The dollar has lost 7 per cent against the euro, yen and sterling since the start of April - a slide that will in turn intensify worries about inflation in the economy. Traders are concerned about the role a weaker dollar will have in correcting the US current account deficit, which is now about 7 per cent of GDP.

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Marc Chandler, economist at Brown Brothers & Harriman in New York, said: "Precisely what officials feared would happen from the large global imbalances is now taking place in reaction to their clumsy attempt to 'fix the problem'. Volatility in the capital markets is rising. Global equities are tumbling."

In Japan, the Nikkei 225 stock average fell 1.5 per cent to 16,601.78, its lowest finish in seven weeks, while in London, the benchmark FTSE-100 index suffered its worst one-day fall in two years, closing 129.9 points, or 2.15 per cent, weaker at 5,912.1. This was a two-month low.

Later the selling also spread to Latin America where the main market indices for Mexico and Brazil fell 1.57 per cent and 1.73 per cent respectively.

Inflation fears have increased sharply since the Fed's open market committee meeting warned that further interest rate rises may yet be necessary. "It opened some eyes," said Brian Williamson, an equity trader at Boston Company Asset Management.

In New York, the dollar ended at $1.293 to the euro and at $1.894 against sterling. Against the yen, it stood at Y110.02. Traders thought a correction was likely.

"Investors are just going to be very sensitive to any type of overheating of the economy," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank Private Wealth Management in New York. "Any pickup on any inflation numbers will be magnified."

The U.S. Producer Price Index for April, expected at 8:30 a.m. (1230 GMT) on Tuesday, and the Consumer Price Index, scheduled for release at the same time on Wednesday, will be among this week's most important economic indicators.

Economists polled by Reuters forecast that overall PPI went up 0.8 percent in April, and core PPI, excluding volatile food and energy prices, rose 0.2 percent. They see overall CPI up 0.5 percent in April, and core CPI, up 0.2 percent.

MIXED MESSAGE FROM THE FED

The Federal Reserve gave the market a mixed view last week of future interest-rate policy, saying more rate rises may be needed while leaving the door open to a possible pause in its nearly two-year campaign of tightening credit.

The news cooled bullish stock market momentum that had pushed the Dow Jones industrial average up earlier in the week to within 100 points of its all-time high of 11,750.28, set on January 14, 2000.

The Fed has raised rates 16 times since late June 2004. It pushed the benchmark federal funds rate up last week to 5 percent, as expected. But the Fed caught Wall Street off guard by saying future moves would depend on how the economic outlook unfolds.

Analysts said that could mean increased market volatility as investors will be even more focused on economic data in the coming weeks.

On Friday, the economic data failed to dispel investors' worries about rising inflation and interest rates, which on Thursday had sparked stocks' biggest decline in nearly four months. Among Friday's reports, Labor Department data showed U.S. import prices surged 2.1 percent in April, exceeding expectations.

"Until the Fed quashes the notion that they're getting behind the curve on inflation, there will be turbulence in the market," said Jeff Schappe, chief investment officer at BB&T Asset Management in Raleigh, North Carolina.

For the past week, the Dow Jones industrial average fell 1.71 percent, while the Standard & Poor's 500 Index dropped 2.62 percent and the Nasdaq Composite Index slid 4.24 percent.

In the week ahead, Tuesday's economic calendar also calls for April housing starts, along with April numbers for U.S. industrial production and capacity utilization.

"I believe the slowdown in housing will be reflected in (the housing starts) report, and that will make the market a little more comfortable with the view that the Federal Reserve can justify a pause when it meets in June," said Anthony Chan, chief economist at J.P. Morgan Private Client Services.

GOLD, OIL AND INFLATION

Skyrocketing gold prices and persistently high oil prices have put inflation back on top of the worry list for investors. New York gold futures jumped on Friday to $732 an ounce and crude traded at around $72 a barrel.

For gold, that was the highest price for a front-month futures contract since January 1980 when it hit a record of $850. That sends a chill through investors who remember that the prime rate hit 21.5 percent in December 1980. This week, big U.S. banks raised the prime rate to 8 percent.

