Dow, Nasdaq turn in triple-digit losses

Profit warnings from Nortel Networks and Palm send technology stocks into a tailspin.

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Profit warnings from Nortel Networks and Palm gave technology investors an excuse to sell shares Wednesday as the Nasdaq composite index shed 118 points, or 6 percent, to finish at 1,853.92.

The Dow Jones industrial average lost 162 points to close at 9,785.35.

"Tuesday's rally was just a bear-market rally. We have learned to sell on these rallies," Ted Oberhaus, manager of equity trading at Lord Abbett & Co., told Reuters. "Once upon a time we used to buy on the dips. Year after year that proved extremely profitable, but in this environment you learn to sell into the rally. The catalyst is the earnings warnings."

Nortel Networks fell $2.76 to $14 after warning that it will miss its own revised estimates this quarter. Other network-equipment stocks fell as well, as Cisco Systems lost $2.38 to $15.75 and Lucent Technologies closed off $1.43 to $10.27.

Ciena dropped $7.03 to $46.78, and JDS Uniphase fell $3.38 to $19.94.

Palm shares plunged $7.44 to $8.06 after the company predicted that sales will slump $250 million below estimates for the fourth quarter.

Shares of Palm rivals also fell. Handspring, which makes a competing handheld using the Palm OS, closed off $5.31 to $10.88, and Research In Motion, which develops two-way messaging devices, lost $4.43 to $20.25.

Intel dropped $2.44 to $26.94. Advanced Micro Devices slid $1.99 to $27.70, and IBM closed off $5.09 to $94.41.

PurchasePro lost 50 cents to $6.75, and AOL Time Warner shed $2.24 to $40.76, after the companies announced they have extended their business-to-business and e-commerce efforts by inking 10 new agreements to develop the Netscape Netbusiness marketplace.

Yahoo trimmed 63 cents to $14.94. Amazon.com and eBay fell 84 cents and $3.75 a share, respectively, while CMGI closed off 35 cents to $2.67.

Among widely held PC stocks, Dell Computer chopped off 56 cents to $26.44, Compaq Computer lost 79 cents to $19.42, Gateway dipped 47 cents to $16.53, and Apple Computer slipped 70 cents to $22.17.

Microsoft lost $2.75 to $55.50, Oracle fell $1.55 to $15.10, and Sun Microsystems ended off $1.56 to $15.85.

Staff and Reuters contributed to this report.