WALL STREET: Bad News Bulls

Spooked by a burst of inflation at home and worrisome economic signals abroad, the stock market suffered an anxiety attack last week. On Friday the Dow Jones industrial average plunged 71.46 points, the largest single-day decline since the 190-point minicrash on Friday, Oct. 13. Last week's loss sent the Dow to 2689.21, down 84.04 for the week.

The power dive came after Tokyo's Nikkei stock average tumbled 653.36 points, to 37,516.77, the steepest one-day drop in two years. Investors had barely calmed down from that fright when Washington reported that the U.S. index of wholesale prices jumped an unexpectedly high 0.7% in December.

The bad news on inflation dampened Wall Street's hopes that the Federal Reserve Board would continue to loosen credit. Those expectations had run high earlier in the week when major U.S. banks cut their prime lending rate from 10 1/2% to 10%. The reduction could quickly lead to lower short-term interest rates on many loans -- unless it is reversed by new inflationary pressures.