Tech Stocks Take a Plunge

Updated from 4:17 p.m. EST

Stocks closed lower Wednesday, with tech stocks posting deep losses, as Cisco's (CSCO Quote) disappointing sales guidance late Tuesday contributed to prolonging the Nasdaq's recent underperformance.

The Dow fell 34.44 points, or 0.3%, to 10,470.74; the Nasdaq lost 52.07 points, or 2.5%, to 2014.14 -- its largest decline since plunging nearly 60 points in September -- and the S&P 500 declined 9.51 points, or 0.8%, to 1126.52.

Volume on the New York Stock Exchange was 1.62 billion shares, while 2.23 billion shares exchanged hands on the Nasdaq. Decliners outpaced advancers by about 7 to 3 on the NYSE and by about 7 to 2 on the Nasdaq.

Robert Basel, co-head of equity trading at Citigroup Global Markets, attributed today's tech declines to disappointment over Cisco's earnings and not widespread profit-taking. Instead, he feels profit-taking began early last week and today's downturn was the result of diminished expectations for future earnings growth.

In economic news Wednesday, the Institute for Supply Management's January report on the service sector came in at 65.7; economists had expected a reading of 60, compared with the prior month's reading of 58. Also, the government said December factory orders rose 1.1%. Analysts had expected an increase of 0.2% from a 1.4% decline in the prior month.

Other Markets

Markets overseas finished mostly lower. In London, the FTSE 100 rose 0.2% to 4399, and in Germany, the Xetra DAX fell 0.7% to 4028. In Asia, Hong Kong's Hang Seng ended unchanged at 13,086.7, and Japan's Nikkei closed 1.8% lower at 10,447.3.

The 10-year Treasury note was recently down 7/32, yielding 4.12%. The dollar was still near a three-year low vs. the Japanese yen, lately fetching 105.48 yen. The dollar was slightly stronger against the euro, with the European single currency worth about $1.253.

Tech Troubles

The tech-laden Nasdaq was tagged for heavy losses Wednesday, after Cisco's earnings figures failed to satisfy investor appetites. The Dow, on the other hand, managed to avoid such a sharp decline, continuing a trend that began early last week. Investors are selling technology stocks in favor of cyclical and stable shares that are more prevalent in the Dow.