"The SANG (Saudi Arabia National Guard) needs these defense articles so that it can effectively conduct security and counter-terrorism operations," the Pentagon's Defense Cooperation and Security Agency said.

The equipment would also serve to make Saudi Arabia "less reliant on the deployment of US combat forces to maintain or restore stability in the Middle East," it said.

The agency said the radios in particular would enable secure communications "and provide the critical VHF and HF links necessary for a large fast-moving force."

Principal contractors would be ITT Aerospace/Communications, Harris Corporation, General Dynamics Land Systems and Raytheon Corporation.

In a separate notification to Congress, the DSCA reported on the possible sale to Saudi Arabia of 24 UH-60L Black Hawk helicopters.

"The total value, if all options are exercised, could be as high as 350 million dollars," it said.

It said the Royal Saudi Land Forces have a long-term plan to use the Black Hawks to expand and modernize their helicopter fleet.

"Saudi forces have used rotary-wing assets in numerous anti-terrorism operations within their borders and view their ability to quickly move troops around the country as a critical capability," it said.

"The additional aircraft will primarily be used to move troops and light equipment over long distances within their kingdom for external defense and internal requirements, as needed," it said.

The principal contractors would be Connecticut-based Sikorsky Aircraft Corporation and General Electric.

Bio Fuel Systems is a wholly Spanish firm, formed this year in eastern Spain after three years of research by scientists and engineers connected with the University of Alicante.

"Bio Fuel Systems has developed a process that converts energy, based on three elements: solar energy, photosynthesis and an electromagnetic field," it said in a press dossier.

"That process allows us to obtain biopetroleum, equivalent to that of fossil origin."

Phytoplankton, like other plants, absorb carbon dioxide as they grow. Scientists have examined the possibility of stimulating growth of the single cell plants as a means of reducing the amount of CO2 in the atmosphere.

CO2, liberated by burning fossil fuels like coal, oil and gas, is widely held responsible for global warming.

Bio Fuel Systems said its new fuel would reduce CO2, was free of other contaminants like sulphur dioxide and would be cheaper than fossil oil is now.

"Our system of bioconversion is about 400 times more productive than any other plant-based system producing oil or ethanol," it said, referring to currently available biofuels made from plants like maize or oilseeds.

Bio Fuel Systems is working with scientists at the University of Alicante on the project. It has drawn up industrial plans to make the fuel and says it will be able to start continuous production in 14 to 18 months.

The increase pushed 30-year rates to the highest level since they stood at 6.81 percent the week of May 24, 2002.

The lowest mortgage rates in four decades powered a boom in housing which pushed sales of both new and existing homes to record levels for five consecutive years. But sales have slowed this year as mortgage rates have been rising.

Some economists have expressed fears that the housing boom could quickly turn into a bust with sales and prices both falling sharply. But Federal Reserve Chairman Ben Bernanke told Congress on Thursday that so far the slowdown in housing "appears to be orderly."

Bernanke said the Fed recognized that a slowdown in housing could have a more severe impact on the overall economy "and we are watching it very carefully."

The rise in mortgage rates this week was blamed in part on further increases in inflation, including a 0.3 percent increase in core inflation as measured by the consumer price index, which was reported on Wednesday.

Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, increased to 6.41 percent, up from 6.37 percent last week.

Rates on one-year adjustable rate mortgages rose to 5.80 percent, up from 5.75 percent last week.

Rates on five-year adjustable-rate mortgages rose to 6.36 percent, up from 6.33 percent last week.

The mortgage rates do not include add-on fees known as points. The 30-year and five-year mortgages carried a nationwide average fee of 0.5 point. The 15-year mortgage had a nationwide average fee of 0.4 point and the one-year ARM carried a fee of 0.6 point.

A year ago, 30-year mortgages averaged 5.73 percent, 15-year mortgages stood at 5.32 percent, one-year ARMs were at 4.42 percent and five-year ARMs averaged 5.26 percent.

Shares of Intel, the world's largest chip maker, fell 7.5 percent to $17.10, a day after it reported the sales forecast and lower quarterly profit.

The Dow industrials were led lower by shares of heavy equipment maker Caterpillar Inc.

The Philadelphia Federal Reserve Bank said its business activity index for the mid-Atlantic region fell to its lowest level since January as costs climbed. The Dow Jones Transportation Average tumbled 4.4 percent.

Setting the stage for Friday, Microsoft Corp. shares rose 6 percent to $24.23 after hours after the company reported fourth-quarter earnings and said its board authorized an additional $20 billion in an ongoing share-repurchase program. Microsoft closed on Nasdaq at $22.85.

Web search leader Google Inc. reported that its quarterly earnings doubled. Google shares rose 1.5 percent to $392.80 after the bell from a Nasdaq close at $387.12.

Meanwhile, Advanced Micro Devices shares fell 5.6 percent to $20.44 in trading after the close as the company said margins and operating income fell. AMD's shares closed at $21.65 on the New York Stock Exchange.

"Stocks lost some momentum after a couple of lackluster earnings reports and the weak Philly Fed," said Steve Neimeth, portfolio manager at AIG SunAmerica Asset Management in Jersey City, New Jersey.

"Earnings after the bell were mixed. Microsoft's buyback is meaningful, but AMD and Google were not stellar," he added.

The Dow Jones industrial average fell 83.32 points, or 0.76 percent, to end at 10,928.10. The Standard & Poor's 500 Index slid 10.68 points, or 0.85 percent, to finish at 1,249.13. The Nasdaq Composite Index dropped 41.29 points, or 1.98 percent, to close at 2,039.42.

Intel shares were the biggest drag on the Nasdaq and the S&P 500. UBS and AG Edwards both cut their price targets on the stock.

CATERPILLAR GETS COAL MINER'S BLUES

Shares of heavy equipment maker Caterpillar Inc. led the Dow's decline. The stock dropped 2.9 percent, or $2.04, to $69.08 on the New York Stock Exchange after Peabody Energy Corp., the world's largest private-sector coal producer, forecast a third-quarter earnings shortfall. Caterpillar's customers include major companies in the mining and energy sectors.

Analysts at Citigroup on Thursday downgraded the capital goods group to "underweight" from "market weight."

Peabody shares slid 10.4 percent, or $5.56, to $47.79.

Yum Brands Inc.'s shares fell 6.4 percent, or $3.13, to $46.00. The company reported earnings late Wednesday, which showed disappointing U.S. same-store sales growth.

POLISHING THE APPLE

But shares of Apple Computer Inc. jumped 11.8 percent, or $6.40, to $60.50 on the Nasdaq, a day after the maker of the iPod digital music player said quarterly profit topped Wall Street's expectations. Apple shares registered their biggest one-day percentage gain in nearly two years.

Analysts said investors were worried about making bets on stocks following strong gains on Wednesday when Federal Reserve Chairman Ben Bernanke's comments raised hopes for a pause in interest-rate rises.

In a second day of testimony on central bank policy, Bernanke told House members on Thursday he expected inflation to moderate and said a wage increase would not impede that.

Minutes of the Federal Reserve's last meeting had limited impact on the stock market, analysts said. The minutes showed policy makers saw "significant uncertainty" about the future path of interest rates.

Trading was heavy on the New York Stock Exchange, where about 1.69 billion shares changed hands, above last year's daily average of 1.61 billion. On Nasdaq, about 2.13 billion shares traded, above last year's daily average of 1.80 billion.

On the NYSE, declining shares outnumbered advancing ones by a ratio of more than 2 to 1, while on Nasdaq, about three stocks fell for every one that rose.