Tuesday's selling followed three straight days of gains last week, when mild economic data calmed inflation fears and temporarily halted a steep two-week slide. Investors have been wary of the chance for more rate hikes; this week's key figures on labor costs and wages are expected to provide some guidance on the Federal Reserve's next move.

Ken Tower, chief market strategist for Schwab's CyberTrader, said he was still optimistic about a growing consensus that the economy remains in good shape and that inflation is under control, which could keep the Fed from boosting rates.

"This pullback is not what you would've wished for, but it's still in the context of a recovering market," Tower said. "If we're in an ongoing rally phase, this is where we ought to bottom out and see the market move higher."

According to preliminary calculations, the Dow plummeted 184.18, or 1.63 percent, to 11,094.43, giving back all of the 180 points it gained in last week's runup. The Dow lost 214 points on May 10, its biggest one-day decline in three years.

Broader stock indicators retreated. The Standard & Poor's 500 index dropped 20.28, or 1.58 percent, to 1,259.88; the Nasdaq composite index plunged 45.63, or 2.06 percent, to 2,164.74, falling back into negative territory for 2006.

Renewed uncertainty about interest rates sent bonds lower, with the yield on the 10-year Treasury note climbing to 5.08 percent from 5.05 percent late Friday.

Meanwhile, the U.S. dollar slumped against other major currencies as Wall Street questioned the impact of Henry Paulson's nomination as Treasury secretary on the nation's foreign exchange policy. Paulson, chairman and chief executive of Goldman Sachs Group Inc. (GSPB), is believed to push for a strong dollar to encourage the in-flow of foreign capital, but traders nonetheless showed their anxiety.

The Conference Board said its consumer confidence index for May fell to 103.2 from a four-year high of 109.8 the month before, but the reading still topped estimates of 100.9. While investors have been hoping for a gentle economic slowdown, some fear that persistently high energy prices could trigger a sudden dropoff that leads the economy into a downturn.

Rick Pendergraft, an equity trader at Schaeffer's Investment Research, said the market will be fixated on this week's data for evidence of moderating economic activity. He noted that consumers were most concerned about employment in the Conference Board report; the Labor Department reports monthly job growth on Friday.

"We're walking a fine line right now: We want to see growth, but too strong of growth is going to lead the Fed to raise rates again," Pendergraft said of the upcoming data. "That's going to scare the market."

Crude futures rose amid expectations of greater fuel demand during the summer driving season, and as forecasters warn of hurricane activity in the coming months. A barrel of light crude surged 78 cents to $72.15 on the New York Mercantile Exchange.

In corporate news, Wal-Mart said its May same-store sales grew 2.3 percent, at the low end of forecasts. Wal-Mart dropped $1.35 to $48.30.

Deutsche Bank cut GM to "sell" on concerns about valuation and moderating vehicle sales. GM sank $1.51 to $26.57.

Kinder Morgan Inc. (KMI) said its chairman and chief executive officer is leading a $13.4 billion bid to take the pipeline operator private for $100 per share. Kinder Morgan surged $15.90 to $100.31.

Albertsons Inc. posted a higher first-quarter profit that handily topped Wall Street estimates, although its revenue was flat and missed targets. Albertsons added 5 cents to $25.67.

Declining issues outpaced advancers by more than 3 to 1 on the New York Stock Exchange, where volume of 1.56 billion shares led the 1.34 billion shares that changed hands Friday.

The Russell 2000 index of smaller companies declined 18.51, or 2.54 percent, to 711.04.

Overseas, Japan's Nikkei stock average fell 0.35 percent. Britain's FTSE 100 lost 2.4 percent, Germany's DAX index dropped 2.3 percent and France's CAC-40 was lower by 2.42 percent.

Beijing has allowed the renminbi to crawl just 1 per cent higher against the dollar since last July's 2.1 per cent revaluation, with the currency falling to a nine-week low of Rmb8.032 on Tuesday. The importance of this issue was made clear by George W. Bush, US president, who said one of Mr Paulson's objectives would be to ensure the currency flexibility of the US's trading partners.

