As all things stocks and bonds failed to get any better than in the dreadful morning, investors could be heard (listen real close) crooning their best

Huey Lewis

: If this is it, they'd like to know, please.

Stock market watchers have been waiting for telescopic valuations to matter and for this whole inflation thing to come to a head. They've been waiting for some sense to be made of ever-shifting sector rotation and, mostly, for a recess in blue-chip indices' ferocious appetite for new records.

While today's action did little to clear overall confusion about what's next, it verified that these nagging inflation fears aren't going anywhere -- at least until Tuesday. And even then, when the

Federal Open Market Committee

meets, things could get worse if the

Fed

adopts a bias toward raising interest rates, as many think it may following this morning's release of inflationary

Consumer Price Index

figures.

The April CPI gained 0.7%, well above the 0.4% expected by economists. The core, which excludes the often volatile food and energy sectors, tacked on 0.4% -- above an expected 0.2% gain. On the news, the yield on the 30-year Treasury shot as high as 5.94%, triggering anxiety about a 6% yield. The price on the long bond ended near its lows, tumbling 2 8/32 to 90 22/32 and lifting its yield to 5.92%.

Peter Canelo, U.S. investment strategist at

Morgan Stanley Dean Witter

, said today didn't tell him anything he didn't already know: that a small amount of inflation is creeping into the economy and that there is real strength in cyclical stocks and real weakness in high P/E consumers, techs and Nifty 50 names. That doesn't mean his long-term outlook is anything less than bullish -- "some of us have a market view beyond five weeks," he chuckled. He sees 1400 to 1425 on the S&P by midyear and 12,000 on the Dow by the end of the year.

Today's action "is just another indication that the high P/E sector and the growth sector have made a major top and cyclicals have made a major bottom," Canelo said. "This settles the argument. And if the Fed does more than take a direction Tuesday, that's it -- the debate is completely over. And you'll see even some die-hards

in growth sell."

Ringing true to Canelo's cause, the

Philadelphia Stock Exchange Forest & Paper Products Sector Index

climbed 2.4% while the

Morgan Stanley Consumer Index

dropped 1.2%. Although the

Morgan Stanley Cyclical Index

gave up 0.8%.

"This is a problem for growth. You can't explain away an uptick in inflation," said Canelo, noting that his firm shifted away from bonds to 15% bonds, 70% stocks and 15% cash in early March. Last month, the strategist added, Morgan moved out of some of the higher P/E names and into "basics, capital goods, transports and energy, and we were underweight tech and massively underweight utilities and consumers."

As for today's hawkish economic data, Canelo, who believes the Fed will move toward a tightening bias Tuesday, said: "A 6% yield is not the end of the world. It's just that 5-something sounded so much nicer. But it's what we expected. There were people who foolishly thought the American economy was slowing down -- I don't know why, but they did. And the global picture is just getting so much better with export orders rising the last three months. I mean,

hello

? -- those numbers were good enough for me. And that's why we made the moves in early April."

The strategist also said he wasn't surprised by today's CPI numbers, which he thinks are slightly less important than

yesterday's friendly

PPI

data. "The core PPI had been rising for a year -- it was 3.5 in December, and has fallen since then to 2.1," he said. "So following the logic that the PPI dictates the CPI, we knew the CPI had to start rising. And now the PPI is already coming down.

"We're not talking about 10% inflation. We're talking about the bottom in the rate of inflation, but that's the end of the world to bonds," he said, with a bit of a poke at bond bulls. "You know, you better start saying your prayers now."

The

Dow Jones Industrial Average

tanked 193.87, or 1.8%, to 10,913.32, above its intraday low of 10,870.08. On the inflation worries, financials

American Express

(AXP) - Get Report

,

Citigroup

(C) - Get Report

and

J.P. Morgan

(JPM) - Get Report

each fell about 3.5%.

Standing above the muck in a pleasant haze of green were

Alcoa

(AA) - Get Report

,

Boeing

(BA) - Get Report

,

Caterpillar

(CAT) - Get Report

,

Procter & Gamble

(PG) - Get Report

and

Union Carbide

(UK)

.

The broader

S&P 500

lost 29.76, or 2.2%, to 1337.80, and the smallish-cap

Russell 2000

skidded 7.71, or 1.7%, to 443.13.

