(Updates to early afternoon, changes byline)
By Elizabeth Lazarowitz
NEW YORK, April 23 (Reuters) - Technology stocks rose on Friday, bolstered by strong results from Microsoft Corp. , but investors' jitters about interest rate rises kept the broad Standard & Poor's 500 index flat.
Revenue increases at Microsoft that suggested the rebound in technology spending is continuing helped push the Nasdaq Composite Index higher for its third straight day.
"The (earnings) numbers have been really good," said Mark Donahoe, managing director of institutional sales trading at U.S. Bancorp Piper Jaffray. "Just in terms of technology, Microsoft set the tone."
Quarterly results are now in from about half of the companies in the S&P 500, and nearly 80 percent of those have beaten Wall Street's expectations.
But some fear that bumper profits and the economy's steady recovery will force the Federal Reserve to hike interest rates as it tries to contain inflation. Higher borrowing costs, in turn, may cap companies' profits in the near-term.
The technology-laced Nasdaq Composite Index was up 10.92 points, or 0.54 percent, at 2,043.83. The Dow Jones industrial average was down 6.04 points, or 0.06 percent, at 10,455.16, and the Standard & Poor's 500 Index was down 0.93 point, or 0.08 percent, at 1,139.00.
A report on Friday showing a surge in new orders for long-lasting manufactured items offered investors more evidence that the economic recovery is on track and higher interest rates may be on the horizon.
"It's going to be a bit of a bumpy road until the market really gets used to the idea of interest rates going up eventually," said Ozan Akcin, chief market strategist at Puglisi and Co. "The stronger top and bottom lines show how good the growth is and that means interest rates will have to rise at some point."
Microsoft was the most heavily traded stock on Nasdaq, up $1.53, or 6 percent, to $27.48. On Thursday, the world's largest software maker said quarterly profit fell after legal charges, but revenue rose a better-than-expected 17 percent on stronger personal computer sales.
Caterpillar was the biggest drag on the Dow, falling $1.74, or 2 percent, to $82.38. The drop comes after sharp gains on Thursday when the construction and mining equipment maker tripled earnings and raised its profit outlook.
Insurance brokers were badly hit on news that New York Attorney General Eliot Spitzer, whose investigations of the mutual fund and stock research businesses led to industrywide reforms, is now investigating fees earned by brokers.
Marsh & McLennan Cos. , the world's largest broker, fell 82 cents, or 2 percent, to $45.17. Aon Corp. , the world's No. 2, fell $1.04, or 4 percent, to $27.72.