NEW YORK (CNN/Money) - U.S. stocks were unable to locate a U-turn on their one-way trip downward Wednesday, after technology and blue-chip stocks across the board floundered in negative territory on concerns sparked by a revenue warning from Nortel Networks.

Some market watchers quickly flagged the trading session as symptomatic of a continuing bear market.

"I think we'll go lower," Brett Gallagher, head of U.S. equities with Julius Baer, told CNNfn's Street Sweep. "This is a market that has no confidence. Corporate confidence is shot, confidence in earnings is shot and confidence in Wall Street analysts is gone. Only time is going to heal that."

"We're going to have to see better news and slow steady incremental gains over a prolonged period of time in order to build the market," Gallagher added.

Nortel's warning set the ball rolling for a second consecutive tech pullback after the Canadian supplier of telecommunications equipment cut its third-quarter revenue forecast, citing continued weakness in spending by phone providers. Nortel Networks (NT: down $0.19 to $1.04, Research, Estimates) said it would cut 7,000 more jobs, on top of 35,000 previously announced cuts.

Telecoms and semiconductor stocks depressed the tech-heavy Nasdaq, while Philip Morris and Boeing were two rare bright spots on the Dow

The Dow Jones industrial average lost 130.32 points, or 1.5 percent to 8,694.09, while the Nasdaq composite lost 2.5 percent, or 33.40 points, to 1,314.38, following a 3 percent decline in the previous session. The Standard & Poor's 500 index lost 16.95 to stand at 917.87.

"Today the market caught the double-dip disease. Recent economic data, like yesterday's [Tuesday's] consumer confidence number, seems to corroborate opinion about deceleration in growth," said Ned Riley, chief investment strategist with State Street Global Advisors.

Riley said the market was likely to stay in a holding pattern, despite the day-to-day fluctuations, as investors take in more key economic updates later this week.

On tap for release Thursday is the Commerce Department's preliminary report on second-quarter gross domestic product, which is not expected to deliver any surprises.

Telecom equipment makers Lucent Technologies (LU: down $0.20 to $1.69, Research, Estimates), Cisco Systems (CSCO: down $0.30 to $13.72, Research, Estimates), Ciena (CIEN: down $0.59 to $4.17, Research, Estimates) and Juniper Networks (JNPR: down $0.45 to $7.00, Research, Estimates) suffered losses on the back of the Nortel news.

Among the chipmakers, Semtech (SMTC: down $4.87 to $14.05, Research, Estimates) turned cautious on its third-quarter sales forecast, saying it anticipates a possibly weaker quarter due to a slump in consumer demand, while sector mate Altera (ALTR: down $0.20 to $11.11, Research, Estimates) said it expected flat sales for its third quarter.

Sector leader Intel (INTC: down $0.34 to $16.84, Research, Estimates) issued cautious comments Monday about its third-quarter growth and the overall global computing environment.

Compounding the tech woes, Goldman Sachs delivered bearish comments on Sun Microsystems (SUNW: down $0.28 to $3.96, Research, Estimates), the leading supplier of Unix servers, saying it believed current weakness in information technology will increase the probability that Sun will miss its estimate for its first quarter.

"We're dealing with so much market volatility that it's difficult to put two decent trading days together, even though we've had technical rallies from four or five weeks ago," Ted Weisberg, a trader with Seaport Securities, told CNNfn's Market Call.

"The clearer sign that the market is ready to go higher is that you can have bad news and individual stocks or the market tends to ignore that news. To the extent that happens will give us a pretty good indication of where we are," Weisberg added.

Microsoft (MSFT: down $1.46 to $49.38, Research, Estimates) could not escape the dour tech sentiment. The software maker was pulled lower after announcing it will cut the retail price of its Xbox video game console in Europe.

On a positive note, biotech firm Amgen (AMGN: down $0.03 to $45.18, Research, Estimates) said it won final European clearance to market two of its drugs for use by cancer patients undergoing chemotherapy. The European Commission approved Arnesp, the company's anemia medication, and Neulasta, developed for the treatment of frequent side effects of chemotherapy.

Among other Dow components, tobacco company Philip Morris (MO: up $1.41 to $49.31, Research, Estimates) stood out as a Dow winner after announcing its board of directors raised its dividend by 10 percent and also named CEO Louis Camilleri chairman.

Personal computer maker Hewlett Packard (HPQ: up $0.06 to $14.27, Research, Estimates) slipped on downward revisions to earnings estimates. Bear Stearns cut its 2003 and 2004 estimates for HP, citing a conservative outlook for the PC industry. UBS Warburg also trimmed its estimates. The personal computer maker Tuesday posted a third-quarter profit that met Wall Street estimates.

Boeing (BA: up $0.50 to $37.53, Research, Estimates) enjoyed gains. The aerospace firm made its final offer Tuesday to the machinists union representing 25,000 of its workers. The union is scheduled to vote Thursday and a rejection of the offer could lead to a Labor Day strike.

But No. 1 aluminum maker Alcoa (AA: down $1.63 to $25.07, Research, Estimates) was a loser after Lehman Brothers said it sees the company's 2003 estimates as "too high" given a challenging economic environment, low aluminum prices and concern over the company's key end markets of housing, auto and aerospace. IBM (IBM: down $1.90 to $76.06, Research, Estimates) and 3M (MMM: down $1.90 to $124.98, Research, Estimates) also contributed to the blue-chip decline.

The latest tech turmoil robbed investors of the chance to enjoy a one-day respite in a week burdened by a slew of economic data.

Wednesday presented investors with an empty economic and earnings agenda after Wall Street took in key reports on housing, durable goods orders and consumer confidence earlier in the week.

In overseas markets, the news from Nortel pushed European stocks sharply lower, bruising tech and telecom issues. Asian stocks also ended mostly lower overnight.

Treasury prices edged higher, pushing the yield on the benchmark 10-year Treasury down to 4.22 percent. The dollar rose against both the euro and the yen. Light crude oil futures lost 49 cents to $28.34 a barrel in New York.

Market breadth was negative. On the New York Stock Exchange, decliners beat advancers 2-to-1 as 1.1 billion shares traded. On the Nasdaq, decliners beat advancers 2-to-1 as 1.3 billion shares traded hands.