Stocks are taking a thumping Wednesday on the latest bad news from Nortel Networks. The S&P/TSX index is down 57 points at midday to 6,585.

Heavy trading in Nortel has boosted the day’s volume to a respectable 91.5 million shares, although selling is outweighing the buying by 22:7. Market breadth is also negative with losers outpacing winners by a margin of five to three.

Technology stocks are leading the way down, dropping more than 6% so far today. There’s also weakness in the industrials, diversifieds, energy and materials sectors. Telecoms are bucking the trend, and there’s a continuing flight to the safety of gold stocks.

Nortel Networks is the story of the day though, after it announced that its sales would fall short of expectations and job cuts will continue at the networking firm. The stock is down 17% to just $1.58 on massive volume of 27.4 million shares. Following Nortel, there’s some weakness in Corel and Research in Motion, but the rest of the sector is not selling off heavily.

There is renewed weakness in Bombardier, however. The firm is down 6.4% on heavy volume of 11.8 million shares, as traders battle over the company’s prospects.

Along with Nortel and Bombardier there is selling in Canadian blue chip stocks such as Alcan, Inco, Bank of Nova Scotia, and CN Rail. Ballard Power is notably weaker, too.

Golds remain the big beneficiary of investor jitters. There are gains on notable volume in Barrick, Placer Dome, Kinross, Wheaton River Minerals, Cambior, Bema Gold, Glamis, Goldcorp and Agnico Eagle.

Rio Narcea Gold Mines is justifying the faith in golds, reporting second quarter net income of $6.1 million.

Other gainers include Neurochem, MDS and Telus.

In New York, the warning from Nortel has also had an impact. And, in the absence of much news to change traders’ minds, markets are down. At midday, the Dow Jones industrial average has dropped 130 points to 8,695. The S&P 500 is down 18 points to 917. And, the Nasdaq composite has dropped 24 points to sit at 1,323.

The strength in golds is bolstering Canadian small caps today, though. The S&P/TSX Venture index has added a couple of points to sit at 1,016. Volume remains light though, at 9.6 million shares. Platinum Group Metals is the top trader, up 5¢ to 90¢ on 141,000 shares.