush to close out their bearish bets, temporarily bidding stocks higher.

"The rally had to do more with the overall market than individual fundamentals turning. The environment for technology companies continues to remain tough," says Rob Lloyd, manager of the AIM Global Science & Technology fund.

But another factor that may be helping technology is that valuations are finally starting to approach reasonable levels. According to First Call, the Dow Jones Technology Index, a broad measure of tech stocks, is trading at 23 times 2003 earnings estimates. Joe Cooper, an analyst for First Call says that the index has generally traded at a multiple of more than 30 times earnings over the past few years and that it has been high as 50 times during the peak of the bull market.

Reasonably priced? Three big tech stocks are cheaper than they were a few months ago. Company  P/E (Jan. 1)  P/E (current)  Cisco Systems  46.4  25.7  Intel  30.5  22.8  Microsoft  31.7  26   Based on estimates for fiscal 2003  Source:  First Call

What's more, the tech sector looks more attractive on a price to earnings growth (PEG) basis than the overall market. The long-term estimated earnings growth rate for the Dow Jones tech index is 17 percent. So the PEG ratio (P/E divided by the growth rate) for tech is 1.4. The S&P 500, on the other hand is trading at 16.5 times 2003 earnings estimates and has an expected growth rate of just 7 percent. So its PEG ratio is 2.4.

"People are looking for opportunities to become more optimistic about technology, especially since valuations have improved," says Phil Sanders, co-manager of the HighMark Growth fund.

Blue chip tech names in particular are starting to look more attractive. Intel, for example, is currently trading at 22.8 times 2003 earnings estimates. On Jan. 1, its P/E was 30.5. Likewise, Cisco was trading at 46.4 times estimates for fiscal 2003 at the beginning of the year. It now has a multiple of 25.7 -- and earnings estimates have increased.

Sanders mentions Microsoft as another dominant tech stock that is worth a look now. At the beginning of the year, Microsoft was trading at 32 times 2003 earnings estimates. Now? Its multiple is 26. And considering that the company's stockpile of cash keeps increasing, Sanders says you could argue that Microsoft is in better shape now than a few months ago.

But the market-leading tech companies are not the only ones trading at more rational levels. Andrew Pratt, manager of the Montgomery U.S. Focus fund, says the sell-off of the past few months has created several values. "There's a long-term place for technology," says Pratt. "We're going through a difficult time but it's fertile ground to look for ideas."

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To that end, Pratt likes International Rectifier, a maker of integrated circuits for the industrial, automotive, personal computer and consumer electronics industries. Pratt says the company has been punished along with other semiconductor companies, even though its fortunes are not as tied to the struggling personal computer and communications industries.

International Rectifier did lower its revenue growth forecast for fiscal 2003 last month but revenues are still expected to rise 25 to 30 percent. And the stock, which traded at a multiple of 24 times fiscal 2003 earnings estimates in January, now trades at a P/E of 18.