A sharp early drop on Wall Street put paid to what looked like a promising rally in blue-chip stocks yesterday but the technology sector continued its relentless advance.

The FTSE 100 index was as much as 144 points higher at 6,288 in mid-morning but it was unable to sustain its strength in the afternoon. The Dow Jones Industrial Average briefly slipped below 10,000 at around 4 p.m. London time and, as usual, the British market danced to Wall Street's tune.

Footsie lost all of its gains and closed 57.4 points down at 6,086.7, leaving the blue-chip index more than 12 per cent below its end-1999 level.

Once again, the performance of the leading index did not really tell the story of the whole market. Indeed, the FTSE SmallCap index advanced 17.3 to 3,297.7, an all-time closing high. And the FTSE 250 index of midcap stocks gained 51.3 to 6,412.9.

The Techmark 100 index of leading technology stocks continued its remarkable run, closing above 5,000 for the first time and briefly touching 5,200. It has more than doubled since its launch in November. Technology stocks have been immune to the market's recent sell-off because investors believe that their growth prospects will not be affected by rising interest rates.

Logica led the way again in the FTSE 100 index, gaining more than 15 per cent as investors continued to support the stock after Wednesday's better-than-expected results and new order news.

Mr Brennan Hiorns, chief investment officer of Taylor Young Investment Management, said: "We are seeing not just a two-tier market but two separate markets - a pretty savage bear market and perhaps an over-aggressive bull market. But if we see more than 15 per cent off the top in tech stocks, I will be a buyer."

There were continuing signs of switching into Vodafone AirTouch, as investors try to build up the requisite weighting in what is now by far Britain's largest stock. Warburg Dillon Read points out that the Vodafone deal is, in effect, a huge rights issue on the British market, which has recently left shares in London vulnerable to technical-driven volatility.

Mr Corey Miller, equity strategist at Paribas, said there had been a big performance differential between Britain and Europe this year. "The UK seems to be much more comfortable with following Wall Street down. The result is that the UK market is now looking very attractive, relative to Europe."

Volume was 2.16 billion shares by the 6 p.m. count.