Stock prices do fall after all.
Wall Street's latest run to record highs ended abruptly Tuesday as profit-taking hammered leading technology stocks and dragged the broad market lower.
The Nasdaq composite plunged 98.11 points, or 3.5%, to 2,732.18, closing near its low for the day. It was the index's biggest loss since April 19, when it fell 138.43 points.
The Dow industrials tumbled 191.55 points, or 1.7%, to 10,996.13, after hitting 10,969.
Meanwhile, in currency trading the dollar jumped against the yen as the Bank of Japan bought dollars to stem the yen's latest rise.
On Wall Street, losers swamped winners by more than 2 to 1 on the New York Stock Exchange and on Nasdaq. But NYSE volume was a modest 758 million shares.
Analysts said many stocks' surge to new highs last week in effect priced in the strong second-quarter earnings now being reported.
"We've anticipated all of these good earnings already," said Robert Finch, a money manager with Aeltus Investment Management.
What's more, some analysts are warning that technology firms' earnings growth, in particular, may slow in the second half.
But some traders said earnings worries are merely a convenient excuse to take profits in stocks that have rocketed this year.
Leading the sell-off on Tuesday were IBM, down $6.38 to $128.25; Microsoft, down $5.06 to $93.31; Texas Instruments, down $8.94 to $141; and Motorola, down $4.13 to $90.50. All had reached all-time highs in recent sessions.
Among other growth stocks, Home Depot slid $4.31 to $65.50 and GE fell $2.44 to $117.56.
The market did have pockets of strength. Paper stocks rose, led by International Paper, up $1.19 to $54.06, on optimism about future earnings growth.
Even in the tech sector, some stocks shined. Qualcomm jumped $4.25 to $162.94 on the heels of its earnings report.
Despite caution about some companies' earnings growth in the second half, analysts are still exceedingly optimistic about blue-chip growth overall.
Analysts expect operating earnings for companies in the Standard & Poor's 500 index to grow 21.3% in the third quarter and 21% in the fourth, according to a First Call/Thomson Financial survey.
Among Tuesday's highlights:
* Internet-related stocks were broadly lower, despite strong receptions for some new issues.
America Online fell $5.81 to $113.19, EBay lost $4.88 to $112.94 and Yahoo fell $7.38 to $142.13.
* Highflying Net-infrastructure stocks were hit hard. F5 Networks dove $6.19 to $62.81 and Efficient Networks slid $3.13 to $48.75.
* Drug stocks were weak. Eli Lilly slid $2.19 to $73.81 and Merck was off $1.94 to $68.69.
* ISS Group slumped $11.75 to $26.56. Goldman Sachs took the network security company off its recommended list, while still ranking it "market outperformer."
In currency trading, the Bank of Japan's intervention--via the Federal Reserve--pushed the dollar up 1.15 yen to 118.95 in New York.
Rising Japanese stocks have fueled demand for yen, but Japan fears that a stronger currency could hurt its exporters.
In other trading, Treasury bond yields eased slightly as some of the money that came out of stocks looked for a "safe haven." Some bond traders were wary ahead of Federal Reserve Chairman Alan Greenspan's speech on the economy Thursday.
Overseas, most Asian markets rebounded. But European and Latin American stocks fell with Wall Street. German shares slid 2.4%; Argentine stocks sank 3.2%.
Market Roundup, C11
* CRUDE AWAKENING: Oil prices posted their biggest drop in seven months. C5