After rising 41 points, the Nasdaq composite index fell 103.92, or nearly 3 percent, to 3,568.90, and the Standard & Poor's 500 index edged down 0.28 to 1,436.23.
The Dow Jones industrial average rose 49.21 to close at 10,700.13 led by Caterpillar, which climbed $3.19 to $34.19.
Last Friday, the Nasdaq closed 3 percent lower from the week before, while the Dow lost nearly 2 percent. The S&P 500 dipped nearly 1 percent lower. The Nasdaq dropped nearly 13 percent for the month of September.
Earnings warnings continue to haunt investors. At least 257 companies have issued third-quarter warnings so far, up 25 percent from the 204 companies that issued warnings in the third quarter of 1999, according to a research note written Friday by First Call/Thomson Financial director of research Charles Hill and research analyst Thomas O'Keefe.
"We're at a faster pace than last year," said Joe Cooper of First Call. "More companies are warning, and more are coming from larger companies."
Large cap tech stocks did not take kindly to the mood. At the end of regular trading, Intel closed down $1.44 at $40.13; Microsoft dropped $1.19 to $59.13; Dell Computer fell $1.56 to $29.25; and Sun Microsystems slipped $3.19 to $113.56.
The CNET tech index lost 26.89 to close at 2,810.84. Losers edged out winners, with 64 of the 97 stocks in the index falling, 29 rising and four remaining unchanged.
The Federal Reserve's policy-making committee will meet tomorrow to discuss the course of interest rates. Most observers believe the economy has been slowing enough to remove any reason to boost rates.
New economic data released today reinforced that viewpoint: Manufacturing activity contracted for the second straight month.
The National Association of Purchasing Managers said its production index rose to 49.9 percent in September from 49.5 percent in August.
The NAPM index uses 50 percent as a break-even point, with anything above that signaling economic growth and anything below indicating contraction. September's number was slightly below Wall Street's expectations of 50 percent.
Of the 18 sectors tracked by CNET Investor, Internet e-tailers posted the sharpest drops, falling about 4 percent. Server hardware makers were one of the day's largest three gainers, climbing a slim 0.54 percent.
Shares of drug maker MedImmune helped send the Nasdaq lower, falling $20.50, or nearly 27 percent, to $56.75. Volume topped 27.6 million shares, more than nine times the stock's average daily volume.
Banc of America Securities lowered its rating on MedImmune's stock to "market perform" from "buy," saying the company's European introduction of Synagis, its biggest-selling drug, might not make up for slowing growth in the United States.
ASM Lithography Holding NV agreed to buy U.S. rival Silicon Valley Group for 1.8 billion euros ($1.59 billion) in stock, becoming the biggest maker of machines that print circuits onto computer chips.
Silicon Valley rose $7.38, or 28 percent, to $33.69 and set a new 52-week high of $37.63 compared to a low of $9.37 over the same period. ASM fell $2.44 to $29.88.
Among members of the CNET tech index, Internet stocks posted losses.
CMGI fell $2.69, or nearly 10 percent, to $25.25; Yahoo slipped $4.94 to $86.06; Amazon.com dipped $2.56 to $35.88, and eBay lost $1.81 to $66.88.
Priceline.com dropped $1, or 8 percent, to $10.88. Connecticut Attorney General Richard Blumenthal said he is investigating the name-your-price e-tailer after receiving more than 100 complaints from consumers. The probe focuses on civil, not criminal, complaints.
E-commerce software maker BroadVision fell $3.88, or 15 percent, to $21.81 after an analyst at Robinson-Humphrey downgraded the shares to "neutral" from "outperform."
Adobe Systems, a maker of desktop publishing software, rose $7.75 to $163. The shares traded as high as $167.06, a new 52-week high compared to the low of $47.53 during the same period.
Nortel Networks won a $1.4 billion contract to upgrade Cable & Wireless' phone network to handle data and video traffic more efficiently. Nortel rose $2 to $62.38.
Chip stocks headed lower. The Philadelphia semiconductor index fell 18.20, or 2 percent, to 833.37, led by chipmaker Micron Technology, which lost $4 to close at $42.