Dow plummets 156.78
on profit-taking

NEW YORK -- An avalanche of profit-taking sliced more than 150 points off the Dow Jones industrial average today as interest rates soared again in a bond market suddenly stricken with inflation jitters.

The Dow fell 156.78 points to close at 8,031.22, a 1.9 percent drop, recovering from a loss of nearly 212 points that briefly put the blue-chip barometer below the 8,000 mark. The index was off 162.82 for the week.

Decliners led advancers by more than a 4-to-1 margin on the New York Stock Exchange, with 544 up, 2,480 down and 370 unchanged. NYSE volume was 561.30 million shares vs. 576.04 million yesterday.

Broader stock indicators also posted heavy losses, starting the day sharply lower as interest rates shot higher in the bond market, continuing a week-long ascent from last week's 17-month lows.

The Standard & Poor's 500 list fell 17.65 to 933.54, and the NYSE index lost 8.83 to 483.79. The Nasdaq index fell 25.66 to 1,598.52, and the American Stock Exchange composite dropped 5.92 to 646.15.

With no news to explain today's jitters, analysts attributed most of the selling to fears the markets had rallied too enthusiastically last month over the prospects for slow-growth and tame inflation.

As bond prices fell today, the yield on the 30-year Treasury -- a key determinant of borrowing costs -- rose as high as 6.66 percent before settling at about 6.63 percent, up from late yesterday's 6.53 percent and the highest finish since early July.

Last week, the yield fell to 6.29 percent, its lowest level since February 1996, as bond traders cheered the federal budget agreement.

But rates began rising last Friday after the release of some economic data suggesting that the economic pace has accelerated, threatening to aggravate inflationary pressures.

Those worries worsened this week after strong July sales reports from Ford Motor and many of the nation's big retailers.

Federal Reserve policy-makers are due to meet in two weeks to decide whether economic activity is still moderate enough to keep inflation in check without a boost in the central bank's key lending rates. The markets have been rallying amid optimism the Fed won't try to slow the economy, which would hurt company profits.

"Why have many of the buyers turned into sellers?" asked Hugh Johnson, chief investment officer at First Albany Corp. "The economy is growing a little stronger. That means there are more reasons to worry about inflation and the chances that the Fed will raise interest rates are better."