The tech-heavy Nasdaq composite index dropped 258.25 to close at 4,188.20, its second-largest point decline ever. The nearly 6 percent decline was the eighth largest in percentage terms.
The Standard & Poor's 500 index fell 11.89 to 1,504.46.
The Dow jumped 75.08 to 11,186.56, led by International Paper and financial companies such as J.P. Morgan, Citigroup and American Express. International Paper, which will report earnings tomorrow, gained $3 to $42.63. Hewlett-Packard, meanwhile, fell $8.75 to $147.25.
The CNET tech index lost 127.76 to 3,234.64, dragged down by shares of eBay and Intuit.
Losers greatly outnumbered winners, with 84 of the 98 stocks in the index falling, 13 rising and one remaining unchanged.
All 18 technology sectors posted losses. Internet services and semiconductor equipment companies posted drops of more than 8 percent each. Communications services remained relatively flat, falling a slim 0.76 percent.
Microsoft fell $3 to $86.06 on volume of 30.3 million shares, making it the second most active stock on the Nasdaq Stock Market behind Cisco Systems, which dropped $2.38 to $72.56 on volume of 42.3 million shares. Microsoft said it will invest $100 million over three years in VerticalNet, a company that manages e-commerce Web sites. VerticalNet fell $7.34, or 13 percent, to $50.88.
Intel fell $5.69 to $131.13. Its CEO said the company will almost double spending on capital equipment this year to $6 billion to meet demand for microprocessors and flash memory, as the popularity of mobile phones continues to grow.
The company's drop hit the Philadelphia semiconductor index, which fell 55.51, or nearly 5 percent, to 1,167.76. Chip equipment maker KLA-Tencor posted the largest drop, falling $13.63, or 14 percent, to close at $83.81. Chip designer Rambus acted as the lone gainer, rising $16.44 to $263.
ON Technology was the Nasdaq's largest percentage loser, falling $3.31, or 35 percent, to $6.06 on heavy volume. The company said that first-quarter results will fall below previous periods.
Among members of the CNET tech index, eBay and Intuit posted significant losses.
eBay fell $25.19, or 14 percent, to $155.69. Gilmour & Associates started coverage of the company with a "sell" rating.
Intuit fell $9.31, or 19 percent, to $41. Credit Suisse First Boston cut its rating on the software maker from "strong buy" to "buy" on revenue concerns.
Ameritrade Holding gained $1.13 to $19.88. ABN-Amro launched coverage of the company with a "buy" rating.
News that Linuxcare chief executive Fernand Sarrat resigned and that the company has postponed its initial public offering unsettled the Linux sector. Shares of competitor Red Hat fell $3.75 to $34.38; its shares have plunged 67 percent this year.