As mentioned above, tech was not spared. In fact, targeted. The

Nasdaq Composite Index

plunged 54.14, or 2.1%, to 2527.86, not too far from its session low of 2519.53.

Oracle

(ORCL) - Get Report

was one of the very few to enjoy a gain -- and only a fraction. And

3Com

(COMS)

spiked up 7.5% thanks to the usual Friday rumor mill, with some help from

Gene Marcial

.

TheStreet.com Internet Sector

index slid 12.17, or 1.9%, to 629.53.

Encouraging to some was that volume -- compared to recent sessions -- was fairly light. In

New York Stock Exchange

trading, 729.8 million shares were exchanged while decliners brutally led gainers 2,399 to 668. In

Nasdaq Stock Market

activity, 938.4 million shares were exchanged with decliners leading 2,480 to 1,560. New 52-week lows paced ahead of new highs 71 to 17 on the Big Board while new highs managed to overcome new lows by 46 to 36 in over-the-counter trading.

Bryan Piskorowski, market analyst at

Prudential Securities

, noted that the session's afternoon story was basically a mirror of morning action.

"This was a story that broke at 8:30 in the morning," he said. "It was a textbook-type day in the market. If you're the lead dog, your view never changes. Techs got clobbered, financials worked lower and we saw something of a bounce in cyclicals as money was left sloshing around. The news is we're back on Fed watch, and I don't think they'll raise rates but there's more pressure now to move to a bias. The press is overstating the risk of inflation -- there was nothing here symbolizing a brave new world. It's more of a return to a mean. People are hanging their head over one number. We've haven't seen a trend, just one number skewed by a couple of upticks in tobacco prices and airlines."

Like many otherwise optimistic Wall Streeters, Piskorowski said a troubled bond market is "the only thing that can undo our bull. But 7% is a real magic level here, not 6%. We haven't seen these rates in about a year, but it's a much broader

stock market now than a year ago. Earnings are substantially better, I think it's much healthier.

"And, you know," the trader went on, "1000 Dow points a month isn't really sustainable, it invites some 'Book 'em down.' And remember, the Fed cut rates three times last fall, and sometimes they do an extra one just in case. So God forbid we should give one back, right? This is more a return to normalcy. There's no way to have oil at $9 a barrel if you want the world economy to pick up. Now I've got more people to sell my product to -- I'd rather have that than be the only show in town."

Among other indices, the

Dow Jones Transportation Average

sagged 86.17, or 2.3%, to 3666.34; the

Dow Jones Utility Average

lost 4.41, or 1.4%, to 315.98; and the

American Stock Exchange Composite Index

dipped 11.58, or 1.5%, to 788.81.

For the week, the Dow industrials lost 118.27, or 1.1%; the S&P 500 dropped 7.20, or 0.5%; the Nasdaq Comp rose 55.58, or 2.3%; the Russell 2000 added 7.02, or 1.6%; TheStreet.com Internet index grew 15.38, or 2.5%; the Dow transports sank 76.49, or 2.0%; the Dow utilities gained 0.03; and the Amex Composite tacked on 1.52, or 0.2%.

Elsewhere in North American equities today, the

Toronto Stock Exchange 300

plummeted 170.65, or 2.4%, to 6886.50 and the

Mexican Stock Exchange IPC Index

plunged 109.66, or 1.8%, to 5913.20. For the week, the TSE 300 fell 72.36, or 1%, and the IPC dropped 51.17, or 0.9%.

Friday's Company Report

By Thomas Lepri
Staff Reporter

(

Earnings estimates from First Call; new highs and lows on a closing basis unless otherwise specified. Earnings reported on a diluted basis unless otherwise specified.

)

A flock o' financials headed south after the

Labor Department

dropped a greater-than-expected CPI-bomb on the markets this morning. The carnage was highlighted by J.P. Morgan, down 5 13/16 to 140 15/16; American Express, which lost 4 to 120 3/4;

Morgan Stanley Dean Witter

(MWD)

, off 7 7/8, or 7.3%, to 100 1/8;

Chase

(CMB)

, which fell 4 15/16, or 5.9%, to 79 1/16; and

Merrill Lynch

(MER)

, down 5 1/2, or 6.4%, to 80 3/4.

