The Nasdaq composite index lost 37.60 to close at 1,464.04, and the Dow Jones industrial average fell 92.58 to 8,567.39. Both indexes had been up slightly as the markets opened but soon ended their winning streak.
For the past two days, both indexes have closed in positive territory. But they're far from regaining losses of around 15 percent racked up in the first week of trading after the Sept. 11 terrorist attacks in New York and Washington.
A triple dose of bad news hit the semiconductor sector, driving the CNET semiconductor index down 3.5 percent. Intel's estimates were cut by two brokerages, AMD said it will slash jobs and close plants, and Micron Technology announced poor fourth-quarter revenue.
Goldman Sachs and Bear Stearns cut their estimates for leading chipmaker Intel on Wednesday, citing an extended drought for the PC industry.
"Following the events of Sept. 11, it seems likely that the PC demand recovery will be postponed and the near-term impact of Windows XP diluted," Goldman Sachs analyst Terry Ragsdale said in a note to clients. The analyst now expects earnings of 42 cents a share in 2002 from Intel, below an original estimate for 60 cents a share. Intel shares were off 77 cents at $20.90.
Intel's primary rival, Advanced Micro Devices, was off 70 cents, or 7 percent, at $8.35 after announcing Tuesday that it will cut 2,300 jobs, or about 15 percent of its work force, and shut two chipmaking plants. As a result, the company will take a third-quarter charge of $80 million to $110 million, but it plans to save $125 million annually.
Micron Technology, down $3.99, or 19 percent, at $17.25, managed to beat estimates in its fourth quarter but also announced declining sales. The maker of computer memory chips said sales tumbled to $480.3 million from $2.31 billion.
Bad news for the chip sector wasn't the only thing driving technology shares lower.
IBM also slumped $3.15 to $91.30 after Merrill Lynch cut its earnings and revenue estimates for the computer giant, citing the business disruption and economic uncertainty caused by the attacks.
Tuesday's somber economic news about consumer confidence proved a downer for the markets overall. Analysts have already confirmed that the U.S. economy has entered a recession. But that probably hasn't been priced into the stock market yet, analysts said.
"Investors who believe the U.S. financial markets have priced in all the bad news of the past few weeks may be in for a surprise--an unpleasant one," Morgan Stanley analyst Joseph P. Quinlan wrote in a research note.
Among other actively traded techs, Oracle dropped 5 cents to $12.20, Cisco Systems dropped 37 cents to $12.23, Sun Microsystems lost 25 cents to $8.44, and Microsoft lost $1.03 cents to $50.27.
In the wake of AOL Time Warner's profit warning Tuesday, shares lost 55 cents to $32.25. Analysts speculated that Yahoo, down $1.17 cents to $8.11, might also miss its upcoming financial targets.
Among other Internet companies, CMGI, which announced wider losses for its fourth quarter, fell 19 cents, or 16 percent, to $1. Amazon fell 74 cents, or 10 percent, to $8.11.
Staff and Reuters contributed to this report.