Blue-chip stocks sank for a second straight session today, languishing behind broader market measures, as worries about higher interest rates sapped enthusiasm for highly priced stocks.

The Dow Jones industrial average fell 136.14 points to close at 10,655.15, adding to a 181-point plunge Thursday. It was the lowest close since June 28.

The blue-chip index was down 255.81 points, or 2.3 percent, for the week and 2.9 percent for all of July.

Broader market indexes posted more moderate losses. The Standard & Poor's 500-stock index fell 12.31, to 1328.72, and the Nasdaq composite index dipped 1.52, to 2638.49.

"Sometimes only the blue chips count, and if you measure by the Dow, it's another lousy day for the market," said Barry Hyman, senior equity analyst at Ehrenkrantz King Nussbaum. Still, the Dow is up 16.2 percent so far this year, well above the modest expectations of analysts when the year began.

Today's sell-off was an extension of a slump sparked Thursday by a Labor Department report that its employment cost index rose 1.1 percent in the second quarter, a bigger-than-expected jump.

Economists said the data, closely monitored by Federal Reserve Chairman Alan Greenspan, could encourage the Fed to raise interest rates when its Federal Open Market Committee meets on Aug. 24.

New figures released today provided the impetus for more selling. A Commerce Department report showed that personal income surged in June and outpaced spending, but the nation's savings rate remained near a record low. And the Commerce Department said sales of new single-family homes rebounded in June, rising 3.1 percent, better than forecast.

Also today, the National Association of Purchasing Management's Chicago branch reported that manufacturing activity in that region of the country accelerated at a faster-than-expected pace in July.

Bond markets, already retreating before the figures came out, fell further on the news. The price of the Treasury's benchmark 30-year bond fell $4.06 per $1,000 invested, while its yield rose to 6.10 percent from 6.07 percent late Thursday.

Financial stocks continued to slide today under the threat of higher rates. Dow components American Express tumbled 6-13/16, to 131 3/4, and J.P. Morgan dropped 2 3/4, to 127 7/8.

Since the prospect of another interest-rate increase hit the market last week, investors have gravitated away from many highly priced stocks, which may become less appealing when rising borrowing costs begin cutting into corporate profits. General Electric's stock has slid 9.1 percent from its July 19 close of 120 to 109 today.

Automakers were mostly lower today, dragged down by DaimlerChrysler, which lost 5-7/16, to 72 1/8. The company posted flat earnings Thursday.

Advancing issues outnumbered declining ones 10 to 9 on the New York Stock Exchange. Volume totaled 763.8 million shares, down slightly from 770.2 million in the previous session.

The NYSE composite index fell 4.74, to 626.07; the American Stock Exchange composite index rose 3.64, to 788.23; and the Russell 2000 index of smaller companies rose 3.19, to 444.77.