NEW YORK (CNN/Money) - So much for the tech rally.

Intel and Motorola both issued earnings warnings for the fourth quarter, and that has put an end to the Nasdaq's four-day winning streak (more on Intel and Motorola). The Nasdaq fell nearly 4 percent Wednesday, after surging more than 15 percent from last Thursday through Tuesday's close.

Tech stocks might get a boost on Thursday, however, since IBM reported better-than-expected earnings Wednesday afternoon. Still, the CFO of the computer services giant did say that customers are still cautious about signing big contracts.

But as the news from Intel and Motorola demonstrated, it still doesn't look like there's any reason to get excited about tech stocks...no matter how cheap they might seem. (And for more on why tech P/E ratios are misleading, click here.)

"Absolutely nothing is getting more positive. We need fundamental evidence to spur a long-term rally," says Pip Coburn, global technology strategist for UBS Warburg.

The earnings warnings should not come as a huge surprise. Intel's main business is supplying semiconductors to the personal computer markets. And even though Dell Computer has held up relatively well during the downturn, other PC manufacturers have been suffering due to weak demand.

Motorola, in addition to making chips, is a supplier of wireless equipment such as cell phone handsets. And there have been brutal price wars among wireless telecom carriers this year. To that end, Motorola lowered its forecast for handset sales for the remainder of 2002.

So why was there a big rally before the warnings? Michael Mahoney, managing director for EGM Capital, a hedge fund specializing in media, telecom and technology stocks, says that short sellers with heavy exposure to the tech sector helped fuel the Nasdaq's big move. Short sellers borrow stock and sell it, hoping that they can buy the shares at a lower price. So when prices rise sharply, short sellers often are forced to buy back stock in order to mitigate their losses.

For this reason, Mahoney thinks that investors should get used to more down days for the tech sector in the coming weeks, as more companies give guidance for the fourth quarter and 2003.

"Tech is still having trouble. It's not over yet. There are a few bright spots here and there but demand for products still has to find a bottom," he said.

Making matters worse for investors is the ripple effect that the Intel and Motorola warnings will have on other technology companies. Intel's woes, for example, directly impact companies in the semiconductor equipment sector since these companies count Intel as a key customer. So companies like Applied Materials, KLA-Tencor and Novellus Systems were all down sharply on Wednesday.

And the bad news from Motorola paints a dismal picture for the wireless sector as a whole. That's why fellow wireless equipment companies Nokia and Ericsson fell more than 5 percent on Wednesday. Companies that sell components to Motorola fared even worse. Advanced Fibre Communications sank more than 10 percent and RF Micro Devices plunged nearly 20 percent.

Jaye Morency, manager of the DLB Technology fund, also says the environment is not looking good for most tech companies. She thinks that earnings estimates for 2003 are still too optimistic, with analysts forecasting 37 percent earnings growth for the sector in 2003. "Companies have to bring down their 2003 numbers. They're still too high," she said.

Until earnings expectations are more reasonable, she thinks that the tech sector will continue to be extremely volatile.

Still, others think that Wednesday's drubbing presents a good opportunity to buy some strong tech companies at a discount. Mark Schultz, portfolio manager with M&T Asset Management, which runs the Vision family of funds, says that companies like Dell, printer manufacturer Lexmark and semiconductor company Texas Instruments are market leaders that are being unfairly punished. "The blanket label of 'tech' does more harm than good for investors," he says.

But he thinks that perhaps the biggest mistake investors can make is to buy the most beaten down companies just because they have been hit hardest. "Why buy challenged companies when they're all on sale?" he says.

And Ted Parrish, manager of the Henssler Equity fund is holding out the faint hope that consumers will spend more on electronics items than expected during the December holiday season and that could lead to positive surprises for companies like Intel, Microsoft and Dell.

"If companies set the bar low enough maybe then they can beat the numbers. That's a possibility," he says.

Then again, lowered earnings expectations have been a painful fact of life in the technology sector this year. And each time investors have bet that the outlook couldn't get any worse, it did. That's why many are skeptical of any rally based solely on sentiment. "During the latest rally, we were wondering what we were missing. But the reality is that nothing has changed," says Morency.