The Nasdaq composite index fell 119.94, or almost 3 percent, to 3,978.41. The Standard & Poor's 500 index dropped 8.01 to 1,494.50.
The Dow Jones industrial average lost 39.22 to close at 11,220.65.
The Dow closed slightly lower from last week. The S&P 500 lost nearly 2 percent, and the Nasdaq fell 6 percent.
"There was a mark up at the end of last month, and I think the market is just surrendering that today," said Todd Clark, head of trading at WR Hambrecht.
Slides in some large technology stocks were the main culprits dragging down the Nasdaq. At the end of regular trading, Intel closed down $2.06 at $65.38. Microsoft dropped 75 cents to $69.31, and WorldCom dipped 63 cents to $29.94. Shares of Cisco Systems closed at $63.88, down $2.38, while Oracle lost $4.63 to finish at $86.56.
"There was a little profit taking and consolidation after a pretty big move," said Richard Cripps, a market strategist at Legg Mason. The Nasdaq rose more than 11 percent in August.
Cripps sees the Nasdaq staying within its present range until after the election. "The market will chop around, but it won't get substantially lower," he said.
However, some analysts think investors should rethink their positions in technology as the slowing economy starts to pinch earnings growth.
According to recent figures compiled by First Call/Thomson Financial, second-quarter earnings in the S&P 500 grew by 21.6 percent from the same quarter in 1999. First Call expects third-quarter earnings growth of 17.2 percent and 15.8 percent in the fourth quarter.
"As growth slows, the sectors you want to be in are the noncyclicals," said Sunil Sharma, a market analyst at Lehman Brothers. Sharma believes that more cyclical industries, including housing construction and automobiles, are most sensitive to cyclical swings.
According to the U.S. government's employment cost index, labor costs rise 4 percent to 5 percent every year. In an effort to offset those increases, many companies try to invest in technology that can reduce staffing levels. Sharma recommended investors consider stocks in companies that manufacture equipment such as routers, components for fiber optics and computer network products.
The CNET tech index lost 94.27 to close at 3,176.61. Losers outpaced winners, with 85 of the 97 stocks in the index falling, 10 rising and two remaining unchanged.
Every one of the 18 sectors tracked by CNET Investor closed lower.
Semiconductor equipment companies blazed the way, shedding about 6 percent, followed by makers of semiconductors and server hardware, which each lost 4 percent. Server hardware makers were the day's largest gainers, climbing a slim 0.6 percent.
The Philadelphia semiconductor index fell 54.54 to 1,039.96, dropping 10 percent from last week. Chip equipment maker KLA-Tencor lost the most, closing down $5.38 at $55.75. Teradyne fell $4.88 to $57.
Among stocks followed in the CNET tech index, PMC-Sierra fell $10.25 to $214.88, while Ciena dropped $15.38 to $199.63.
Internet consulting company Scient bucked the downward trend among competitors in the crowded niche, jumping $6.25, or 30 percent, to $27. William Blair analyst Matthew Litfin boosted his rating of Scient to "strong buy" from "buy."
Litfin predicted the company would beat his earnings estimate by a penny this quarter. Scient will meet analysts' $100 million sales estimate for the fiscal second quarter ending this month, Litfin said, and meet or exceed his per-share profit estimate of 6 cents.
Investors were not as kind to fellow Net consultant Viant, whose stock continued to drop a week after the company announced it would see revenues decline in the third quarter. Viant fell 34 cents to $7.53 at the end of trading, and at one point today set a new 52-week low of $7.38. The stock's 52-week high was $63.56.
Earnings news released after yesterday's close drove down shares of SpeedFam-IPEC, a maker of polishing equipment for semiconductors, based in Chandler, Ariz.
For the first quarter of fiscal 2001, which ended on Sept. 2, the company expects to post a net loss of $7 million to $8 million, or 23 cents to 27 cents a share. Wall Street expected the company to make a profit of 12 cents a share, the consensus estimate of five analysts surveyed by First Call. The stock fell $2.25, or 14 percent, to $13.81.
Earnings jitters also hit Gadzoox Networks, which fell $2.06, or 20 percent, to $8.25. The stock also set a new 52-week low of $7.50 compared to a high of $98. The manufacturer of Fibre Channel equipment for data storage networks said fiscal second-quarter revenue will miss expectations.
Mpower Communications revised its financial forecasts downward for the remainder of the year, which sent its stock sharply lower today. Shares of the competitive local exchange company fell $3.44, nearly 28 percent, to $8.88 on a volume of about 13.8 million shares, more than 30 times the stock's average daily volume.