The Nasdaq composite index fell 4.39 points to 1,912.41, after making gains briefly earlier in the day, and the Dow Jones industrial average was off 40.82 to 10,382.35.
Cisco Systems' announcement late Thursday that sales appear to be stabilizing and its current quarter is on track to meet estimates sent the Nasdaq up 4 percent Friday. But technology investors fell back into their selling pattern Monday, as worries about the economy continued to hold sway.
Meanwhile, analysts have been talking about economic recovery, but upbeat forecasts have yet to help the markets. Morgan Stanley analyst Jay Pelosky explained the discrepancy by pointing out the "micro" and "macro" camps that have Wall Street divided.
"While signs of macro stabilization are becoming apparent, investors seem focused on the micro outlook, creating a sharp divide between the two investment branches," Pelosky said. In other words, traders and investors don't know whether to concentrate on news from individual companies or larger economic reports.
"We are close to an equity market inflection point," Pelosky predicted, adding that the "divide" presents a good opportunity to buy "in preparation for a better economy and equity market six to 12 months ahead."
Lehman Brothers analyst Jeffrey Applegate remarked that the Cisco-inspired gains are a sign the market isn't going to turn around until it gets more positive "micro" news.
"The U.S. stock market showed us on Friday that a little evidence of corporate business stability could go a long way towards leading the market higher," Applegate said. He added that the market's discounts assume "deep reservations around the prospects for an earnings recovery in the quarters ahead," something that he said now has a good possibility of materializing.
The analyst said he expects the market to meet his new targets for the Standard & Poor's 500 earnings, based on predictions that "a turning point in the earnings cycle is at hand."
In other economic news Monday, a report from the National Association of Realtors showed sales of previously owned homes fell last month to a seasonally adjusted annual rate of 5.17 million units from a rate of 5.33 million units in June. The rate was below analysts' expectations for a 5.29-million-a-year pace, indicating the existing home market is still weak.
In company news, Excite@Home slipped 20 percent, losing 11 cents to close at 39 cents as the company announced that holders of notes worth $50 million are demanding payments from the company by the end of the month. The holder, Promethean Investment Group, said Excite@Home breached commitments related to the notes.
PeopleSoft fell 6 cents to $37.09 after the first day of its user conference as the company announced the acquisition of Cohera, a private maker of content integration software. PeopleSoft has been one of the few companies raising estimates and beating predictions in the tough economic climate.
Centillium Communications stock made strong gains, up $1.98 to $13.51 after the company reaffirmed its third-quarter financial projections. The maker of integrated circuits for digital subscriber line equipment said it sees $46 million in revenues and earnings of 8 cents per share for the third quarter of fiscal 2001. First Call was expecting earnings of 8 cents a share.
Homestore.com tumbled 14 percent, or $2.48 to $18.60, after Salomon Smith Barney reiterated a "neutral" rating on the stock and said the company has "quality of earnings" issues. Analyst Lanny Baker also said the online real estate company could have trouble renewing the 180,000 subscriptions that originated from a bulk purchase from Cendant.
Among other heavily traded techs, Intel rose 8 cents to $29.16, Microsoft rose 25 cents to $ 62.30, Oracle fell 26 cents to $14.93, Cisco slipped 24 cents to $14.93, and Sun Microsystems slid 47 cents to $14.50.
Amazon.com fell 7 cents to $10.16, AOL Time Warner fell 9 cents to $41.72 and Yahoo lost 73 cents to $13.38.
Staff and Reuters contributed to this report.