NEW YORK (CNNfn) - The Nasdaq composite index tumbled more than 100 points Wednesday after a fresh batch of earnings warnings from technology companies ignited fears that more financial disappointments lie ahead.
Computer Associates, BMC Software and Entrust Technologies all braced Wall Street for worse-than-expected results later this month, becoming the latest firms to spark concerns that the economy's slowdown will hurt profits.
"The tech sector has to slow," Vince Farell, chairman of investment firm Spears, Benzak, Salomon & Farrell, told CNN's Street Sweep.
Farrell says the Federal Reserve will ultimately be successful in tempering the economy's growth, meaning technology profits will be "strong but not as robust as many had hoped."
 The Dow Jones industrial average also fell, but more modestly. Gains in "old economy" stocks such as Minnesota Mining & Manufacturing, General Motors and Boeing partially offset losses in Intel and IBM.
"Now people are trying to find other places to put their money," said Kenneth Sheinberg, head of NYSE trading at S.G. Cowen. "It's just more of the continuing rotation that's gone on for a while."
The Nasdaq fell 128.83 points, or 3.2 percent, to 3,863.10.
The Dow lost 77.07, or 0.7 percent, to 10,483.60, while the S&P 500 shed 23.09 to 1,446.23.
 Market breadth was mixed. Advancing issues on the New York Stock Exchange edged out declining ones 1,476 to 1,465 as trading volume reached 972 million shares. But Nasdaq losers beat winners 2,451 to 1,612 as more than 1.3 billion shares changed hands.
In other markets, Treasury prices rose. The dollar weakened against the yen but gained versus the euro.
Techs get punished
Profit warnings from two software makers, Computer Associates (CA: Research, Estimates) and BMC Software (BMCS: Research, Estimates), sparked losses through the technology sector.
CA plunged 21-3/4, or 42.8 percent, to 29-3/8 after warning it would miss fiscal first quarter earnings estimates of 55 cents a share. BMC shed 14-3/16, or 40 percent, to 21-5/16. The software maker said earnings for the latest quarter will come in at about 20 cents a share, excluding one-time items, well below Wall Street forecasts of 46 cents a share.
John Forrelli, senior vice president at Independent Investment Associates, called the announcements from the two large companies significant.
"It shows that the traditional tech space is slowing down," Forelli said. "The economy is slowing down and that's going to show up" in the technology sector.
Those profit warnings led to weakness in Dow component IBM (IBM: Research, Estimates), down 5-1/2 to 104, because of comments by both CA and BMC that some of their problems are due to weakness in mainframe sales.
 Perhaps the most devastating earnings warning came from Entrust Technologies (ENTU: Research, Estimates). The security software developer, saw its market value cut by more than half after it said second-quarter earnings per share will be a quarter of what Wall Street analysts had expecting. Entrust tumbled 40-1/2 to 46-5/8.
These warnings come amid a string of negative forecasts from companies trying to please shareholders during a time of rising borrowing costs. The Federal Reserve raised interest rates six times since June 1999, hoping to slow growth enough to prevent inflation. But some stock investors fret the central bank may have gone too far, triggering a slowdown that hurts corporate profits.
Douglas Cliggott, U.S. equity strategist for J.P. Morgan, told CNNfn's market coverage that he thinks future earnings weakness is a sign that the markets may be headed toward a slump. (386K WAV) (386K AIFF)
An economic report Wednesday offered more evidence the economy is cooling. The Conference Board, a New York-based research group, said its Index of Leading Economic Indicators, designed to forecast economic activity six month ahead, declined 0.1 percent in May after remaining unchanged in April.
Dow losses more moderate
Another Dow issue, Intel (INTC: Research, Estimates), lost 5-1/4 to 131-5/8. The world's largest chipmaker suffered after Salomon Smith Barney downgraded the semiconductor sector to "neutral" from "outperform." Other chipmakers also fell as the Philadelphia Stock Exchange semiconductor index tumbled 110.10 points to 1,070.81.
"Old economy" issues kept the Dow's losses from becoming worse, as investors parked money in blue chip companies with proven earnings records. Minnesota Mining & Manufacturing (MMM: Research, Estimates) rose 4-3/8 to 88-7/16, General Motors (GM: Research, Estimates) gained 9/16 to 60-3/16 and Boeing (BA: Research, Estimates) jumped 1-1/4 to 42-15/16. The Wall Street Journal reported Boeing is near a $5.5 billion agreement under which International Lease Finance would order 30 of its big 777 planes.
2Q results ahead
Despite the day's tech losses, Chuck Hill, director of research at First Call, said warnings among technology companies are running at a lower rate than in previous years
"Let's keep this in perspective," Hill told CNNfn's Before Hours.
 And overall profits look good. Companies in the S&P 500 are forecast to post average profit gains for the second quarter of 19.2 percent versus 14.7 percent in the year-earlier period, according to First Call, which tracks earnings estimates. Still, the latest quarter gain would be slower than the 23.6 percent rise in the first three months of the year.
As the quarterly earnings reporting season begins in the weeks ahead, Hill expects strong numbers from technology and energy companies, which will benefit from a near tripling in oil prices over the last 12 months.
In an effort to bring those prices down, Saudi Arabia said Monday it will boost output by 500,000 barrels a day. Oil prices fell on the news, lifting shares of transportation companies, whose profits often suffer when the cost of the widely used commodity rises. The Dow Jones transportation average, home to many of the nation's biggest airlines and trucking firms, surged 65.30, or 2.4 percent, to 2,770.13.
But oil producers took a hit. Exxon-Mobil (XOM: Research, Estimates) fell 2-19/32 to 76-15/16 and Texaco (TX: Research, Estimates) lost 2-11/32 to 51-7/8 
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