The Nasdaq composite index fell as much as 574 points to 3,649.11 before recovering most of its losses for the day as a record 2.6 billion shares traded hands. It lost 74.78 to close at 4,148.90, while the Standard & Poor's 500 index lost 11.20 to 1,494.77.
The Dow Jones industrial average, down more than 500 points in midday trading, lost 46.85 to close at 11,175.08, led by Home Depot. Financial stocks also posted losses as Citigroup, American Express and J.P. Morgan dipped.
Cisco Systems was the most actively traded stock on the Nasdaq Stock Market as 115 million shares changed hands, more than four times the stock's average daily volume. The shares gained 19 cents to close at $73.13.
The CNET tech index lost 23.99 to close at 3,184.46. Losers edged out winners, with 67 of the 98 stocks in the index falling and 31 rising.
Of the 18 sectors tracked, wireless companies posted the sharpest drop, falling about 4 percent. Semiconductor equipment makers were the day's largest gainers, climbing 6 percent.
BindView Development was the Nasdaq's largest loser, falling $16.69, or 65 percent, to $8.88 on volume of 10.6 million shares, more than 27 times its daily average. Analysts at Deutsche Bank, Hibernia Southcoast and Merrill Lynch cut their ratings on the stock.
Among members of the CNET tech index, 3Com and eToys posted losses.
3Com fell $5.19, or 10 percent, to $44.56. Shares in the company's Palm subsidiary almost fell below their $38 initial public offering price. Palm fell $2.06 to close at $38.25.
eToys fell $1.22, or 13 percent, to $7.56. Competitor Toys "R" Us said it will open two more e-commerce sites. Toys "R" Us fell 13 cents to $14.19
Parametric Technology fell $1.59, or 15 percent, to $9.16 on volume of 44.3 million shares, more than eight times the average daily volume. Analysts from four firms cut their ratings on the stock.
Shares of online grocer Peapod gained 56 cents to $3.25. The company is negotiating with an unnamed party for an equity investment.
The Philadelphia semiconductor index fell 25.92, or 2.4 percent, to 1,068.89, led by chip designer Rambus, which lost $47.94, or 18 percent, to close at $209.
Among other stocks listed on the index, Applied Materials gained $8.88, or nearly 10 percent, to $98.13. Novellus rose $4.63 to $50.25.
Verizon Wireless, the company created yesterday by the merger of Bell Atlantic's and Vodafone's U.S. mobile phone networks, plans to go public this year. Bell rose 69 cents to $63.75, while Vodafone fell $3.44 to $52.06.
Nortel Networks said it will sell its manufacturing plants in North America and Asia to Solectron. Nortel fell $5.41 to $114.44, while Solectron rose $1.06 to $40.31.