Investors wait for Fed's rate decision

NEW YORK - Stocks plummeted Monday as heightened fears of another hurricane strike on the Gulf Coast sent oil prices racing past $67 a barrel and investors grew anxious about the Federal Reserve's upcoming interest-rate meeting.

Wall Street saw some bright spots in merger activity and strong earnings from Nike Inc. and Carnival Corp., but the market became increasingly uneasy as surging energy prices threatened consumer spending.

Investors also awaited the Fed's decision whether to raise rates or halt its string of increases to mitigate an economic slide following Hurricane Katrina.

At the close of trading, the Dow Jones industrial average dropped 84.31, or 0.79 percent, to 10,557.63. The Dow lost as much as 120.69 during the session.

Broader stock indicators also declined.

The Standard & Poor's 500 index fell 6.89, or 0.56 percent, to 1,231.02, and the Nasdaq composite index sank 15.09, or 0.7 percent, to 2,145.26.

Bonds rose, with the yield on the 10-year Treasury note sliding to 4.25 percent from 4.27 percent on Friday.

The U.S. dollar was mixed against other major currencies in European trading, while gold prices gained a second day and set a fresh 17-year record.

Though Wall Street is uncertain about what the Fed's decision is likely to be, many analysts are predicting the central bank will continue lifting rates to stem inflation.

They think that will be the main priority despite the widespread economic ripple left in Katrina's wake.

The Federal Reserve's rate policy announcement is expected this afternoon.