Blue-chip stocks extended their losses Friday as the renewed threat of higher interest rates convinced investors that the strong corporate earnings of the second quarter might be in jeopardy.
After dropping as much as 100 points in early trading, the Dow Jones industrial average closed down 58.26 points at 10,910.96. For the week, the Dow lost 298.88 points, or 2.7%.
Broader stock indicators were mixed, as the Nasdaq composite index, which fell steeply earlier this week, managed a last-minute gain of 7.96 points to close at 2,692.40. For the week, Nasdaq lost 6.1%.
Banks and brokerages led the Dow lower Friday, as Thursday's remarks from Federal Reserve Chairman Alan Greenspan echoed on Wall Street.
Greenspan told Congress that while 1999 has been an exceptional year for the U.S. economy, the central bank would "act promptly and forcefully" to raise interest rates at the first hint of inflation pressures.
Friday, financial services stocks were hit hardest. J.P. Morgan, down $2.75 to $133.56, was the weakest component of the Dow. Big rival brokerages such as Merrill Lynch, down $2.31 to $71.69, also tumbled. Those businesses are generally the first to suffer from rate increases, because clients postpone borrowing in light of the higher costs.
The threat of higher rates also sent bond prices plummeting for the second straight session, pushing the yield on the benchmark 30-year Treasury bond to 6.01%, from 5.96% the day before. Some traders consider bond yields above 6% a menace to stocks, since at that level, bonds present an attractive investment alternative.
Debate over Greenspan's message deflected some attention from the latest companies to report strong earnings.
"After Greenspan's speech, many believe that the Fed may be more aggressive than expected," said Alan Ackerman, senior vice president at Fahnestock & Co. "The fear of higher interest rates is overshadowing the strong earnings we are seeing."
Among the positive earnings news Friday was a report from Sun Microsystems, which said its quarterly profit grew a better-than-expected 30%. Sun's stock rose $3.19 to $70.38.
Computer seller Gateway rose $10.13 to $73 after the company reported a 47% surge in second-quarter earnings.
Most other technology leaders were lower, however, stumbling under the weight of Greenspan's comments. Their often-high valuations become less appealing to investors if high interest rates are cutting into profits.
America Online and Microsoft both fell, even though both posted strong earnings this week. AOL fell $2.56 to $107.94, and Microsoft slipped 81 cents to $90.25.
Declining issues outnumbered advancers by nearly a 2-1 ratio on the New York Stock Exchange. Volume was light.
The Standard & Poor's 500, the NYSE composite and the Russell 2,000 all fell slightly.
Among new offerings, Redwood City, Calif.-based InsWeb, an Internet insurance marketplace, zoomed $14.56 to $31.56 in its first trading day, giving the company a market value of $1.1 billion.
But Los Angeles-based JFax.com, which allows people to manage their faxes and voicemail from an e-mail box, was unchanged at $9.50 in its debut, giving it a market value of about $312 million.
Market Roundup, C4