The Nasdaq fell 179.23, or nearly 5 percent, to 3,663. The Standard & Poor's 500 index dropped 29.73 to 1,419.89.
The Dow Jones industrial average fell 74.96 to close at 10,511.17, led by Intel, which closed down $7.88 at $129.13. Microsoft rose 31 cents to $69.69.
The Nasdaq closed down nearly 11 percent from its close of 4,094.45 last Friday. The Dow slipped 2 percent for the week, and the S&P 500 fell 4 percent.
Unimpressive earnings news topped investor concerns.
Big companies such as Lucent, Nokia and Ericsson have all recently warned investors that growth in the second half of the year may slow down. Several technology companies in the past two weeks have warned that parts shortages caused by voracious consumer demand will trim revenues for the remainder of the year.
"People are starting to look toward future earnings, and that's what the market is reacting to today," said Tony Crooks, an analyst at First Call/Thomson Financial.
Of the 78 technology companies in the S&P 500, 64 have reported earnings so far. Total earnings from those companies have grown 44 percent from last year's second quarter.
Despite that relatively exuberant performance, many investors are jittery about third- and fourth-quarter performance.
"The whole reason why we had a June rally is that people were expecting strong second-quarter earnings," said Tom McManus, an equity portfolio strategist at Banc of America. McManus believes "the continuing worries about earnings will affect (stock) prices going forward."
Investors may have also been spooked today when the government reported that the gross domestic product (GDP), the total output of goods and services, grew 5.2 percent in the second quarter, compared with a 4.8 increase in the first quarter. The number was higher than some economists and analysts had expected.
The number could indicate the economy is growing at an overly rapid pace, possibly prompting the Federal Reserve to boost interest rates next month. Businesses see higher interest rates as a disincentive to aggressive growth, typically resulting in a chilling effect on markets.
"The higher-than-expected GDP number raised concern that the Fed won't stand pat in August," said Todd Clark, head of listed trading at technology-focused investment bank WR Hambrecht in San Francisco.
Another critical number reported today: Consumer spending increased 3 percent, compared with last quarter's increase of 7.6 percent. The rise was the lowest since the fourth quarter of 1997 and could be a sign that consumers are scaling back their spending.
Although that may be a good sign for shortage-struck companies struggling with excess demand, a slowing of consumer spending is generally seen as negative for the broader economy.
One exception to the cooling in consumer spending: Business investment in software and equipment increased 21 percent compared with last quarter's jump of 20.6 percent and is the highest since a 24 percent hike in the first quarter of 1998. Some economists say that means that the nation may enjoy productivity gains in the long term.
"Business investment translates into productivity gains," said Greg Mount, an economist at BankOne, "so there's a payoff down the road."
Inventory accumulation rose to $60.3 billion from a previous $36.6 billion. Businesses "accumulate inventory in one quarter, then give it back in the future," Mount said.
Peter Kretzmer, an economist at Banc of America, reported in a research note that higher inventories this quarter could mean lower production activity in the future.
"Hedging against rebounding sales led to faster inventory accumulation (by businesses)," he wrote. "If demand remains moderate, this points to slower production growth ahead."
Despite that bit of optimistic news, the government also reported that soaring imports led to a widening trade gap. Imports rose 17 percent, the highest since the third quarter of 1997, while exports increased 7.3 percent.
Many economists said today's economic news will not spark any radical revisions of the Fed's interest rate policy.
"The report will not cause the Fed to change course," Mount said, who believes investors can expect at least one interest rate hike later this year.
The CNET tech index lost 73.74 to close at 2,959.13. Losers edged out winners, with 74 of the 97 stocks in the index falling, 20 rising and three remaining unchanged.
All of the 18 sectors tracked got swept up in the downturn. Computer memory storage companies posted the sharpest drops, falling 6 percent. Semiconductor equipment companies were the day's smallest losers, slipping a slim 0.29 percent.
The only exception to the market pounding seemed to be several tech initial offerings. The initial offering of Avici, a maker of networking equipment, was the biggest percentage gainer on the Nasdaq. The shares jumped $65.75, or 212 percent, to $96.75. Volume topped 9.7 million shares.
Corvis and WebEx also roared on their first day of trading. Corvis, a maker of optical network equipment, rose $48.72, or 135 percent, to $84.72, and WebEx, a provider of online conferencing services, jumped $19.06, or 136 percent, to $33.06.
Among members of the CNET tech index, American Power Conversion posted losses from earnings news. The shares fell $20.69, or 44 percent, to $25.81 after the company announced profit for the rest of the year would not meet analysts' expectations.
Cox Communications' shares also fell on earnings woes. The stock dropped $7.88, or about 18 percent, to $36 after the company said cash flow this year will miss the cable-television provider's previous forecasts. It said it faced more competition in the second quarter from telephone companies.
Clarent, which sells Internet phone systems to telecommunications providers, fell after reporting earnings. Investors were concerned that the company may have cut prices on its hardware. The stock fell $29.06, or 39 percent, to $45.06.
The Philadelphia semiconductor index squeaked up 24.26, or nearly 3 percent, to 974.16, led by chip equipment maker Novellus Systems. Novellus gained $3.94 to close at $51.50.