NEW YORK (CNN/Money) - U.S. stocks never recovered Thursday from Electronic Data Systems' bombshell warning that pummeled techs, deflated IBM, and brought the Dow below 8,000.

A pair of disappointing economic updates on jobs and housing also depressed market sentiment.

"Technically, today looks bad as far as market action goes," Scott Wren, equity strategist with A.G. Edwards, told CNNfn's Street Sweep. "It reminds me a lot of late 1999 to early 2000 when people thought the good times would never end. Now they think the bad times are never going to end."

It was the thunderbolt from EDS that threw stocks for a loop. EDS's warning knocked the wind out of its rival IBM, spurring a broad-based blue-chip selloff. Financials continued to show weakness after brokerage Morgan Stanley posted a quarterly profit that missed Wall Street estimates.

Techs showed weakness across the board, denying the Nasdaq a chance to come up for air.

The Dow Jones industrial average lost 230.06 to 7,942.39, breaking through its Aug. 5 low of 8,043.63, and falling below 8,000 for the first time since July 23. The Nasdaq composite index fell 35.68 to 1,216.45, hitting a session low and closing lower for the fourth-straight day. The Standard & Poor's 500 index dropped 26.14 to end the day at 843.32.

"We've been in a relatively negative technology environment ever since the August rally ended," said John Hughes, market analyst with Shields & Co. "Today's drop is a follow-through on more bad news. Also, the developments on Iraq and deflationary concerns in the economy remain in the background."

Thursday's downbeat session comes ahead of a "triple-witching" Friday on Wall Street -- typically a volatile trading session -- when contracts for stock index futures, stock index options and stock options all expire.

EDS (EDS: down $19.26 to $17.20, Research, Estimates), the information technology company founded by H. Ross Perot, warned late Wednesday that third-quarter earnings and revenue won't measure up to previous expectations by a wide margin. The company blamed the shortfall on continued restraint in information technology spending by corporations. It also said it would be hurt by the US Airways Group bankruptcy filing -- a month after saying the filing would have no impact on its results.

A slew of brokerages punished EDS with negative comments. Deutsche Banc downgraded the stock to "sell" from "buy," while USB Piper Jaffray downgraded the stock to "market perform" from "outperform."Credit Suisse First Boston cut its 2002 and 2003 estimates.

Analysts also hounded EDS' rival IBM (IBM: down $4.75 to $64.80, Research, Estimates), operator of the world's largest information technology services business. IBM held the dubious distinction of being the biggest decliner on the Dow.

J.P. Morgan and Merrill Lynch cut third-quarter sales and earnings estimates for the computer maker, while Lehman Brothers cut its price target on the stock and its 2002 and 2003 earnings estimates.

"What we're [seeing] is that investors have no patience for a company that whips up numbers and lies," said Marc Cohodes, an analyst at New York hedge fund Rocker Partners. "EDS has consistently missed its sales and cash flow estimates."

"Investors are fast losing confidence in the numbers that companies are reporting. There isn't necessarily another Enron or WorldCom on the horizon, but we're likely to see more stories of companies where the numbers don't make sense," Cohodes added.

And embattled conglomerate Tyco International (TYC: down $0.63 to $15.29, Research, Estimates) is high on Cohodes' radar.

"A big pie in the face of investors will be Tyco, whose numbers are in shambles," said Cohodes. "Tyco's numbers when they come out will have a bigger impact on the market. It will make EDS look like Sunday school."

While Tyco shares have fallen 70 percent this year, the company has never had to restate results. The Securities and Exchange Commission is looking into Tyco, but has released no findings.

Coca-Cola (KO: down $1.63 to $47.67, Research, Estimates) was another early laggard on the Dow. UBS Warburg downgraded the maker and marketer of soft drinks to "buy" from "strong buy" and cut its price target on the stock to $45 from $57, citing a slowdown in global economies that could make it difficult for the company to maintain its volume estimates. The brokerage also downgraded Coke's rival PepsiCo (PEP: down $0.90 to $37.15, Research, Estimates) to "hold" from "buy."

Cigarette marketer Philip Morris (MO: down $2.37 to $44.70, Research, Estimates) fell after Salomon Smith Barney cited a number of near-term concerns, including loss of market share and the possibility of a "net" price war, that could negatively impact the stock.

Financial services firm Morgan Stanley (MWD: down $4.20 to $33.90, Research, Estimates) posted a worse-than-expected fiscal third-quarter profit of 55 cents a share, 12 cents less than what analysts expected forecast.

Morgan's miss magnified the problems for the financial services sector, which deflated the Dow Wednesday after J.P. Morgan Chase (JPM: down $0.57 to $19.87, Research, Estimates) warned its third-quarter profit will fall below its second-quarter result on the back of bad loans and sluggish trading revenue.

The Labor Department reported new weekly claims for jobless benefits in the United States fell in the latest week but stayed above the benchmark 400,000 level, as the labor market struggled to recover from heavy job cuts last year. The pace of home construction also fell in August.

On a brighter note, the Federal Reserve Bank of Philadelphia said its regional index of economic activity rose to plus 2.3 from the negative 3.1 posted in August. The figure was just above analysts' forecasts.

"Investors are worried about a double-dip possibility," said Charles Payne, CEO and chief analyst with Wall Street Strategies, referring to a "double-dip" recession. "The two reports this morning on jobs and housing disappointed. In addition, concerns about corporate earnings and Iraq are a drag on the markets."

Wall Street's woes are also factoring in external concerns as the Bush administration intensifies its war drumbeat against Iraq. The White House asked Congress Thursday for broad authority to take action against Iraq if Baghdad does not comply with U.N. resolutions requiring its disarmament.

Mideast tensions also clouded the markets after a suicide bombing in Tel Aviv killed 5 people, and Israel responded by surrounding the headquarters of Palestinian leader Yasser Arafat.

European markets ended lower, while Tokyo stocks finished sharply higher Thursday as investors reacted positively to the Bank of Japan's decision to buy corporate shares held by the nation's banks; the Nikkei index rose 2 percent.

Treasury prices were rallied, lowering the 10-year note yield to 3.79 percent. The dollar slipped against the yen and euro.

Light crude oil futures rose 5 cents to $29.72 a barrel in U.S. trading. OPEC agreed Thursday to maintain restraints on oil production for the fourth quarter in a move to keep crude prices high.

Market breadth was negative. On the New York Stock Exchange, decliners beat advancers nearly 5-to-2 as 1.4 billion shares traded. On the Nasdaq, losers beat winners 2-to-1 as 1.4 billion shares changed hands.