Stock collapsed late Thursday, with the technology-packed Nasdaq index sinking to its worst close since late October, as fears about shrinking earnings at technology icons like chip maker Intel overpowered enthusiasm over an uptick in manufacturing. 

The Dow Jones industrial average lost 106.49 points, or 1.07 percent, to 9,834.68. The blue-chip average dropped back below the 10,000 mark after breaching the key level for the first time in a week earlier in the session.

The Nasdaq Composite Index tumbled 59.33 points, or 3.34 percent, to 1,716.24, finishing lower for the fourth session in five and hitting its lowest close since Oct. 31. The broad Standard & Poor's 500 Index fell 17.03 points. or 1.55 percent, to 1,080.95. 

The Nasdaq closed below the key support level -- a point where buyers usually emerge -- of around 1,740. That's a bearish sign, two technical analysts said, and the index is likely to test support levels at around 1,650, predicted Holly Liss, chief technical analyst at Fuji Futures.

"There is little conviction and a lot of confusion," said Donna Van Vlack, director of trading at Brandywine Asset Management, which oversees $8 billion. "I think there is a lot of fear, because people don't want to be blindsided by the next piece of bad news. It is a very intolerant, unforgiving landscape out there."

Selling accelerated toward the closing bell, just one day after bargain hunters helped the blue-chip Dow rack up its largest gain since early December. Worries over the reliability of corporate accounting still plague the market, keeping traders on edge in the wake of the blow-up of energy trader Enron Corp. 

"This thing is still trying to go up on hope, but there is no real conviction," said Ned Collins, head of trading at Daiwa Securities America. "That is why you are getting these wide swings."

Losers trounced winners by a ratio of 3 to 2 on the New York Stock Exchange and about 2 to 1 on the Nasdaq. More than 1.34 billion shares changed hands on the Big Board and more than 1.81 billion on Nasdaq. 

Oil and gas-related stocks advanced as oil prices rose after the U.S. government confirmed industry data showing an expected reduction in crude supplies last week and tension mounted in the Middle East. Dow component Exxon Mobil Corp. , the world's largest publicly traded oil company, added 16 cents to $39.15. 

Chip makers got hammered after Banc of America Securities cut its earnings estimates on Intel, and telecom gear suppliers fell on the heels of a warning from Ciena Corp. . Investors nibbled at traditional companies like plane maker Boeing Co. and aluminum giant Alcoa Inc. after data suggested an upturn in the hard-hit factory sector. 

Intel fell $1.96 to $29.48, losing more than 6 percent and dragging down both the Dow and the Nasdaq. Banc of America Securities trimmed earnings estimates for the world's largest computer chip marker, pointing to the possibility of weaker near-term demand. The brokerage firm added the supply of chips may rise, which would restrain Intel from raising prices. 

Communications chip maker PMC-Sierra Inc. dropped $2.27 to $16.93, and Vitesse Semiconductor Corp. sank $1.18 to $7.81. Specialty chip maker Altera Corp. lost $2.36 to $19.82. The Philadelphia Stock Exchange semiconductor index <.SOXX> surrendered 6.68 percent. 

Optical networking company Ciena fell $1.10 to $7.60, dropping more than 12 percent. The company posted a record quarterly operating loss because of the spending slowdown in the telecommunications industry and warned the April quarter's results will lag expectations due to further reductions in orders. 

The Standard & Poor's communications equipment index <.GSPCOEQ> sank 7.73 percent. Lucent Technologies Inc. lost 40 cents to $5.28. Nortel Networks Corp. fell 29 cents to $5.36. Cisco Systems Inc. dropped $1.58 to $15.11. 

The Dow got a fleeting boost after manufacturing activity in the U.S. mid-Atlantic region in February expanded at its fastest pace in nearly two years, according to a report from the Federal Reserve Bank of Philadelphia. The data indicated manufacturing activity may have bottomed after shrinking for more than a year. 

Boeing climbed 90 cents to $44.21, while Alcoa jumped 87 cents to $37.48. Construction equipment maker Caterpillar Inc. rose 78 cents to $51.88. All three stocks boosted the Dow earlier in the day, propelling it back above the psychologically key 10,000 mark for the first time in a week. 

"People are gravitating toward companies that have products and business models that are easy to understand -- they know soap, but they don't understand 'DRAM,"' (computer memory chips), said Kevin Bannon, chief investment officer for BNY Asset Management, which manages $67 billion. 

American International Group Inc. , the world's No. 1 insurer by market value, dropped $2.68 to $71.04. The stock was hit by concerns about a subpoena AIG received, related to a probe into a bank it helped structure financial deals for, as well as lingering doubts over who will take over from Chairman Maurice Greenberg. A top AIG executive also warned of possible industry losses from a rash of shareholder lawsuits.

The Russell 2000 index, the barometer of smaller company stocks, slipped 0.04 to 467.21.

Overseas, markets were higher Thursday. Japan's Nikkei stock average surged 4.7 percent on renewed hope in a government plan to bail out the nation's bad bank loans and a rally in technology.

In Europe, France's CAC-40 finished up 1.0 percent, Britain's FT-SE 100 rose 1.0 percent, and in late-day trading, Germany's DAX index was up 1.4 percent.

Reuters and the Associated Press contributed to this report.