"I think $700 gold is starting to spook people. It's usually a harbinger of global inflation trends ... That's going to flash red in the minds of some portfolio managers," said Fred Dickson, market strategist and director of retail research at D.A. Davidson & Co. in Lake Oswego, Oregon.

Last week, the price of U.S. crude for June delivery rose 2.6 percent to settle Friday at $72.04 a barrel.

Concerns about oil producer Iran's nuclear ambitions, fuel supplies heading into the U.S. vacation season, and a pipeline explosion on Friday in Nigeria, another major oil-producing country, have kept crude prices high.

"The equity market will continue to watch oil prices, and oil prices so far have been unfriendly," Chan said.

EARNINGS WRAP: TECH AND RETAIL

Computer maker Dell Inc., whose profit warning last week jolted the tech sector along with negative outlooks from other companies, could put investors on edge again when it reports earnings on Thursday.

Rival Hewlett-Packard Co., a Dow component, is set to report results on Tuesday.

Earnings from major retailers, including Wal-Mart Stores Inc., Target Corp. and Limited Brands, also are expected this week.

Their financial scorecards come at the end of a mostly stronger-than-expected first-quarter earnings reporting period. About 69 percent of the 456 S&P 500 companies that have reported first-quarter earnings so far have exceeded analysts' estimates, compared with about 66 percent a year earlier, according to Reuters Estimates.

First-quarter earnings are forecast to increase about 14 percent from a year ago, Reuters Estimates said.

"The sharp decline reflects the impact of rising gasoline prices and the low approval ratings of President Bush," said Asha Bangalore, economist at Northern Trust Co.

The report stirred worries that many Americans will stay away from the shopping malls over the next few months as they spend more to fill up their cars -- although the link between consumer sentiment and actual spending is often tenuous.

"If sentiment stays at this level -- it might even decline further -- you should expect a serious slowing in second quarter and third quarter consumption," said Ian Shepherdson, chief U.S. economist with High Frequency Economics.

The dollar fell on news of weakening consumer sentiment, while U.S. stock indexes stumbled for a second straight day on the jump in import prices and worries about higher interest rates. The Dow Jones industrial average fell more than 1 percent to 11,380.99 points.

Treasury debt yields rose as inflation worries fueled by rising import prices overshadowed concerns about weak consumer optimism. The benchmark 10-year Treasury note was down 12/32 in price, to yield 5.19 percent, up from 5.16 percent on Thursday.

The Michigan reading was the lowest since 1993, excluding a one-month plunge in October after Hurricane Katrina. Both elements of the report -- current conditions and expectations -- tumbled based on a survey of about 500 households.

The median inflation expectation also rose, suggesting that respondents were worried about higher prices eroding their financial well-being.

"Job security is holding up reasonably well. But expectations on housing, stocks and gasoline are looking pretty harmful for consumers," said Richard Iley, senior economist, North America, at BNP Paribas in New York.

"Underneath the surface, it (consumer confidence) is pretty brittle."

The report was consistent with ideas on Wall Street that the
Federal Reserve will end its almost two-year run of interest rate increases in June to brace for a slowdown in economic growth from the torrid first-quarter pace.

The housing sector -- notable now for stagnant prices and bulging inventories -- is likely to lead the way.

Analysts suspect extremely low job approval rates for President Bush are also eating into confidence. A new Harris Interactive poll on Friday in The Wall Street Journal Online showed Bush's job approval rating fell to a new low of 29 percent from 35 percent in April.

TRADE DEFICIT FALLS AS U.S. EXPORTS JUMP

Earlier, the Commerce Department said record high exports pushed the trade deficit down to $62 billion in March, its lowest since August and a second straight month of narrowing.

Exports, including to China, climbed to new highs, suggesting a weaker dollar is boosting demand for US goods.

Wall Street analysts had expected the gap to widen to about $67 billion on the back of higher oil import volumes.

"The trade gap is definitely better than expected, which is good any way you look at it," said David Wyss, chief economist at Standard and Poor's Ratings Services in New York.

US exports of $114.7 billion in March included record shipments to Canada, Mexico, the European Union, China and South and Central America.

