With confidence badly shaken by the selling in Treasuries and tension high ahead of next week's

Federal Open Market Committee

meeting next Tuesday, stocks closed not too far from their session lows. It was a very bad day.

The

Dow Jones Industrial Average

fell 193.87, or 2%, to 10,913.32, while the broader

S&P 500

dropped 29.76, or 2%, to 1337.80.

The basic rule for the day was the higher the multiple the higher the fall. While the damage on the value and cyclical side of things was limited, traditional growth areas like tech and drugs were hurt badly. The tech-tumescent

Nasdaq Composite

fell 54.13, or 2%, to 2527.87, while the

Amex Pharmaceutical

index fell 11.90, or 3%, to 369.50.

Those uber-growth issues, the .coms, also took their lumps.

TheStreet.com Internet Sector Index

fell 12.17, or 2%, to 629.53.

The small-cap

Russell 2000

fell 7.71, or 2%, to 443.13.

The 30-year bond fell 2 6/32 to 90 24/32, lifting the yield up to 5.92%.

Market internals were predictably horrible. On the

New York Stock Exchange

, decliners beat advancers 2,399 to 669 on 728 million shares. On the

Nasdaq Stock Market

, losers stomped winners 2,480 to 1,560 on 934 million shares. On the NYSE, 71 issues set new 52-week lows while 17 touched new highs. On the Nasdaq, 36 issues set new lows while new highs came in at 46.

On the Big Board,

America Online

(AOL)

was most active, with 22 million shares traded. AOL fell 6 5/8, or 5%, to 126.

On the Nasdaq,

Microsoft

(MSFT) - Get Report

was most active with 42 million shares changing hands. It was down 2 1/4, or 3%, to 76 7/8.

Market data above are preliminary. Updated numbers and analysis will follow in the Market Round up.

3:06 p.m.: Stocks Rebound Slightly From Session Lows

The Treasury market has stabilized, with the long bond down roughly 2 points at its highest yield in nearly a year, and perhaps the worst is over in the stock market as well: In the last hour there has been remarkably little change in the major averages.

Following the release of stronger-than-expected data on consumer prices and industrial production this morning, the bond market went to pieces, with the futures contract on the benchmark 30-year issues "suffering one of its worst days ever," a research note from Jim Bianco, president of

Bianco Research

said. Though the bond is lower by only 1 31/32 at the moment, it fell more than 2 1/2 points earlier. The bond contract has closed down more than 2 1/2 points only six times since it was introduced in 1977.

The data has the bond market scared that the

Fed

will raise interest rates in the months ahead, and as soon as next week, when its monetary policy committee meets.

With the sellers evidently exhausted in the bond market, the major stock proxies may have put in lows for the day. The

Dow Jones Industrial Average

, down as much as 216.80 shortly before 2 p.m. EDT, was down 155, or 1%. The

S&P 500

, down as much as 31.54 at around the same time, was lately down 25, or 2%. The

Nasdaq Composite Index

, down 53.4 in the last hour, was down 39, or 2%. The

Russell 2000

, down as much as 7.73, was down 7, or 2%. And

TheStreet.com Internet Sector Index

down as much as 19.6 in the last hour, was down 11, or 2%.

Breadth, not surprisingly, is horrible, with decliners outnumbering advancers more than 3.5 to 1 on the

New York Stock Exchange

and more than 1.5 to 1 on the

Nasdaq Stock Market

. Advancers beat decliners 2,381 to 682 on volume of 577 million on the NYSE, and 2,373 to 1,486 on volume of 735 million of the Nasdaq. There were 68 new lows and 16 new highs on the NYSE; 25 new lows and 41 new highs on the Nasdaq.

The biggest percentage loser on the day so far on the NYSE is

Applied Power

(APW)

, which this afternoon guided analyst estimates of third- and fourth-quarter earnings lower. The company projected earnings of $2.05 to $2.15 a share for the year, vs. a

First Call

consensus estimate of $2.31 a share. The company reported earnings of 53 cents a share in the first quarter and 48 cents a share in the second quarter. The stock was down 9 13/16, or 29%, at 24 1/8.

