Losers edged out winners, with 65 of the 100 stocks in the index falling, 30 rising and five remaining unchanged.
Of the 18 sectors tracked, computer memory storage and semiconductor equipment companies posted the sharpest drops, falling about 6 percent and 5 percent, respectively. Server hardware makers were the day's largest gainers, climbing a slim 0.6 percent.
In the broader markets, the Nasdaq composite index lost 123.95 to 4,582.68, and the Standard & Poor's 500 index added 32.99 to 1,392.14. The Dow Jones industrial average jumped 3 percent, climbing 320.17 to close at 10,131.41.
Intel closed up $1.69 at $119.56, extending its year-to-date climb to 46 percent. Microsoft inched up 25 cents to $95.38.
The initial offering of Loudeye Technologies, an Internet software company, was the biggest percentage gainer on the Nasdaq. The shares jumped $24, or 150 percent, to $40. Volume topped 9.7 million shares.
Cumulus Media was the Nasdaq's largest loser, falling $5.81, or 28 percent, to $14.50 on a volume of 3.7 million shares.
Among members of the CNET Tech Index, Xerox and Oracle posted strong gains.
Xerox rose $2.50, or 10 percent, to $25.75. The company announced yesterday that it will form an alliance with other companies to go after Hewlett-Packard's share of the printer market. HP closed down $8.88 at $130.88.
Oracle rose $1.63 to $78.63 on volume of 71.6 million shares, making it the most actively traded stock on the Nasdaq. The company announced higher-than-expected earnings after yesterday's close.
Shares of 3Com rose $6.25, or 11 percent, to $61.06 after an unconfirmed report that the company will spin off at least one of its network systems businesses.
eBay fell $21.50, or 10 percent, to $189.50. The company announced plans to enter the business-to-business e-commerce market. Yahoo shares also fell, losing $10.25 to $158.50 after analysts said a merger with eBay is unlikely.
Software company SAP said it will form a subsidiary to focus exclusively on business-to-business e-commerce. Its shares closed down $5.25 at $72.19.
Network equipment maker PMC-Sierra fell $32, or 14 percent, to $186 on volume over three times the stock's daily average.
The Philadelphia semiconductor index fell 28.50 to 1,201.34, led by chip equipment maker Novellus, which lost $5.47 to close at $56.69.
Epiphany agreed to buy Octane Software, which builds software that can be used within companies to measure customer relationship management, for about $3.18 billion in stock. Epiphany shares fell $61.94, or 24 percent, to $187 on a volume of 1.8 million shares.