DOW'S WORST WEEK ENDS.

Byline: Eileen Glanton Associated Press 

The last thing Wall Street needed was one of Alan Greenspan's periodic warnings that the stock market's great rally might abruptly end. And it certainly didn't need news that inflation is gaining momentum.

But that double dose of unpleasantness was waiting for investors Friday when the stock market opened, and prices plunged in response, briefly sending the Dow Jones industrials beneath 10,000 for the first time since April 7.

The Dow dropped 266.90 points to close at 10,019.71, having recovered slightly from its low for the session of 9,998.18. The Dow had its worst weekly point drop in history, plummeting 630.05, or 5.9 percent.

Friday's drop exacerbated weeks of declines that saw the Dow give up more than 1,300 points after reaching a closing high of 11,326.04 on Aug. 25. Fears of inflation and higher interest rates have undermined the market's optimism and prompted many investors to pull their money out.

``The bull market is based on the assumption that inflation is declining, interest rates are declining, and earnings are rising,'' said Michael Metz, portfolio manager at CIBC Oppenheimer in New York. ``This week, we got question marks on all three.''

The market's focus of late has been on the Federal Reserve and whether it will raise interest rates for a third time to forestall inflation.

Greenspan, the Fed's influential chairman, did his part to unsettle investors in a speech Thursday night. Greenspan, who has often suggested stocks are overvalued, told a group of risk managers that investors may be underestimating the risks inherent in U.S. equities.

The chairman's concerns were a far cry from his notorious 1996 worries over the market's ``irrational exuberance'' and perhaps should not have rattled investors, analysts said.

``Greenspan gave a very balanced speech, but it came at a time when the market was nervous anyway,'' Metz said. ``When people are in the mood to sell, they'll sell.''

Friday morning, the market got another reason to sell when the Labor Department reported that the Producer Price Index surged 1.1 percent in September, the biggest increase in nine years.

The higher-than-expected reading convinced many investors that the Fed will raise rates when its policy-making Open Market Committee meets Nov. 16.

The market's decline surprised analysts who expected stocks to rise as corporate earnings season began in earnest. Most companies are expected to post robust profits, reaping rewards from the continued U.S. economic growth and recovery overseas.

But this past week, Intel, which makes the chips that run most personal computers, did what has become unthinkable in an age of soaring expectations: It missed Wall Street analysts' earnings estimates. Its shares tumbled and helped depress the broader technology sector.

Stock prices slashed

Intel wasn't the only major company to miss estimates. Defense contractor Raytheon and computer company Unisys saw their stock prices slashed after releasing bad news about profits.

But in their rush to sell the earnings laggards, investors virtually ignored strong profit reports from companies like Apple and Boeing. Despite their robust results, investors remained resolutely pessimistic about the broader market.

``The companies that had earnings disappointments have been punished absolutely mercilessly,'' Metz said. ``Wall Street won't brook any disappointment.''

That's because rising interest rates had left the market in a fragile state, said Jim Weiss, deputy chief investment officer for equities at State Street Research and Management Co. in Boston.

``The market was standing on a foundation of sand rather than stone,'' he said. ``When a couple of companies disappointed, there wasn't any solid ground for the market to lean on.''

As trading wound down Friday afternoon, few analysts were proclaiming the end of the 10-year bull market. Some expected a round of bargain-hunting in the coming week, and many held out hope that a continuing stream of corporate earnings reports will lift the market.

Rally expected

The market's dip below 10,000 will undoubtedly scare off some investors, analysts said. But it may also end a persistent sense that stocks are too expensive and bound for a fall.

``We may have finally reached an oversold condition,'' said Eugene E. Peroni Jr., director of equity research at John Nuveen & Co. ``And that could set the stage for a better, more sustainable rally in the months to come.''

The Dow industrials ended the week with not only their biggest point drop ever, but their steepest percentage loss in 10 years.

The Standard & Poor's 500 fell 88.61 on the week after losing 36.01 Friday to 1,247.41.

The Nasdaq composite lost 154.74 during the week to 2,731.83, after tumbling 75.01 on Friday.

The Russell 2000 index, which reflects the performance of smaller companies, fell 13.01 on the week, closing at 414.70. The index fell 4.61 on Friday.

The Wilshire Associates Equity Index, which represents the combined market value of all NYSE, American and Nasdaq issues, ended the week at $11.45 trillion, off $732.80 billion from last week. A year ago, the index was $9.54 trillion.