NEW YORK (CNNfn) - Stocks took a shot on the chin Monday as investors grew more concerned the Federal Reserve will raise interest rates next week.
The Dow Jones industrial average was off 52.11 points to 6,883.35 at 2:30 p.m. The index failed to hold onto the momentum established Friday when a tame inflation report on wholesale prices helped it to recoup some the 160 points it lost Thursday.
The Nasdaq Composite was the biggest loser in percentage terms. The tech-rich index dropped 21.32 points, or 1.68 percent, to 1,271.65.
The other leading market indexes were also weaker, with the S&P 500 falling 6.64 to 786.83, and the American Stock Exchange index down 5.66 to 594.81.
On the Big Board, declines led advances, almost 4 to 1, as New York Stock Exchange volume topped 345.7 million shares.
The bond market applied tremendous pressure to stocks. The price of the benchmark 30-year Treasury fell 12/32, hiking the yield to 6.97 percent. As the yield drew close to the psychologically important 7 percent level, investors were tempted to pull out of stocks for the security of fixed-income investments.
Warren Buffett surprised some on Wall Street with his annual letter to Berkshire Hathaway shareholders. The prominent investor, one of the world's wealthiest individuals, said the market might be overheated and warned of the "need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid."
Buffett's comments added to the anxiety already rippling through Wall Street about next week's Fed meeting, which could result in a rate hike.
Dow components leading the decline included DuPont (DD), down 3/8 to 112-3/8; Eastman Kodak (EK), off 1-1/8 to 87-1/4; and IBM (IBM), falling 4-5/8 to 139.
Philip Morris (MO) lost 4-1/4 to 124-7/8. After the Florida Supreme Court cleared the way for the state to sue tobacco firms to recover the cost of treating smoking-related illnesses.
In the battered tech sector, Intel (INTC) dropped 3-5/8 to 134-1/8; Texas Instruments (TXN) also sank 3-5/8 to 82-1/4; Microsoft (MSFT) declined 1/4 to 98-3/4; and Digital Computer (DEC) slipped 1/2 to 29-1/4.
A wave of merger deals swept Wall Street. Tyco International said it agreed to acquire security systems firm ADT in a $5.6 billion deal that steps in the way of a hostile bid made by Western Resources. "White knight" Tyco (TYC) fell 2-3/4 to 57-1/2, while ADT (ADT) rose 3-3/4 to 25-1/2, and Western (WR) gained 5/8 to 30-3/4.
Shares in H.F. Ahmanson (AHM) shed 1 to 39-1/4 after the company raised it bid for control of Great Western Financial to $7 billion, a $400 million increase over rival Washington Mutual's offer. In reaction, Great Western (GWF) retreated 1/2 to 45, and Washington Mutual (WAMU) remained level at 50-3/8.
Rupert Murdoch's News Corp (NWS) lost 3/4 to 20-1/8 after it agreed to pay $754 million in stock for Heritage Media (HTG), which soared 6 to 18-1/8.
Meanwhile, Rockwell International (ROK) was up 1/8 to 68 on word the aerospace giant wants to spin off its automotive component operations as a publicly traded company. The units involved in the plan had combined sales of $3.1 billion in 1996.