Stocks resumed their end-of-summer slump as concerns about inflation and interest rates were compounded by a dismal earnings outlook from Sears, Roebuck and Co. At one state the Dow Jones was down 205 points and broader stock indicators also closed lower. Investors were rattled by continuing fears that the Federal Reserve had not yet completed its efforts to ward off inflation by imposing higher interest rates.

Those fears escalated yesterday when Federal Reserve governor, Mr Edward Kelley, told Market News International it would be premature to assume the Fed would wait until next year to raise rates again.

A Labour Department report offered potential justification for higher rates. The government said the growth of workers' productivity slowed considerably in the spring, while labour costs jumped sharply.