The Nasdaq composite index fell 133.61, or 4 percent, to 3,031.88, and the Standard & Poor's 500 index lost 17.72 to 1,372.32. The Dow Jones industrial average dipped 51.57 to 10,656.03.
"The whole feeling in the market was that there was no catalyst to get things going," said Michael Palazzi, head of Nasdaq trading at CIBC World Markets.
The uncertainty over the outcome of the U.S. presidential election also sapped investor enthusiasm. "Nobody is going to commit any sizable amount of capital until there's some kind of resolution," said Tony Cecin, head of trading at U.S. Bancorp Piper Jaffray.
Chip stocks in particular took a hit. The Philadelphia semiconductor index dropped 39.95, or almost 6 percent, to 675.05 led by chip equipment maker KLA-Tencor, which closed down $2.75 to $29.
All 18 sectors tracked by CNET Investor headed south. Semiconductor and server hardware makers posted the sharpest drops, falling about 7 percent and 6 percent, respectively.
Merrill Lynch analyst Joe Osha released a report on communication chip makers that said high inventory and a decrease in spending by telecom service companies "will weigh on the group for the next one to two quarters."
Osha also said that the "combined inventories at (original equipment makers) and their contract manufacturers could be as much as 40 percent higher than historical norms," which means that they would hold back from making additional chip purchases.
At the end of regular trading, Applied Micro Circuits fell $10.06, or 14 percent, to $60.94; Broadcom dropped $25.19, or about 15 percent, to $144.50; and PMC-Sierra lost $18.13, or nearly 14 percent, to $113.
Osha cut his price targets on all three stocks, and also cut his rating from "near-term buy" to "near-term accumulate" on the chipmakers.
Investors also digested economic data that could indicate creeping inflation.
The Labor Department reported Thursday that the Consumer Price Index, a measure of the change in prices at the consumer level, inched up 0.2 percent in October. Falling prices for gasoline and airline fares helped offset rising costs of natural gas, medical care and clothing.
The advance in the index followed a 0.5 percent jump in September that reflected surging energy costs.
Excluding the volatile energy and food sectors, the "core" CPI rose 0.2 percent in October, following a 0.3 percent rise in September. Both the overall inflation figure and the core rate matched analysts' expectations.
The CNET tech index fell 85.59 to 2,455.66. Losers handily outdistanced losers, with 87 of the 97 stocks in the index falling, 7 rising and three remaining unchanged.
Chip equipment maker Applied Materials reported better-than-expected earnings but gave a murky outlook for the next quarter.
Excluding charges, the Santa Clara, Calif.-based company reported fourth-quarter net income of 77 cents a share versus 37 cents a share, for the year-ago quarter. Wall Street expected the company to earn 76 cents a share, the consensus estimate of 26 analysts surveyed by First Call/Thomson Financial.
During a post-announcement conference call, the company said earnings for the first quarter would fall between 75 cents and 78 cents a share. The company also said bookings of new orders could decline by as much as 10 percent from fourth-quarter bookings of $3.6 billion.
Applied shares closed down $1.13 to $41.63.
Investors didn't seem to notice. Shares of MP3.com rose $2.31, or 37 percent, to $8.50 on a volume of more than 12 million shares, more than 16 times the stock's average daily volume of about 749,000 shares. The stock has risen about 140 percent this week.
Shares of software maker Packeteer fell $10.75, or 32 percent, to $22.81, making it the second-largest percentage loser on the Nasdaq. Volume topped 11.2 million shares, more than 31 times the stock's daily average of 356,000 shares.
Bear Stearns analyst Bob Lam said in a report that Intel will change the way it resells some of Packeteer's products.
Lam said that Intel, which accounted for 12 percent of Packeteer's revenue last quarter, will sell its NetStructure product line to original equipment manufacturers instead of directly to customers.
Shares of NaviSite fell $1.25, or 15 percent, to $7, a new 52-week low compared to a high of $164.93 over the same period.
The Internet hosting company was downgraded to "near-term accumulate" from "near-term buy" by Merrill Lynch analyst Thomas W. Watts. CMGI, Navisite's parent company, fell $1.56, or about 11 percent, to $13.13.