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Dow average slides 12.80, to 4,195.38


NEW YORK -- U.S. stocks fell yesterday amid concern that a surge in commodity prices and a weakening dollar will accelerate inflation and lead to higher interest rates.

Paper issues led stocks lower. Two rounds of computer-guided "sell" orders late in the day accelerated the decline.

"With gold up about four dollars and crude oil up and the dollar falling, concerns of inflation have taken hold of investors," said Ernie Cecilia, president and chief executive officer of PNC Equity Advisors. "The equity market is thinking the interest-rate scenario has changed."

The Dow Jones industrial average slid 12.80, to 4,195.38, after TC rising as much as 29.05 earlier in the day, as International Paper Co., Aluminum Co. of America and Procter & Gamble Co. fell. Declining shares outnumbered advancing issues, 1,159 shares to 1,072, on the New York Stock Exchange.

International Paper shares fell $2.125, to $73.125, after Stone Container Corp. said it will expand seven of its 12 U.S. containerboard mills to increase production.

Other paper stocks also lost. Stone Container was down $1.75, to $21.375; Champion International Corp. lost $2.875, to $41, and Georgia-Pacific Corp. fell $4.25, to $76.375.

Among broader market measures, the Standard & Poor's 500 stock index fell 3.10, to 506.13, after a 2.8-point rise. Losses in telephone and electric companies overwhelmed gains in computer software, computer system and gold stocks.

The yield on the S&P; 500 index reached a record low of 2.60 percent yesterday, displacing the old low of 2.62 percent, set in August 1987, two months before the market crashed. Many analysts consider the stock market overvalued whenever the S&P; 500 yield falls below 3 percent.

Gold stocks posted their biggest gains in six weeks as the price of gold bullion jumped to almost $400 an ounce.

Newmont Mining Corp. spurted $2.25, to $43.875; Placer Dome Inc. advanced $1.625, to $24.75; Homestake Mining climbed $1.125, to $18.375; Barrick Gold Corp. added 87.5 cents, to $24.75; Santa Fe Pacific Corp. gained $1, to $12.625; and Echo Bay Mines Ltd. increased 62.5 cents, to $10.375.

Oil issues rose, echoing a surge in crude oil and refined product futures, after Iraq rejected a United Nations plan that would allow it to sell regulated amounts of oil every six months. Royal Dutch Petroleum Co. rose $1, to $120, and Mobil Corp. strengthened 37.5 cents, to $89.75.

The Nasdaq composite index, which Thursday reached its ninth record high for the year, also reversed its gains, slipping 1.82, to 830.82.

The Russell 2,000 index was little changed, falling 0.02, to 263.96, and the Wilshire 5,000 index fell 23.62, to 4,973.56, after setting its 16th record high on Thursday.

Trading on U.S. exchanges rose to 333.9 million shares from 301.5 million on Thursday.

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