Qualcomm warning contributes to Nasdaq drop

The Dow Jones industrial average posted early gains today but slipped in late trading as Federal Reserve chairman Alan Greenspan appeared before a Senate Banking Committee confirmation hearing.

At the 1 p.m. PST close of regular trading, the Dow was up 3.1 points to 11,032.99, having pulled back from an earlier gain of more than 50 points.

The S&P 500 index was down 5.94 to 1,404.09, and the CNET tech index fell 74.95 to 2,819.26. The Nasdaq was off 97.47 to 4,069.94.

"Greenspan's warning of speculative forces addresses some of the impact to the markets today, but it wasn't the main reason Nasdaq was down so much," said Richard Cripps, market strategist for Legg Mason.

What was the main reason? Qualcomm. The company released first-quarter results yesterday and warned that sales of its chips and phones may slow in the second quarter.

Today, the wireless technology developer's shares tumbled $24.13, or about 16 percent, to $124.88 by the market's close, extending yesterday's 11 percent decline. Qualcomm was the most active issue on the Nasdaq, with volume topping 68 million shares.

"The Nasdaq hit a high last week and had a surge late yesterday, so today we're seeing an alignment of the broad moves in the markets," Cripps said. "The Dow was down for six days in a row until yesterday, so it may have gotten oversold."

Outside of the tech sector, Cripps noted one area of surprise has been the cyclical stocks such as Honeywell, which tend to be driven by the performance of the economy.

"These are economic-driven stocks and now they're weak, so we're trying to determine if the economy is going down," Cripps said.

He added that these stocks may be an indicator that interest rates may climb higher than people expected.

A number of other stocks posted large moves today.

Online bookstore Fatbrain rose $3, or about 18 percent, to $19.50.

Although Fatbrain climbed by double digits earlier in the day, it's still far from erasing its 61 percent decline since November.

"There is no company specific news or operational issues that led to its decline, or its rise today," said Dalton Chandler, an analyst with Needham & Co. "Even though it's a business-to-business company, it's been lumped in with e-tailers, which have been sold off significantly."

Internet companies Ask Jeeves, iVillage and Looksmart also posted gains today.

Ask Jeeves rose $5.25, or about 5 percent, to $109.25 after announcing yesterday it would acquire Direct Hit Technologies--an Internet question-and-answer service--in a stock deal valued at $532.5 million.

iVillage added $2.13, or about 20 percent, to $18.69. The women's network company plans to announce its fourth-quarter results tomorrow.

Looksmart, a search company, rose $4, or about 12 percent, to $38.25.