Tech Tanks as Earnings Jitters Spread

Updated from 4:06 p.m. EDT

Stocks plunged Tuesday as profit warnings from the tech sector battered the Nasdaq to its largest loss since early March, while the broader markets also broke below key technical levels, spurred by higher crude oil prices.

The Nasdaq lost 43.23 points, or 2.15%, to 1963.43; the Dow fell 63.49 points, or 0.62%, to 10,219.34; and the S&P 500 closed down 9.19 points, or 0.82%, to 1116.19. The 10-year Treasury note was down 5/32 in price to yield 4.48%, while the dollar was higher against the yen and virtually even against the euro.

Ken Tower, chief market strategist at CyberTrader, said the session's action showed a clear technical breakdown of the last month's trading range for the Dow and the S&P. "What's really clear is that the correction that started in January is not over," he said. "The rally since the March low was not the second leg of the bull market. Now it appears that, at least on the Dow and the S&P, we are going to go back down to the May lows and test them."

However, Tower said a spike in put buying among options traders showed strong bearish sentiment, which he views as a positive. "The contrarian view would be that because there is so much negative sentiment displayed in the put/call trading today, that suggests a limited downside move."

The negativity stemmed largely from a continuation of the earnings warning parade, with Veritas (VRTS) lowering its second-quarter earnings and revenue guidance, citing weakness in U.S. enterprise sales. It now expects second-quarter earnings of 17 cents to 19 cents a share on revenue of $475 million to $485 million, having previously expected second-quarter earnings of 21 cents to 23 cents a share on revenue of $490 million to $505 million. Its stock closed down $9.55, or 36%, to $17.