"China has not taken kindly to pounding the pulpit and speakers who seem to convey an antagonistic approach," said Michael Woolfolk, senior currency strategist at Bank of New York. "Mr Paulson has considerable experience in China and is well regarded over there. He could reinvigorate the discussions over currency policy."

He added: "Paulson represents a window of opportunity to accomplish a soft landing to a rapidly growing global imbalances problem. If anyone is capable of carrying this off, he is one of the best placed. The 'strong dollar' policy may quite quickly have an epitaph written for it: 'rest in peace'."

Monica Fan, global head of FX strategy at RBC Capital Markets, also saw Mr Paulson's Chinese links as crucial. "Paulson's intimate knowledge of the Chinese administration and pro-environmental stance means he is more popular in China. He may be more effective in persuading China to allow greater currency appreciation," she said.

However, Ms Fan argued this could allow the dollar to strengthen against the euro, with European currencies no longer having to bear as much of the burden of dollar adjustment.

Tony Norfield, global head of FX strategy at ABN Amro, argued that Mr Paulson would not be as bad for the dollar as several other candidates for the Treasury job would have been, notably Don Evans, who was seen as reacting to the concerns of industry, and Martin Feldstein, who had said the dollar needed to fall by 30-40 per cent to help rein in global imbalances.

Indeed, the dollar had fallen in morning trading on speculation that Mr Evans was to be appointed, before initially firming on the news that Mr Paulson had been named, only to hit new lows later on. By mid-session New York trade, the dollar was down 1 per cent at $1.2866 to the euro, 1.3 per cent to $1.8818 against sterling, 1 per cent to SFr1.2119 against the Swiss franc, 0.2 per cent at Y112.23 against the yen, and 0.6 per cent to C$1.0995 against its Canadian counterpart, brushing 28-year lows.

Some attributed part of the dollar's sell-off to a slide in US consumer confidence in May, although the reading still came in ahead of market expectations.

The dollar did gain 2.3 per cent to R$2.3245 against the Brazilian real and 0.8 per cent to 11.274 pesos against the Mexican peso as a selective withdrawal from emerging markets continued.

Sterling was strong, rising 0.3 per cent to £0.6835 to the euro, 0.8 per cent to $A2.4704 against the Australian dollar and 1 per cent to Y211.08 against the yen, amid a view that housing data due on Wednesday might prove strong enough to tilt the Bank of England towards a near-term rate rise.

The yen fell 0.7 per cent to Y144.34 to the euro as Toshihiko Fukui, the governor of the Bank of Japan, reiterated his view that the end of quantitative easing would not automatically spell the end for Tokyo's zero interest rate policy.

"The market's more sensitive to bullish news than bearish news right now," said Aaron Kildow, a broker at Prudential Securities in New York.

To explain this, analysts point to the world's limited spare production capacity, which has the effect of making any real or perceived hiccup in the global energy trade that much more threatening.

Some of the top international concerns keeping prices elevated include diplomatic tensions between the West and
Iran over Tehran's nuclear goals, violence in Nigeria and rising energy demand in China.

After climbing as high as $72.75 per barrel, light sweet crude for July delivery settled 63 cents higher at $72.03 a barrel on the New York Mercantile Exchange.

July Brent crude at London's ICE Futures exchange gained 78 cents to $71.37 a barrel.

"Thursday's OPEC summit is going to be the big fundamental story of the week," said Citigroup oil analyst Timothy Evans.

Venezuelan President Hugo Chavez wants the cartel to cut production - a familiar refrain from a country known as a price hawk - but other OPEC countries, including Qatar and the United Arab Emirates, are calling for no change to the group's official 28 million barrel per day production quota.

Traders also are watching the June 1 official start of the U.S. Gulf of Mexico hurricane season, which is expected to be more active than normal, but not as harsh as last year's. Hurricanes Katrina and Rita caused heavy damage to offshore platforms and pipelines, as well as onshore refineries, sending gasoline prices skyrocketing amid spot shortages and emergency imports from Europe.

