Wall Street sinks for third day

NEW YORK (Reuters) - Stocks fell for a third session on Friday after a disappointing outlook from Qualcomm Inc triggered more weakness in technology shares and helped send the Nasdaq down to its biggest weekly point loss since the September 11, 2001, attacks.

The wireless technology developer late Thursday forecast 2008 earnings and revenue below analysts' expectations, a day after Cisco Systems Inc warned about demand from its customers in the banking sector.

Adding to the negative tone, Fannie Mae, the largest source of mortgage financing in the United States, posted a third-quarter net loss that was double its loss from a year ago. Its shares ended the session down 1.6 percent at $49.00, after earlier dropping 10.6 percent to a fresh 52-week low at $44.54.

And Wachovia Corp, the fourth-largest U.S. bank, shook up financial markets some more by reporting a potential $1.7 billion loss on mortgage-related debt. Wachovia's stock fell more than 5 percent to a 52-week low at $38.05, but then rebounded to finish the day up 0.9 percent at $40.65.

The week's disappointing news from tech companies sparked concern that fallout from the credit crisis was hurting demand from key customers. Technology until recently had been a bright spot for the market.

"It has seemed for a couple of days here we've been in a correction mode. Today certainly furthers that feeling," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.

"While technology has been leading the market recently, it's a volatile sector, and you can't forget that. With negative demand visibility looming, it's probably going to be tough for technology to lead the market in the near term," he sad.

For the week, the Nasdaq lost 6.5 percent -- or 182 points. The Dow dropped 4.1 percent and the S&P 500 declined 3.7 percent.

For the day, the Dow Jones industrial average was down 223.55 points, or 1.69 percent, at 13,042.74. The Standard & Poor's 500 Index was down 21.07 points, or 1.43 percent, at 1,453.70. The Nasdaq Composite Index was down 68.06 points, or 2.52 percent, at 2,627.94.

Qualcomm was among the bellwether tech stocks that led the Nasdaq lower with a decline of 4.2 percent to $38.10, while software maker Microsoft Corp fell 2.9 percent to $33.73.

Tech services company IBM was the Dow's top drag, down 5.2 percent at $100.64.

Meanwhile, the week closed with the first back-to-back gains in two weeks for financial stocks as investors scoured the downtrodden sector for bargains even after a fresh bout of credit loss revelations from some big banks, including Wachovia and Morgan Stanley.

Citigroup Inc. gained 0.6 percent to close at $33.10 on the NYSE, snapping a losing streak. Morgan Stanley advanced 1 percent to end at $54.20 on the NYSE.

Also bucking the trend, shares of mortgage insurers such as PMI Group surged, topping the list of the NYSE's biggest percentage gainers, following news that Old Republic had acquired big stakes in two of the companies. PMI shares skyrocketed 33.9 percent to $14.88.

Trading was active on the New York Stock Exchange, with about 1.83 billion shares changing hands, close to last year's estimated daily average of 1.84 billion. On Nasdaq, about 2.95 billion shares traded, ahead of last year's daily average of 2.02 billion.

Declining stocks outnumbered advancing ones by a ratio of about 3 to 1 on the NYSE and by 2 to 1 on Nasdaq.