Stocks slumped Thursday, led by technology shares, after profit warnings from companies like networking giant Juniper Networks Inc. reignited worries about what is likely to be a brutal fourth-quarter earnings reporting season.

Argentina's deepening economic and political instability also worried investors.

The blue-chip Dow Jones industrial average dropped 85.04, or 0.84 percent, to 9,985.45, while the technology-laced Nasdaq Composite Index plummeted 64.20 points, or 3.24 percent, to close at 1,918.69. The broader Standard & Poor's 500 Index lost 9.60 points, or 0.84 percent, to 1,139.96.

"We are in prime earnings warnings season,'' said Alan Ruskin, research director at 4Cast Ltd., an economic research firm in New York. "The market wants to be bullish but it's getting beaten down by earnings every now and again.'' 

Analysts are forecasting a 20.3 percent drop in earnings of the Standard & Poor's 500 companies in the fourth quarter, but that number could widen to 22 percent, making it the worst earnings drop of the year, according to market research firm Thomson Financial/First Call. 

"There is already a bit of anticipation built into some equity prices ... and as these corporate profit warnings come out, people get jittery and say, 'Oh gosh, things aren't necessarily going to turn around,''' said Richard Babson, chairman of Babson-United Investment Advisors.

AT&T Corp. was also in focus after saying it will sell its cable television unit to smaller rival Comcast Corp. for $72 billion in stock and debt, ending five months of negotiations and creating a massive cable operator with more than 22 million subscribers. AT&T's stock climbed $1.05 to $17.85. Traders, however, were less bullish on Comcast, sending it down $2.28, or nearly 6 percent, to $35.79.

Much of the weakness in technology issues was attributable to Juniper, which said its earnings would fall short of Wall Street forecasts by 50 percent. Juniper tumbled $4.08 to $18.85. 

Contract electronics manufacturer Jabil Circuit also warned slow demand would keep hurting earnings. Jabil's quarterly earnings fell more than 80 percent, as orders from computer and telecommunications companies stalled. In active NYSE trading, Jabil fell $3.50 to $21.25. 

Reflecting the selloff in the tech sector, the Philadelphia Semiconductor index tumbled 5.58 percent, to 507.60. 

Stocks of financial services firms slipped after several Wall Street firms — Bear Stearns Cos. Inc. and Goldman Sachs Group Inc. among them — reported sharply lower profits due to declining investment banking fees.

Bear Stearns posted a 21 percent drop in earnings, as the stock market slide depressed trading, and its stock fell 60 cents to $58.38. Goldman Sachs said earnings fell 17 percent, as the Sept. 11 attacks worsened Wall Street's slump. The news sent the company's stock down $2.10 to $92.31. 

No. 2 U.S. bank JP Morgan Chase weighed on the Dow, falling $1.48 to $36.52 after it disclosed more loans to bankrupt energy giant Enron Corp.

Argentina, Latin America's third-largest economy, is reeling from civil disruptions in protest of austerity measures imposed by Economy Minister Domingo Cavallo, who resigned on Thursday. The unrest has touched off fears that the country will soon default on its sizable debt, which would be the biggest debt default in history. 

"Everybody knew that there was a major problem over there in Argentina. They're just hopeful that it doesn't spread to all the other countries over in that particular area,'' said Lance Zipper, managing director of equity trading at Brean Murray & Co. "Everybody's going to be watching it. It's another piece of nervousness that's hanging in the market.''

The latest economic report gave some hope that an economic turnabout could be close at hand, but offered scant comfort to investors. Claims for first-time jobless benefits fell unexpectedly, to a seasonally adjusted 384,000 in the week ended Dec. 15 from 395,00 in the previous week. 

Meanwhile, a report by the Federal Reserve Bank of Philadelphia said manufacturing activity in the U.S. mid-Atlantic region rebounded sharply this month. The monthly index of business conditions posted its 13th straight month of contraction, but showed signs of recovery.

Declining issues led advancers 4 to 3 on the New York Stock Exchange. Volume came to 1.09 billion issues, compared with 1.36 billion at the same point Wednesday. 

The Russell 2000 index lost 5.54 to 476.53. 

Overseas, Japan's Nikkei stock average dropped 0.4 percent. In Europe, Germany's DAX index fell 1.0 percent, Britain's FT-SE 100 lost 0.8 percent, and France's CAC-40 slipped 0.9 percent.

Reuters and the Associated Press contributed to this report.