Technology shares fell sharply, as the sector has been buffeted lately by disappointing news, including a profit warning from computer maker Dell Inc. and a disappointing revenue outlook from Cisco Systems Inc.

"The market as a whole is very weak because of the problems with Fed, and with higher commodities, and then on top of it all, the techs have some earnings issues," said Edgar Peters, chief investment officer and director of asset allocation at PanAgora Asset Management Inc.

The Dow Jones industrial average slid 141.92 points, or 1.22 percent, to end at 11,500.73. The Standard & Poor's 500 Index fell 16.93 points, or 1.28 percent, to finish at 1,305.92. The Nasdaq Composite Index dropped 48.04 points, or 2.07 percent, to close at 2,272.70.

The Dow was pulled off a six-year peak as AIG, the world's largest insurance company, fell on a decline in first-quarter earnings. The stock was the biggest drag on the blue-chip Dow and the S&P 500, falling 5.1 percent, or $3.39, to $63.15 on the New York Stock Exchange. .

OIL, GOLD AND BOND YIELDS CLIMB

The surge in crude oil prices revived concern that higher energy costs would filter through to core inflation measures, increasing the chances of higher interest rates. Crude for June delivery rose $1.19 to settle at $73.32 per barrel.

A jump in metals prices added to inflationary worries. The price of spot gold climbed to $726 an ounce, its highest in 26 years.

The price of the benchmark 10-year U.S. Treasury note fell after an auction of new notes suggested weak foreign demand. The note's yield, which moves in the opposite direction of the price, climbed to a four-year high of 5.18 percent.

"We've been living in a bit of a fantasy world here, and there's obviously going to be a readjustment from time to time and we're seeing part of that," said Cummins Catherwood, managing director of Walnut Asset Management.

Small-cap stocks, which depend on cheaper lending rates for growth, also took a hit, further pressuring the Nasdaq. The Russell 2000, a measure of small-company stock performance, fell 2.4 percent --its biggest drop since October 2005.

GM AND GOOGLE FALL

Shares of General Motors Corp. (GM), another Dow component, fell 2.9 percent, or 78 cents, to $25.81 amid worries about labor issues at its former auto parts unit Delphi Corp. GM ranked among the heaviest weights on the Dow average.

Weighing on the technology sector was a drop in the shares of Web search company Google Inc., which fell almost 4 percent, or $15.98, to $387 before its shareholder meeting.

Dell declined 1.5 percent, or 38 cents, to $24.51, while Cisco fell 3.4 percent, or 70 cents, to $20.05.

Trading was heavy on the New York Stock Exchange, where about 1.83 billion shares changed hands, above the 1.61 billion daily average for last year. On Nasdaq, about 2.46 billion shares traded, exceeding last year's daily average of 1.8 billion.

Declining shares beat advancers on both the NYSE and the Nasdaq by a ratio of about 4 to 1.

In London, June Brent crude rose 99 cents to $73.43 a barrel.

NYMEX June gasoline rose 5.02 cents to $2.2196 per gallon, while June RBOB gained 3.06 cents to $2.49.

June heating oil gained 3.17 cents to $2.0964 a gallon.

"Nigeria seems to be getting a lot worse and people have to take it a lot more seriously," said Phil Flynn, analyst at Alaron Trading in Chicago.

Three foreign oil workers were kidnapped in Nigeria's oil capital Port Harcourt on Thursday, a day after a U.S. oil executive was killed in the same city.

The militant Movement for the Emancipation of the Niger Delta, which has waged a campaign of attacks against the oil industry in the world's eighth-largest exporter, said it was not involved in the kidnapping.

After a rollercoaster ride, gasoline futures ended up as refinery snags spooked traders before the summer peak driving season.

Two Valero refineries in Texas and Louisiana had problems with their coking facilities over the last week, according to trade sources, while ConocoPhillips' Bayway refinery in Linden, New Jersey, was also running at reduced rates.

The supply worries came despite increases in petroleum inventory last week reported by the U.S. Energy Information Administration on Wednesday.

U.S. gasoline inventories rose by 2.4 million barrels to 205.1 million barrels.

Refinery utilization rose 1.4 percentage points to 90.2 percent of capacity, increasing gasoline production by 323,000 bpd to nearly 9 million bpd.

Average gasoline demand over the past four weeks fell 0.1 percent from a year ago to 9.14 million bpd.

Crude stocks rose unexpectedly by 300,000 barrels to 347 million barrels, their highest in almost eight years.

OPEC will ship 520,000 bpd more oil in the four weeks to May 27 to 24.78 million bpd, said Roy Mason of consulting group Oil Movements.

"The major surge in exports showing up are because long-haul sailings from the Gulf will be arriving in the third quarter when crude runs peak during the summer driving season," Mason told Reuters.

