The Dow Jones industrials followed the Nasdaq, giving up early gains and also closing sharply lower.
The Nasdaq fell 200.61, or 4.1 percent, to close at 4,706.63. With Monday's 141-point loss, the Nasdaq has shed 6.8 percent in two sessions; Tuesday's drop was second only to a 229.46 slide on Jan. 4.
The Dow fell 135.89 to close at 9,811.24. Selling pressure accelerated in the final half-hour of trading.
Broader market measures also surrendered early gains to finish lower. The Standard & Poor's 500 fell 24.47 to 1,359.15 and the Russell 2000 index of smaller companies plunged 17.15 to 572.99.
Biotech stocks plunged, pulling the rest of the Nasdaq, after the United States and Britain agreed to openly share data from a project to decode the human genetic pattern.
The two countries say they would share raw fundamental data on the human genome, including the human DNA sequence and its variations, with scientists everywhere. A joint statement urges private companies to follow the lead of government laboratories.
The agreement may halt several companies' plans to sell genetic data to drugmakers and researchers.
Incyte Pharmaceuticals skidded 53@1/2 to 143@1/2 and Human Genome Sciences fell 29 3/64. PE Corp.'s Celera Genomics tumbled 39 to 150 on the NYSE.
Analysts said that while some companies will struggle to find other sources of revenue, most biotechnology business are involved in a wide range of projects and won't be adversely affected by the decision.
This is a bit of an overreaction, said Dr. Joseph Zammit-Lucia, president of Cambridge Pharma Consultancy. It's a little bit of correction in a frothy market.
Biotech stocks have been among the strongest performers in the Nasdaq's sharp rise this year, leaving them especially vulnerable to profit-taking, analysts said.
When you get something that's gone up to that extent, you're going to get violent shakeouts, said Don Selkin, chief investment strategist at Joseph Gunnar in New York. This year, people are going to have to get used to the volatility.
As biotech stocks fell, other technology groups succumbed to profit-taking. Applied Materials, a leading maker of equipment used in the semiconductor industry, fell 9 3/16 to 178@3/4. Apple Computer fell 7 1/16 to 114@1/4 and 3Com fell 9@1/2 to 54 13/16.
Tuesday's losses highlighted the extraordinary fluctuations in the technology-dominated Nasdaq. In the year to date, the index is up 16 percent, while both the Dow and the S&P are down. Yet eight of the Nasdaq's 10 biggest point drops have occurred this year.
I'm not sying it's straight up, but overall, I think (the Nasdaq) is the place to be, Selkin said.
"The news has roiled the sector," Paul Kelly, an analyst at ING Barings, tells CBS MarketWatch. Kelly noted that Clinton and Blair's assertion that academics should be free to use the baseline genomics information could hurt companies who have "trumpeted" to the market the value of their patent portfolios.
Robertson Stephens analyst Michael King said the sell-off was waiting to happen, as share prices were driven skyward in recent months by investors who were "piling in just because the stocks were going up," he said.
In recent months, the stocks of genomics companies have recorded spectacular gains amid investor enthusiasm for the commercial potential of gene-based medicine.
On Tuesday, several companies said they supported the president's position, despite the perceived threat it poses to their commercial ambitions.
CBS MarketWatch's Stephanie O'Brien reports Celera has had a very public disagreement with the National Human Genome Research Institute. Last week, behind-the-scenes efforts to forge an alliance between public and private efforts accused each other of bad faith.
The two sides, which had been negotiating since December, had hoped to form a partnership that would merge the international Human Genome Project with Celera's efforts, according to the Washington Post and other news sources. The effort appeared to have foundered over divisive disagreements about commercial use of the gene database.
The negotiations became public when the U.K.'s Wellcome Trust, which is financing gene research, released a copy of a letter from public negotiators to Celera president J. Craig Venter. In it, its primary author Francis Collins, director of the National Human Genome Research Institute said a prime issue was Celera's desire for restrictions on commercial use of the genome database.
Venter said his company supports the goal of completing the gene map rapidly but is concerned that research it paid for will be available for other companies to repackage and sell, the Washington Post reported.
In a statement Tuesday, Celera said it welcomes Clinton and Blair's comments.
The company said its own mission is "completely consistent" with the goal of assuring global access to the human genome data. "Since the announcement of Celeras formation we have made a clear commitment that upon our completion of the consensus human genome we would publish it in a peer-reviewed scientific journal and make it available to researchers for free," Celera said.