Stocks dropped Monday after International Business Machines Corp. (IBM), the world's No. 1 maker of computers, stunned the market with a disappointing forecast — but technology stocks swung higher as investors snapped up selected software and semiconductor names.

The Dow Jones Industrial Average fell 22.56 points, or 0.22 percent, to 10,249.08, while the technology-packed Nasdaq Composite Index rose 15.8 points, or 0.89 percent, to 1,785.87, after sinking more than 2 percent. The broad Standard & Poor's 500 Index gained 2.56 points, or 0.23 percent, to 1,125.29.

IBM shares slumped 10 percent, keeping the mired in the red. About 1.1 billion shares changed hands on the Big Board, while 1.6 billion shares were traded on Nasdaq.

"A lot of the technology names like software stocks and semiconductors have already reported, already pre-announced or are expected to have decent numbers, so I think people used the weakness of the market as an opportunity," said Jon Baranko, director of trading at Strong Capital Management.

IBM tumbled $9.84 to $87.41 and ranked as the most active stock on the Big Board. Its stock sank to $85.35 earlier in the day, hitting a low not seen since January 2001. IBM had last issued an earnings warning in June 1991.

"We all knew coming into the first quarter that, especially in technology, the business environment was still weak," said Benjamin Pace, managing director at Deutsche Bank Private Banking, which oversees about $9 billion.

Growing expectations for a U.S. economic rebound have also helped foster hopes for increasing spending on technology in the second half of the year, Pace added.

Investors are being lured by relatively low prices since the Nasdaq Composite Index has tumbled 15 percent from its 2002 closing high, slammed by concerns about earnings and corporate accounting issues.

Earnings season kicks into high gear next week. Profits are expected to fall 9.2 percent from the same year-ago period, according to Thomson Financial/First Call. That is worse than the 8.8 percent decline forecast on March 28, after a wave of technology companies warned they would miss estimates.

The technology sector took a beating early in the day, as the IBM news hit companies like Electronic Data Systems Corp. (EDS), the world's No. 2 supplier of computer services, dropped $1.74 to $51.11. Networking computer maker Sun Microsystems Inc. (SUNW) fell 21 cents to $8.50.

But software heavyweight Microsoft Corp. (MSFT) reversed direction and gained $1.35 to $57.22, while Veritas Software (VRTS) rose $1.51 to $36.62.

Applied Materials Inc. (AMAT), the world's largest maker of semiconductor manufacturing gear, rose 63 cents to $53.03. while the Philadelphia Stock Exchange semiconductor index climbed 0.57 percent.

"So many tech stocks are so beaten down already, people that are holding them now aren't going to sell," said Charles Payne, market analyst at Wall Street Strategies.

Oil stocks also helped the market higher as they tracked crude prices, which soared more than $1 to above $27 a barrel on the Iraq news. Stoppages by protesting state oil managers in Venezuela, the world's No. 4 oil exporter, further jolted the market for crude.

ExxonMobil Corp. (XOM), the world's largest publicly traded oil company, perked up 61 cents to $43.24, offering support to the Dow.

Investors turned their focus to a few bright spots in the earnings picture. Software maker Computer Associates International Inc. (CA) said quarterly revenues would meet its previous estimates and that its loss, excluding charges, would be smaller than expected. It rose 83 cents to $20.73.

Software developer Intuit Inc. (INTU) on Monday raised its quarterly earnings and revenue guidance, citing a shift to direct sales and strong demand for its small-business accounting and consumer tax-preparation software. It jumped $2.77 to $40.07.

Kenneth Cole Productions Inc. (KCP), a retailer of footwear and apparel, raked in a gain of 25 percent. Its shares rose $4.80 to $24.30 after the company raised its earnings forecast, citing strength in its wholesale business as well as cost controls put in place last year.

Resistance -- the point where sellers are likely to emerge -- is at 10,325 for the Dow, 1,800 for the Nasdaq and 1,135 for the S&P, according to research firm Schaeffersresearch.com.

Support -- where buyers are expected to swoop in -- is at 10,150 for the Dow, 1,745 to 1,770 for the Nasdaq and 1,113 for the S&P. The levels are key elements of technical analysis, which studies prices, volume and charts to determine a potentially opportune time to buy or sell stocks.

The Russell 2000 index, the barometer of smaller company stocks, rose 5.25, or 1.1 percent, to 503.01.

Overseas, Japan's Nikkei stock average finished Monday up 0.2 percent. But stocks fell sharply in Europe on concerns that higher oil prices will harm business there, as well. Germany's DAX index fell 1.5 percent, France's CAC-40 lost 1.9 percent, and Britain's FT-SE 100 declined 1.1 percent.

Reuters and the Associated Press contributed to this report.