Updated from 4:03 p.m. EST

Stocks sagged to a lower close Thursday as falling tech shares won a daylong tug of war with blue-chips.

Technology measures were under pressure all day following disappointing earnings news and negative comments on Intel ( INTC). After rising above 10,000 earlier, the Dow Jones Industrial Average ended down 106.49 points, or 1.1%, to 9834.68. The Nasdaq tumbled 59.33 points, or 3.3%, to 1716.24, and the S&P 500 closed off 17.03 points, or 1.6%, at 1080.95.

The Dow was dragged down by late weakness in IBM ( IBM), which fell 3%, and Microsoft ( MSFT), which lost 3.1%. Tech investors were also spooked by reports that Lehman Brothers analysts came away from a Wednesday visit to Cisco ( CSCO) worried. According to a Lehman note circulating among institutional clients, usually optimistic Cisco CEO John Chambers said visibility is tough, and that the strength seen in the past few months has now softened. Cisco ended down 9.3%.

The averages had plenty of news to drive the action Thursday, starting with optical networking company Ciena ( CIEN), which slashed its second-quarter revenue guidance . The outlook pressured not only the networking sector, but technology stocks in general.

The company's revenue for the recently completed first quarter fell 50% to $162.2 million from $352 million in the year-ago period, and Ciena posted the largest loss in its history because of the spending slump in the telecommunications industry. For the second quarter, the company expects revenue of about $100 million, 32% below the Wall Street consensus of $148 million and 76% below its year-ago revenue of $425 million. Shares of Ciena fell $1.10, or 12.6%, to $7.60.

Other networkers were lower as well. JDS Uniphase ( JDSU), Juniper ( JNPR), Redback ( RBAK) and Sycamore ( SCMR) all lost ground. The American Stock Exchange Networking Index dropped 5.9%.

The other big tech news of the day surrounded Nextel ( NXTL). The provider of wireless communications services said most of its key measures came in as expected in the fourth quarter, although the company pushed back the release of its earnings per share results because of a debt restructuring at its international unit. The company's loss widened to $188 million from $96 million in the prior-year quarter, and revenue rose to $1.88 billion from $1.53 billion. The stock finished up 12 cents, or 2.7%, to $4.50.

Elsewhere, analysts at Banc of America trimmed their earnings estimates on Intel, the world's largest chipmaker, citing a ramp-up in inventories. The stock responded accordingly, falling $1.96, or 6.1%, to $29.48. The Philadelphia Stock Exchange Semiconductor Index was down 6.7%.

On the economic front, the Philadelphia Fed Index came in much stronger than expected, rising to 16.0 in January from 14.7 in December, providing further proof that the manufacturing sector is on the mend. The Labor Department said initial jobless claims rose to 383,000 in the week ended Feb. 16 from 373,000 in the previous week. Economists were expecting the number of first-time claims to come in at 375,000.

Separately, the Commerce Department said the U.S. international trade gap fell to $25.3 billion in December, below the consensus estimate of $28.5 billion.

On the Big Board, Aetna ( AET) climbed after the insurance company posted a wider-than-expected fourth-quarter operating loss excluding one-time items of $84.6 million, or 59 cents a share. Analysts were expecting a loss of 43 cents a share, according to research firm First Call/Thomson Financial. The company took a $125.1 million charge in the quarter to account for job cuts and other actions. Shares of Aetna gained 5.1% to $33.50.

Radio Shack ( RSH) slipped a penny to $27 after the electronics retailer reported fourth-quarter earnings of 67 cents a share, beating analysts' expectations by a penny. Radio Shack lowered its guidance for the first quarter, but the company remains confident that it will deliver 13% to 15% earnings growth in 2002.

Shares of BellSouth ( BLS) came under pressure after the telephone company trimmed its guidance for 2002, saying earnings, revenue and capital expenditures would come in lower than previously expected. The stock closed off 6.2% at $37.95.

AOL Time Warner ( AOL) was the most active stock on the NYSE, trading down $1.20, or 5%, to $23, just pennies above the 52-week low. The stock was hurt by a published report that said Janus Capital has been selling AOL shares even as some of its money managers have kept a positive stance on the stock.

Online auction house eBay ( EBAY) traded down 0.7% to $53.98 after the company said that it has repurchased Wells Fargo's ( WFC) equity stake in Billpoint, eBay's payment subsidiary, for $43.5 million.

U.S. Treasury issues were higher. Around 4 p.m. EST, the 10-year note was up 9/32 to 100 6/32, yielding 4.85%.

Overseas, European stocks were higher across the board as London's FTSE 100 advanced 1% to 5073 and Germany's Xetra Dax was up 1.5% to 4851. Strength was coming from technology, media, and telecommunications shares. Japan's Nikkei 225 rallied up 4.7% to 10,295, its biggest one-day gain in almost a year. The Hang Seng closed up 0.4% to 10,789.

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