Stocks tumbled Thursday as profit warnings from Ciena and Lucent Technologies, along with news of more layoffs and deteriorating retail sales, unnerved Wall Street and prompted investors to sell.

The blue-chip Dow Jones industrial average fell 128.36 points, or 1.30 percent, to 9,766.45, while the technology-packed Nasdaq Composite Index dropped more than 3.23 percent, or 64.87 points, to 1,946.51. The broader Standard & Poor's 500 Index finished at its lowest level since Nov. 12, shedding 17.69 points, or 1.56 percent, to end at 1,119.38.

"There seems to be concerted bouts of profit-taking after the bad news from Ciena and Lucent that is taking the bloom off the rose in technology," said Scott Bleier, chief investment strategist at Prime Charter Limited. "After running to very big psychological points at 10,000 in the Dow and 2,000 in the Nasdaq, the market has seemingly run out of steam."

The spate of negative news indicated that parts of the economy won't be stronger in early in 2002, a disappointment to investors who have been buying stocks for weeks on increasing confidence of an impending economic recovery.

After hitting three-year lows on Sept. 21, tech shares powered higher on hopes of a swift economic rebound, propelling the Nasdaq up as much as 40 percent. But the major market indexes have retrenched in the last five trading sessions on fresh concerns the market may have risen prematurely.

Optical components maker Ciena lost 17 percent and Telecom gear maker Lucent Lucent sank more than 15 percent in heavy trading after warning of weak financial results. Telecom company Qwest Communications International Inc. also cut its growth outlook, convincing investors to bail out of the communications sector.

Ciena dropped $3.03 to $14.94 after saying it expects quarterly sales to fall as much as 40 percent as customers slash spending on big-ticket technology items. Lucent Technologies fell $1.21 to $6.52 after warning that its quarterly loss would be larger than Wall Street's expectations.

Ciena and Lucent's warnings had a ripple effect on all semiconductor and telecommunications related issues. Corning Inc., the world's largest maker of fiber-optic cable, lost $1.17 to $8.95. JDS Uniphase Corp., a leading maker of fiber-optic parts for the telecom industry, dropped $1.14 to 8.71.

Meanwhile, retail sales fell by 3.7 percent, the largest monthly drop since records have been kept in 1992, as consumer steered clear of auto dealers. The steep drop stoked fears an economic bounce may be further off as consumers tighten their purse strings.

Volume tapered off shortly before midday as traders moved from trading screens to television screens. The United States released a videotape it said showed Saudi-born militant Usama bin Laden was indeed behind the Sept. 11 attacks.

Prudential Financial was one of the few bright spots in an otherwise dismal session. In its New York Stock Exchange trading debut, the No. 2 U.S. life insurer was the one of the session's most active stocks. It rose $1.80 to $29.30.

Qwest fell 30 cents to $11.80. The telecom company cut its growth outlook through 2002, citing softer demand for voice and data services in the weak economy. Qwest also said it will reduce its work force by 7,000 jobs, or more than 11 percent.

Investors are concerned that the fourth-quarter "confessional season" -- when companies warn earnings could miss analysts' estimates -- may be even worse than expected.

"There's a lot of nervousness out there and there's nothing better to overcome that than a good earnings story, but we're not getting that," said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum. "The expectations rally is over and the next will have to be based on decent (economic) fundamentals, which won't come until 2002."

Applied Materials Inc. , the world's biggest maker of semiconductor-manufacturing equipment, fell $3.79 to $41.08. The company will slash 1,700 jobs, or 10 percent of its work force -- its second round of cuts this year -- amid the worst-ever slump in the microchip industry.

HotJobs.com Inc. jumped $3.83 to $10.30 after Yahoo! outbid what TMP Worldwide Inc. has agreed to pay for HotJobs in a friendly deal. Yahoo lost $1.56 to $17.58, while TMP dropped $3.28 to $41.77.

The stock of Willamette surged $3.25 to $48.75 after hostile bidder Weyerhaeuser Co. raised its bid to buy the timber company in a last-ditch attempt to head off Willamette's efforts to quash the deal by buying a Georgia-Pacific Corp. unit.

The Russell 2000 index, the barometer of smaller company stocks, fell 4.33, or 0.9 percent, to 470.98. 

Overseas, Japan's Nikkei stock average closed down 3.4 percent. In Europe, Britain's FT-SE 100 finished down 0.9 percent, France's CAC-40 fell 2.2 percent and Germany's DAX index declined 1.9 percent.

Reuters and the Associated Press contributed to this report.