Technology shares drop sharply

Technology shares have dropped sharply amid rumours that Cisco Systems will be the next company to warn of weaker profits.

Blue chips also fell, compounding losses run up on Monday after IBM reduced its earnings outlook.

The Dow Jones industrial average closed down 40.41, or 0.4%, at 10,208.67.

On Monday, the blue chip index recovered from a 150-point dip caused by IBM's news and closed just 22.56 lower.

The broader market recorded steeper losses. The tech-dominated Nasdaq composite index fell 43.36, or 2.4%, to 1,742.51, having advanced 15.84 on Monday despite IBM's warning. The Standard & Poor's 500 index declined 7.50, or 0.7%, to 1,117.79.

Cisco Systems fell $1.36 to $14.82 after RBC Capital Markets lowered its third-quarter estimates on the networking stock, citing a continued slump in capital spending on information technology.

Later, rumours spread on Wall Street that Cisco would be the next big tech company to warn about profits.

Other tech losers included Microsoft, which fell $2.35 to $54.87, and Intel, which was down $1.47 to $28.46. Yahoo! stumbled 38 cents to $18.46 ahead of its earnings due out tomorrow.

But Dow industrial IBM rose 33 cents to $87.74, a meagre recovery from Monday's $9.84 loss.

Among the winners, Wendy's gained $1.36 to $37.30 after raising its fiscal 2002 earnings estimate. Lehman Brothers, Goldman Sachs and Credit Suisse First Boston also raised various earnings estimates for the fast-food company.