* Tech shares rally, boosted by Cisco comments on outlook

* Oil continues to slide, falls to $118/bbl

* Freddie Mac posts loss, to slash dividend

* Dow, S&P flat, Nasdaq up 0.7 pct (Updates to midday, recasts, changes byline)

By Steven C. Johnson

NEW YORK, Aug 6 (Reuters) - U.S. technology shares rose on Wednesday, boosting optimism about future corporate spending and profits, but the Dow and S&P were little changed due to concerns about fallout from the mortgage crisis.

Tech stocks rose after Cisco Systems Inc (CSCO.O: Quote, Profile, Research), the largest U.S. maker of equipment that directs Web traffic, said it expects the weak economic environment to be relatively short-lived. Shares jumped 6 percent, making the stock the biggest percentage gainer on the Nasdaq 100 index and a leader on the S&P 500.

The technology sector also got a lift from a report Microsoft Corp (MSFT.O: Quote, Profile, Research) may buy back as much as $20 billion of its stock to boost its share price. Shares rose nearly 2 percent after the report by Bloomberg News, citing a UBS analyst report. Microsoft could not be reached for comment.

Further declines in oil's price helped the broad market recover from earlier losses sparked by a news of a fourth straight quarterly loss from home finance company Freddie Mac (FRE.N: Quote, Profile, Research), which was down 12 percent.