Venezuelan President Hugo Chavez said on Thursday he expected world oil prices to rise in the next few months as energy markets fret over U.S. tension with Iran and ongoing instability in Iraq.

International Energy Agency director Claude Mandil said on Thursday he was surprised record high oil prices had not had more impact in curbing demand.

"Maybe that's due to a time lag," Mandil said. "It needs recognition by the general public that they have to save energy ... It would be a good thing for demand to decrease."

In London, the spot price of gold reached $726 an ounce, the highest since September 1980. Seen as a safe haven in times of mounting inflation fears and political uncertainty, bullion has rocketed nearly 40 per cent this year. The price has steadily increased to hit $500 an ounce last November and took another five months to break though $600, but recently sprinted to exceed $700 in less than a month. Some say gold could go all the way to its all-time high of $850 reached in January 1980, before coming down again.

Investors have piled into precious metals in the face of growing global tensions, triggered by the stand-off between the US and Iran over its nuclear programme, high oil prices and dollar weakness.

Silver prices broke through the $15 an ounce mark for the first time since December 1980, reaching $15.17. Platinum climbed to a record high of $1,287.50 per ounce. Copper, aluminium, zinc and nickel also hit new highs. The price of oil traded near $73.50 per barrel and seemed to be heading towards last month's record high of $75.35.

Among a gently swaying sea of poppy heads near the town of Grishk, Haji Shadi Khan, 50, squatted wearily on his haunches and drained a proffered bottle of water in a single draught.

The harvest began last week and it is brutally labour intensive and skilled work. Every one of thousands of poppy heads must be lightly scored with a four- bladed razor and then the opium "milk" that oozes forth scraped off and collected.

Depending on the quality of the crop, the operation must be repeated between three and seven times. Behind him in the field, his sons Gul Ahmed, 10 and Juma Jan, seven, were hard at work. Small boys have the advantage of working at the same height as the poppy heads.

Though he is only a paid labourer and does not own the land he is working, Haji Shadi expects to make about $1,800 (£1,000). That represents one-third of the value of the crop on a plot that is four-fifths of a hectare.

In April, a UN rapid assessment that sought only to estimate broad trends in poppy cultivation offered an alarming picture of likely production when it suggested cultivation was down in only three of Afghanistan's 36 provinces and was increasing or strongly increasing in 13.

That left the British-led counter-narcotics effort relying on a massive eradication effort to make an inroad into the Afghan poppy crop. However, in the south at least, efforts at eradication appear to have largely failed.

Haji Shadi chuckled merrily as he described how the provincial governor's eradication team arrived at his fields, enjoyed a convivial cup of tea and then left again with a wink, $50 richer. $50 is a month's wages for most government employees.

An estimated 40,000 to 50,000 hectares of poppy are being cultivated in Helmand this year, at least a 50 per cent increase on last year. The governor of Helmand, Engineer Mohammed Daoud, claims to have eradicated 7,000 hectares of poppy this year. But even that modest claim is disputed.

"The real figure is about 1,000 hectares," one Western source said. "The district elders just followed the eradication teams around handing out wads of money. Sometimes the teams just drove a single tractor through the field and announced that they had eradicated it."

Another Western source described the shambolic progress of a central government eradication team sent to Helmand.

Backed by American mercenaries from the Dyncorp corporation, the force suffered endless delays as Afghan drivers refused to travel to dangerous areas; a problem which was compounded when a number of Afghan police were killed by a roadside bomb clearly intended to send a warning to the force. The force's eventual impact was negligible. The central eradication force is said to cost a total of $175m this year.

Such is the glut of opium that is about to flow onto the market that the price has plummeted to less than $100 a kilogram, 50 per cent lower than it was a year ago. The relationship between price and availability is not exact but the drop is broadly indicative of anticipated market forces.

Western officials admit to intense frustration in a war where so many Afghan officials are a part of the narco-criminal problem. Engineer Daoud is widely respected as an honest man but, last summer, almost nine tons of opium were discovered in the offices of his predecessor Sher Mohammed Akhundzada, who claimed he had seized them and was on the point of handing them in.

After intense British and American pressure to have him ousted, Mr Akhundzada was given a seat in the new upper house of the Afghan parliament.

In his office in Kandahar, the province's director of drugs control, Gul Mohammad Shukran, shifted uncomfortably as The Independent ran through a list of well known millionaire drug smugglers in the province. "If I answer your questions I will be dead within three days," he said, showing us to the door.

Meanwhile, a campaign of Taliban intimidation and assassination is targeting government officials working across the south.

In Helmand it has been what one Western source called "a methodical slaughter". Four out of 12 district police chiefs have been killed in six months, further undermining the effort to establish some sort of order.