Oil industry and government officials asserted at a press conference in Washington that they would be better prepared this summer to respond to any hurricane-related damage to energy infrastructure, mainly because of better coordination and communication now in place.

"We did it as good as we could" following last year's hurricanes, said Red Cavaney, head of the American Petroleum Institute. "But we look forward to doing it better next time." Cavaney said the U.S. will again be able to rely on Europe for emergency gasoline imports should that become necessary.

Elmer P. Danenberger, chief of offshore regulatory programs at the Minerals Management Service, said the industry has made significant progress in the past year strengthening offshore drilling units so that they are better moored to the ocean floor. "As much as possible has been done in the offseason," Danenberger said.

On Tuesday, Nymex gasoline futures rose by 1.31 cent to finish at $2.1499 a gallon while heating oil futures rose 2.34 cents to close at $2.0039 a gallon.

Nymex natural gas futures fell 3.1 cents to settle at $6.123 per 1,000 cubic feet.

Natural gas futures are near a one-year low and some analysts say that if inventories continue to grow at this pace, the country could run out of natural-gas storage capacity before winter, a prospect which should exert downward pressure on prices.

Dependents who were covered under their parents' employer-sponsored insurance are usually dropped at age 18 or 19 if they are not full-time students. Similarly, low-income teenagers insured under Medicaid or the State Children's Health Insurance Program (SCHIP) lose coverage at age 19 unless they qualify for Medicaid as adults, which often does not happen because of the program's requirements become more strict, according to the report authors, led by Dr. Sara R. Collins, who is a senior program officer at The Commonwealth Fund.

The result is that the health coverage problem is most acute among low-income young adults, who often do not attend college and frequently have jobs with no health benefits.

At any given time, 40 percent of 19- to 23-year-olds who do not attend college or are part-time students have no health insurance, according to Collins and her colleagues. A Commonwealth Fund survey in 2005 found that among workers ages 19 to 29, 43 percent of those who earned less than $10 an hour were uninsured.

But even many college graduates face a significant period without health insurance, the study authors say. Of students who graduated between 1996 and 2000, they report, 38 percent were uninsured for at least part of the following year, with 21 percent going without coverage for six months or longer.

Collins and her colleagues offer three broad measures they say could address the problem. Regarding Medicaid and SCHIP, they suggest Congress require states to extend coverage several years beyond age 18.

"Such a policy change," the researchers write, "could help the 2.9 million uninsured young adults ages 19 to 23 with incomes under 100 percent of poverty."

Similarly, they add, more states could require private insurers to extend coverage for unmarried dependents beyond age 19. Several states have already done so; in a law that took effect this month, New Jersey is requiring most group health plans to cover single adult dependents up to age 30.

States could also ensure that all colleges require students to have health coverage, as many institutions already do, Collins and her colleagues suggest. These schools offer health insurance to students who lack it, with the cost ranging from $500 to $2,400 a year.

Requiring all colleges and universities to have such policies, the researchers note, would help cover the 2 million full- and part-time students between 19 and 23 who lack health insurance.

In Tokyo, the Nikkei 255 index closed below 15,500 points for the first time in three months, extending the recent slide in worrying fashion.

Crucially, foreign investors remained net sellers in pre-opening orders, fanning concerns about an outflow of funds from Asian markets en masse.

"As selling by risk-averse foreign investors continues on the back of worries over prospects for the US economy, as well as on concerns over an expected rise in local interest rates, the Japanese market will continue to have a difficult time going forward," Naito Securities analyst Youzo Asai said.

"While there is some bargain-hunting from local players on the downside, this lacks the ability to absorb and cancel out the impact of foreign investor selling," Asai said.

Worse still, there is a potential overhang from investors who borrowed money to bet the market would rise but now face pressure to close those positions.

"Retail investors have been buying equities on margin since last year, which helped buoy the Japanese market but those long positions that have not been settled are now weighing on the top-side of the market," Asai said.

