The Nasdaq Composite Index notched its biggest one-day slide in nearly 2½ years, dragging the broader market sharply lower, as investors resumed selling risky biotechnology and smaller technology stocks.

While the S&P 500 and Dow Jones Industrial Average remain not far from record highs even after Thursday's declines, the bottom has fallen out in shares of biotech, high-growth technology and Internet companies including Facebook and Netflix, which were some of the biggest winners in the bull-market rally. Many hedge funds...