Updated from 4:10 p.m. EDT

The Richard Fisher effect was in evidence again Thursday on Wall Street, as stocks continued a down week following the latest hawkish comments from the president of the Federal Reserve Bank of Dallas.

The Dow Jones Industrial Average fell 30.26 points, or 0.29%, to 10,287.10. The S&P 500 was off 4.90 points, or 0.4%, at 1191.49, and the Nasdaq lost 18.94 points, or 0.9%, to 2084.08.

Since the start of the week, the Dow has lost 2.7%, the S&P 500 is down 3% and the Nasdaq has fallen 3.1%. The major averages have lost ground every day this week, with the exception of the Nasdaq, which tacked on about 4 points Monday.

Even before Fisher's comments, the session had been choppy, but after he said "we can't let inflation poison the system," traders took that as another sign the Fed wasn't through raising rates.

While his comments don't stray notably from the widely accepted central bank line of thinking, for the second time this week stocks sold off right after his statements became known.

"Once again, the Fed's issues with inflation got people scared," said Jay Suskind, head of institutional equity trading with Ryan Beck & Co. "It just totally scared the marketplace. Combined with a possible economic slowdown, it has become a bad recipe for the market. We just need to weather the storm."

At one point late in the session, the Dow was down nearly 100 points, and the Nasdaq was plunging 1.6% before a rally in the last minutes of trading pared the losses.

The Dow was pressured by Hewlett Packard ( HPQ), which finished down 2.1%. Caterpillar ( CAT), Altria ( MO) and Procter & Gamble ( MO) were all lower by more than 1.6%, as well.

About 2.13 billion shares traded on the New York Stock Exchange, with decliners beating advancers by a 2-to-1 margin. Trading volume on the Nasdaq was 2.12 billion shares, with decliners outpacing advancers 2 to 1.

In other markets, the 10-year Treasury was down 6/32 in price to yield 4.37%, while the dollar fell against the yen and euro.

Energy prices continued a decline that has pulled crude oil prices down 7.2% since last Thursday. Crude for November delivery, finishing down $1.43 to $61.36 a barrel, its lowest level since the end of July. Unleaded gasoline futures were down 6 cents at $1.85 a gallon.

With the decline in energy, the Amex Oil Index fell 2.2%. Amerada Hess ( AHC) was lower by 4.7%, Chevron ( CVX) was off 3.3%, and Valero ( VLO) closed down 2.6%.

On the economic front, the Labor Department said weekly jobless claims rose 21,000 to 390,000 for the week ended Oct. 1. Economists expected new claims to decline to 350,000 from 356,000 the previous week.

Paul Mendelsohn, chief investment strategist with Windham Financial, said trading Thursday was done by investors who were "positioning ahead of tomorrow's September employment report," which is expected show that 150,000 jobs were lost last month.

Fears of inflation coupled with a slowing rate of economic growth sent the markets lower Wednesday. The Dow Jones Industrial Average lost 123 points, the S&P 500 fell by 18 points, and the Nasdaq tumbled about 36 points.

Stronger sectors include retail and airlines. Biotech, energy and software were among the laggards.

U.S. retailers have been flooding the wires with same-store sales reports for September. Among early returns, Wal-Mart ( WMT) said that same-store sales rose 3.8% for the month as total sales increased 9.7% to $28.2 billion. Looking ahead, Wal-Mart expects an increase of 2% to 4% in same-store sales for October.

Wal-Mart also reiterated its third-quarter earnings outlook of 55 cents to 59 cents a share, but said the combined effect of both Hurricanes Katrina and Rita will drop earnings by a penny a share. The stock added 43 cents, or 1%, to $43.93.

After the bell Wednesday, Starbucks ( SBUX) said same-store sales rose 10% in September. Shares rose $1.86, or 3.7%, to $51.67.

Among other retailers, American Eagle Outfitters ( AEOS) said September comps rose 13% from a year ago, while Abercrombie & Fitch ( ANF) reported same-store sales growth of 21%. Claire's Stores ( CLE) said comp sales rose 8%.

Elsewhere, Bon-Ton Stores ( BONT) said same-store sales fell 7.8%, citing higher gas prices and the hurricanes. Hot Topic ( HOTT) reported same-store results that were down 5.6% from last year. Pier 1's ( PIR) same-store sales dropped 10.6% last month.

Costco Wholesale ( COST) finished up 4.7% after the company said fourth-quarter earnings rose 19.5% to $355 million, or 73 cents a share, from a year ago. Revenue climbed 10.3% to $16.4 billion. Excluding items, Costco earned 67 cents a share, beating the Thomson First Call consensus of 64 cents a share. The company also announced a $1 billion stock buyback plan. Costco gained $2.01 to $44.92.

Away from retail, Merck ( MRK) said a Phase III trial of its gardasil investigational drug prevented 100% of cervical precancers and noninvasive cervical cancers. Merck lost 6 cents, or 0.2%, to $26.83.

The Medicines Co. ( MDCO) late Wednesday lowered its 2005 revenue outlook to $150 million from a range between $195 million and $204 million. The company also expects a loss of $10 million for the year. The stock plummeted on the news, finishing down $4.90, or 22.3%, to $17.03.

Chipmaker ATI Technologies ( ATYT) reported a fourth-quarter loss of $104 million, or 41 cents a share. Excluding items, ATI lost $29 milion, or 12 cents a share. Analysts expected the company to lose 30 cents a share, according to Thomson First Call. Revenue in the quarter fell $60 million to $470 million. ATI was up 94 cents, or 7.1%, to close at $14.20.

Overseas markets were uniformly lower, with London's FTSE 100 down 1% at 5372 and Germany's Xetra DAX dropping 1% to 5017. In Asia, Japan's Nikkei lost 2.4% overnight to 13,359, while Hong Kong's Hang Seng was down 2.1% at 14,839.

To view Gregg Greenberg's video take on today's market, click here .