The Nasdaq composite index closed down 4.19 to 2,871.45 after gaining as much as 46 points earlier in the day. The Standard & Poor's 500 index climbed 4.73 to 1,347.35, and the Dow Jones industrial average rose 31.85 to 10,494.50.
"There's no conviction," said Tony Cecin, head of listed trading at U.S. Bancorp Piper Jaffray. "There's a market re-evaluation going on from technology on down in terms of earnings for the fourth quarter and what the first quarter of next year might look like."
Many investors are concerned that corporate earnings growth will decline over the next few quarters, but are unsure about the depth or duration.
Tech stocks, which often trade at higher valuations than non-tech shares, are bearing the brunt of the pessimism.
The markets "are in an earnings environment that's grinding down the tech stocks," said Bryan Piskorowski, a market strategist at Prudential. "The tech stocks that delivered the high gains over the past four years are getting sacked."
The tech-heavy Nasdag established a new 52-week closing low Tuesday and has fallen 43 percent from its 52-week high of 5,048.62 set last March.
On the economic front, the Department of Commerce reported that the U.S. trade deficit spiked to a record $34.3 billion in September from $29.8 billion in September, well above analysts' expectations. The deficit topped the previous record high of $31.7 billion in July.
Some economists think the record deficit means that the economy is slowing more than previously believed. "We now believe that third-quarter GDP will be revised down to around a 2 percent from an initially reported 2.7 percent gain," said Gerald Cohen, an economist at Merrill Lynch.
The Department of Commerce initially reported in October that Gross Domestic Product, the measure of the country's output in goods and services, gained 2.7 percent in the third quarter. GDP is often revised once more data is considered.
The CNET tech index fell 10.29 to 2,372.43. Decliners thumped advancers, with 70 of the 97 stocks in the index falling, 24 rising and three remaining unchanged.
Of the 18 sectors tracked by CNET Investor, Internet content posted the sharpest drops, falling about 7 percent, followed by Internet e-tailers, which lost 5 percent. Server hardware makers were the day's largest gainer gainers, climbing almost 3 percent.
Yahoo took a chunk of value out of the Internet content sector, falling $7.19, or almost 15 percent, to $41.69. America Online dropped $4.09, or about 9 percent, to $42.59, and Time Warner lost $5.46, or about 8 percent, to $64.15.
Yahoo shares established a new two-year low after analysts released negative reports reiterating concerns about weakness in advertising revenue at the Internet portal company.
Shares of Inktomi also fell. The software maker dropped $5.81, or almost 14 percent, to $36.25 and traded as low as $35, a new 52-week low compared with the stock's high of $241.50 over the same period. Inktomi has fallen 43 percent this month.
Earnings news lifted shares of Agilent Technologies. The maker of test and measurement equipment rose $3.38, or about 8 percent, to $48.
The Palo Alto, Calif.-based company reported net income for the fiscal fourth-quarter of $305 million, or 66 cents a share, up from $146 million, or 39 cents, a year earlier. Agilent also said in a statement released after the markets closed Monday that revenue climbed 38 percent to $3.37 billion from $2.45 billion.
Shares of Avnet fell $3.81, or almost 17 percent, to $18.88. The distributor of computer parts and semiconductors said second-quarter earnings will fall short of estimates because of excess inventory in the semiconductor industry. Earnings in the quarter ending in December will be about 75 cents to 80 cents a share, Avnet said in a statement released after the markets closed Monday. Wall Street expected the company to earn 85 cents, the consensus estimate of six analysts surveyed by First Call/Thomson Financial.
The Phoenix-based company also said the correction might be temporary and did not change its estimates for the second half of the current fiscal year.
New Era of Networks fell $10.50, or about 53 percent, to $9.38, making it the largest percentage loser on the Nasdaq. Wit SoundView analyst Ben Sim downgraded the company to "hold" from "strong buy."
Lucent Technologies fell $3.38, or 16 percent, to $17.56 and traded as low as $17.50, a new 52-week low compared to the stock's 52-week high of $84.18.
Lucent, a maker of telecommunications equipment, said Tuesday it might have to shave $125 million off its already reported revenue. The reduction could cause the company to reduce its earnings for the quarter ended Sept. 30 by 2 cents. Lucent previously announced a fourth-quarter profit of $600 million, or 18 cents a share, on revenue of $9.4 billion.
Chip stocks fell. The Philadelphia semiconductor index dropped 31.34, or about 5 percent, to 630.66 led by chipmaker LSI Logic, which lost $5.81, or 20 percent, to $22.94.
LSI announced Tuesday the departure of two key executives, including one who was seen as the possible successor to company founder and chief executive Wilfred Corrigan.