Stock prices closed mostly lower as cautious investors, fearing a pending interest-rate increase, fled the technology sector despite strong corporate earnings.
The technology-heavy Nasdaq composite index fell sharply, losing 97.50 to close at 4069.91. The Dow Jones industrial average, well into positive territory for most of the session, survived a late sell-off to close up 3.10 at 11,032.99.
The Standard & Poor's 500-stock index fell 5.94, to 1404.09.
"We saw a fairly big decline in the technology sector. It had been showing signs of cracking, and it really kind of came unglued today," said Ricky Harrington, a technical analyst with Wachovia Securities in Charlotte.
The sell-off occurred despite strong earnings reports. But several well-known technology companies were punished for not living up to investors' extraordinary expectations for the sector.
A case in point was cellular-phone chipmaker Qualcomm, which closed down 24 3/8 at 124 5/8. Despite beating analysts' earnings estimates by a penny, the company warned Tuesday that sales may be off this quarter. Investors promptly punished the company, driving the stock down nearly 14 percent.
And software maker and network storage company EMC Corp. fell despite reporting fourth-quarter earnings of 34 cents a share, excluding a one-time charge related to an acquisition. The figure beat Wall Street analysts' estimates of 31 cents a share, but the company reported lower-than-expected revenues for an important segment of its business, causing investors to flee. EMC was trading down 7 1/2 at 111 in after-hours trading.
Market watchers said congressional testimony by Federal Reserve Board Chairman Alan Greenspan gave investors few signals about the direction Fed policymakers are likely to take when they meet to discuss interest rates next week.
"Investors were cautious in anticipation of Greenspan's testimony, which might have given them an indication of where interest rates are going. But he didn't say anything investors could latch on to one way or the other," said Paul McEnroe, a trader at Brown Brothers Harriman in New York.
The financial services sector was up across the board in the wake of strong earnings after a booming fourth quarter on Wall Street. J.P. Morgan, part of the Dow Jones industrial average, closed up 7-3/16 at 123 3/8.
Brokerage firms were also rewarded today. Merrill Lynch traded up 6 at 87 in after-hours trading, and Morgan Stanley Dean Witter rose 3-7/16, at 132 7/8.
McEnroe said it appeared as if some investors were rotating money out of newer technology stocks into more established companies.
Among the stocks benefiting from that trend were Corning, which rose 4 3/4, to 156, and Minnesota Mining and Manufacturing, up 4-15/16 at 96-5/16.
Analysts said President Clinton's State of the Union address, scheduled for Thursday, was also making investors cautious.