updated 1/22/2007 5:42:14 PM ET 2007-01-22T22:42:14

Wall Street tumbled Monday, as growing concerns over technology companies led jittery investors to pull money out of the market ahead of this week’s earnings reports.

Major Market Indices

The market has been vulnerable to erratic trading lately, with investors cautious about the direction of the economy and companies’ results. The tech sector so far has been knocked down the most, after Apple Inc.’s and Intel Corp.’s outlooks last week fell below the Street’s expectations.

With industry leaders like Qualcomm Inc. and Microsoft Corp. releasing their financial results later this week, many investors are bracing for disappointment.

(MSNBC.com is a Microsoft-NBC joint venture.)

“The market is nervous,” said Joe Ranieri, managing director in equity trading at Canaccord Adams. “We’ve had a few good quarters in a row in tech land. The problem with having good quarters is, it gets harder and harder to impress.”

Blue chip stocks were also dragged down by a Wachovia analyst’s downgrade of Boeing Co.; the analyst cited possible aircraft order delays from the jet maker.

Overall, earnings reports and economic data this year have signaled growth that’s cooling, but not so quickly that it is squeezing corporate profits. This would normally be good news for the stock market, but investors have been retreating — wisely, many market watchers say — on signs they may have gotten ahead of themselves late last year, when the Dow Jones industrial average began racing into record territory.

The Dow index recorded its biggest one-day drop since Nov. 27, when the index fell by 158 points, finishing Monday down 88.37 points, or 0.70 percent, having dropped more than 114 points earlier in the session. The broader Standard & Poor’s 500-stock index closed Monday down 7.55 points, or 0.53 percent, while the Nasdaq composite index lost 20.24 points, or 0.83 percent.

Bond prices rose, though investors’ hopes for an interest rate cut have dwindled in response to upbeat economic data. The yield on the benchmark 10-year Treasury note edged lower to 4.76 percent from 4.78 percent late Friday. The dollar was mostly higher against other major currencies, while gold prices slipped.

The stock indexes rebounded slightly from the session’s lows after crude oil resumed its downtrend. With the price of oil down 16 percent this year, consumer spending could be boosted by lower fuel costs.

Crude fell 86 cents to settle at $51.13 a barrel Monday on the New York Mercantile Exchange, after briefly rising above $53.44.

Relief about oil’s decline wasn’t enough, though, to offset technology-related worries, which were kindled by analyst downgrades of Cisco Systems Inc., the world’s largest networking equipment maker; Motorola Inc., the world’s second largest cell phone maker; and computer maker Dell Inc.

Cisco fell 17 cents to $26.53; Motorola fell 55 cents, or 2.9 percent, to $18.72; and Dell dropped 53 cents, or 2.1 percent, to $24.49.

Chip maker Advanced Micro Devices Inc. fell after rival Intel Corp. and Sun Microsystems announced an alliance that could take away some business from Advanced Micro.

Advanced Micro, which will release its earnings Tuesday, fell 20 cents to $17.53.

If Advanced Micro’s earnings report comes in better than expected, the tech sector could rebound Tuesday. Texas Instruments Inc. reported after the market closed Monday that its fourth-quarter earnings surpassed the Street estimate, and that it would slash jobs to reduce costs. The cell phone chip maker rose 53 cents to $29.12 in after-hours trading, following its 25-cent rise to close at $28.64.

Despite the market’s recent aversion to technology stocks, the Dow, the S&P and the tech-dominated Nasdaq are all still up on the year. Stocks have the potential to rally, especially as earnings season winds down, Ranieri said.

“If we get through the next few weeks without disastrous earnings, some buyers will start picking up the stocks that are getting beat up now,” he said.

A separate worry weighing on the market is interest rates. A report from the Chicago region’s Federal Reserve indicated above-trend growth in December for the first time in four months — yet another argument for U.S. Fed policy makers to keep rates on hold, or perhaps even hike them.

The market is in a tug of war right now over whether rates will be raised or lowered later in the year, said Jim Herrick, manager and director of equity trading at Baird & Co. “Also, some believe oil will continue to go lower, some believe oil will go back to the levels of last year ... There’s two camps right now, and that’s why we’re having this volatility.”

Pfizer Inc., the world’s biggest drug maker, reported better-than-expected earnings but also that it is cutting 10,000 jobs in an effort to slash costs. Pfizer fell 27 cents to $26.95.

Boeing fell $3.03, or 3.4 percent, to $85.60 after Wachovia’s downgrade.

Overseas, Japan’s Nikkei stock average rose 0.66 percent. Britain’s FTSE 100 was down 0.30 percent, Germany’s DAX index was down 0.89 percent and France’s CAC-40 was down 0.62 percent.

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