NEW YORK (CNNfn) - The Nasdaq composite index fell for the sixth straight session Monday and set a fresh low for the year. But the tech-heavy index staged a modest recovery from its earlier tumble, which was sparked by Dow component Hewlett-Packard's earnings shortfall.
The rebound came amid an already nervous market, plagued by uncertainty about the presidential election, which prompted some investors to take cash off the table.
"There was a combination of things that really depressed it. One was Hewlett-Packard's shortfall and we had a sympathetic sell-off using the political environment as a backdrop," said Ned Riley, chief investment strategist at State Street Global Advisors. "Ironically, IBM remained the stalwart and it probably gave the notion of stability to the tech sector and we saw some people looking for bargains."
 The Dow Jones industrial average also suffered from HP's shortfall along with a broad sell-off of many of the blue chip issues, including those bought up ahead of the election in anticipation of a Republican win. But IBM helped temper the losses.
"I think the key word is uncertainty. Until we find some direction you look for good companies or sectors that are growing at a reasonable price," Sarat Sethi, portfolio manager at Douglas C. Lane & Associates, told CNNFn's market coverage.
 The Nasdaq composite index lost 62.25 points, or more than 2 percent, to 2,966.74. The index tumbled as low as 2,859.39, a 169-point drop, before rebounding.
The Dow Jones industrial average skidded 85.70 points to 10,517.25, while the S&P 500 declined 14.72 to 1,351.22.
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Market breadth was firmly negative. Decliners beat advancers 1,673 to 1,179 on the New York Stock Exchange as more than 1.1 billion shares changed hands. On the Nasdaq, losers topped winners 2,570 to 1,380 as more than 2 billion shares were traded.
In other markets, Treasury securities edged higher. The dollar was little changed against the euro but fell versus the yen.
Hewlett-Packard takes a beating
After posting disappointing earnings, Hewlett-Packard's conference call with analysts helped soothe sentiment that the shortfall was specific to HP, making other tech issues attractive.
Hewlett-Packard (HWP: Research, Estimates) fell $5 to $34.13 after posting a fiscal fourth-quarter profit of 41 cents a share, falling short of the 51 cents a share forecast by analysts. HP cited currency and expense problems for its shortfall.
"With Hewlett-Packard, another one bites the dust and technology is bearing the brunt of a buyers' strike," said Bryan Piskorowski, market analyst with Prudential Securities. "We're mired in a period of uncertainty here and clearly the vote right now is 'Cash is king.'"
But Sanford Bernstein kept its "market perform" rating on HP, calling the stock valuation "attractive."
And one analyst said the modest recovery came as investors digested HP's earnings and realized all the news wasn't as bad as initially perceived.
"The market opened down when people did a superficial analysis and saw that (HP) missed earnings," said David Beard, portfolio manager at Morgens Waterfall Vintiadis. "Once the conference call got going and you had a chance to read the press release, you got a different story. Hewlett's demand picture was good."
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Other tech issues managed to attract buyers. Qualcomm (QCOM: Research, Estimates) rose $1.13 to $75.06, and Worldcom (WCOM: Research, Estimates) advanced 88 cents to $16.38.
"I think what we have is a recognition by investors that there is some decent value at this price. But whether they have the intestinal fortitude to stay during further adverse times is still unanswered," said State Street's Riley. "Today, they seem to have rallied based on the expectation that there is cheapness in some of these stocks."
 In tech news and leading the Dow buyers, IBM (IBM: Research, Estimates) gained $4.38 to $97.38 after saying that it agreed to buy extra ceramic substrate packaging for its chips from an outside supplier to alleviate shortages of the microelectronics part that have hindered sales of certain computers.
Intel (INTC: Research, Estimates) rose $1.19 to $38.19. The company is expected to announce its fastest-ever Celeron microprocessors that are slated for personal computers costing less than $1,000. The company also cited research claiming that it has 94 percent of the U.S. retail market for cheap desktop PCs.
Waiting for the White House
Investors do not like uncertainty, and analysts had hoped to sail past the U.S. presidential election unscathed so the markets could return to more fundamentally based activity.
With the outcome still too close to call, investors have opted to take their money off the table until the election is settled.
"The uncertain outcome of the U.S. presidential race may delay a fourth-quarter recovery in share prices but should not eliminate it," wrote Christine Callies, chief U.S. investment strategist with Merrill Lynch, in a note to clients. "We believe that potential buyers are waiting for a resolution before implementing their 2001 investment plans."
A federal court judge in Miami rejected the request from the campaign of Texas Gov. George W. Bush to block a manual recount of votes in four Florida counties. But the Bush camp is expected to appeal the ruling. Recounts that have been conducted so far have actually widened Bush's microscopic lead over Vice President Al Gore.
But Gore faces a new obstacle -- Florida's secretary of state ruled that recounts must be completed by Tuesday afternoon in order to count in the state's tally. Officials in at least one of the counties where the manual recounts are taking place plan to ask a state court to delay the deadline.
Todd Eberhard, stock strategist at Eberhard Investments told CNNfn's Market Call, sees a variety of issues from negative earnings surprises to the uncertainty over the presidential election plaguing the markets. (395K WAV) (395K AIFF)
 The uncertainty weighed on some of the stocks seen as benefiting from a Bush win, which had run up ahead of the election. Philip Morris (MO: Research, Estimates) shed $2.25 to $34.63, Merck (MRK: Research, Estimates) lost $2.19 to $89.31 and Johnson & Johnson (JNJ: Research, Estimates) fell $1.38 to $93.06. 
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