The Nasdaq closed down 186.78, or about 4 percent, to 4,457.89, its fifth-worst point drop ever. With about 30 minutes left in the trading day, the tech-heavy index was down about 289 points, but an 11th-hour rally trimmed the decline.
The Nasdaq has declined each day this week, a slide that has cut about 10 percent from its value in those four days. Since March 10, the index is off about 13 percent.
"Technology stocks were extended, and they needed a pullback," said Bryan Rauscher, an investment strategist at Morgan Stanley Dean Witter. "People were trying to cut some of the tech weighting in their portfolios."
He added that the next few weeks will indicate "how much of the pullback is real, and how much is just funds doing some window dressing."
The Standard & Poor's 500 index fell 20.60 to 1,487.92, and the Dow Jones industrial average slid 38.47 to close at 10,980.25.
The CNET tech index lost 132.13, or nearly 4 percent, to close at 3,269.82, dragged down by shares of Cabletron Systems and Seagate Technology.
Losers vastly outnumbered gainers, with 86 of the 100 stocks in the index falling, 12 rising and two remaining unchanged.
Of the 18 sectors tracked, computer memory companies posted the sharpest drop, falling a whopping 9 percent. Computer distributors were the day's largest gainers, climbing a slim 0.4 percent.
Intel closed down $4.88 at $127, while Microsoft fell $3.81 to $103.38. A former Intel employee was indicted by a U.S. grand jury on charges of stealing trade secrets about the company's upcoming "Itanium" microprocessor.
The initial offering of Luminex, a biotech company, was the biggest percentage gainer on the Nasdaq Stock Market. The shares jumped $5.88, or 34 percent, to $22.88. Volume topped 5.5 million shares.
Among members of the CNET tech index, Cabletron and Seagate posted sharp declines.
Cabletron fell $21.13, or 42 percent, to $28.75 after Goldman Sachs downgraded the company over concerns that its split would hurt sales and earnings for several quarters.
Seagate fell $7.50 to $66.50 on volume of 21.5 million shares, more than 10 times the stock's average daily volume. Seagate announced yesterday that it will be bought by Veritas Software and an investment group in a $20 billion deal. Veritas closed up $2.75 at $145.25.
The drop in Seagate's shares, however, should be put in perspective: At the close of regular trading yesterday, the shares were at $62.75. After the deal with Veritas was announced, the shares jumped to about $74 in after-hours trading. Today's decline represents the pullback from the gains posted after the markets closed yesterday.
Citrix Systems fell $13.75, or 16 percent, to $72.13 on a volume of 20.1 million shares, more than 19 times the stock's daily average, from fears that it will miss next quarter's earnings expectations.
The Philadelphia semiconductor index fell 42.49, or 3 percent, to 1,151.31, led by Micron Technology and Altera. Micron fell $13.50 to $121,and Altera fell $8.50 to $76.38--a 10 percent drop for both stocks. Micron said yesterday that it will split its shares 2-for-1.
Shares of Yahoo fell $7.56 to $169.50. The company said today that the Federal Trade Commission is investigating the Web site's consumer data practices.
Dell Computer has named James Schneider chief financial officer, taking the place of Thomas Meredith. The computer maker's shares fell $1.63 to $52.19.