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For most of the session, it looked like most of the market's major gauges would be sporting just a little bit of a loss at the closing bell.

But then the final hour of trading hit. And so did the sellers. And they hit hard, sending the

Nasdaq Composite Index

down 128.48, or 3.2%, to 3921.19, erasing a huge chunk of the record 167 point gain it sported

yesterday. Today's decline in the Nasdaq Comp was the fifth-largest in its history. The Comp had traded as low as 3904.82, a level it hit late in the day.

Crushing the Comp were steep losses in Internet, telecommunications and the stocks of networking companies. Also adding to the misery were sizable losses in Comp heavyweights


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Sun Microsystems

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MCI WorldCom

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Meanwhile, the

Dow Jones Industrial Average

fell 61.12, or 0.5%, to 11,511.08, after closing at an all-time high yesterday. The Dow had traded higher through a good portion of the session, but fell into the red late in the day and never recovered. The biggest drag on the Dow came via Microsoft.

Not all was bleak in tech, as shares of


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Credit Suisse First Boston

upgraded the stock.


S&P 500

gave up 19.04, or 1.3%, to 1438.56. The small-cap

Russell 2000

shed 9.81, or 1.9%, to 492.61.

Internet stocks, which were yesterday's prominent winners, reversed course and got hammered. Internet Sector

index swooned 66.48, or 5.7%, to 1094.69. The biggest loser in the DOT was



ahead of its earnings, which were released after the close. The company posted fourth-quarter earnings of 19 cents a share, 4 cents ahead of the 27-analyst

First Call/Thomson Financial

estimate of 15 cents. New Tech 30

tumbled 47.05, or 7.4%, to 592.33. Unveiled Wednesday, the TSC New Tech 30 is an expanded index designed to replace the

Red Hots

index: The market-cap-weighted index remains focused on tracking the most scorching part of the market, the magnet for Wall Street's hot money. A list of the index components is available at


Nasdaq Telecommunications Index

crumbled 5.2%. The

American Stock Exchange Networking Index

slumped 3.2%.

Some of the blame for the stock selloff fell at the dilapidated doorstep of the Treasury market, which got blasted due to a number of factors. Not helping stocks was the fact there wasn't a big catalyst for a rally like

yesterday's, which was sparked by news that

America Online


is buying

Time Warner


in the

biggest merger ever.

Scott Curtis, senior equity trader at

Brown Brothers Harriman

, pointed out that the techs have had a huge rally the last couple of sessions, an advance starting Friday morning that traveled into yesterday and that there was "air coming out" of it today. He noted that last week's selloff was profit taking as investors sold off stock after the new year to delay their tax bill until 2001, the market subsequently got a little oversold and snapped back last week and yesterday before running out of steam today.

In the Treasury market, the 30-year bond was down 1 2/32 to 92 30/32, putting its yield at 6.675%, the highest it has been in more than 2 1/2 years. The long bond was clubbed by several factors, including a selloff in European bond markets, looming supply and hawkish comments from

Richmond Fed


Al Broaddus

, a

Federal Open Market Committee

voting member, who cautioned in comments last night that the Fed would have to continue to act "pre-emptively."

However, not all of the Fedspeak was negative.

San Francisco Fed


Robert Parry

, who is also a voting member of the FOMC, today said up to 3.75%


growth could be sustained due to productivity improvements.

Some Treasury market participants have said that the bond market's going to continue to struggle until there's a big pullback in the stock market.

As bonds fell, so did bank stocks. The

Philadelphia Stock Exchange/KBW Bank Index

tumbled 1.8%. The

Nasdaq Financial-100 Index

stumbled 2.2%. The

NYSE Financial Index

shed 1.1%.

The continued erosion in the bond market has more than a few stock market watchers concerned, concerns obviously that didn't evaporate today.

"We're in a cyclical bear market for bonds," said Philip Roth, chief technical analyst at

Morgan Stanley Dean Witter

. In an interview this afternoon, when the yield stood at 6.66% for the long bond, the technician said that every notch up in rates creates more problems for stocks, noting that the financials and utility stocks are acting poorly, and he added that at some level, the level of interest rates are bearish for growth stocks as well.

Roth has a short-term target of 6.75% for the long bond.

In an environment where the economy is strong, increasing expectations of inflation and interest rates are rising, "I want to buy stocks" that benefit in that environment, notably basic materials and energy stocks, said Roth.

Roth said he thinks that if the averages go below the lows of last week, "that would be pretty bearish," with those levels being 1378 on the S&P 500 and 11,100 on the Dow.

"The mania in tech is at a fever pitch," Roth said, adding that he doesn't think the broader market can do well until the tech sector corrects.


New York Stock Exchange

trading, 999.9 illion shares were exchanged while declining stocks thumped advancers 2,083 to 1,013. In

Nasdaq Stock Market

action 1.67 billion shares traded while losers beat winners 2,572 to 1,592. New 52-week highs were even with new lows 70 to 70 on the Big Board while new highs beat new lows 216 to 85 in over-the-counter trading.

Among other indices, the

Dow Jones Utility Average

slipped 2.00, or 0.7%, to 294.37. Elsewhere, the

Dow Jones Transportation Average

fell 30.94, or 1%, to 2949.56 and the

American Stock Exchange Composite Index

slumped 17.24, or 2%, to 865.51.

For coverage of today's top stocks in the news, see the Company Report, published separately