BLUE-chip stocks extended their losses yesterday on Wall Street as the renewed threat of higher US interest rates convinced investors that the strong corporate earnings of the second quarter may be in jeopardy.

At the close of trading, the Dow Jones industrial average was down 58.26 at 10,910.96, adding to Thursday's 33-point drop.

Banks and brokerages led the Dow lower, as Thursday's remarks from Federal Reserve Chairman Alan Greenspan echoed on Wall Street.

Mr Greenspan told Congress that while 1999 has been an exceptional year for the US economy, the central bank would "act promptly and forcefully" to raise interest rates at the first hint of inflation pressures.

Financial services stocks were hit hardest. JP Morgan was the weakest component of the Dow, and big rival brokerages like Merrill Lynch also tumbled.

Those businesses are generally the first to suffer from rate increases, because clients postpone borrowing in light of the higher costs.