Stocks fell as good economic news for Japan stimulated Wall Street's fears that the unfettered growth of the U.S. economy will prompt the Federal Reserve to raise interest rates.
The Dow Jones industrial average fell 69.02 to close at 10,621.27. The blue-chip index, down as much as 164 points, began marching back in the last hour of trading.
Broader stock indicators were also lower. The Standard & Poor's 500 fell 15.82, to 1302.82, and the Nasdaq composite index, dominated by technology stocks, fell 34.73, to 2484.62.
Stocks came under pressure after the Japanese government said the nation's gross domestic product grew 1.9 percent in the first three months of the year -- a larger increase than expected and the first since the summer of 1997.
Analysts said the strong report could help sway the Fed toward raising interest rates in an effort to halt inflation. Last fall, amid a financial crisis that crippled several Asian nations, the Fed cut rates three times, hoping to protect the global economy from falling into a downward spiral.
Bond prices, which are highly sensitive to inflation, dropped today. The price of the Treasury's benchmark 30-year bond fell $4.69 per $1,000 invested, and its yield rose to 6.06 percent, from 6.02 percent late Wednesday. Analysts consider bond yields above 6 percent to be detrimental to stocks, as investors may turn to the lucrative, stable return of bonds.
The threat of higher rates hurt bank and financial stocks the most. Higher interest rates cut into bank profits as lending volume shrinks. American Express fell 2, to 123 1/8, and PNC Bank led consumer banks lower, falling 1 3/4, to 56-5/16.
Computer stocks also declined. Those shares, which are often expensive, are also vulnerable to higher interest rates as investors become less willing to pay a high price for a stock relative to its earnings.
Technology companies are also battling customers' uncertainty over the year 2000 computer problem, analysts said. Gateway fell 3-3/16, to 58-13/16, and network provider Cisco Systems fell 3-5/16, to 110-7/16.
Pfizer tumbled 5 3/8, to 99-9/16, leading the drug sector lower. Pfizer sustained its second sharp drop since the Food and Drug Administration on Wednesday restricted the use of Pfizer's antibiotic Trovan.
On the New York Stock Exchange, declining issues outnumbered advancing ones by 2 to 1. NYSE volume rose to 716.6 million shares, from 662.0 million in the previous session.
The NYSE composite index fell 6.43, to 622.85; the American Stock Exchange composite index fell 4.74, to 768.25; and the Russell 2000 index fell 2.92, to 442.27.