Technology stocks lead selloff

Stocks slid Wednesday, with technology leading the way, as investors dumped Yahoo shares after the company announced a partnership with Microsoft.

Wall Street was also vulnerable to a pullback in the wake of a big two-week rally.

The Dow Jones industrial average (INDU) lost 62 points, or 0.7%. The S&P 500 (SPX) index fell 8 points, or 0.8%. The Nasdaq composite (COMP) gave up 15 points, or 0.8%.

U.S. stocks were volatile Tuesday and finished the session mixed as investors weighed a weak reading on consumer sentiment and had trouble finding momentum in the aftermath of the recent rally.

Peter Cardillo, chief market economist for Avalon Partners, said Tuesday's weak Treasury auction "gave the market a bad case of indigestion" that was offset somewhat by bullish traders.

Microsoft-Yahoo: Microsoft (MSFT, Fortune 500) and Yahoo (YHOO, Fortune 500) have reached a long-awaited 10-year search deal, the companies announced. Microsoft will acquire Yahoo's search technologies to integrate into its existing platforms, while Yahoo will become the exclusive sales force for both companies' search business, according to their joint statement.

Yahoo shares slumped almost 8% on the news, while Microsoft shares added 1%.

Oil prices and stocks: The price of oil dropped $1.83 per barrel, to $65.40. Oil stocks declined in tandem, with Dow components Chevron (CVX, Fortune 500) and Exxon Mobil (XOM, Fortune 500) both sliding 2%.

Economy: The U.S. Census Bureau reported that durable goods orders fell 2.5% in June, which was much worse than expected.

The durable goods orders, which reflect manufacturing activity, were expected to slip 0.6% for the month of June, according to a Briefing.com consensus, compared to an increase of 1.3% in May.

Investors will also look to the Fed's Beige Book of economic conditions, due out at 2 p.m. ET.

Corporate results: Investors have another batch of results to consider.

Time Warner (TWX, Fortune 500), the largest media company in the world and the parent company of CNNMoney.com, reported that its second-quarter profit from continuing operations slipped to 43 cents per share from 47 cents a year earlier.

Sprint Nextel (S, Fortune 500) a wireless communications provider, reported a diluted loss of 13 cents per share in the second quarter, which was slightly larger than the 12 cent loss per share in the year-ago quarter.

World markets: Asian shares dived, with Shanghai stocks losing 5%. European shares ended higher.

Money and oil: The dollar rose against the major international currencies, including the euro, the yen and the British pound.