Tech Leads Heavy Selloff at Session End

Stocks took a hard hit Wednesday after a strong dollar and weak housing numbers prompted a pullback, starting with technology names.

The Dow Jones Industrial Average closed down 121 points at 9761. The Nasdaq dropped 56 to 2060, a 2.5% drop, and the S&P declined 21 to 1043.

Weak results from SAP (SAP) pressured the Nasdaq and boosted the notion that tech stocks may be falling into a sector rotation as investors change their views on valuation and growth. The German information technology firm missed earnings estimates and its shares dropped.

"Markets have to consolidate before they can move higher," said Jamie Cox, managing partner of Harris Financial Group in Colonial Heights, Va. "People knew this was going to be ugly and nobody thought there would be a rosy finish to this [recession]. We're in the mud and we're just going to have to walk a while before the mud is off our boots."

The Commerce Department said orders for long-lasting goods during September increased for the fourth time in six months, while a key gauge of capital spending rose strongly, a favorable sign for U.S. manufacturing.

Manufacturers' orders for durable goods increased by 1.0% last month to a seasonally adjusted $165.67 billion, the Commerce Department said Wednesday. Economists surveyed by Dow Jones Newswires had projected orders would climb 1.5%.

Later Wednesday, new-home sales data for September are due at 10 a.m. On Thursday, a key report on third-quarter gross domestic product will be released. Goldman Sachs (GS) on Wednesday lowered its estimate of GDP growth to 2.7% from 3.0%.

As of 4:04 p.m., oil futures traded on the Nymex declined 14 cents after the regular session close, dropping to to $77.32 a barrel after an unexpected boost to gasoline inventories was reported by the Energy Department.

Dow Jones Newswires contributed to this report.