The Dow Jones Industrial Average ended off 53.36 points, or .51 percent, at 10,440.53 after racking up five consecutive record highs last week.
The Nasdaq plunged 138.43 points, or 5.57 percent, to 2,345.61, nearly 255 points below its April 12 record close of 2,598.81.
"The sell-off of the techs created a sense of panic among other growth players," said Joseph Bartel, chief investment officer at Fahnestock & Company. "It's starting to appear that we're setting ourselves up for a more pronounced correction this summer."
The Dow climbed nearly 275 points to an intraday high of 10,765, which started tongues wagging about "Dow 11,000" before a late wave of selling struck as the Nasdaq market sank.
Among Internet stocks, Amazon.com plunged 31.06 to 158.94, America Online lost 23.88 to 115.88, Excite fell 30.88 to 108.5, and Yahoo dropped 25.5 to 163.69.
Internet brokers also were lower, with E*Trade dropping 18.75 to 73.81, Ameritrade sinking 38.13 to 87.88, and Charles Schwab losing 12.81 to 102.
Yesterday, Eckhard Pfeiffer was unexpectedly ousted as Compaq's chief executive officer. As previously reported, the top-level shakeup, prompted by chairman of the board Benjamin Rosen, also included the resignation of Earl Mason as chief financial officer of the leading PC maker. Pfeiffer's immediate plans are not known, but Mason is leaving to take over as chief executive of Alliance Foods, a large food corporation in Chicago, analysts say.
On April 9, Compaq warned of a first-quarter shortfall, which Pfeiffer blamed on price wars and other industry factors. Compaq said it was expecting earnings of about 15 cents per share, less than half of the 31 cents projected by First Call financial analysts. Compaq shares plunged on the earnings warning. Results are expected to be announced on April 21.
Shares of Compaq closed down .88 at 22.75.
Separately, Compaq today said it would cut prices on its Armada notebooks and Deskpro desktop PCs. Armada 1700, 3500, and 7400 notebook models were reduced up to 13 percent. Selected models of Compaq's Deskpro EP and EN Series were reduced up to 12 percent, the company said in a statement.
Meanwhile, other PC hardware stocks also were mixed in late trading. Shares of Apple Computer dropped 1.56 to 33.88, and HP shares gained 1 to 71.38. Dell dropped 2.81 to 35.44, and IBM dropped 3.63 to 166.75.
Reuters contributed to this report.