Stocks ended lower as rising debt loads at telecom companies like WorldCom exacerbated investors' fears that corporate profits and the US economy would not rebound any time soon.
Investors, bruised by weeks of selling, for the second day locked in gains from Wednesday's monster rally -- which lifted the technology-rich Nasdaq Composite Index almost 8 per cent.
Technology shares led the sell-off as Wednesday's euphoria over better-than-expected earnings from web gear giant Cisco Systems faded. Telecom stocks were hit hardest after WorldCom's credit rating was slashed to "junk" status on Thursday.
"There are unrealised hopes and expectations," said Mr John Davidson, president and chief executive at PartnerRe Asset Management, which oversees $4.5 billion. "In reality, the economic situation hasn't changed with the forecast of one big company. Wednesday's rally didn't change the landscape."
The blue-chip Dow Jones Industrial Average lost 97.50 points, or 0.97 per cent, to 9,939.92. The broader Standard & Poor's 500 Index dropped 18.65 points to 1,053.92. The Nasdaq Composite Index fell 49.62 points to 1,600.92.
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