Old-economy stocks manage to carve out some gains, while an earnings warning from National Semiconductor pulls the tech sector into negative territory.
After starting ahead by more than 50 points, the Nasdaq composite index closed down 48.90 at 3,419.79, while the Standard & Poor's 500 index squeaked up 2.35 to 1,398.13.
The Dow Jones industrial average rose 121.35 to 10,393.07, paced by old-economy stalwarts. General Electric climbed $3.63 to $53.38, International Paper advanced $2.88 to $32.56, and J.P. Morgan rose $6.63 to $145.13.
Large-cap stocks on the Nasdaq lost some ground. Intel fell $1.31 to $42, Microsoft lost 63 cents to $61.50, Cisco Systems dropped $1 to $54.88, and JDS Uniphase slipped $6.13 to $95.06 after rising as much as $2.56.
Gloomy news from National Semiconductor sent the chip sector lower. The cell phone chipmaker's shares fell $12.69, or 34 percent, to $24.25 after the company said sales and profit may decline in its fiscal second and third quarters.
Of the 18 sectors tracked by CNET Investor, semiconductor equipment makers posted the sharpest drops, falling 5 percent. Communication services providers were the day's largest gainers, climbing 4 percent.
The Philadelphia semiconductor index dived 60.89, or almost 8 percent, to 716.37, led by National Semiconductor. Altera fell $4.19, or about 11 percent, to $35.38, LSI Logic lost $3.56, or 11 percent, to $28.50, and KLA-Tencor slipped $3 to $33.31.
Despite National Semiconductor's woes, some analysts said they're enthused by the relatively strong performance by technology bellwethers.
As of Tuesday, 64 percent of S&P 500 companies have reported an earnings growth rate of 19 percent from last year's quarter, according to First Call. Of the companies that have reported, 59 percent have exceeded analysts' expectations, and 31 percent have matched forecasts.
"It's been a great earnings season," said Joe Cooper, a senior research analyst at First Call. "What the market is missing is that earnings are still strong. Far more companies are meeting and beating earnings expectations this quarter than usual."
Out of all the sectors tracked, energy beat expectations by the widest margin, 10 percent, followed by technology, which bested predictions by 7 percent and had a 38 percent earnings growth rate from last year's quarter.
First Call predicts earnings growth will slow over the next few quarters and expects fourth-quarter growth of 13.6 percent, 12.7 percent for first-quarter 2001, and 12 percent for the second quarter.
"The euphoria has gone away and people are looking at valuations again," Cooper said.
The CNET tech index fell 50.04 to 2,683.18. Decliners thumped winners, with 65 of the 97 stocks in the index falling, 31 rising and one remaining unchanged.
The earnings gloom was not confined to the chip sector. Internet consulting company MarchFirst reported third-quarter earnings Tuesday that fell far below analysts' expectations.
The news sent the company's stock down $6.94, or about 59 percent, to $4.88 on a volume of 49.8 million shares, more than 18 times the stock's average daily volume of 2.7 million shares. The dive made MarchFirst the largest percentage loser and most active stock on the Nasdaq.
Among members of the CNET tech index, Qwest Communications International posted strong gains.
In its first quarter since acquiring local-phone giant US West, Qwest posted a profit that topped Wall Street expectations Tuesday, buoyed by strong growth for commercial services. Shares of Qwest rose $2.31 to $47.69.
American Power Conversion also rose $2, or 10 percent, to $21.56, and CNET Networks, the publisher of News.com, climbed $3.69, or nearly 17 percent, to $25.69.
Some Internet stocks were not as lucky. Yahoo fell $1 to $58.63; Amazon.com lost 44 cents to $29.56; and eBay shaved off $5.50 to $54.06.