Chip Selloff Clips Nasdaq

Updated from 4:15 p.m. EDT

Weakness in the semiconductor sector weighed down the broader tech universe Monday, and blue chips closed well below their session highs as sellers took control after midday.

After having been up by as many as 12 points earlier, the Nasdaq Composite fell 13.13 points, or 0.62%, to 2116.93. The Dow Jones Industrial Average rose 12.88 points, or 0.12%, to 11,103.55, giving up most of an 85-point gain from earlier in the session. The S&P 500 also stumbled from its best level, finishing up 1.86 points, or 0.15%, at 1267.34.

The Nasdaq was pressured by a 2.2% decline in the Philadelphia Semiconductor Sector Index, as components Marvell (MRVL Quote) and Advanced Micro Devices(AMD Quote) fell by 5.7% and 4.5%, respectively.

Ken Tower, chief market strategist with CyberTrader, said big tech names "remain the weakest link for the bulls. Particularly weak are the big Nasdaq stocks. It appears likely that we are heading for a test of the June lows by the weakest sectors."

As for the Dow, the biggest laggard was computer maker Hewlett-Packard(HPQ Quote), which lost 2.8% to $31.93. Chip heavyweight Intel (INTC Quote) dropped 2.1% to $18.18.

The 10-year note was unchanged in price and yielding 5.13%, while the dollar rose against the euro and fell against the yen.

Volume was light to start the week. About 1.28 billion shares changed hands on the New York Stock Exchange, with advancers outpacing decliners by a 5-to-3 margin. Volume on the Nasdaq was 1.60 billion shares, and winners trailed losers 8 to 7.

Second-quarter earnings season unofficially kicked off after the bell Monday with numbers from aluminum producer Alcoa(AA Quote), the first member of the Dow to report.

Alcoa posted second-quarter earnings of $744 million, or 85 cents a share, up from $460 million, or 52 cents a share, last year. Results included a 4-cents-a-share charge related to a labor agreement. Revenue came in at $7.96 billion for the quarter, below analysts' expectations.