NEW YORK (REUTERS) - Wall Street fell sharply on Friday and capped off its worst week since the dark days of August, hurt by a selloff in technology companies, while department stores dropped on concerns about the upcoming holiday shopping season.

The three major indexes ended the week down more than 3 per cent, firmly putting the brakes on a fast rally that began in October.

Dow component Cisco dropped 5.8 per cent after it gave a flimsy forecast, citing a slowdown in orders and weak spending outside the United States.

It was the second-biggest drag on the S&P and the Nasdaq and pulled down shares of tech heavyweights including Apple and Facebook.

Retailers were hit by disappointing reports from department store chains. Nordstrom lowered its full-year forecast on Thursday, spooking investors already on edge after Macy's cut its forecast on Wednesday.

Added to that, data showed US retail sales rose less than expected in October, suggesting a slowdown in consumer spending.

Consumer stocks have been a bright spot this year as weak commodity prices, fears of a global slowdown and the anticipation of a US rate hike have hit most stocks, especially those of materials, energy and industrial companies.

The S&P 600 smallcap index lost 4.6 per cent for the week, its worst weekly performance in over three years.

The underperformance of smallcaps relative to larger companies in recent weeks hints at vulnerability in the broader market, said Alan Gayle, senior investment strategist at RidgeWorth Investments in Atlanta, which has US$50 billion in assets under management.

"The market got to up within about a percent of its previous record high. It got overbought, but we really didn't get the follow-through we wanted from the small caps," Gayle said.

The Dow Jones industrial average fell 1.16 per cent to finish at 17,245.24 points and the S&P 500 lost 1.12 per cent to 2,023.04. The Nasdaq Composite dropped 1.54 per cent to 4,927.88.

All three major indices had their worst week since August, when fears about the health of China's economy and stock market slammed global asset prices.

The Dow lost 3.7 per cent for the week, the S&P fell 3.6 per cent and the Nasdaq declined 4.3 per cent.

For 2015, the S&P is now down about 2 per cent.

Nine of the 10 major S&P sectors finished lower on Friday, with the consumer discretionary sector's 2.65 per cent fall leading the decliners.

Nordstrom and J.C. Penney both sank about 15 per cent.

Fossil slumped 36.50 per cent after the watchmaker said current-quarter sales could fall as much as 16 percent.

The S&P technology index fell 2.01 per cent, with Apple down 2.92 per cent. Facebook fell 3.77 per cent, its worst day in over a month.

Declining issues outnumbered advancing ones on the NYSE by 1,903 to 1,154. On the Nasdaq, 1,761 issues fell and 1,027 advanced.

The S&P 500 index showed no new 52-week highs and 36 new lows, while the Nasdaq recorded 29 new highs and 181 new lows.

About 7.7 billion shares changing hands on U.S. exchanges, well above the 7.1 billion daily average for the past 20 trading days, according to Thomson Reuters data.