The smugglers and the Taliban were increasingly close, with the Islamic fighters suspending their operations during the poppy harvest to ensure it is safely out of the way before the Taliban's promised campaign of summer violence. The Taliban have a vested interest as they take a tax on opium produced in the region, which could be worth tens of millions of dollars this year.

In the face of so much bad news, the authorities point to some small beacons of hope. In Kandahar province, there was some effective eradication under the new governor, Asadullah Khalid.

In Nangahar province a remarkable - and many thought unsustainable - 96 per cent drop in poppy cultivation was achieved last year. However, opium production was expected to bounce back this year after farmers complained that promised foreign aid to help them grow alternative crops never materialised.

The bounce-back has occurred but not as much as many officials had feared.

Two hours' drive from the Afghan city of Kandahar, "the perfect storm" is about to break in the fields of Helmand province.

Here, in the place where British troops are to spend the next three years, a combination of factors have conspired to produce what is probably the biggest opium harvest in the history of a province that, last year, produced more than 20 per cent of the world's heroin on its own.

A law and order vacuum has allowed an increasingly well-organised drugs cartel, a corrupt local government and resurgent Taliban to structure the poppy cultivation of the province as never before. That has combined with fine growing conditions this year to produce what, if these were wine producers, might be considered a memorable vintage. And, country-wide it is now clear the poppy harvest will be close to record levels again. It is a dispiriting blow for the international counter-narcotics effort as 86 per cent of the world's heroin comes from Afghanistan.

Among a gently swaying sea of poppy heads near the town of Grishk, Haji Shadi Khan, 50, squatted wearily on his haunches and drained a proffered bottle of water in a single draught.

The harvest began last week and it is brutally labour intensive and skilled work. Every one of thousands of poppy heads must be lightly scored with a four- bladed razor and then the opium "milk" that oozes forth scraped off and collected.

Depending on the quality of the crop, the operation must be repeated between three and seven times. Behind him in the field, his sons Gul Ahmed, 10 and Juma Jan, seven, were hard at work. Small boys have the advantage of working at the same height as the poppy heads.

Though he is only a paid labourer and does not own the land he is working, Haji Shadi expects to make about $1,800 (£1,000). That represents one-third of the value of the crop on a plot that is four-fifths of a hectare.

In April, a UN rapid assessment that sought only to estimate broad trends in poppy cultivation offered an alarming picture of likely production when it suggested cultivation was down in only three of Afghanistan's 36 provinces and was increasing or strongly increasing in 13.

That left the British-led counter-narcotics effort relying on a massive eradication effort to make an inroad into the Afghan poppy crop. However, in the south at least, efforts at eradication appear to have largely failed.

Haji Shadi chuckled merrily as he described how the provincial governor's eradication team arrived at his fields, enjoyed a convivial cup of tea and then left again with a wink, $50 richer. $50 is a month's wages for most government employees.

An estimated 40,000 to 50,000 hectares of poppy are being cultivated in Helmand this year, at least a 50 per cent increase on last year. The governor of Helmand, Engineer Mohammed Daoud, claims to have eradicated 7,000 hectares of poppy this year. But even that modest claim is disputed.

"The real figure is about 1,000 hectares," one Western source said. "The district elders just followed the eradication teams around handing out wads of money. Sometimes the teams just drove a single tractor through the field and announced that they had eradicated it."

Another Western source described the shambolic progress of a central government eradication team sent to Helmand.

Backed by American mercenaries from the Dyncorp corporation, the force suffered endless delays as Afghan drivers refused to travel to dangerous areas; a problem which was compounded when a number of Afghan police were killed by a roadside bomb clearly intended to send a warning to the force. The force's eventual impact was negligible. The central eradication force is said to cost a total of $175m this year.

Such is the glut of opium that is about to flow onto the market that the price has plummeted to less than $100 a kilogram, 50 per cent lower than it was a year ago. The relationship between price and availability is not exact but the drop is broadly indicative of anticipated market forces.

Western officials admit to intense frustration in a war where so many Afghan officials are a part of the narco-criminal problem. Engineer Daoud is widely respected as an honest man but, last summer, almost nine tons of opium were discovered in the offices of his predecessor Sher Mohammed Akhundzada, who claimed he had seized them and was on the point of handing them in.

After intense British and American pressure to have him ousted, Mr Akhundzada was given a seat in the new upper house of the Afghan parliament.

In his office in Kandahar, the province's director of drugs control, Gul Mohammad Shukran, shifted uncomfortably as The Independent ran through a list of well known millionaire drug smugglers in the province. "If I answer your questions I will be dead within three days," he said, showing us to the door.

Meanwhile, a campaign of Taliban intimidation and assassination is targeting government officials working across the south.

In Helmand it has been what one Western source called "a methodical slaughter". Four out of 12 district police chiefs have been killed in six months, further undermining the effort to establish some sort of order.