Exports were especially strong for industrial supplies and materials, such as petroleum products and plastics, and capital goods, which include industrial machines and computers.

Analysts said the data could prompt an upward revision in estimates of first-quarter US economic growth, previously reported at a 4.8 percent annual rate.

Still, the overall U.S. trade deficit for the first quarter of 2006 was $196.2 billion, on a pace to exceed the record of $723.6 billion for the whole of 2005.

The politically sensitive trade gap with China, which hit a record $202 billion in 2005, widened in March to $15.6 billion. U.S. exports to China were a record $5 billion, while imports from that country were $20.5 billion.

The Labor Department reported on Friday that the cost of imported petroleum jumped 11.5 percent in April, the biggest gain since March 2005.

The increase boosted overall US import prices by an unexpectedly sharp 2.1 percent in April, although nonpetroleum prices were flat, the report showed.

The import price report suggests a prolonged decline in the value of the dollar is beginning to show up in higher prices on imported goods, said Kevin Flanagan, fixed income strategist with Global Wealth Management at Morgan Stanley.

"I feel that is something we need to pay more attention to," Flanagan said.

Do illegal immigrants take more than they contribute? Or is it the other way around? Despite volumes of studies cited by both sides, no one knows for sure.

And answers often reflect the opinions of who's talking as much as the reality of illegal immigrants in the United States today, according to academics who study the issue.

"Because of the politically charged nature of this, people are going to cherry-pick their results," said V. Joseph Hotz, a labor economist at the University of California, Los Angeles, who doesn't believe a definitive study is possible.

One reason is the nature of the population in question.

"Anything that is illegal, the data is going to be suspect," said Vernon Briggs, a labor economist at Cornell University who has been studying immigration issues for 40 years.

That won't stop Congress from wrestling with that bottom line and other issues.

Majority Leader Bill Frist, R-Tenn., has said he is committed to passing immigration reform legislation by Memorial Day. The bill up for debate would include additional border security, a new guest worker program and provisions opening the way to eventual citizenship for many of illegal immigrants in the country. The House passed a bill late last year that would criminalize illegal immigrants and those who offer them assistance.

Pressure to act quickly has intensified. A majority of Americans now cite anxiety over immigration as one of the most important problems facing the nation, according to a recent poll by The Associated Press and Ipsos.

Yet compiling hard data has been difficult.

Even the number of illegal immigrants in the country is debated. The generally accepted figure is about 11 million, but some researchers peg the number as high as 20 million.

In diverse areas such as Los Angeles, illegal immigrants can rent an apartment and open a checking account with little more than an ID from their home country. That kind of anonymity hampers researchers trying to tally how many are here - and how much they cost in public services.

That uncertainty hasn't stopped advocates on both sides from citing research that seems to make their case.

To fill in the blanks, researchers often assume the bulk of illegal immigrants have little or no formal education or skills; are likely to live at or below the poverty level; contribute little in the form of taxes; and take advantage of public services.

One report both sides cite as one of the most definitive is nearly a decade old. In 1997, the National Research Council concluded that all immigrants - not just those here illegally - had a negative fiscal impact on state and local services but at the federal level received less in services than they paid in taxes.

In California, the state with the highest population of foreign-born residents, citizen households were saddled with an annual tax burden of $1,178 from the use of public services by immigrants, according to the study.

Pro-immigrants groups counter that whatever the answer - whether immigrants pay more in taxes than they use in services or the other way around - the economic importance of illegal immigrants is undeniable.

"You don't know whether a guy who is loading boxes on a truck or onto a ship on the docks pays his taxes or not," said Benjamin Johnson, director of the Washington-based Immigration Policy Center, which calls itself nonpartisan but pro-immigrant. "But you know what that worker means as a cog on the economic wheel."

"They're relocating to a city where they don't actually have to be accountable to their own shareholders," said Maureen Haver, spokeswoman for the Houston Global Awareness Collective and one of 15 protesters arrested at Halliburton's meeting last year. "They're going to a town they have in their pocket."

The oilfield services conglomerate is not alone in taking big business to middle America's smaller places.