In Sydney, down 2.03 percent, CMC Markets senior dealer James Foulsham said investors remained on edge after recent losses and sold aggressively.

With the negative US lead, "people were set to quickly unwind positions," he said, adding that a fall in metals prices put pressure on the leading stocks.

"A majority of traders expect the choppy conditions to continue for while so they are not willing to weather negative moves," Foulsham said.

In Mumbai, down 5.5 percent at one stage, the sell-off threatened to turn more serious still as fund outflows prompted concerns about the current account deficit, still a weak point despite India's recent strong economic performance.

Dealers there noted how the rupee was being quoted at a three-year low of 46.5 to the dollar, reflecting sustained dollar demand from foreign funds selling down their Indian equity holdings.

"India's central bank has not yet stepped in to curb the trend," said a dealer with a private bank, hoping for some action to stop the slide.

Dealers said foreign funds continued to sell but stocks are still overvalued, suggesting more losses are in store before the correction is over.

Market data Tuesday showed overseas funds had sold 2.47 billion dollars worth of India stocks over the 13 trading days to Tuesday, leaving their net position at 2.49 billion dollars for the year so far.

Elsewhere, Singapore was down 2.49 percent in mid-afternoon trade, with Bangkok off 1.70 percent and Jakarta down 2.31 percent while Kuala Lumpur held up relatively well with a loss of 1.13 percent.

The data echoed an earlier consumer confidence survey, which showed that households are likely to spend more.

The retail sales data came as figures showed that Germany's unemployment rate also fell in May.

Unemployment was down to 11% in May, compared to 11.3% in April, according to seasonally-adjusted figures from the Federal Labour Agency.

One of the factors prompting greater job opportunities is the World Cup, both for employment in services and construction, the agency said.

French economy

However, while Germany's economy seems set for a recovery, data for France was not as positive.

Consumer confidence for May declined to a net -30, according to INSEE, France's National Statistics Office.

"We have extremely weak confidence and the only thing that could be a catalyst to help this would be a change in government," said Emmanuel Ferry, economist with Exane BNP Paribas.

However, French producer prices were up slightly less than expected, rising by 0.6% in April for the month, and 3.6% on a year-by-year basis.

Meanwhile, unemployment was lower in April at 9.3%, compared to 9.5% in March.

According to Strapped, Gen X-ers have it much worse than our Baby Boomer parents, because while typical earnings for college grads have stayed the same for three decades, the costs of housing, education and health care have grown exponentially -- much faster than inflation.

The grim financial situation many young folks are now facing is part of a broad governmental failure to regulate the rising costs of higher education, to boost the minimum wage to a livable wage, and to create a sufficient number of full-time jobs -- with benefits -- to ensure that America's massive twenty- and thirty-something work force is healthy and paid well enough to provide for their families.

The result of this sweeping federal failure isn't pretty. Attending college, for many middle-class as well as low-income families, is a "damned if you do, damned if you don't" proposition, and in 2003, less than a third of young adults aged 25 to 29 had a bachelor's degree. College is just too expensive for all but the luckiest few to afford -- but not having a degree means difficulty in landing a job. According to Draut, in 1972, the typical male high school graduate, aged 25 to 34, earned $42,000 in inflation-adjusted dollars; three decades later, male high school graduates of the same age were earning just over $29,000.

Because of the scarcity -- and competition to find -- full-time salaried jobs, growing numbers of young people are turning to part-time or temp gigs. During the '90s, the number of jobs handled by temp agencies doubled. And more and more young people are being forced to move back home with their parents; nowadays, four out of 10 people move home at least once after college.

I discussed all of these issues, and more, with Strapped author Tamara Draut in an email interview.

Laura Barcella: What inspired you to write this book?

Tamara Draut: I wanted to counter the conventional wisdom that young people today are struggling financially because they lack a strong work ethic or because they're profligate spenders. There is so much frustration out there among both parents and young people who can't understand why they're having such a difficult time getting ahead. I wrote Strapped with the hope of raising awareness that the challenges facing this generation are not personal, but the result of political decisions made over the last three decades.