The smugglers and the Taliban were increasingly close, with the Islamic fighters suspending their operations during the poppy harvest to ensure it is safely out of the way before the Taliban's promised campaign of summer violence. The Taliban have a vested interest as they take a tax on opium produced in the region, which could be worth tens of millions of dollars this year.

In the face of so much bad news, the authorities point to some small beacons of hope. In Kandahar province, there was some effective eradication under the new governor, Asadullah Khalid.

In Nangahar province a remarkable - and many thought unsustainable - 96 per cent drop in poppy cultivation was achieved last year. However, opium production was expected to bounce back this year after farmers complained that promised foreign aid to help them grow alternative crops never materialised.

The bounce-back has occurred but not as much as many officials had feared.

The Nigerian Red Cross had earlier reported more than 100 deaths as a result of the explosion at Ilado beach village, near the port of Apapa, where numerous oil installations are located.

"Over one hundred people were burnt to death and beyond recognition following the explosion," Nigerian Red Cross Secretary General Abiodun Orebiyi told AFP by telephone.

"We have been unable to recover any injured person. All of them were burnt beyond recognition. We found at the scene of the explosion about 500 jerrycans which we suspect were used to steal fuel from the pipeline," he said.

An AFP correspondent at the scene reported seeing scores of carbonised, disfigured corpses floating on the water and lying under a boat that had been destroyed by the flames.

Only the bones remained of some of the victims.

There were indications several had attempted to flee before the fireball completely engulfed them, the correspondent said.

Orebiyi said the "raging fire" had been put out and normality was returning to Ilado.

He said Red Cross workers at the scene had found evidence that people had been trying to siphon off oil from the pipeline.

"We found that vandals have drilled holes on (into) the pipeline, from where they have been stealing fuel. We advise strongly Nigerians to desist from this dangerous act."

Private television netowrk Channels said fire fighters and officials from the Nigerian National Petroleum Corporation (NNPC) had been sent to Ilado village.

Hundreds of people have been killed in pipeline explosions in the past few years across Nigeria, many of whose citizens live in abject poverty despite the nation's huge oil riches.

Close-quarter street battles spread beyond Mogadishu's battered northern shanty town of Siisii into the neighboring district of Yaqshid, in the worst violence in the lawless capital for more than a decade.

Warlord spokesman Hussein Gutale Rage said the death toll had reached 150 but this could not be immediately verified.

Armed with basic possessions, many Mogadishu inhabitants fled to safer parts of the city and looters ransacked empty houses, undeterred by a barrage from artillery, mortars and anti-aircraft missiles.

"Around 600 civilians are trapped in storm drains with bullets and mortars flying over them, they can't get out because heavy fighting is still going on," said Ali Nur, a member of the warlords militia.

Hundreds of people have been wounded in the clashes, with shells regularly hitting houses and killing many civilians, including women and children.

"We have decided to leave because the fighting looks like it will go on for a long time," Ahmed Jimale said as he fled with his children from Siisii.

Siyad Mohamed, a militia leader linked to the Islamic side, said many people were heading to areas outside Mogadishu.

"Those who have cars have driven off with essential goods while the rest are fleeing on foot," he told Reuters by telephone.

"Looters are breaking into people's houses and leaving with whatever they can carry without fearing bullets and mortars."

Analysts view the fighting in the failed Horn of Africa state as a proxy battle between al Qaeda and Washington, which is widely believed to be funding the warlords.

FIGHTING INTENSIFIES

This week's Mogadishu street battles were the third round this year between gunmen allied to Islamic courts and militia from a self-styled anti-terrorist alliance of powerful warlords.

Many residents say the Islamic courts, which have created a semblance of order in the lawless city of 1 million by providing justice under sharia law, are fighting to repel a determined warlord offensive to take areas under their control.

Somalia's interim President Abdullahi Yusuf accuses Washington of backing the warlords' "Alliance for the Restoration of Peace and Counter-Terrorism."

"No group seems to be winning, it's a very close battle with so many fatalities, it will definitely continue for days until one group is weakened," Nur said.

"It's getting worse. The militias are exchanging fire from opposite buildings with only a road in between them. ... Even getting the wounded and the dead from the scene is very difficult."

Resident Abdifatah Abdikadir said the Islamic side was broadcasting radio messages urging residents to take up arms.

"The Islamic courts are urging residents to come forward and wage Jihad against the alliance," Abdikadir said.

Washington has long viewed Somalia, without an effective central government since the 1991 ousting of former dictator Mohamed Siad Barre, as a terrorist haven.

The fighting in Mogadishu shows how little control Somalia's fledging government -- the 14th attempt to restore rule in 15 years -- has over the nation of 10 million.