Updated from 4:11 p.m. EST

Investors handed stocks a pasting on the fourth anniversary of the Nasdaq's bubble zenith Wednesday, sending two of the three main indices to new 2004 lows despite a slew of positive earnings news in the industrial sector.

The Dow Jones Industrial Average tumbled 160.07 points, or 1.53%, to 10296.89, while the Nasdaq Composite fell 31.01 points, or 1.55%, to 1964.15. Both closed at their lowest level since mid-December. The S&P 500 fell 16.68, or 1.46%, to 1123.90, its lowest close since Jan. 6.

While stocks sold off, bonds held their ground, ending flat after several sessions of dramatic price appreciation. The 10-year note is currently yielding 3.72%.

Volume on the New York Stock Exchange approached 1.7 billion shares, while almost 2.2 billion shares changed hands on the Nasdaq. Decliners outnumbered advancers by 7 to 2 on both exchanges.

"What was happening up until now was mostly a rotation from one sector of the market to another, while today shows money is just coming out of the market," said Barry Ritholtz, chief market strategist at Maxim Group. "Clearly the character of the market has changed. It doesn't mean, mind you, that we're going right back to where we were. We're still waiting for 5% pullbacks in the Dow and the S&P in this bull market."

"While the low-hanging fruit has already picked, there's still upside," he added. "It's just less of a 'chasing momentum' market, and more of a 'buying the pullback' market."

Only three of the 30 Dow components ended in the green, among them Procter & Gamble ( PG), which Tuesday night predicted current-quarter earnings would beat estimates and set a 2-for-1 stock split. The other two gainers were McDonald's ( MCD) and Altria ( MO), proxies for the traditional sin havens that often thrive amid broader downturns.

Falling more than 3% were old economy stalwarts Alcoa ( AA), DuPont ( DD), Honeywell ( HON), International Paper ( IP), and Caterpiller ( CAT).

The industrials' weakness came despite a bullish update from Ingersoll-Rand ( IR), which raised its first-quarter guidance on strength in its end markets. IR's shares ended down $1.44, or 2%, to $63.45.

Other industrial companies with positive earnings news Wednesday were Danaher ( DHR) and Hughes Supply ( HUG).

In technology, the Philadelphia Semiconductor Index fell 2.07%, four years to the day after the Nasdaq touched its all-time high at 5048.62 in 2000. Was the anniversary weighing on sentiment?

"For so many people, the mistakes made after that peak are going to haunt them for a long time," Ken Tower, a chief market strategist at Cybertrader. "I don't think that we will embrace hope and enthusiasm for a new technology in anything like the way we embraced the growth and opportunities presented by the internet -- at least not for a long time."

"But the stock market is a creature of human emotions," he added, "and human emotions have not evolved very much over thousands of years, so I think you can certainly expect these patterns to repeat themselves over time. It just takes a long time for some of them."

Among major Nasdaq names, Intel ( INTC) fell 2.2%, Microsoft ( MSFT) lost 1.2%, Siebel ( SEBL ) fell 3% and Xilinx ( XLNX) gave up 3.6%.

Barry Hyman, an equity market strategist at Ehrenkrantz King Nussbaum, said the recent slide in the markets stems from investor concerns about the sustainability of the economic recovery in the wake of February's dismal employment report.

"That was such a huge miss," said Hyman. "Now, as we enter the political season, it raises concerns about the electability or reelection of President Bush -- it's a little more in doubt than it was a month ago."

"I still think the market is on solid footing -- economically and fundamentally," he added. "I think this downward movement is short-term in nature. The market is probably due for a more significant correction at some point, but I don't see any reason for a major sell-off. There's still room for growth."

The market's jitters were intensified Wednesday when Pennsylvania said it would join about a dozen other states that are suing drug companies for allegedly inflating prices. The lawsuit filed by Attorney General Jerry Pappert seeks hundreds of millions of dollars in damages and names blue-chips like AstraZeneca ( AZN), Pfizer ( PFE), Schering-Ploush ( SGP) and Johnson & Johnson ( JNJ).

The U.S. deficit in international trade of goods and services rose to $43.1 billion in January from an upwardly revised gap of $42.69 billion in December, the Commerce Department reported. Economists had predicted the deficit to narrow to $41.8 billion.

In corporate news, Krispy Kreme Doughnuts ( KKD) posted a big rise in quarterly earnings as new store openings helped boost sales. Meeting its own forecasts, the doughnut chain reported a fourth-quarter profit of $16.4 million, or 26 cents per share, compared with last year's profit of $11.3 million, or 19 cents per share, excluding a pretax charge of $9.1 million related to an arbitration.

Specialty retailer Talbots ( TLB) said its fourth-quarter earnings dropped from a year earlier and missed Wall Street's expectations by 2 cents a share; the company cited reduced inventory levels.

Deutsche Telekom's ( DT) fourth-quarter loss grew because of a reserve related to a German public works contract, but profitability at its wireless segment remained solid.

Overseas, London's FTSE was flat at 4545, and Germany's Xetra DAX was down 1% to 4045. In Asia, Japan's Nikkei was down 0.9% to 11,433, and the Hang Seng in Hong Kong gave up 1.4% to 13,214.

In currencies, the dollar strengthened vs. the euro but slid against the yen. Recently, the euro was buying $1.2237 compared with $1.2314 late Tuesday. Meanwhile, the dollar was worth 110.76 yen compared with 111.33 at Tuesday's closing bell. The 10-year Treasury note traded up 2/32 to yield 3.71%, while crude oil and gold prices declined.

On Thursday, the government's weekly initial jobless claims numbers, due out at 8:30 a.m. EST, are expected to be unchanged from last week's 345,000 claims. Retail sales numbers for February, due at the same time from the Census Bureau, are expected to rise 0.6% compared to January's 0.3% rate of decline.

At 10:00 a.m. EST, Fed Chairman Alan Greenspan will address a congressional committee on Capitol Hill, and the Treasury Department is scheduled to release its budget for February. The national deficit is predicted to be $100 billion in February compared to $97.6 billion for the same month last year.

Earnings reports are due out before the opening bell from EchoStar ( DISH), Dick's Sporting Goods ( DKS) and Claire's Stores ( CLE).