Tech Weakness Sinks Stocks

Updated from 4:12 p.m. EDT

Stocks finished sharply lower Wednesday as the semiconductor group led a broad selloff in technology shares and traders had a tepid reaction to the latest stream of corporate earnings.

The Dow Jones Industrial Average dropped 121.59 points, or 1.09%, to 11,013.18, and the S&P 500 lost 13.92 points, or 1.09%, at 1258.60. The Nasdaq Composite was the hardest hit, falling 38.62 points, or 1.81%, to 2090.24. The 10-year Treasury bond fell 2/32 in price to yield 5.11%, and the dollar rose against the yen and euro.

"The big question now is whether earnings are going to hold up or not," said Edgar Peters, chief investment officer with Pan Agora. "In tightening cycles, there is misplaced optimism when the economy is slowing that earnings wouldn't slow. Today showed the market repricing itself because of earnings disappointment. Volatility from geopolitical concerns and rising oil prices certainly didn't help."

Since the start of July, the Nasdaq has dropped 80 points, or 3.7%. The Dow is off 138 points, or 1.2%, and the S&P 500 has given back 12 points, or 0.9%.

Pressuring the Nasdaq was the Philadelphia Semiconductor Sector Index, which ended lower by 2.7% as all 19 of its components finished in the red. Chip shares have been notably influential this week, leading the market to a lower close Monday but then providing a late lift Tuesday.

Intel(INTC) was the main drag on the Dow, falling 4.2%. Fellow component IBM(IBM) dropped 1.3% after JPMorgan Chase cut its revenue forecasts for the computer maker.

Another Dow loser was Microsoft(MSFT), down 2% to $22.64 after the European Union slapped the software maker with a $357 million fine. The EU determined that the company failed to make good on a pledge to share source code with other software makers as part of a 2004 antitrust settlement.