The Nasdaq composite index closed down 87.16 at 3,706.41, and the Standard & Poor's 500 index dropped 14.14 to 1,427.47.
Microsoft dropped $1.88 to $78.69. The software giant unveiled an anticipated Pocket PC operating system for handheld devices.
Sagent Technology was the biggest percentage loser on the Nasdaq Stock Market. The software company's shares fell $10.91, or 60 percent, to $7.22. Volume topped 17.5 million shares.
The CNET tech index dropped 73.89 to 2,958.98, dragged down by shares of Broadcom and RealNetworks.
Losers edged out winners, with 67 of the 99 stocks in the index falling and 32 rising.
Of the 18 sectors tracked, semiconductor equipment makers and semiconductor companies posted the sharpest drops, falling about 6 percent and 5 percent, respectively. Peripheral makers and distributors were the day's largest gainers, climbing about 3 percent each.
The Philadelphia semiconductor index fell 39.72 to 1,012.87, led by chip equipment maker KLA-Tencor, which slid $7.44, or 10 percent, to $64.56.
Shares of Apple Computer, Veritas Software and Knight/Trimark are among the shares to watch tomorrow; all are reporting earnings today after the markets' close.