NEW YORK (CNNfn) - U.S. stocks stumbled Tuesday afternoon, after a profit warning from wireless equipment maker Nokia sparked widespread anxiety about what company might be the next to issue negative guidance.
In afternoon trading, the pace of selling slowed down as investors sought bargains, but volume remained moderate.
"We've been down all day largely on the Nokia earnings warning," said Stephen Carl, principal and head of equity trading at Williams Capital Group. "There is some bottom fishing after two down days and maybe some short covering. But the market is trading with very little conviction."
Payne also noted that the selling came from disappointment rather than panic, which could bode well for stock prices in the coming months.
"Disappointment can go away faster than the panic," Payne said.
Around 3 p.m. ET, the Nasdaq composite index fell 18.23 points to 2,152.55 while the Dow Jones industrial average dropped 51.66 points to 10,870.43. The S&P 500 shed 6.04 to 1,248.35.
The selloff was also partly due to investors getting ahead of themselves by betting that all the bad news already was factored into stock prices.
Throughout April and May, it was this sentiment that injected life into the major indexes. In those two months, the Dow gained 10.4 percent, the Nasdaq jumped 14.7 percent, and the S&P advanced 8.2 percent.
"Stocks rallied pretty good and they rallied, in part, on the belief that this quarter would bail us out -- and we know that's not the case," said Charles Payne, president of Wall Street Strategies. "But this market still wants to trade higher -- even though investors have gotten ahead of themselves, they're still buyers if given the right catalyst."
Keeping pressure on the Dow were shares of Honeywell International (HON: down $2.11 to $43.14, Research, Estimates), after European antitrust regulators indicated they want General Electric (GE: up $1.36 to $48.76, Research, Estimates) to shed more than half of Honeywell's aerospace division, according to the Wall Street Journal.
Also hurting the Dow was Alcoa (AA: down $1.84 to $40.30, Research, Estimates), the world's largest aluminum producer, which tumbled after Sanford Bernstein cut its rating to "market perform" from "outperform."
Market breadth was negative. Nasdaq losers beat winners 2,394 to 1,295 as 1.26 billion shares traded. Declining issues on the New York Stock Exchange topped advancing ones 1,772 to 1,262 as 826 million shares traded.
In other markets, Treasury securities rose. The dollar slipped against the euro but was little changed versus the yen.
Techs dragged down by Nokia
Investors looking for some positive guidance were sorely disappointed Tuesday as Nokia's warning prompted investors to question when the overall economic and earnings picture would truly improve.
"The recovery is going to take longer than anyone initially hoped for, and (Nokia) is the biggest name to warn so far," Payne said. "I think it was wishful thinking that the turn would happen overnight. But it's not a bad assumption to believe that things are going to get better -- it just takes time and maybe investors haven't been realistic."
Most analysts expect more churning as the pace of near-term corporate guidance increases.
"This is the wakeup call," James Awad, money manager with Awad Asset Management, told CNNfn's Before Hours. "We're going to go through a test here where we're going to have a period of turbulence in the market as we report second-quarter earnings and get forward-looking guidance for the third quarter."
Nokia (NOK: down $5.48 to $23.23, Research, Estimates) said slower-than-expected market growth would lead to second-quarter earnings per share of only  0.15-0.17, compared with earlier expectations of 0.20.
Other wireless companies that followed Nokia lower included Western Wireless (WWCA: down $0.56 to $40.15, Research, Estimates) and Motorola (MOT: down $0.89 to $13.97, Research, Estimates). Qualcomm (QCOM: down $1.98 to $57.80, Research, Estimates), which makes chips for wireless communications equipment, also took it on the chin.
But the selling wasn't confined to wireless stocks. All sectors were under pressure. In the biotech space, a warning from Affymetrix (AFFX: down $14.26 to $26.69, Research, Estimates) sent shares plunging.
Affymetrix said its second-quarter revenue would reach only $44 million to $50 million, versus First Call estimates of $57 million, and also said business may be sporadic over the next few quarters.
Merrill Lynch cut its intermediate-term rating on Affymetrix to "neutral" from "accumulate," but maintained its long-term "buy" rating based on the belief that the current softness in sales would eventually correct itself.
Other biotechs that faltered included Amgen (AMGN: up $0.04 to $66.79, Research, Estimates), Celera Genomics (CRA: down $2.68 to $43.26, Research, Estimates) and Genentech (DNA: down $0.80 to $52.20, Research, Estimates). 
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