Techs lead Wall Street's downturn

NEW YORK (CNNMoney.com) -- Technology led a broader stock market selloff near the close of trade Thursday, with investors doing an about-face after pushing the Dow and S&P 500 to record intraday highs earlier in the session.

The Dow Jones industrial average (Charts) lost 0.6 percent with 20 minutes left in the session, near the end of a volatile afternoon. Earlier, the Dow hit an an all-time intra-day high of 14,198.02.

The S&P 500 (Charts) index fell 0.7 percent. The broad index briefly hit a record intra-day high of 1,576.09 before backing off.

The tech-heavy Nasdaq composite (Charts) lost 1.5 percent, erasing early gains that set it at a fresh 6-1/2 year high.

Stocks rallied through the early afternoon after Wal-Mart's improved earnings forecast tempered some worries about consumer spending and a spike in oil prices lifted big oil stocks.

But the advance hit a roadblock in the afternoon, with investors backing off shortly after the major gauges hit the records, said Tom Schrader, managing director of U.S. equity trading at Legg Mason.

"We were having a pretty good day, until they (investors) decided we've gotten too extended on the upside," Schrader said. "So they're hitting the semis and some of the other techs pretty hard in the afternoon."

Earlier, stocks had risen across the board as investors showed a renewed enthusiasm about economic growth, thanks to Wal-Mart's earnings forecast and a big drop in the trade deficit, said Jack Ablin, chief investment officer at Harris Private Bank.

Declines were broad based, with 24 out of 30 Dow issues sliding, led by Alcoa (Charts, Fortune 500), Caterpillar (Charts, Fortune 500), Intel (Charts, Fortune 500) and United Technologies (Charts, Fortune 500).

Component Boeing (Charts, Fortune 500) slipped for a second day in a row on news that it is delaying the delivery of its first 787 Dreamliner planes by six months, due to assembly problems. Boeing said the delay won't hit 2007 and 2008 earnings, but investors sent the stock lower anyway.

Wal-Mart Stores (Charts, Fortune 500), the world's largest retailer, said it now expects to earn 66 to 69 cents per share, up from a previous range of 62 to 65 cents. The Dow company attributed this strength to cost-cutting rather than sales growth.

Wal-Mart also reported tepid September sales growth, but investors sent the stock 3.5 percent higher anyway on bets that it means consumer spending will hold up OK, despite the housing market collapse.

But Wal-Mart was a standout, with many retailers providing weak September sales numbers and some issuing earnings warnings, including Nordstrom (Charts, Fortune 500). The high-end retailer said it struggled with high inventory levels, a potentially bad sign for consumer spending going into the holiday shopping season.

Apple (Charts, Fortune 500), eBay (Charts, Fortune 500), Google (Charts, Fortune 500), Oracle (Charts, Fortune 500) and Research In Motion (Charts) were among the big technology stocks that got pummeled after rising in the morning.

The run up in oil and gold prices lifted the stocks of oil services and metals firms. However, it dragged on the airline sector, as those companies are especially sensitive to fuel price fluctuations.

Meanwhile, auto stocks rallied after the Chrysler strike ended quickly and GM (Charts, Fortune 500) workers ratified their new contract.

Market breadth turned negative. On the New York Stock Exchange, losers beat winners almost 2 to 1 on volume of 1.26 billion shares. On the Nasdaq, decliners topped advancers seven to three on volume of 2.22 billion shares.

PepsiCo (Charts, Fortune 500) reported higher quarterly sales and earnings that topped estimates. However, investors took a 'sell the news' approach, sending shares lower.

Alcoa (Charts, Fortune 500) unofficially kicked off the third-quarter earnings reporting period earlier this week and GE (Charts, Fortune 500) will be the next bellwether to open the books, when it reports results on Friday. But the big wave of earnings doesn't really kick in until next week.

Currently, earnings are expected to have grown just 1.4 percent in the third quarter, according to tracking firm Thomson Financial, the worst quarterly growth figure in more than five years.

In economic news, the trade deficit fell to a 7-month low, thanks to strong sales overseas and the impact of the weak dollar.

The number of Americans filing new claims for unemployment fell last week, versus expectations for the number to hold steady. The four-week moving average, considered to be a more reliable number, also dropped.

Another report showed that the number of mortgage delinquencies fell in September after hitting a 32-month high in August.

In global trade, Asian and European markets ended higher.

Treasury prices erased losses, turning higher, sending the yield on the benchmark 10-year note to 4.63 percent from 4.65 percent late Wednesday. Bond prices and yields move in opposite directions.

COMEX gold for December delivery rose $10.70 to settle at $756.70 an ounce.

U.S. light crude oil for November delivery rose $1.78 to settle at $83.08 a barrel on the New York Mercantile Exchange. Prices gained after the weekly government report showed a drop in crude inventories.