Sector Watch: Networking Stocks Hit, Drugs Lone Winner

Thanks to a bunch of earnings warnings that came out after the closing bell last night, investors were shrieking in horror at the sight of tech stocks.

The warnings didn't come from one sector, however, but were related enough to pack a wallop.

Software maker BroadVision(BVSN Quote), networker Redback Networks(RBAK Quote), Internet infrastructure software developer Inktomi(INKT Quote) and e-services firm E.piphany(EPNY Quote) warned about their financial problems and helped drag the Morgan Stanley High-Tech 35 down 5.1%. Earlier today, the index hit a new 52-week low.

Look at the triple-whammy from B2B software maker Ariba(ARBA Quote). Last night, the company issued a profit warning, announced it would lay off about one-third of its workforce and called off its merger with fellow software company Agile(AGIL Quote).

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Meanwhile, Redback's news helped inspire a hefty Lehman Brothers downgrade on rival Sycamore Networks(SCMR Quote).

Those networking companies count telcos as clients, so their problems were applying quite a bit of pressure to the Nasdaq Telecommunications Index. It was falling 7.5%.

Also inflicting some pain was Finnish mobile-phone maker Nokia(NOK Quote), which was down 4.3% to $21.93. The company weighed heavily on European markets after it announced that it will lend a couple of billion euros to the France Telecom(FTE Quote) mobile phone unit, Orange. Alcatel(ALA Quote) and Ericsson(ERICY Quote) were also included in the deal. Yesterday, Nokia said it would continue to provide financing to Hutchison Whampoa.

Watchers of Nokia said such financing agreements could put extra pressure on the company's finances.

About the only pocket of safety was drugs -- an area of defense for investors fleeing tech.

And no matter what the financial outlook, people always need drugs, ahem, that is pharmaceuticals, especially with those baby boomers creeping up in age. The American Stock Exchange Pharmaceutical Index was up 0.9%.