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New York - US stocks sunk on Thursday amid speculation that China will hike interest rates in an effort to curb faster-than-expected inflation and as the tech sector received a pummeling.
Early trade was dominated by news of a stronger-than-expected rise in China's consumer price index, data which raised expectations of another rate hike as Beijing admitted it may miss its 2010 inflation target.
The blue chip Dow Jones Industrial Average fell 81.59 points (0.72%) to 11 274.81 in opening trades.
China said Thursday that consumer prices rose at their fastest pace in more than two years in October.
People's Bank of China Vice Governor Hu Xiaolian said the central bank was paying "close attention" to inflation, adding it would use monetary policy to fight inflation. She declined to elaborate.
"Market bears are poised to take the reins once again this morning," said Joseph Hargett of Schaeffer's Investment Research.
The S&P 500 index, a broader measure of the market, dropped 8.54 points (0.70%) to 1 210.17.
Meanwhile the Dow and the tech-rich Nasdaq were weighed down by news that Cisco Systems lowered its revenue outlook, sending its stocks plummeting more than 15%.
The Nasdaq fell 33.03 points (1.28%) at 2 545.75.
"Despite the inline results, Cisco said that it expects revenue to rise only three to five percent on a year-over-year basis for the current quarter," according to Hargett.
That fell well short of the expectations of Wall Street analysts who had forecast growth of 12.9% for the San Jose, California-based company considered a bellwether for technology sector spending.
The ripples from Cisco's poor outlook were felt throughout the sector, with Dow components Hewlett-Packard (down 2.7%), Microsoft (down 1.8%) and IBM (down 1.6%).
The bond market was mixed.
The yield on the 10-year Treasury bond fell to 2.64% from 2.69% early Wednesday, while that of the 30-year bond rose to 4.33% from 4.23%. Bond prices and yields move in opposite directions.
