Fears about the effect of another interest rate rise and questions over high valuations in the technology sector drove the Nasdaq market sharply lower in New York yesterday.

There was little effect, however, on the broader market or the "old economy" stocks that dominate the Dow Jones Industrial Average.

After a busy session, the Nasdaq Composite Index closed down 147.44, on 3,669.38, while the Dow ended the day 0.24 per cent higher at 10,603.63, a rise of 25.77 on the day.

"There is a lot of apathy out there and I would say that most investors are now confused about technology," said one fund manager.

He added: "On the other hand, investors can't think of another sub-sector of the market that is as important as technology."

Fears over the impact of the anticipated half-point rise in US interest rates next week were compounded by an article in financial weekly, Barron's, which questioned the market capitalisation of Cisco Systems, the leading maker of equipment that directs traffic on the Internet.

But some analysts downplayed the significance of the Barron's article and said weakness in technology stocks was due to the nervousness in advance of the Federal Reserve's May 16th meeting at which interest rates are likely to be raised. Higher interest rates can hurt corporate profits because they make it more expensive for companies to borrow money.

Technology companies are often deemed less exposed to interest-rate hikes because they often carry less debt and more cash on their balance sheets than traditional companies.