So investors really do buy on the rumors and sell on the news. The stock market -- elevated in recent weeks by strong profit predictions -- plummeted today, as investors abandoned high-technology companies that reported positive earnings.
The Nasdaq composite index suffered its biggest decline in three months -- dropping 98.11 points, or 3.5 percent, to 2732.18.
The Dow Jones industrial average fell 191.55 points, or 1.7 percent, closing at 10,996.13. International Business Machines accounted for 32 percent of that loss. The Standard & Poor's 500-stock index declined 30.55, or 2.2 percent, to 1377.10.
"There was clearly profit-taking in Silicon Valley," said Marshall Acuff, chief market strategist at Salomon Smith Barney.
"There's a general feeling that all the positive profits that were expected are being reflected already and so these strong stocks won't shoot up."
The sell-off came after several major high-tech companies reported earnings that either satisfied or beat expections. Microsoft, Lucent Technologies, and IBM led the decline after reporting profit growth of at least 17 percent.
The stocks of many high-tech leaders have grown more than 25 percent this year -- and that is spooking investors. "There seems to be a fear that people can't produce third-quarter earnings as good," said Ed McMahon, chief trader at Merrill Lynch. "Can it continue to go up?" So even though Microsoft's profit grew 62 percent, the world's largest software maker saw its stock fall 5-1/16 to 93-5/16. Feeding the decline, Microsoft warned that revenue growth will slow next quarter as demand slackens for personal computers and concerns arise about how computers will cope internally with the turnover to 2000.
The outlook did not surprise analysts, who have become accustomed to Microsoft's attempts to temper expectations. But investors seemed to take it seriously.
Companies that make personal computers and parts were pummeled. Dell Computer lost 1-5/16 to 41 1/8 and Compaq Computer lost 7/8, declining to 25 5/8. Intel, the biggest semiconductor maker, slipped 2 5/8 to 64-15/16.
IBM dropped 6 3/8 to 128 1/4 after reporting that a surge in computer sales boosted its second-quarter profit 17 percent -- more than expected. Lucent also beat analysts expectations, with a 60 percent increase in third-quarter earnings. And its stock sank 6-57/64 to 69-15/16.
"Management is probably drowning themselves in martinis by now," Acuff said.
"They must be saying, `What's going on here?' "
Contributing to the decline is that Federal Reserve Chairman Alan Greenspan is due to testify on Thursday.
"So buyers aren't there," Acuff said.
"I'm not going to buy on Tuesday if Greenspan's speaking on Thursday. I agree with what these people are doing. I'd buy tomorrow."
The New York Stock Exchange suffered its most negative trading day since May 14, with seven stocks falling for every three that rose. Trading volume was 758.7 million shares, up from 645 million on Monday.
Many analysts believe that this is a temporary blip.
Chuck Hill, research director at First Call, pointed out that many of the stocks that took hits were the very ones that are strongest, signaling profit-taking rather than panic.
"If it were a major correction, people would be selling companies with very disappointing results," he said.
"Instead, they're trying to get a pop off the good news."
Analysts polled by First Call predict that profits this quarter will come in around 15 percent. In the third quarter, they expect a 21 percent gain.
"This is not the end of the line," Acuff said. "It may be that people may want to play a new game each quarter."