The Dow Jones industrial average fell 72.58 points (0.68 percent) to 10,538.66 with the Nasdaq tumbling 39.51 points (2.05 percent) to 1,889.98 at 1600 GMT.
The Standard and Poor’s 500 shed 11.88 points (1.02 percent) to 1,156.38.
Dealers said stocks opened lower and remained in negative territory after the first half hour of trade, as investors unloaded shares in the telecom group and a variety of other sectors.
The negative tone was intensified by renewed concerns about misleading accounting practices after news that the SEC is probing the earnings statements of both Qwest and WorldCom.
In addition, the deterioration of accounting giant Arthur Andersen in the wake of the Enron bankruptcy scandal also was depressing investor sentiment.
However, dealers noted that the selling was relatively restrained and could run its course before the end of the session, given that investors overall are becoming optimistic about economic prospects after a recent string of positive data releases.
Despite a mediocre session Monday, "momentum remains positive" on Wall Street, said Alfred Goldman of AG Edwards.
Lucent was 17.2 percent lower, down $1.09 at 5.17 after it pushed back its forecast for a return to profitability to 2003.
American Depository Receipts for Nokia were down $1.54 or 6.4 percent at $21.96, in line with prior losses in overseas trade, due to its announcement that its first-quarter sales were coming in weaker than expected.
WorldCom slipped $1.35 or 14.9 percent at $7.66 after it revealed that the US Securities and Exchange Commission requested information relating to its accounting practices and loans to corporate officers.
Qwest fell 35 cents to $9.11, extending the heavy losses it posted Monday after revealing that the SEC is probing the methods under which it booked revenues in its 2000 and 2001 financial statements.
IBM managed to buck the general negative trend, trading up $2.60 at $107.84 as investors reacted positively to news it will offer a more detailed accounting method in future annual reports.
However, Cisco was down 54 cents at 16.88 after it offered additional information about its accounting practices.
Goldman Sachs was down 71 cents at $89.99 after a news report it will have to cut 10 percent of its global workforce.
On the bond market, the yield on the 10-year Treasury bond eased to 5.273 percent from 5.298 percent Monday and on the 30-year bond to 5.692 percent against 5.715 percent. Bond yields and prices move in opposite directions.