A blood bath in the bond market sent investors scurrying Friday as the Dow Jones industrial average plunged 194 points to close at 10,913.32 and the Nasdaq dropped 54 points to 2,527.87.
Inflation worries returned after the Labor Department reported the Consumer Price Index rose 9.7 percent in April and the core rate jumped 0.4 percent. The sharp increase in consumer prices sent the bond market into a nosedive and pushed the 30-year bond yield up near the dangerous 6 percent level.
April's rise in consumer prices was the biggest jump since October 1990 when it also gained 0.7 percent.
Friday's developments make Tuesday's meeting of the Federal Reserve Board's Open Market committee all the more important. A change in interest rates or a change in the Fed's bias could send stocks into a tailspin.
Technology stocks took an inordinate amount of abuse Friday as blue-chip and small-cap stocks took a pounding.
IBM Corp. (IBM), which gained 20 points Thursday, tumbled 6 1/4 to 239 3/4 and Intel Corp. (INTC) lost 2 1/16 to 58.
Dell Computer Corp. (DELL), which will announce its first-quarter earnings Tuesday, fell 2 1/16 to 41 3/16. Compaq Computer Corp. (CPQ) shed 3/8 to 25 3/4 while Gateway Inc. (GTW) and Apple Computer Inc. (AAPL) closed off 1 1/2 and 1 13/16 a share, respectively.
Internet stocks didn't take the steep cuts one might expect, but it wasn't a banner day by any stretch.
America Online Inc. (AOL) fell 6 5/8 to 126. Yahoo! Inc. (YHOO) dropped 3 to 157 3/8 and Excite Inc. (XCIT) inched up 7/8 to 154 3/8. Amazon.com Inc. (AMZN) slid 3 5/8 to 132 3/8 and Lycos Inc. (LCOS) closed off 9/16 to 107 1/8.
At Home Corp. (ATHM) picked up 13/16 to 150 1/8 after Microsoft Corp. (MSFT) signed on to use its At Home Solutions for its 15-million member Internet service.
Internet initial public offerings got off to a hot start before fading in late trading. Scient Corp. (SCNT) picked up 12 5/8 to 37 5/8 and Alloy Online Inc. (ALOY) gained 5 to 20 in their debuts. NextCard Inc. (NXCD) added 13 1/2 to 33 1/2.
Software developer Pegasystems Inc. (PEGA) moved up 1 1/2 to 6 17/32 after announcing that AOL will use its software for the automating inbound customer care requests and billing issues.
Priceline.com Inc. (PCLN) surged up 11 5/16 to 132 13/16 after Merrill Lynch raised its second quarter estimate and 2000 revenue expectations. Merrill now looks for $65 million in sales for the second quarter, up $5 million and $300 million for the year, from an earlier estimate at $265 million. For 2000, the brokerage forecasts sales of $450 million, up from $415 million.
Microsoft Corp. (MSFT) closed off 2 1/4 to 76 7/8. Oracle Corp. (ORCL) gained 7/8 to 23 7/8 after Prudential Securities upgraded it to a "strong buy" and Sun Microsystems Inc. (SUNW) fell 9/16 to close at 64 5/8.