On the Nasdaq,

Iridium

(IRID)

was the biggest loser in percentage terms, lately down 3 3/4, or 26%, at 10 11/16. The company last night announced that it had hired bankers to restructure its debt. (See the

latest installment of

Herb Greenberg's

coverage of the company.)

--

Elizabeth Roy

1:57 p.m.: Stocks Hover Near Session Lows After Crushing CPI Data

The stock and bond markets continued to suffer mightily from this morning's shocker of a

Consumer Price Index

report, with major indices scraping at or near session lows.

The

Dow Jones Industrial Average

was down 195, or 2%, to 10,912, right near its worst levels so far today.

IBM

(IBM) - Get Report

and

J.P. Morgan

(JPM) - Get Report

, yesterday's stars, continued to lead on the downside.

General Electric

(GE) - Get Report

,

Citigroup

(C) - Get Report

and

United Technologies

(UTX) - Get Report

were among the many Dow components under heavy pressure. The

S&P 500

was down 29, or 2%, to 1339.

The

Nasdaq Composite Index

was off 47, or 2%, to 2535, with not a single green symbol among its top 10 issues. The smallish-cap

Russell 2000

was down 7, or 2%, to 442 and

TheStreet.com Internet Sector

index was down 16, or 2%, to 626.

The bond market remained the locus of the day's harshest action, with the benchmark 30-year Treasury down 2 6/32 to 90 24/32. Its yield spiked to 5.91%, the highest level in nearly a year. The move in interest rates, spurred by a higher-than-expected rise in the April CPI, has Wall Street worried that the

Federal Open Market Committee

will either adopt a bias toward tightening or go ahead and hike interest rates at its Tuesday meeting.

Market internals were continuing to cause grief among the longs.

New York Stock Exchange

decliners were crushing advancers 2,374 to 609 on 488 million shares. On the

Nasdaq Composite Index

, 2,423 decliners were bashing 1,360 advancers on 624 million shares. New 52-week lows were way ahead of new highs on the Big Board, 63 to 15, while new highs were leading new lows 36 to 22 on the Nasdaq.

America Online

(AOL)

was most active on the NYSE, down 6 7/16 to 126 3/16 on 16 million shares.

Oracle

(ORCL) - Get Report

was leading the Nasdaq's most-actives, up 1 to 24 on 30 million shares. The stock took a tumble yesterday on fears of a profit warning that never materialized.

--

John J. Edwards III

12:57 p.m.: Midday Musings: Stocks Stable With Harsh Losses as Equity Players Eye Interest Rates

11:57 a.m.: Stocks Fall Further After Surprising CPI Data

Stocks continued to slide as the morning waned. All major indices are suffering after the inflationary

Consumer Price Index

rocked bonds and raised fears of higher inflation.

Shares of Baby Bell

U S West

(USW)

rose today after

CNBC

reported that the phone company is in talks to be acquired by

Global Crossing

(GBLX)

, a provider of undersea fiber-optic telecommunications systems. Shares of U S West were lately up 1 5/16 to 61 5/16, while Global Crossing fell by 7/16 to 59 3/4.

The

Dow Jones Industrial Average

rebounded from the day's lows, but the average lately was off 166 to 10,941, a 2% decline. Hit hardest were the financial stocks, including

Citigroup

(C) - Get Report

, down 2 15/16 to 70 1/2, and J.P. Morgan

(JPM) - Get Report

, down 5 to 141 3/4.

This morning the CPI gained an unexpected 0.7%, well above the 0.4% that economists were expecting. The core, which excludes food and energy prices, rose 0.4%, versus the market's expectations for a 0.2% gain. The shock caused traders to sell rapidly, and lately bonds are extending those losses. The 30-year Treasury bond was down 2 15/32 to 90 15/32. The yield rose to 5.94%, its highest in almost a year.

The rise in yields is bad for stocks because it means companies' cost of capital increases. It also causes analysts to re-examine current valuations of equities. The rise in bond yields makes the Treasury bond, a guaranteed investment, more attractive when viewed against riskier equities.

