The technology sector picked up where it left off last week, losing its footing and sending the major indices lower. Selling, confined to the

Nasdaq Composite Index for much of the day, picked up in earnest in the afternoon, as portfolio managers unloaded technology stocks for the safety of brokerages, energy stocks and retailers.

The tech sector's decline was incited by

Goldman Sachs

, which lowered earnings estimates for

IBM

(IBM) - Get Report

this morning, citing diminished earnings based on weakness in the euro. IBM fell sharply on the news, dropping $4.75 to $124.75 today, and contributing 28 points of negative drag to the

Dow Jones Industrial Average, which fell 25.16, or 0.2%, to 11,195.49.

Hewlett-Packard

(HWP)

also ended down, losing $8.06 to $113.56 on news that it was looking to purchase PriceWaterhouseCoopers' consulting business. Meanwhile, the

S&P 500 lost 5.24, or 0.4%, to 1489.26, and the Nasdaq dropped 82.06, or 2.1%, to 3896.35. The

Russell 2000 lost 2.08 to 533.62.

"Anytime we've made a recovery to the highs, the market's been vulnerable to a pullback," said Steven Goldman, market strategist at

Weeden

. "The Nasdaq punched out to a new recovery higher and we're vulnerable. Again, it's a decline that could last a few weeks, and the waning on the S&P is tied into that."

Meanwhile, the specter of inflation continues to scare the market, especially as oil prices climbed higher despite OPEC's announcement that it would increase daily oil production by 800,000 barrels. With the exception of commodity-related indices, which are dancing in the black gold, the rest of the market is worried. Sectors most directly affected by rising fuel costs -- transportation, airlines and chemicals -- had a poor day today, but Jim Volk, co-director of institutional trading at

D.A. Davidson

, said rising prices are a detriment to the health of the entire market.

"If oil prices are not going to come down, people wave the inflation flag," said Volk.

Technology Stinks it Up

Money managers brushed off blue-chip technology stocks like a fungus, dooming

Cisco

(CSCO) - Get Report

,

Sun Microsystems

(SUNW) - Get Report

and

Oracle

(ORCL) - Get Report

to significant losses. The usual reasons were mentioned for the weakness -- earnings, high valuations and the Nasdaq's strong August run.

"We're setting up for a good fourth quarter," said Jeff Phelps, portfolio manager of the

Chase Core Equity Fund

in Houston. "I don't know that anything is wrong. This is just the market being the market."

Being the market meant being lousy today. IBM's

problems regarding the euro zone currency aren't likely to be confined. Other companies, including

DuPont

(DD) - Get Report

last week, have already stated that their revenues would be hurt by the weakness in the euro. Earnings tracker

I/B/E/S

commented today that other multinationals, including those in the basic industries and technology sector, are likely to face earnings erosion due to the euro's weakness.

The

Nasdaq Telecommunications Index

lost 2.5% today, while the

Nasdaq Biotechnology Index

dropped 4%.

TheStreet.com Internet Sector

index lost 1.3%.

Meanwhile, the brokerage stocks were a haven for investors again.

Lehman Brothers

(LEH)

rose $12.13, or 8.2%, to $160.25, mostly in the last hour of trading, on (what else) rumors the company is going to be sold. Since the recent purchase announcements of U.S. firms

PaineWebber

(PWJ)

and

Donaldson Lufkin & Jenrette

(DLJ)

, various financial stocks have been boosted on takeover rumors. Today, it's Lehman; last week, it was

J.P. Morgan

(JPM) - Get Report

(which itself rose $5 to $169 today).

The

S&P Insurance Index

TheStreet Recommends

gained 2.7% today, another solid performance for those stocks. The

Philadelphia Stock Exchange/KBW Bank Index

rose 0.9%.

Outside of the financials and energy stocks, retailers strengthened today.

Wal-Mart

(WMT) - Get Report

got a shot in the arm from

Banc of America Securities

this morning, which initiated coverage on the stock with a buy rating and a $62 target. The Arkansas-based retailer responded, rising $2.19 to $54.31 today.

Home Depot

(HD) - Get Report

, another Dow component, gained $1.31 to $54.25 today, and the

S&P Retail Index

rose 2.6%. TSC wrote a

story about Wal-Mart earlier in the day.

Market Internals

Breadth was mixed on the Big Board; lousy on the Nasdaq, on mediocre volume.

New York Stock Exchange: 1,525 advancers, 1,295 decliners, 902 million shares. 192 new 52-week highs, 34 new lows.

Nasdaq Stock Market: 1,568 advancers, 2,433 decliners, 1.46 billion shares. 74 new highs, 70 new lows.

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Most Active Stocks

NYSE Most Actives

  • Nortel (NT) : 25 million shares.
  • Lucent Technologies (LU) : 20.8 million shares.
  • AT&T (T) - Get Report: 11.9 million shares.

Nasdaq Most Actives

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Sector Watch

OPEC's

decision to raise output by 800,000 barrels per day wasn't enough to drive down the price of oil, leaving oil stocks burning up. The

American Stock Exchange Oil & Gas Index

ended up 2.3%, to 544.79. Dow component

ExxonMobil

(XOM) - Get Report

climbed 1.8%, while

Chevron

(CHV)

ended up 3%. Oil's power was generating the

Philadelphia Stock Exchange Oil Service Index

, sending it up 4.6%.

Soaring energy prices caused the

Dow Jones Utility Average

to rise 2.4%.

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Bonds/Economy

Oil prices are back up, and the bond market doesn't like it.

In the wake of

OPEC's

decision over the weekend to boost output by just 3%, oil, which tumbled 5% on Friday, is back near the 10-year high of $35.39 a barrel it hit on Thursday. With no economic data on the calendar, the negative implications for inflation are hurting bonds.

The benchmark 10-year Treasury note lately was down 7/32 at 99 27/32, lifting its yield to 5.768%.

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International

Major European indices closed lower with London's

FTSE

down 18.7 to 6582. Paris'

CAC

was off 28.35 to 6675.01 and the

DAX

in Germany fell 53.32 to 7214.

The euro was trading at $0.8578. The dollar was trading at 106.03 yen.

Asian markets stumbled overnight.

Despite strong economic numbers, Tokyo shares closed lower amid news of an index reshuffling that had investors scrambling to adjust portfolios. The key

Nikkei 225

index shed 370.65, or 2.3%, to close at 16,130.90,

With the euro hitting a new low, the greenback fell against the yen to fetch 106.21. in Tokyo trading. The dollar was lately trading at 106.04 yen.

Hong Kong's Hang Seng index declined 267.47, or 1.6%, to close at 17,007.98 as shares of

Pacific Cyberworks

(PCW)

continued to be punished by investors.

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