The drug sector's generally supposed to be above niggling economic data. But it wasn't the CPI that knocked the wind out of

Sepracor

(SEPR)

; it was the news that the company will have to go it alone on its

norastemizole

allergy drug, currently in Phase III clinical trials. The li'l pharma firm disclosed that big brother

Johnson & Johnson

(JNJ) - Get Report

won't be picking up its option to co-promote the drug because of its general lack of interest in the respiratory market. Unfazed, Sepracor announced its intention to fund the drug's trials and marketing on its own -- and saw its stock drop 13 5/8, or 14.8%, to 78 3/4.

Volpe Brown Whelan

downgraded Sepracor to buy from strong buy on the news.

Mergers, acquisitions and joint ventures

Networking gear maker 3Com gained 2, or 7.5%, to 28 9/16 on rumors that it is a takeover target. The company hasn't commented on the rumor, which was started by Gene Marcial's oft-mistaken Inside Wall Street column in

Business Week

. Marcial identified possible bidders as

Ericsson

(ERICY)

, down 1 1/8 to 26 7/8, and

Lucent

(LU)

, down 2 1/2 to 58 1/2.

Wrought-iron furniture manufacturer

Meadowcraft

(MWI)

flew up 2 11/16, or 38.39%, to 9 11/16 after it agreed last night to a $53.2 million buyout by controlling shareholder and Chairman Samuel Blount. Blount, who already owns about 73% of Meadowcraft's common stock, is paying $10 a share in cash.

Baby Bell

U S West

(USW)

lifted 2 1/4 to 62 1/4 after

CNBC

reported that it has held merger talks with undersea fiber-optics firm

Global Crossing

(GBLX)

. Global Crossing rose 15/16 to 61 3/8.

Earnings/revenue reports and previews

Oil and gas company

Abraxas Petroleum

(AXAS) - Get Report

rose 1/4, or 11.4%, to 2 1/2 after posting a first-quarter loss of 99 cents, considerably narrower than the four-analyst view of $1.28 but wider than last year's 72-cent loss.

Agouron Pharmaceuticals

(AGPH)

closed down 15/16 to 59 1/16 after it posted third-quarter earnings of 3 cents a share, missing the seven-analyst estimate by a penny and down from last year's 41 cents. The company attributed its earnings decline to the costs of drug development and its own impending acquisition by

Warner-Lambert

(WLA)

, a deal that still needs shareholder approval.

Industrial equipment maker

Applied Power

(APW)

plummeted 9 15/16, or 29.3%, to 24 after it warned that its fiscal 1999 earnings won't make the estimated $2.31 a share. The company, which said it expects earnings of $2.05 to $2.15, cited slack European sales resulting from a strong dollar.

Canadian auto parts company

Magna International

(MGA) - Get Report

rose 1 11/16 to 61 1/4 after reporting first quarter earnings of $1.22 a share, 6 cents over the 11-analyst call and down from last-year's $1.33.

Retailer

Nordstrom

(NOBE)

shed 3 1/8, or 8.8%, to 32 7/16 after it last night reported first-quarter earnings of 22 cents a share, missing the 20-analyst First Call forecast by 2 cents and above the year-ago 21 cents. The retailer also said same-store sales fell 2.6% from a year earlier. A bevy of analysts from

Donaldson Lufkin & Jenrette

,

Goldman Sachs

,

Hambrecht & Quist

and

Prudential Securities

downgraded Nordstrom on the news.

International telecom carrier

Pacific Gateway Exchange

(PGEX)

jumped 5 15/16, or 16.1%, to 42 7/8 after it last night reported first-quarter earnings of 22 cents a share, a penny below the 11-analyst forecast and a repeat of the year-ago figure.

Customer service software maker

PegaSystems

(PEGA) - Get Report

was up 1 9/16, or 31.65%, to 6 1/2 after it last night announced a deal to work on

America Online's

(AOL)

Member Services division. The deal was timely, as last night PegaSystems posted a first-quarter loss of 29 cents a share, wider than the four-analyst estimate of 13 cents and down from the restated penny earned a year ago.