The

S&P 500

was lately down 25 to 1342. The

Nasdaq Composite Index

was also getting hammered, down 34 to 2548.

On the New York Stock Exchange, decliners were beating advancers by a count of 2,287 to 563 on 342 million shares. Losers were ahead of winners on the Nasdaq as well by a count of 2,324 to 1,216 on 422 million shares.

TheStreet.com Internet Sector

index was off modestly, down 12 to 630, while the small-cap

Russell 2000

was down just 7 to 444.

Tech Focus

All major tech indices were feeling the pain as a result of the heightened worries over inflation. The

Morgan Stanley High-Tech 35

fell 16 points to 1039. The

Philadelphia Stock Exchange Semiconductor Index

was down 5 to 402 and the

Philadelphia Stock Exchange Box Maker Index

declined by 5 to 248.

Oracle

(ORCL) - Get Report

is once again the most active stock on the Nasdaq, with 22 million shares having traded hands. The stock is staging a recovery today, up 1 5/16 to 24 5/16.

Iridium

(IRID)

, which runs the first global satellite-telephone network, was down 3 11/16 to 10 11/16 after the company said it doesn't expect to meet the terms of an $800 million debt by the May 31 deadline. The company's junk bonds were trading in the teens as of last week.

--

David A. Gaffen

10:59 a.m.: Stocks Continue to Take a Beating Amid Bond Meltdown

With bonds at their lowest levels in a year, stocks remain under heavy pressure.

The problem is the April

Consumer Price Index

, which came in well above expectations and may force the

Federal Open Market Committee

to shift toward a tightening bias at its meeting next Tuesday.

"People are getting spooked again about inflation," said Jim Volk, co-director of institutional trading at

D.A. Davidson

in Portland, Ore. "We'll see what happens, but right now the line of least resistance is down."

The

Dow Jones Industrial Average

was lately off 147, or 1%, to 10,960. The

S&P 500

was down 23, or 2%, to 1345.

Tech stocks and Internets were taking heavy hits. The

Nasdaq Composite

was down 30, or 1% to 2552, and

TheStreet.com Internet Sector Index

was down 9 to 633. Small-caps, which have seen good gains over the last month, were down as well: The

Russell 2000

lost 5, or 1%, to 446.

The 30-year bond was last down 2 2/32 to 90 29/32, yielding 5.90%

There was selective strength in oils and cyclicals, as investors bet that growth in those sectors would be able outpace a hike in rates.

--

Justin Lahart

9:58 a.m.: Surprise in CPI Data Sends Stocks Tumbling

Stocks and bonds are plunging in early trading after a surprisingly large increase in the

Consumer Price Index

.

The April CPI rose 0.7% overall and 0.4% excluding volatile food and energy prices -- both figures were way ahead of expectations. The 30-year Treasury bond lurched sharply downward as soon as the numbers came out at 8:30 a.m. EDT, and it lately was down 1 23/32 to 91 8/32. The yield shot up to 5.88%, the highest level in nearly a year.

The

Dow Jones Industrial Average

was down 105 to 11,002, the

S&P 500

was down 18 to 1350, the

Nasdaq Composite Index

was down 46 to 2536, the

Russell 2000

was down 6 to 445 and

TheStreet.com Internet Sector

index was down 14 to 628.

Most Up at Open -- NYSE

Case (CSE) , up 1 11/16 to 44 1/2

: Case was rising on news of a possible merger with

New Holland

(NH) - Get Report

.

Most Up at Open -- Nasdaq

@Home (ATHM) - Get Report, up 2 3/4 to 152 1/16

: The company formed an alliance with

Microsoft

(MSFT) - Get Report

to speed the launch of high-speed Web services.

Most Down at Open -- NYSE

Charles Schwab (SCH) , down 5 15/16 to 111 1/16

.

Most Down at Open -- Nasdaq

Net.B@nk (NTBK) , down 6 1/8 to 181 1/8

.

--

John J. Edwards III