Dow falls 101; below 8,000

NEW YORK - Stocks dropped sharply in the final hour of trading today after bond yields shot higher on concerns of building inflation. The Dow Jones industrial average ended 101.27 points lower to close at 7,960.84, the first below 8,000 since July 21.

Decliners led advancers by a 4-to-3 margin on the New York Stock Exchange, with 1,609 down, 1,256 up and 537 unchanged. NYSE volume totaled 498.89 million vs. 480.34 million yesterday.

Broad-market indexes also were lower. The Standard & Poor's 500 list fell 10.47 to 926.53, and the NYSE composite index lost 4.45 points to 480.76. The Nasdaq index fell 10.29 to 1,576.45, and the American Stock Exchange index fell 1.12 to 643.23.

The 30-year Treasury bond was down 7/16 point, pushing its yield, which rises when prices fall, to 6.68 percent from 6.63 percent late yesterday. Bonds fell after a private report this afternoon suggested retail sales were strong in August. The report, from Interstate Johnson Lane, raised worries that important government reports due out tomorrow and Thursday would show that inflation is rearing its head.

Bond investors, and stock investors by extension, do not like inflation scares because they suggest that the Federal Reserve might find it necessary to raise short-

term interest rates, which would attack the long-term value of both stocks and bonds.

The government is scheduled to release July producer prices and retail sales tomorrow and July consumer prices Thursday.