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Sharp division on Wall St.
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January 11, 1999: 5:29 p.m. ET
Blue chip stocks sink, but relentless Internet rally keeps going, and going...
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NEW YORK (CNNfn) - Investors Monday succumbed to the temptation of cashing in on their profits from last week's blue-chip rally. But nothing could stop those eager to own a share in the Internet gold rush and, as a result, the Nasdaq soared to its seventh record close in a row.
The Dow Jones industrial average fell 23.43 points to 9,619.89. On the New York Stock Exchange, declines trounced advances 1,958 to 1,110, as trading volume rose to 816 million shares.
Weakness in the blue-chip index was blamed on profit taking after a week of solid gains, as well as a continuing slide in the dollar against the Japanese yen.
The Nasdaq Composite, however, scoring its seventh record high in a row, rocketed 40.18 points, or 1.7 percent, to 2,384.59. The S&P 500 index slumped 11.21 to 1,263.88.
Despite Wall Street's mixed performance, Tom Galvin, chief investment officer at Donaldson, Lufkin & Jenrette, raised the stock allocation in his model portfolio to 80 percent from 75 percent, at the expense of bonds, which were cut to 15 percent of assets from 20 percent. The news came also as Goldman Sachs warned it would be "cautious" about investing in bonds in the near term.
And Alan Kral, portfolio manager at Trevor Stewart Burton & Jacobsen, warned investors to watch out for rising volatility in the stocks of companies whose earnings fail to keep pace with a still strong economy. (240K WAV) or (240K AIFF)
The bond market came off the day's lows in late trading, but remained under severe pressure from the dollar's weakness. The price of the benchmark 30-year Treasury bond, which had fallen a full point in the morning, traded 15/32 of a point higher, for a yield of 5.30 percent.
The dollar slid to a 28-month low against the yen overnight, and remained weak in U.S. trading. The greenback gained solid ground against the euro.
Mergers rule
In the stock market, news of pending and accomplished corporate mergers dominated trading.
In what was seen as the driving force behind much of the rally among technology shares, reports said Lucent Technologies (LU) was close to reaching a deal to buy Ascend Communications (ASND) for more than $16 billion. Speculation of the pending deal sent Ascend's stock up 5-1/4 to 76-11/16, while Lucent's shares closed down 2-1/2 to 112-3/4.
Separately, Lucent announced it is buying privately-held Kenan Systems in a $1.5 billion stock swap, and Ascend said it sold the enterprise computer division of Stratus Computer, a company Ascend bought in October.
Shares of Cisco Systems (CSCO), whose dominance in the computer networking sector could be challenged by a Lucent/Ascend merger, were down 2 to 104-11/16.
Other technology stocks also embarked on a fast-paced rally, after several analysts made positive comments about the sector. Shares of Intel (INTC) climbed 10-1/16 to 139-3/4 after Lehman Brothers raised its target price for the stock to $180 a share from $135 and kept a "buy" recommendation on the company. Intel is due to report its latest earnings Tuesday after the closing bell.
And in the sizzling Internet sector, shares of America Online (AOL) rose 18-1/4, or more than 12 percent, to 164-3/4 after Merrill Lynch more than doubled its stock price projection for the company to $195 a share from $75. Also caught in the Internet tornado, shares of Yahoo! (YHOO) soared 70-7/8, or nearly 21 percent, to 414-1/2. Yahoo! is scheduled to report its latest earnings Tuesday as well. On Monday, the company announced a marketing alliance with IBM (IBM).
Bullish comments from an analyst also helped make General Motors (GM) the best performing Dow stock for the day. GM rallied 6 to 86-1/16 after J.P. Morgan raised its 1999 target price for the company to $95 a share from $90. J.P. Morgan also raised its earnings estimates for GM to $8.75 a share in 1999 from $8.40 and compared with 1998 estimated earnings of $4.67 a share.
Elsewhere in the day's news, shares of information technology services firm SPR Inc. (SPRI) shot up 2-9/32, or nearly 13 percent, higher, to 20-3/32 on news rival Metamor (MMWW) is buying the company in a $315 million stock swap. Metamor lost 2-1/2 to 26.
Also on the merger front, Bergen Brunswig (BBC) said it is paying $1.4 billion for the purchase of PharMerica (DOSE), and the news sent PharMerica's shares up 9/16, or more than 8 percent, to 7-1/16, while Bergen's stock sank finished unchanged at 32-1/2.
Among the market's dogs Monday, shares of Pacific Gateway Exchange (PGEX) tumbled 14-11/16, or more than 32 percent, to 31 after the telecommunications services company issued a fourth-quarter profit warning.
Finally, the stock of Campbell Soup (SPB) shed 6-7/8, or more than 13 percent, to 45-3/8 after the food giant said it expects fiscal 1999 profit to fall 18 to 23 cents below market expectations, most of it taking place in the second quarter. Following the news, Merrill Lynch downgraded the stock to "near-term neutral" from "buy."
(Click here for a look at today's CNNfn market movers)
(Click here for a look at today's CNNfn tech stock report) 
-- by staff writer Malina Poshtova Zang
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