Dow Plunges 66 on Bad News : Wall St.: Signs of inflation and rise in Mideast tension trigger sharp drop.

Stock prices dropped sharply today in moderate trading amid signs that inflation is picking up and tension in the Middle East may be rising.

The Dow Jones average of 30 industrials fell 66.83 to 2,681.44.

Declining issues outnumbered advancing ones by 4 to 1 on the New York Stock Exchange, with 323 up, 1,285 down and 395 unchanged.

Big Board volume totaled 138.85 million shares, against 135.21 million in the previous session.

The NYSE’s composite index fell 3.81 to 182.73.

At the American Stock Exchange, the market value index lost 3.81 to 336.83.

The Labor Department said consumer prices, excluding the volatile food and energy sector, rose 0.6% last month. Overall prices rose 0.4%, higher than the 0.3% most economists expected.

The department pointed out that the data was collected before the start of the Mideast crisis, which has sent oil prices surging.

The report also caused bond prices to fall sharply, providing further weakness for stocks.

Also today, the Commerce Department said housing starts continued to plummet in July, falling 2.6% to their lowest level since September, 1982.

Despite the weakness in housing, economists said the bad news on inflation gave the Federal Reserve little room to stimulate the economy by lowering interest rates.

Meanwhile, Iraqi President Saddam Hussein charged that President Bush has lied to the American people about the Middle East situation, and warned there would be American deaths in the region if the United States continues to intervene.

Iraqi military authorities in Kuwait instructed all Americans and Britons to assemble at two hotels in the emirate. The reason was not given.

Concern about the Mideast sent oil prices climbing, furthering inflationary pressures.

The U.S. stock markets received little help from abroad. Stock prices fell in Japan, with the key index on the Tokyo exchange closing 2% lower. Prices also closed lower in London.