International Business Machines Corp. recently held its annual meeting in Tulsa, Oklahoma's second largest city, and Pfizer Inc. met in Lincoln, Neb., locations where both New York-based companies have operations.

Joseph Horgan, a representative for the International Brotherhood of Teamsters, came to Tulsa to represent the union's concerns and ended up riding out a tornado warning in a parking garage. Days later, he followed Pfizer to Lincoln.

Both meetings, he said, were convened far from concentrations of active shareholders, limiting participation by those with beefs about high executive pay and other business practices.

"They were trying to escape scrutiny by active owners," he complained after the IBM meeting.

IBM and Pfizer say changing their meeting locations is nothing new and that doing so gives shareholders in different regions of the country the chance to show up and executives the chance to showcase local facilities. Both reported average meeting attendance.

"In many cases, we have retirees who are shareholders and it gives them an opportunity to attend the meeting and listen to management talk about business," said Pfizer spokesman Paul Fitzhenry, who listed other recent meetings in Ann Arbor, Mich., Groton, Conn., and St. Louis.

Halliburton's annual meetings have drawn 200 to 500 protesters in recent years.

The company, once headed by Vice President Dick Cheney, has drawn criticism for its big government contracts, some awarded without competitive bidding. Its KBR unit provides support services for troops stationed in the Middle East.

But the company denies trying to escape critics by moving to this quiet town, where Old Glory waves on Main Street and old timers drink coffee at the downtown drug store.

"We are holding our meeting in Duncan because we are a company that values our tradition and spirit of innovation - much of which started in Duncan more than 80 years ago," spokeswoman Cathy Mann said. "We are excited to showcase this heritage for our shareholders."

Erle P. Halliburton's oilfield services company incorporated in Duncan in 1924. It moved its headquarters in 1961 to Dallas and later to Houston but remains Duncan's top employer.

The 2,400 workers at Halliburton's manufacturing, technology center, field camps and administrative offices here grossed more than $126 million last year.

"Almost everyone we know is related to Halliburton or retired from Halliburton, or a spouse works there," said Mindy Borgstadt, whose husband is an engineer for the company.

Residents see their futures so inextricably linked to Halliburton that even those with only praise for the company were afraid to share it for publication, lest it divert from the company line.

"If it hadn't been for Halliburton, Duncan wouldn't be this kind of town at all," explained retired Halliburton engineer Tex Hamilton, envisioning an abandoned speck on the map instead of a humming little city full of fellow retirees.

About 100 shareholders attended last year's meeting, but Mann wouldn't speculate how many will make the trip to Duncan.

A group that accuses Halliburton of war profiteering, Oklahoma Veterans for Peace, received a permit for 300 demonstrators outside the meeting at the Simmons Center, a venue Halliburton helped fund. The group's organizers expect to be joined by anti-globalization activists and other protest groups, including Houston Global Awareness.

Extra law officers and other security will be on hand, and a nearby middle school will close for the day for the students' safety. Last year's arrests followed a sit-in at the Houston hotel where the meeting took place.

City Manager Clyde Shaw said protesters aren't something he's had to deal with in the planning for other annual draws, including the "World's Largest Garage Sale" in July. A group of Duncan residents have obtained a permit to hold a pro-Halliburton counter demonstration.

"I want to humbly offer support to the poorest people who do not have resources for central heating in winter and make sure that support arrives," Chavez said at a gathering in Vienna of activists and representatives of social movements and non-governmental groups.

The so-called alternative summit was held in parallel to a three-day summit of leaders from the European Union, Latin America and the Caribbean that concluded earlier Saturday in the Austrian capital.

This past winter, Venezuela delivered cut-rate oil to low-income Americans through Citgo, the Houston-based subsidiary of Venezuela's state-owned oil company. Some Chavez critics charged the heating aid program was an attempt to embarrass President Bush and was more an attempt to score political points than it was an act of charity.

In other comments during his speech that lasted more than two hours, Chavez - known for his anti-American rhetoric - said that the "final hours of the North American empire have arrived."

"So now we have to say to the empire: 'We're not afraid of you. You're a paper tiger," he added.