The Dow Jones industrial average fell 64.73 to 5,647.65. The blue chip index started the day lower, tried to rally in late morning but resumed falling by early afternoon. It was down as much as 75 points in mid-afternoon before bouncing off the bottom.
Declining issues led advancers by more than 2 to 1 on the New York Stock Exchange, with 761 up, 1,643 down and 795 unchanged. NYSE volume totaled 321.09 million shares, vs. 296.39 million yesterday. The light volume was typical for the end of the week before the Labor Day holiday on Monday.
The NYSE's index fell 3.43 to 353.36; The Standard & Poor's 500-stock index fell 7.42 to 657.39; The Nasdaq composite fell 8.56 to 1,145.32; and the American Stock Exchange index fell 2.05 to 561.34.
Bonds started the day lower after the Commerce Department said the U.S. economy surged at a 4.8 percent annual rate in the second quarter, the fastest in two years. The report stirred fears that inflation is building in the economy, which could prompt the Federal Reserve to raise interest rates. Higher rates would raise corporate borrowing costs and cut into profits, which is bad for stocks.
Fears of inflation were reinforced with a late morning report that sales of new homes unexpectedly shot up 7.9 percent in July to the highest level in five months, despite mortgage rates that remained over 8 percent.