The Nasdaq composite index fell 200.28, or 6 percent, to close at 3,384.73. Decliners beat advancers by a ratio of more than 3-to-1. The drop was the seventh-largest point decrease in the Nasdaq's history.
The Standard & Poor's 500 index dropped 29.09, or 2 percent, to 1,383.05, and the Dow Jones industrial average dived 168.97 to 10,367.78, led by Intel and Hewlett-Packard.
Microsoft fell $1.63 to $66.19. Intel dropped $10.88 to $106.06. The chipmaker said it has discovered a problem with components inside some Pentium III computers that could cost the company several hundred million dollars to fix.
The CNET tech index lost 140.95 to 2,680.29, dragged down by shares of Motorola, Cisco Systems and semiconductor stocks. Losers edged out winners, with 89 of the 99 stocks in the index falling and 10 rising.
Of the 18 sectors tracked, semiconductor and semiconductor equipment companies posted the sharpest drops, falling about 8 percent and 7 percent, respectively. Communications services companies recorded the day's smallest drop, falling a slim 0.7 percent.
Among members of the CNET tech index, Xerox and Oracle posted declines. Xerox fell 50 cents to $27.50, while Oracle lost $4.38 to $67.63.
Tech giant Cisco fell $4.25, or 7 percent, to $58.50 on a volume of 91.9 million shares, more than twice the stock's average daily volume. It announced better-than-expected earnings yesterday but added that a shortage of components could hurt the company's future profitability.
Motorola fell $18.25, or 17 percent, to $86.25, after an analyst lowered his forecast on the stock amid concerns about the company's ability to release new products.
Semiconductor stocks took a hit. Vitesse Semiconductor fell $7.25, or 14 percent, to $45.75; PMC-Sierra fell $18.50, or 12 percent, to $139.19; and National Semiconductor fell $5.81 to $48.06.
The Philadelphia semiconductor index fell 85.10, or 9 percent, to 908.94, led by Motorola. Novellus, LSI Logic and Teradyne also posted losses.
US West said it plans to move into SBC Communications' territory, kicking off a business-focused high-speed Net service in Sacramento, Calif. Its shares rose 34 cents to $72, while SBC rose $2.81 to $45.13.
Online banks are facing tougher competition as scores of new and powerful competitors threaten to take over their turf. Wells Fargo and Bank of America have beefed up online offerings, while deregulation has allowed brokerage houses to enter the online financial market.
IBM chief executive Lou Gerstner yesterday recapped several of the company's recent missteps but reiterated that he expects a strong second half of the year. The company fell $5.06 to $103.94.