GLOBAL MARKETS - Tech shares rally; economy woes dog financials

By Leslie Adler

NEW YORK (Reuters) - Technology stocks rose in both the United States and Europe on Friday as bargain-hunters bought up shares in the downtrodden sector, but recession fears drove the broader U.S. market lower.

Fears about the precarious state of the U.S. economy, highlighted by remarks late on Thursday by a Federal Reserve official who said she was "not confident" a recession could be avoided this year, sparked a rally in U.S. Treasury debt prices. Worries about credit markets also raised the safe-haven allure of U.S. government bonds and helped them recover from their worst rout in four years.

Shares of financial companies fell both in the United States and Europe, driven by unease about the outlook for bond insurers and fears that a slowdown in business and consumer spending would reduce borrowing and hurt profits.

"There is that fear angle still out there," said David Coard, head of fixed-income sales and trading at the Williams Capital Group in New York. "Add to that the fear of recession and that is what is helping to give Treasuries a better bid here."

The Dow Jones industrial average was down 98.11 points, or 0.80 percent, at 12,148.89. The Standard & Poor's 500 Index fell 8.53 points, or 0.64 percent, to 1,328.38. The Nasdaq Composite Index was up 2.15 points, or 0.09 percent, at 2,295.18.

The S&P Financial index was down 2.34 percent.

"There's still a fear of unknowns over the weekend, a mini disaster that could affect us going into Monday," said John O'Brien, senior vice president at MKM Partners LLC in Cleveland. "There's still the fear that Merrill has more (write-downs) to go, and Citigroup has more to go."

Technology stocks, however, remained strong. Shares of Microsoft Corp, a Dow component, gained 1.7 percent, and shares of iPod maker Apple Inc rose 2.3 percent.