LB: What sort of social or economic impact do you hope the book will have on American culture, and young people in particular?

TD: Already the book is having impact. I get countless emails from young people thanking me for telling this story. I've even gotten emails from parents telling me that they now better understand the lives of their twenty-something children. On a larger scale, I hope the book inspires more young people to fight for reforms by showing that the breakdown in opportunity and economic security didn't "just happen," and it can be changed.

LB: Can you give us a brief overview of why exactly "getting ahead" has gotten so much harder for young people today?

TD: Today's generation of twenty- and thirty-somethings are experiencing the fallout of a three-decade-long shift in our culture and politics. A generation ago, three factors helped smooth the transition to adulthood. The first was the fact that there were jobs that provided good wages, even for high school graduates. A college degree wasn't necessary to earn a decent living. But even if you wanted to go, it wasn't that expensive, and grants were widely available.

The second was an economy that lifted all boats, with productivity gains shared by workers and CEOs alike. The result was a massive growth of the middle class, which provided security and stability for families.

Third, a range of public policies helped facilitate economic mobility and opportunity: a strong minimum wage, low college tuition and generous financial aid, major incentives for homeownership and a solid safety net for those falling on hard times. Simply put, the government had your back. This world no longer exists. The story of what happened is well-known.

As the nation's shift to a service-based economy accelerated, the new economy dramatically changed the way we lived and worked. Relationships between employers and employees became more tenuous, as corporations faced global competitors and quarterly bottom-line pressures from Wall Street. Increasingly, fringe benefits like health care and pension plans were only provided to well-paid workers. Wages rose quickly for educated workers and declined for those with only high school degrees, resulting in new demands for college credentials.

As most families saw their incomes stagnate or decline, they needed two full-time incomes just to stay afloat, creating new demands on working parents. Getting into the middle class now required a four-year college degree, and even that was no guarantee of the American dream.

While adults of all ages have endured the economic and social changes brought by post-industrialization, today's young adults are the first to experience its full weight as they try to start their adult lives. But the challenges facing young adults also reflect the failure of public policy to address the changing realities of building a life in the 21st century. Government no longer has our back. As young adults today are working to get into the middle class, they're being hit by a one-two punch: The economy no longer generates widespread opportunity, and our public policies haven't picked up any of the slack.

LB: Why are so few college-qualified students enrolling, when now -- more than ever -- one seems to need a college degree to land a decent job? Is it because the price of university has risen so dramatically, or are other factors also at play?

TD: Young people have gotten the message loud and clear that they need a college degree to get into the middle class. Today, three-quarters of high school grads continue their education with some type of college experience. The problem is that college has become a luxury-priced necessity. Over the last two decades, the cost of tuition has more than doubled, and federal financial aid has fossilized. As a result, young people from low-income households often can't scrape together enough loans, grants or cash to foot the bill.

LB: Tell me a bit about college loans and their insidious impact on the lives and financial security of younger folks.

TD: Today, the average student loan debt for a college grad is close to $20,000. That's a $200 monthly bite out your paycheck for ten years. For those who continue on to grad school, the combined debt is about $46,000 -- a $500 monthly payment for ten years.

The problem is that the typical earnings for college grads have been flat for three decades, while the cost of housing, health care and education have all risen much faster than inflation. So essentially young people must figure out how to do more with less money.

Another layer to this problem is that about 1 out of 5 students who borrow money end up dropping out of college. So they've got the debt, but no degree. The enormous debt load means that today's generation has less money to save, whether for retirement or for a down payment on a home.

LB: I'm part of the general demographic of people you profiled in "Strapped." Can you explain how and why our parents' generation had it easier when it came to graduating from college, getting good jobs with benefits and raising a family?

TD: A generation ago, a young person entered the labor market on an escalator. Young workers could count on a swift and stead progression in their earnings. Today, young workers enter the labor market on one of those automated airport walkways. Productivity may be rising, but young workers' paychecks are staying flat.

