NEW YORK (CNN/Money) - Earnings warnings from telecommunications equipment makers and a disappointing U.S. retail sales report weighed heavily on the technology sector, which led the broader market lower Thursday.
The Nasdaq composite index, which is weighted heavily with technology names, fell 64.86 points to 1,946.52, a 3.2 percent decline on the day.
Shares of communications equipment maker Ciena (CIEN: down $3.03 to $14.94, Research, Estimates) were among the most actively traded on Nasdaq, falling about 6 percent after its latest corporate earnings report.
The company early Thursday reported a net loss of $1.8 billion, mainly on a charge to write down assets. Excluding one-time charges, Ciena reported an operating profit of $17.1 million, or 5 cents per share. That compared with $41.9 million, or 14 cents per share, in the same period last year and was in line with analysts general expectations.
At the same time, the company warned of operating losses in the coming months as a slowdown in capital spending among service providers continues.
On the New York Stock Exchange, shares of Lucent Technologies (LU: down $1.21 to $6.52, Research, Estimates) topped the most-active list, tumbling more than 15 percent.
Before the market opened Thursday, executives of Lucent lowered their financial targets for the fiscal first quarter. They're now aiming for an operating loss ranging between 23 cents and 26 cents per share. Analysts recently had expected a loss nearer 17 cents per share.
Henry Schacht, Lucent's CEO, told CNNfn Thursday the company came out with the warning right after it realized its top line would be much lower than previously expected. Executives now expect Lucent's first-quarter revenue to range between $3.1 billion and $3.4 billion. Expectations on Wall Street recently had been running nearer $4.5 billion.
"This is a very confusing time because all of our customers are seeing 15- to 20-percent cuts," Schacht said, noting that the company expects the current quarter, which ends in December, to mark the bottom of the industry's recent downturn.
Makers of telecommunications and data-networking equipment have been particularly hard hit by the recent general economic slowdown, as service providers and large corporations have either deferred or canceled their new-equipment orders as they struggle to hold onto dwindling profits.
Qwest Communications (Q: down $0.30 to $11.80, Research, Estimates), the dominant local telephone company in 14 states from Minnesota to Washington, was the latest to weigh in. It cut its growth outlook through 2002 early Thursday, and cut its capital spending budget for the year to a range of $4.2 billion to $4.3 billion.
The company began this year anticipating a 2002 capital spending budget of $7.5 billion.
Other telecom and data-networking companies whose shares lost ground Thursday included: Nortel Networks (NT: down $0.95 to $7.43, Research, Estimates); Tellabs (TLAB: down $1.74 to $14.35, Research, Estimates); JDS Uniphase (JDSU: down $1.14 to $8.71, Research, Estimates); Cisco Systems (CSCO: down $1.49 to $19.01, Research, Estimates); Juniper Networks (JNPR: down $2.75 to $21.18, Research, Estimates); and Redback Networks (RBAK: down $0.24 to $3.99, Research, Estimates).
The American Stock Exchange's networking index fell 32.83 points to 315.02, a 9.4 percent decline on the day.
Meanwhile, stocks elsewhere in the technology sector moved mostly lower as well, following a general decline in the broader markets which was spurred largely by a disappointing retail sales report.
The U.S. Commerce Department said retail sales in November fell 3.7 percent to a seasonally adjusted $293.6 billion, the biggest drop on record.
Shares of PC microprocessor maker Advanced Micro Devices (AMD: down $2.13 to $16.18, Research, Estimates) were among the biggest losers in the chip segment after Prudential Securities downgraded its rating on them to "sell" from "hold."
In a note to clients, Prudential said it believes recent reports of an uptick in demand for AMD's Athlon XP chips is attributable more to shortages of Intel's Pentium 4 than true demand for the Athlon XP.
Other PC-related chip stocks on the decline included: Intel (INTC: down $1.51 to $32.57, Research, Estimates), the top supplier of microprocessors; Micron Technology (MU: down $2.06 to $29.69, Research, Estimates), a leading memory chip maker; and Rambus (RMBS: down $0.35 to $8.26, Research, Estimates), which makes money by licensing a technology used to speed up computer memory systems.
Shares of Applied Materials (AMAT: down $3.79 to $41.08, Research, Estimates), the No. 1 maker of the equipment used to manufacture chips, fell sharply after it announced more layoffs. Citing continued weakness in demand, the company late Wednesday said it would lay off 1,700 employees, bringing the total number of job cuts it has made this year to 3,700.
Other chip-equipment makers following Applied Materials lower included KLA Tencor (KLAC: down $4.27 to $52.04, Research, Estimates); Novellus Systems (NVLS: down $2.45 to $41.36, Research, Estimates); and Teradyne (TER: down $2.69 to $28.51, Research, Estimates).
The Philadelphia Stock Exchange's semiconductor index, which lists the stocks of 16 chip and chip-equipment makers, fell 39.03 points to 536.59, a 6.8 percent decline.
In the computer hardware segment, shares of Hewlett-Packard (HWP: down $0.74 to $21.07, Research, Estimates) and Compaq (CPQ: down $0.40 to $9.39, Research, Estimates) fell as the controversy surrounding their proposed merger intensified.
Shares of PC makers Dell (DELL: down $0.70 to $28.48, Research, Estimates) and Gateway (GTW: down $0.81 to $8.80, Research, Estimates) also finished in the minus column.
The Goldman Sachs computer hardware index fell 15.41 points to 268.66, a 5.4 percent decline on the day.
Internet stocks moved mostly lower as well, pushing Goldman's Internet index 3.96 points lower to 105.61, a 3.6 percent decline.
Employment site HotJobs.com (HOTJ: up $3.83 to $10.30, Research, Estimates) bucked the broader trend. Its shares soared after Internet media company Yahoo! (YHOO: down $1.56 to $17.58, Research, Estimates) offered to acquire the company for roughly $436 million, hoping to counter a previous buyout offer from TMP Worldwide (TMPW: down $3.28 to $41.77, Research, Estimates). 
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