STOCKS ended another volatile session with sharp losses yesterday.

The drop happened as news that housing starts in February racked up their biggest increase in nearly three years.

And this heightened speculation that the Federal Reserve will now raise interest rates next week to slow the economy's growth.

The Dow Jones industrial average closed 58.92 points lower at 6,896.56 after trading briefly with a loss of more than 100 points.

In the broader market, declining issues beat advances by 2-1 on active volume of 471 million shares on the New York Stock Exchange.

A government report that housing starts rose 12.2 per cent in February to the fastest rate in nearly three years further worried investors that Fed policy-makers would raise short-term rates at their meeting on March 25th to slow the economy's growth.

While the jump in housing starts was aided by unusually warm weather, the robust activity still surprised economists.