MARKET CLOSE: Hot economy withers tech stocks

Inflation worries sent stocks into a tailspin Friday as the Dow Jones industrial average plunged 288 points to 10,739.81 and the Nasdaq composite tumbled 151 points to close at 3,888.43.

The gross domestic product and employment cost index reports confirmed investor fears that the U.S. economy finished 1999 with its strongest growth rate of the year while labor costs and prices crept higher. Gross domestic product grew at a 5.8 percent annual rate in the fourth quarter, above the 5.5 percent expected. The GDP price deflator, a key inflation gauge, rose at a 2 percent annual rate, above forecasts of a 1.5 percent rise.

"I think the bond market is just a safe haven on a day like today," said Trude Latimer, an independent market strategist. "It's just getting a little too lumpy-bumpy for some people. It's a safe haven while you're waiting for some of these technology stocks to come down."

The U.S. Commerce Department also announced its advance estimate of an annualized 5.8 percent Gross Domestic Product growth rate in the fourth quarter after a 5.7 percent rate in the third quarter. Economists surveyed by Reuters predicted a 5.3 percent GDP growth rate.

The Fed's policy-setting group, the Federal Open Market Committee, which meets Tuesday and Wednesday, is widely expected to raise the federal funds rate by 25 basis points to 5.75 percent from 5.50 percent.

The employment cost index showed labor costs rose at a 1.1 percent annual rate in the final quarter, above the 0.8 percent gain in the third quarter.

Some initial public offerings offered a ray of hope Friday as 724 Solutions (Nasdaq: SVNX) soared up 45 13/16 to 71 13/16 in its debut. The handheld wireless banking software company priced at $26 a share after doubling its expected range from $11-$13 a share to $20-$22 per share.

InterWAVE (Nasdaq: IWAV), provider of equipment for wireless GSM communications, closed up 23 7/8 to 36 7/8 in its IPO while online advertising and marketing company L90 (Nasdaq: LNTY) and Caminus Corp. (Nasdaq: CAMZ) moved up 8 9/16 and 3 1/4 a share, respectively.

Microsoft Corp. (MSFT) shaved off 1/2 to 98 1/4. Oracle Corp. (ORCL) lost 3 15/16 to 47 7/8 and Sun Microsystems Inc. (SUNW) closed off 1 7/8 to 75 1/16.

Veritas Software Corp. (Nasdaq: VRTS) lost 3 3/4 to 154 after it topped analysts' estimates and announced a 3-for-2 stock split. Analysts also raised their ratings on the stock.

American depositary receipts of Ericsson (Nasdaq: ERICY) jumped 4 7/16 to 70 1/16 after the Swedish mobile-phone maker reported a 39-percent surge in fourth-quarter income and announced a 4-for-1 stock split.

Anadigics, Inc. (Nasdaq: ANAD) rose 1 1/2 to 75 5/8 as it reported fourth quarter earnings were 22 cents a share, blasting past First Call's estimate of 16 cents a share. The company also announced a 3-for-2 stock split.

Documentum, Inc. (Nasdaq: DCTM) blasted up 7 1/8 to 64 3/8 after it reversed the loss of a penny a share predicted by First Call, and analysts raised their ratings.

Internet stocks took a thumping.

Amazon.com Inc. (Nasdaq: AMZN) fell 5 1/4 to 61 11/16 on news it will lay off 2 percent of its workforce. Yahoo! (Nasdaq: YHOO) shed 24 1/8 to 313 1/4 and America Online Inc. (NYSE: AOL) dropped 2 1/2 to 59 1/8.

Lycos Inc. (LCOS) dropped 3 1/4 to 74 7/8 while eBay Inc. (EBAY) and Excite@Home Corp. (ATHM) closed off 6 3/8 and 1 9/16 a share, respectively.

Among widely held PC stocks, Dell Computer Corp. (DELL) lost 5/16 to 37 1/4; Compaq Computer Corp. (CPQ) dropped 3/4 to 27 1/4; Apple Computer Inc. (AAPL) plunged 8 3/8 to 101 5/8 and Gateway Inc. (GTW) inched up 3/16 to 60 3/16.

Intel Corp. (INTC) lost 3 15/16 to 94 3/16 and Advanced Micro Devices Inc. (AMD) closed off 1 11/16 to 35 1/4.