Back in 1972, the typical 25- to 34-year-old male high school graduate earned just over $42,000 in inflation-adjusted dollars. Three decades later, male high school graduates are earning just over $29,000. But the earnings for college grads have remained fairly steady over the last three decades.

Young women's earnings have also declined, but not as steeply. Young female workers with college degrees have experienced growth in their incomes compared to three decades ago as career opportunities have grown, though women in this age group earn less than their male counterparts at every level of education.

The earnings picture is grim. But add to that the reality that while paychecks have been stuck in first gear, the price of housing has soared in the last ten years. This is especially true for young professionals because the hottest job markets are still clustered around our nation's largest and most expensive cities. Between 1995 and 2002, median rents in nearly all the largest metropolitan areas rose by more than 50 percent.

LB: What's shifted politically to keep people of this generation down?

TD: Over the last three decades, the triumph of conservative ideology has resulted in a major shift away from shared responsibility toward personal responsibility. States slashed their support of higher education, leading to steep tuition hikes.

At the federal level, financial aid shifted from being a grant-based system to a loan-based system. Guaranteed pensions got replaced with individual retirement plans. After Ronald Reagan's firing of striking airline workers, businesses ramped up their anti-union efforts, and states passed legislation making it more difficult for workers to unionize. The minimum wage lost its purchasing power. ...

Over the last three decades, we've witnessed a steady retrenchment from investing in the common good. We've failed to shore up the public structures that provide individuals with the opportunities to get ahead. As I write in the book, in this era of hyper-individualism, our national spirit has shifted from "We're all in this together" to "Hey, look out, I'm about to step on you."

LB: How have the Bush administration's policies affected the lives of Generation X (and Y) for better or -- more likely -- for worse?

TD: The policies of the Bush administration and Congress have made the future look even grimmer for young people. The soaring national deficit and debt will be our burden to pay. Three rounds of tax cuts have further constrained our nation's ability to get serious about shoring up our investments in education and health care. Most recently, Congress made major cuts to financial aid for college, including raising the cost of federal student loans. The Bush administration has taken the creed of selfish individualism to new heights -- and the public good has suffered as a result.

Brokerage CMCIC commented: "A period of deep uncertainty has begun." It said the "no member of the (Michelin) family of five brothers and sisters appears likely to succeed Edouard".

And at Exane BNP Paribas, analyst Petra Horn said: "The ultimate succession could be a delicate matter because traditionally the position of the president and managing director has been held by a member of the Michelin family."

She also noted that the company had an unusual share structure whereby decision-making was concentrated in a few hands to limit the influence of shareholders.

Edouard Michelin drowned on Friday while fishing from a boat off northwest France.

Analysts said that the group was in good shape and that Edouard Michelin had laid down and driven clear strategic direction for the business.

Under Edouard Michelin, the Michelin group had changed fundamentally and had adapted its strategy, aiming increasingly at the high end of the tyre market and expanding in Asia in a highly competitive market, they said.

Analysts said that they were confident that Rollier could run the company until a successor to Edouard Michelin was appointed.

Horn said that Rollier knew the company well and was well known in the financial sector because he had been group finance director from 1999 to 2005.

Analysts also remarked that Rollier would work with the 13 members of the group's executive council.

It was also possible that the man Rollier had replaced, the former joint manager Rene Zingraff, might be asked to return to help.

"Petrobras (has been)... the only company that is not delivering (diesel) in recent days. This is because, allegedly, it has not received government credit notes," said Alvarado.

He said the Bolivian government might have been late in paying Petrobras for the subsidized fuel, but that it had never been a problem before.

"I see... the act of Petrobras as an approach intended to sabotage the country," Alvarado said.

The relations between Petrobras and Bolivia have been tense since May 1, when the country decided to nationalize its fossil fuel resources.

Petrobras, which produces 60 percent of the natural gas that Bolivia exports to Brazil, was hard hit by the decision.