NEW YORK (CNN/Money) - U.S. stocks stumbled for the second straight session Wednesday in choppy trading punctuated by the collapse of the proposed merger between Dynegy and Enron but without a single catalyst causing the downslide.
The Dow Jones industrial average experienced a triple-digit loss as investors sold stocks to collect profits amassed after the market's recent climb. Wireless, networking, and semiconductor stocks dragged the Nasdaq composite index lower.
"Today was a good healthy profit-taking day. There were no particular leaders, and it was a pretty broad-based sell-off, which felt good after the recent run that we've had," David Briggs, head of equity trading with Federated Investors, told CNNfn's Street Sweep.
"The Enron news may have been enough to distract people today, or if not, then maybe kept investors to the sidelines to take a look at what their position is on some of the companies that they were buying. However, it did have a drag on the market," Briggs added.
Trading in shares of Dynegy and Enron were halted on the New York Stock Exchange after termination of the deal. Enron also suspended indefinitely further operation of its Internet-based EnronOnline trading system.
Enron (ENE: down $3.50 to $0.61, Research, Estimates), which plummeted more than 70 percent on heavy volume when Standard & Poor's downgraded the energy trading company's debt to "junk" status,
broke the one-day volume record on a trade of 181.89 million shares.
The S& P warned that bankruptcy was a "distinct possibility" if the proposed merger with Dynegy (DYN: down $4.92 to $35.97, Research, Estimates) fell through.
The Dow Jones industrial average plunged 160.74, or 1.63 percent, to 9,711.86. The Nasdaq composite dropped 48, or 2.58 percent, to 1,887.97.
In the broader market, the Standard & Poor's 500 index lost 20.98, or 1.83 percent, to 1,128.52.
More stocks fell than rose on heavy volume. On the New York Stock Exchange, decliners outpaced advancers by 2 to 1 as 1.3 billion shares traded. On the Nasdaq, losers led winners by more than 2 to 1 as 1.8 billion shares changed hands.
In the currency markets, the dollar slipped against the yen and was little changed versus the euro. Light crude oil futures lost 34 cents to $19.40 a barrel in New York.
Asian stock markets closed lower Wednesday, as did Europe's bourses.
Treasury prices reversed course with the yield on the 10-year note rising to 4.94 percent. The dollar slipped against the yen and the euro.
Market watchers were not surprised by the broad-based pullback, saying it was long overdue as investors weighed early optimism of an economic recovery against continued evidence of a lag in corporate profits.
"Investors are being cautiously optimistic. There's a desire to put money back into the market based on a feeling that the worst of the economy may be behind us," said Alan Ackerman, market strategist with Fahnestock & Co. "However, there's not enough evidence of that."
"Also, this market still needs the underpinning of improved corporate earnings," Ackerman added. "We've not got the evidence that that's happening in a meaningful way. I like the way it has stabilized following the sharp moves since Sept. 21, but I am concerned that not enough fundamentals are in place."
Investors got another read on the state of the economy in the Federal Reserve's "beige book" report, which provided anecdotal evidence of sluggishness in the economy in late October and early November, after the Sept. 11 terrorist attacks.
The report, based on analyses from the Fed's 12 regional banks, said consumer spending was mixed, with auto sales rising to "exceptional levels."
Enron hurts financials
Enron's woes could be trouble for some financial services companies that have investments in the energy trader. Among those that could be hurt by a bankruptcy filing are Citigroup (C: down $2.75 to $47.80, Research, Estimates) and J.P. Morgan Chase (JPM: down $2.30 to $37.50, Research, Estimates).
Energy stocks Valero Energy (VLO: down $1.13 to $34.99, Research, Estimates) and Burlington Resources (BR: down $1.27 to $34.52, Research, Estimates) lost value.
Texas Instruments (TXN: down $1.55 to $31.03, Research, Estimates) late Tuesday reaffirmed its guidance of a fourth-quarter loss but said it has started to see signs of stabilization. CEO Tom Engibous said the third quarter was a bottom for mobile phone chip sales.
But the news did little to restore enthusiasm for chip equipment stocks, with the sector caught in the overall downdraft. Micron Technology (MU: down $2.42 to $26.73, Research, Estimates), Maxim Integrated (MXIM: down $2.70 to $51.31, Research, Estimates), and Xilinx (XLNX: down $2.00 to $34.45, Research, Estimates) led the decliners.
Wireless stocks trended lower, not helped by Nokia's (NOK: down $1.62 to $22.10, Research, Estimates) announcement Tuesday that it had lowered its latest estimate for global industry-wide unit sales for 2001. Among the sector components hurt were Ericsson (ERICY: down $0.46 to $5.21, Research, Estimates) and Motorola (MOT: down $0.50 to $17.01, Research, Estimates).
IBM (IBM: down $2.05 to $112.15, Research, Estimates) said it plans to cut about 1,000 jobs from its microelectronics chip division, though affected workers will be able to look for other jobs at the company.
More legal woes surfaced for Microsoft (MSFT: down $0.94 to $62.80, Research, Estimates) after a key witness in the software maker's proposed $1 billion settlement of the private consumer class-action lawsuit said he had underestimated the amount of damages the world's biggest software maker should pay.
Gap (GPS: down $0.79 to $13.61, Research, Estimates), the well-known apparel retailer, suffered after a Prudential analyst cut the investment rating on the stock to a rare "sell," citing the worsening sales outlook. "We think holiday merchandise looks bad and management acknowledges that there is no near-term product fix," Prudential said in a note to clients, adding that Gap's price-to-earnings ratio makes it "the most expensive stock in our universe."
Gap's downgrade weighed down other retail names including Men's Wearhouse (MW: down $1.32 to $18.65, Research, Estimates), Sears Roebuck (S: down $0.61 to $44.65, Research, Estimates), Kohl's (KSS: down $0.84 to $67.86, Research, Estimates), and May Department Stores (MAY: down $0.78 to $36.10, Research, Estimates).
Electronics manufacturing firm Flextronics (FLEX: up $0.80 to $26.35, Research, Estimates) said it is comfortable with fourth-quarter earnings estimates of 17 cents per share on revenue of $3.4 billion. The company also said it is in "a much more stable environment."
Oil stocks slid on the heels of the latest data from the American Petroleum Institute showing an increase in inventories and slowing demand. Dow component Exxon Mobil (XOM: down $0.25 to $37.10, Research, Estimates), Chevron Texaco (CVX: down $1.07 to $84.55, Research, Estimates), and BP (BP: down $0.95 to $43.23, Research, Estimates) eased. 
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