LONDON (CNN) - Europe's main markets all closed lower on Friday after Philips warned its chip unit will post a loss and JDS Uniphase downgraded its earnings forecast.
Philips Electronics, Europe's biggest consumer electronics company, dropped 4.4 percent after saying weakening demand means its chip business will post a second-quarter loss of $151 million.
The warning follows hot on the heals of a similar warning from rival STMicroelectronics [LSE:PSTM, Europe's biggest chipmaker, on Thursday. The company fell just over 3 percent.
The continent's No. 2 chip maker, Infineon Technologies (FIFX), slipped 4.1 percent and ARM Holdings (ARM), Europe's biggest chip designer, dropped 6.2 percent.
"This is the confessional season and the markets will be a lot more nervous," Commerzbank market strategist Michael O'Sullivan told CNN. "Technology stocks will come under pressure and it is a perfect excuse for big investors to sell down."
London's FTSE 100 slipped 0.5 percent to 5,723.0, with Railtrack [LSE:RTK} leading the losers, down 8.9 percent.
Internet data carrier Energis (EGS) fell 6.6 percent.
Media companies across the continent fell on concern that falling ad revenue would crimp profits. Pearson (PSON), which publishes the Financial Times newspaper, slipped 4.4 percent. Commercial TV broadcaster Carlton Communications (CCM) dipped 3.8 percent.
France's biggest broadcaster TF1 (PTFI) declined 3.9.
In Paris, the CAC 40 blue chip index lost 1 percent to reach 5,243.84. Mobile operator Bouygues (PEN) topped the losers, falling 5.7 percent. Telecom equipment maker Alcatel (PCGE) dropped 4.5 percent.
Frankfurt's electronically traded Xetra Dax declined 1.6 percent to 5,935.97 as Europe's biggest software company SAP (SAP) fell 4.8 percent. SAP joined a raft of other software companies in negative territory; Logica (LOG) fell 2.6 percent and Anglo-Dutch CMG (CMG) declined 1.7 percent.
In Amsterdam, the AEX index lost 1.8 percent, as the biggest supplier of equipment to make chips, ASM Lithography, shed 4.3 percent.
The SMI in Zurich was 0.6 percent lower and Milan's MIB30 index dipped 0.9 percent.
The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, was down 0.7 percent, with its computer services sub-index falling 3.3 percent.
The information technology index's biggest component, Nokia, the world's biggest supplier of mobile phone handsets, slipped 0.5 percent, France's Alcatel (PCGE) lost 4.5 percent, Britain's Marconi (MONI) declined 5.8 percent and Siemens, the German communications and engineering conglomerate, shed just under 4 percent.
Spirent (SPT), a UK telecom testing equipment maker that is not part of the sub-index, slid 6.6 percent in London.
In the U.S., stock markets erased most of their early losses Friday morning as renewed strength in defensive issues, particularly drug and manufacturing stocks, mitigated weakness in the tech sector.
The Dow Jones industrial average rebounded from a more than 123-point drop in the early going. Before midday trade, it stood at 10,683.76, down 6.37.
Leading the blue-chip indicator were drugmaker Johnson & Johnson (JNJ: up $0.95 to $51.86, Research, Estimates) , oil producer Exxon Mobil (XON: Research, Estimates), and financial services provider J.P. Morgan Chase (JPM: up $1.11 to $44.70, Research, Estimates).
The Nasdaq composite index slid 14.64 to 2,029.43 after tipping below 2,000 for the first time since mid-April. Sparking the tech-laden indicator's decline were results warnings from two bellwethers, fiber-optic equipment maker JDS Uniphase (JDSU: down $2.10 to $11.71, Research, Estimates) and network equipment maker Nortel Networks (NT: down $1.46 to $9.14, Research, Estimates)
Nortel Networks had issued a second-quarter profit warning and said it would cut another 10,000 jobs, on top of the 20,000 cuts already announced, before the market opened Friday.
In the currency market, the euro rose eased slightly against the U.S. dollar, fetching 86.17 U.S. cents compared with 86.22 cents in late New York trading on Thursday. 
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