U.S. stocks fell sharply Thursday amid fears on further interest-rate hikes.

In the midday exchanges, the Dow Jones Industrial Average dropped 153.61, to 10,777.29. The Standard & Poor's 500 index fell 18.04 to 1,238.11.

The Nasdaq composite index plunged 45.03 to 2,106.76.

Following remarks on inflation by U.S. Federal Reserve Chairman Ben Bernanke a day ago, analysts forecasted that the Fed would continue to increase the short-term interest rate at the policy- making meeting to be held at the end of this month.

The Fed has increased short-term interest rates for 16 times since June 2004 and raised the federal fund rate to 5 percent last month.

Rising interest rates worried Wall Street because they can squeeze corporate profits and curb consumer spending, which accounts for about two-thirds of U.S. economic activity.

Labor Department said Thursday that the number of first-time claims for unemployment insurance benefits dropped 35,000 to 302, 000 in the week ended June 3.

Chief financial officers across the world are growing more pessimistic about the U.S. economy, but still plan to increase capital spending and hiring this year, according to the June 2006 Duke University/CFO Magazine Business Outlook survey released Wednesday.

World crude oil prices plunged below 70 dollars Thursday on Zarqawi's death and improved U.S. energy stocks. U.S. claimed Thursday that Abu Musab al-Zarqawi, the most wanted terrorist and al Qaida's leader in Iraq, was killed during a U.S. air strike near Baquba, 60 km north of Baghdad, on Wednesday.

That prompted speculation the attacks and sabotage that have curtailed Iraqi oil exports will ease. European Central Bank raised the bank's benchmark refinancing rate by 0.25 percentage points to 2.75 percent on Thursday. The raise, the third since December, was delivered amid concerns over high-energy costs and inflationary pressures in the 12-member zone. Stocks in Europe slid to the lowest in a year, while Asian shares posted their biggest drop in two years.

Source: Xinhua