The Nasdaq composite lost 29.32 points to close at 1,959.24, and the Dow Jones industrial average fell 183.30 to 10,241.12.
Federal Reserve Chairman Alan Greenspan's remarks before the Senate Banking Committee had little effect on the markets. He indicated that inflation was being contained and predicted that tax cuts won't bump up consumer prices.
Investors were more concerned with the string of poor results that keep piling up. "We've had a progression of disappointing news that investors cannot tolerate," said Ned Riley, chief investment strategist for State Street Global Advisors. "The light at the end of the tunnel is being pushed far back," he added.
Lucent plunged $1.47, or 18 percent, to $6.43 after announcing it will lay off 15,000 to 20,000 more workers and take a $7 billion to $9 billion charge. The moves are part of a restructuring plan designed to bring the ailing company to profitability sometime in fiscal 2002.
CNET's Telecom Equipment index was down more than 5 percent.
In the wireless niche of communications, a couple good earnings reports turned up. AT&T Wireless Services, up 44 cents to $16.75, and Nextel Communications, down $1.40 to $15.96, posted strong results, saying increased cell phone use helped the industry in spite of an overall downturn in telecommunications.
Amazon tumbled $3.97, or 25 percent, to $12.06 after analysts gave it a thumbs down on slowing sales. The company's ability to balance turning a profit with growing sales has fallen flat, judging by second-quarter results and forecasts for the rest of 2001, which it reported after the bell Monday.
CNET's Internet Etailers index was down more than 7 percent.
Chipmaker Cirrus Logic was another big loser on the Nasdaq Tuesday, dropping $5.64 to $18.39 on Monday's news that its first-quarter operating earnings plunged.
On the bright side, Acxiom, which offers computer-based marketing services, was up $1.87, or 18 percent, to $12.41 after it reported a first-quarter loss but said profits were ahead in its second quarter.
Among technology bellwethers, Microsoft fell 77 cents to $66.32, Oracle gained 8 cents to $18.21, Cisco Systems rose 11 cents to $18.38 and Intel was down 12 cents to $28.88.
AOL Time Warner fell 30 cents to $42.70, and Yahoo fell 59 cents to $16.97.
Staff and Reuters contributed to this report.