Stocks Catch Google's Cold

The averages end sharply lower after its growth warning.
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Updated from 4:05 p.m. EST

Stocks closed sharply lower Tuesday after

Google

(GOOG) - Get Report

warned that its breakneck growth is decelerating.

The

Nasdaq Composite

led the plunge, falling 25.79 points, or 1.12%, to 2281.39. The index was dragged down by a 7% decline in Google and a 1.6% sympathy hit in

Yahoo!

(YHOO)

.

Meanwhile, the

Dow Jones Industrial Average

fell 104.14 points, or 0.94%, to 10,993.41, and the

S&P 500

lost 13.46 points, or 1.04%, to 1280.66. The Dow closed below the 11,000 mark for the first time since Feb. 13.

Google's chief financial officer, George Reyes, told a Merrill Lynch conference Tuesday that "clearly our growth rates are slowing." Shares of Google were down $28 to $362.37, but had been as low as $338.51.

"You can see that each and every quarter," Reyes told investors and analysts. "We are going to have to find new ways to monetize the business."

Despite the losses Tuesday, the Dow finished February up 129 points, or 1.2%, and the S&P 500 finished higher by a fraction of a point. The Nasdaq, however, lost about 24 points, or 1.1%, on the month.

About 1.77 billion shares changed hands on the

New York Stock Exchange

, and volume on the Nasdaq was 2.13 billion shares. Decliners outpaced advancers more than 2 to 1.

The 10-year Treasury bond was up 11/32 in price to yield 4.55% -- 13 basis points below the two-year yield -- while the dollar dropped against the yen and euro.

"We started out on the downside, and Google's news added fuel to the fire," said Paul Nolte, director of investments at Hinsdale Associates. "Of course, Google is the poster child for technology."

Google's comments followed a large serving of economic news, including the first revision of the Commerce Department's estimate of fourth-quarter economic growth. The department said GDP rose at a 1.6% rate between October and December, up from its initial peg of 1.1%. The revision was in line with economists' estimates. Inflation, as measured by the personal consumption expenditure deflator, was slightly stronger than expected at 3.3%.

To view Gregg Greenberg's video take on today's market, click here

.

Other economic reports included consumer confidence, which fell to 101.7 in February from 106.8 in January, below expectations. Meanwhile, existing-home sales slipped 2.8% to an annual rate of 6.56 million units, the lowest since February 2004. Also, the Chicago purchasing managers' index declined to a reading of 54.9 from 58.5, below estimates.

"We're near four-and-a-half year highs and there's always concerns at these levels," said Robert Pavlik, chief investment officer with Oaktree Asset Management. "There is a pushing-and-pulling effect with all this economic news. There's always concern about inflation, especially how the Fed has talked it up recently."

Crude oil rose after two volatile sessions, with the April contract finishing up 41 cents to $61.41 a barrel. An Energy Department update on U.S. storage inventories Wednesday is expected to show another decent build in crude stocks and declines in gasoline and distillates. Front-month crude swung in a 3% band on Friday and Monday.

By sector, the Amex Interactive Week Internet index fell by 1.7% , the Nasdaq Computer index finished down 1.3%, and the Amex Computer index was off 0.7%.

Elsewhere, the S&P Retail index finished lower despite earnings beats from

Staples

(SPLS)

and

BJ's Wholesale Club

(BJ) - Get Report

.

Dow component

General Motors

(GM) - Get Report

was in the news Tuesday, with the

Financial Times

reporting that the automaker wants its bankers to complete a deal for GMAC before a board meeting next Monday. A transaction for control of the financing arm could be worth more than $11.5 billion, the newspaper said. GM rose 20 cents, or 1%, to $20.31.

Apple

(AAPL) - Get Report

ended Tuesday lower after the company's product demonstration in Cupertino, Calif. Apple debuted new Mac Mini computers that use

Intel's

(INTC) - Get Report

Core Duo processor. Rumors had circulated before the meeting that Apple would debut a new version its video iPod. Shares were down $2.50, or 3.5%, to close at $68.49.

In earnings news,

Universal Health Services

(UHS) - Get Report

said fourth-quarter profit fell 67% from a year ago to $12.3 million, or 23 cents a share, while adjusted earnings of 45 cents a share were 3 cents short of estimates. The stock slid $1.04, or 2%, to $50.27.

Teva's

(TEVA) - Get Report

fourth-quarter earnings rose 9% to $304.9 million, or 45 cents a share, beating estimates on strong sales of its brand-name and generic drugs. Sales rose 6% to $1.4 billion. Shares lost 81 cents, or 1.9%, to $41.99.

Charter Communications

(CHTR) - Get Report

lost $336 million, or $1.06 a share, in the fourth quarter, compared with a loss of $339 million, or $1.12 a share, last year. Analysts expected a loss of 85 cents a share, according to Thomson First Call. Revenue rose 5.2% from last year to $1.34 billion, matching estimates. Charter finished down 5 cents, or 4.2%, to $1.15.

Wendy's

(WEN) - Get Report

disclosed details on the expected public sale of a stake in its Tim Hortons doughnut chain. The fast-food chain expects to sell 29 million shares of the subsidiary at $18 to $20 apiece. Goldman and RBC are lead underwriters on the deal. Wendy's fell by 81 cents, or 1.4%, to $57.85.

The day's research reports included a call on the Chinese Internet space from CIBC. The bank started

Sohu

(SOHU) - Get Report

and

Sina

(SINA) - Get Report

at sector perform and

Baidu

(BIDU) - Get Report

at underperform. CIBC cited valuation in the Baidu rating.

Overseas markets were mostly lower, with London's FTSE 100 down 1.4% to 5791 and Germany's Xetra DAX losing 2% to 5796 . In Asia, Japan's Nikkei added 0.1% overnight to 16,205, while Hong Kong's Hang Seng shed 0.2% to 15,918.