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Weakness on Wall St.
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October 1, 1999: 11:41 a.m. ET
Strong economic data sparks fears of inflation, Fed rate hike next week
By Staff Writer Malina Poshtova Zang
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NEW YORK (CNNfn) - U.S. stock markets climbed back from their session lows at midday Friday, but remained in negative territory as investors lightened their portfolios after unexpectedly strong economic data raised speculation the Federal Reserve might raise interest rates next week.
Shortly before 11:30 a.m. ET, the Dow Jones industrial average was 58.89 points lower at 10,278.06. On the New York Stock Exchange, market breadth was decidedly negative, with declines ahead of advances by 1,645 to 1,088 on heavy trading volume of 327 million shares.
The Nasdaq composite fell 12.55 to 2,733.61 and the S&P 500 index lost 4.14 to 1,278.57.
Wall Street was upset over the release of stronger-than-expected personal income data for August and many investors opted to exercise caution ahead of what could be a crucial week for the market.
Adding to the market's bearish reaction was news that the National Association of Purchasing Management's September index jumped to 57.8 from 54.2 in August, sharply above expectations and indicating that manufacturing activity is extremely robust. Moreover, the index's prices paid component registered a jump to 67.6 from 59.8 in August, a potential signal that inflation could be heating up.
The Federal Reserve is set to meet Tuesday to discuss interest rates. Even though the majority of market watchers doesn't expect the central bank to raise short-term interest rates, strong economic data in recent weeks has caused investors to be skittish with stocks.
Renewed weakness in the dollar Friday and profit-taking after the previous day's market rally added to the negative tone on Wall Street.
The bond market opened sharply lower as profit-taking hit Treasury securities as well. Bond prices slid further after the release of the bearish personal income and NAPM data. The bellwether 30-year Treasury bond shed 1-5/32 points in price, its yield jumping to 6.12 percent from Thursday's 6.05 percent.
The dollar fell against the yen as investors prepared for what could be an upbeat survey of Japanese business sentiment, due out next week. The Bank of Japan's lack of concrete action to curtail the yen, following a pledge last week to do so, added pressure to the dollar. Uncertainty over the near-term prospects for U.S. financial assets pushed the dollar lower against the euro.
Rate-sensitive stocks suffer
Investors rushed to lighten up on their holdings of interest-rate sensitive technology and financial issues, just in case the Fed does decide to hike rates next week.
Otherwise, most market participants focused their efforts on companies involved in the day's news, especially those related to the upcoming third-quarter corporate earnings reporting season.
Shares of Dow component DuPont (DD) gained 1-7/8 to 62-3/8 after the company denied a CNBC television report that it was about to issue a profit warning.
But the stock of fellow Dow member Hewlett Packard (HWP) fell 1-13/16 to 88-15/16 after new chief executive Carly Fiorina said HP's fourth-quarter revenue would be at the low end of forecasts, the company has a "decent shot" of meeting earnings projections, and a top management restructuring is in the works.
Shares of cosmetics power Revlon (REV) followed a similar path -- falling 4-1/4, or 23 percent, to 14 -- after the company said its third quarter will show a large loss, instead of the small profit Wall Street expected.
Elsewhere in the market, shares of Excite@Home (ATHM) jumped 3-7/16 to 44-7/8 after majority owner AT&T (T) said it is considering its options regarding the ownership of the Internet portal/service provider.
And shares of Eli Lilly (LLY) rose 2-13/16 to 67 after the Food and Drug Administration said the company's osteoporosis treatment Evista can be used for the treatment of the disease, not just its prevention. 
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