Viasat

(VSAT) - Get Report

, a maker of communications gear for the defense industry, lost 5/8, or 5.5%, to 10 7/8 despite recording first-quarter earnings of 23 cents a share, a penny above the four-analyst call and up from the year-ago 19 cents.

Offerings and stock actions

Three Net IPOs took of today in their first day of trading. Web e-tailer

Alloy Online

(ALOY:Nasdaq) gained 5, or 33.3%, to 20 after being priced at 15 by lead underwriter

BancBoston Robertson Stephens

. Web credit card processor

NextCard

(NXCD:Nasdaq) soared 15, or 75%, to 35; it was priced last night at 20 by lead underwriter DLJ, outside its revised pricing range of $17 to $19. And Internet consulting firm

Scient

(SCNT:Nasdaq) jumped 12 1/2, or 62.5%, to 32 5/8 after pricing at 20 by Morgan Stanley.

Seagram

(VO) - Get Report

lost 4 9/16, or 7.8%, to 54 on news of some impending dilution; Seagram filed with the SEC today to offer $2.3 billion in common stock.

Three days after its IPO,

TheStreet.com

(TSCM)

, publisher of this Web site, fell 5, or 9.8%, to 46.

Analyst actions

Adtran

(ADTN) - Get Report

, which makes products for high-speed data transmission, was up 3 7/8, or 18.24%, to 25 1/2 after Hambrecht & Quist initiated coverage with a buy.

Earthshell

(ERTH)

backed off 2 1/2, or 23.7%, to 8 1/8 after

Credit Suisse First Boston

lowered it to hold from buy.

Guitar Center

(GTRC)

shed 1 3/16, or 7.1%, to 15 11/16 despite

Dain Rauscher's

upgrading it to strong buy from buy. Guitar Center announced late yesterday that it would it will acquire and merge with Internet retailer

Musician's Friend

in a $50 million deal.

Iridium World Communications

(IRID)

dumped 4, or 27.8%, to 10 7/16 as

C.E. Unterberg Towbin

downgraded it to hold from long-term buy. Last night Iridium said it had hired DLJ to advise it on restructuring its debt, prompting

Moody's Investors Service

to lower its senior debt rating to Caa3 from B3. It's been more than two weeks since

TSC

columnist

James Cramer

couldn't get his

cell phone to work at the St. Martin airport.

Fundraiser

Marketing Services

(MSGI)

popped 1 15/16, or 5.2%, to 39 1/4 after

ING Barings

started it with a buy.

Earnings worries didn't plague

Oracle

(ORCL) - Get Report

for a second straight day, as the stock gained 7/8 to 23 7/8 after Prudential raised it to strong buy from accumulate. The upgrade came as Oracle announced a deal to help discount druggist

Drug Emporium

(DEMP)

upgrade its Web site.

Primus Telecom

(PRTL)

shot up 1 7/8, or 12%, to 17 9/16 after Morgan Stanley upgraded it to strong buy from underperform.

Startec Global Communications

(STGC)

stepped down 7/8, or 8.7%%, to 9 1/4 after

Lehman Brothers

lowered it to outperform from buy.

Tut Systems

(TUTS)

was giving back yesterday's gains from Lehman Brothers' upgrading of the stock to buy from neutral. Tut lost 3 15/16, or 7.4%, to 49.

Retail store operator

Venator

(Z) - Get Report

was up 1 7/16, or 14.9%, to 11 1/16 after Morgan Stanley Dean Witter upgraded it to near-term buy from neutral; Merrill Lynch also raised the stock to near-term buy from near-term neutral.

Miscellany

Keebler Foods

(KBL)

lost 11/16 to 31 7/8 after it said it will take a $69 million pre-tax charge to close its Sayrevile, N.J., manufacturing plant. The company said the charge should reduce second-quarter earnings by 48 cents a share.

Investors aren't buying into well to life and health insurer

Provident American's

(PAMC)

Internet

Houdini

act. Provident fell 4 1/4, or 11.1%, to 34 1/4 after setting plans to merge itself into its majority-owned subsidiary, online health insurance marketer

HealthAxis.com

.

Silknet Software

(SILK) - Get Report

shot up 7 3/4, or 22.9%, to 41 9/16 two days after

priceline.com

(PCLN)

agreed to use its Silknet eCommerce and Silknet eService products on its Web site.