NEW YORK (CNNfn) - Biotech and Internet stocks sent the Nasdaq composite index plunging more than 100 points Monday to its lowest level in four months, as investors dumped stocks that may not be able to sustain strong revenue growth.
"It's just eroding," said Terence Gabriel, stock market strategist at IDEAglobal.com. "It's all panic and follow-through on tech earnings fears. Biotech and Internet stocks are all getting slammed with some flight to safety into Dow stocks, but I don't see it being sustained."
That sentiment was echoed by Nick Angilletta, global head of retail sales and trading at Salomon Smith Barney, who told CNNfn's market coverage that investors remain uncertain about when it will be the right time to return to stocks. (258K WAV) (258K AIFF)
 On the first trading day of the fourth quarter, the Nasdaq composite index extended its previous session's 105-point loss another 103.92 points, or nearly 3 percent, to 3,568.90. The index is now down 12.3 percent from the start of the year.
Meanwhile, J.P. Morgan and IBM helped give the Dow Jones industrial average a boost although a downgrade in Boeing kept blue chip gains in check.
 The Dow Jones industrial average advanced 49.21 to 10,700.13, while the S&P 500 index was little changed, shedding 0.28 to 1,436.23.
Market breadth was negative. On the New York Stock Exchange, decliners outpaced advancers 1,629 to 1,264, as more than 1 billion shares changed hands. Losers topped winners on the Nasdaq 2,735 to 1,428, as more than 1.7 billion shares were traded.
The dollar fell against both the euro and yen, while Treasury securities were mostly higher.
MedImmune leads biotech selling
Biotechnology firm MedImmune (MEDI: Research, Estimates) tumbled $20.50 to $56.75 after Banc of America Securities downgraded the company to "market perform" from "buy."
Other biotechs fell in sympathy. Biogen (BGEN: Research, Estimates) slipped $1.81 to $59.19 and Amgen (AMGN: Research, Estimates) lost $4.06 to close at $65.75. The AMEX biotech index fell 6.5 percent from its previous session.
"The market is waiting to see the earnings because that is your first catalyst in the market that can possibly dispel the slower-than-expected growth that the market is anticipating," said Barry Hyman, chief investment strategist at Weatherly Securities. "The market is very split today. People are just looking for reasons to own some things and reasons to sell others."
Internet stocks took a hit amid continued concerns that there is a strong likelihood that advertising-based companies may not show good corporate results for the quarter.
"I think they're concerned about being overweighted in a group that has provided substantial, if not most, of the performance over the past several years and concerns about warnings from very visible companies that business is slowing," said Bill Meehan, chief market analyst at Cantor Fitzgerald.
Yahoo! (YHOO: Research, Estimates) slumped $4.94 to $86.06, eBay (EBAY: Research, Estimates) shed $1.81 to $66.88, and Amazon.com (AMZN: Research, Estimates) lost $2.56 to $35.88.
 One bright spot in the technology sector came from Dow component IBM.
IBM (IBM: Research, Estimates) shares jumped $5.19 to $117.81.
Also helping the Dow, J.P. Morgan (JPM: Research, Estimates) rose $5.13 to close at $168.50.
"There are analysts out there talking up their favorite tech stocks," said Meehan. "On the other hand, there are still concerns that large cap tech stocks may be doing some pre-announcements, so there are a lot of cross currents."
Caterpillar creeps higher
In company news, Dow component Caterpillar (CAT: Research, Estimates) warned late Friday warned that it would miss third-quarter earnings estimates. The heavy equipment maker said weak foreign currencies, a softer domestic construction market and higher energy costs bulldozed its earnings.
Still, Caterpillar shares popped $3.25, or 10 percent to close Monday at $34.25, up from the $31 after-hours close Friday following the profit warning.
 Third-quarter earnings warnings have jumped 25 percent from the third quarter of 1999 to a total of 257, according to First Call.
Hurting the blue chips was Dow component Boeing (BA: Research, Estimates), which slumped $6.13 to $58.38 after Lehman Brothers downgraded the aircraft manufacturer to "neutral" from "outperform."
Financials, telecoms in the news
FleetBoston Financial agreed Sunday to buy Summit Bancorp in a $7 billion stock deal. Summit (SUB: Research, Estimates) is the fourth-largest bank in New Jersey, ranked by deposits.
FleetBoston (FBF: Research, Estimates), the nation's eighth-largest bank, was created by last year's merger of Fleet Financial and BankBoston Corp.
Summit shares rose $3.75 to $38.13 while FleetBoston shares slid 63 cents to $38.38.
 Avaya (AV: Research, Estimates) fell $2.75 to $20.19 after the corporate telecommunications company started trading independently on the NYSE Monday, having been spun off from telecommunications equipment maker Lucent Technologies (LU: Research, Estimates).
NAPM, construction spending uneventful
The National Association of Purchasing Management's September manufacturing index came in just shy of expectations at 49.9 percent, compared with 49.5 percent in August.
Also on the economic front, the Commerce Department construction spending report for August showed an increase of 1.4 percent -- greater than analysts expected -- to an annual rate of $794 billion. The July report was revised down to a 1.9 percent decline.
In upcoming economic events, Federal Reserve policy makers are expected to leave interest rates alone for the third straight time when they meet Tuesday. As in the previous two sessions, the focus will be on the rhetoric accompanying the Fed's decision.
"There won't be any change in rates but the language is very interesting," James Annabel, chief economist at Wingspanbank.com, told CNNfn's Before Hours. "I think they will move to a neutral bias and will get rid of that tone that they're worried about inflation, and that would be good news for the markets. Our belief is that economic growth in the fourth quarter is going to rebound." 
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