Stocks rallied strongly early Friday after the Labor Department said the U.S. economy shed fewer jobs than feared last month, but a 23% decline in shares of Sun Microsystems (NASDAQ: JAVA) set the tone the rest of the way, dragging the Nasdaq into the red by the close.

Sun plunged after the company blamed the weak economy for missing earnings and sales estimates, and Nortel (NYSE: NT) shed 2% on its results. NetSuite (NYSE: N) was another big earnings decliner, off 16% on inline guidance that wasn't as strong as investors had hoped.

The Dow and S&P ended the day with modest gains on news that the economy only shed 20,000 jobs last month, much better than expectations for a loss of 75,000 jobs. The Nasdaq ended the day a few points lower.

One bright spot for the tech sector was Yahoo (NASDAQ: YHOO), which jumped 7% on reports that talks with Microsoft (NASDAQ: MSFT) were intensifying — and that the two may be getting closer on price.

ComScore (NASDAQ: SCOR) jumped 14% on better than expected sales growth of 41%.

Cirrus Logic (NASDAQ: CRUS) and MicroStrategy (NASDAQ: MSTR) fell sharply on their quarterly results.

Cisco (NASDAQ: CSCO) was little changed ahead of its earnings report on Tuesday.

The Nasdaq lost 3 to 2476, the S&P rose 4 to 1414, and the Dow rose 48 to 13,058. Volume declined to 3.92 billion shares on the NYSE, and 2.28 billion on the Nasdaq. Advancers led by a 19-14 margin on the NYSE, but decliners held a 16-12 edge on the Nasdaq. Upside volume was 59% on the NYSE, and 51% on the Nasdaq. New highs-new lows were 79-57 on the NYSE, and 87-91 on the Nasdaq.

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