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Blue chips push into the black
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April 29, 1999: 1:40 p.m. ET
Dow gets fresh upward momentum as oil joins cyclical rally, but techs stay gloomy
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NEW YORK (CNNfn) - The Dow extended its morning gains Thursday afternoon, moving past a retreat from Internet stocks and profit taking elsewhere in the technology sector, as investors continued their infatuation with financial and cyclical companies.
Shortly before 1:30 p.m., the Dow Jones industrial average had climbed 64.43 points deeper into record territory at 10,909.88. Advances led declines 1,507 to 1,320 as 548 million shares traded on the New York Stock Exchange.
The Nasdaq Composite, home of many big-name Internet issues, fell 24.45 points to 2,525.92. The S&P 500 index eased 1.21 to 1,349.70. (Click here for a look at today's list of CNNfn's market movers.)
Bonds surged, helped by a surprisingly tame first-quarter employment cost index reading, which helped soothe inflation fears once again. The benchmark 30-year Treasury bond was up 27/32 of a point in price, for a yield of 5.52 percent.
The dollar eased against the Japanese yen, but rose against the euro, which suffered the consequences of what appears likely to be a lengthy military conflict between NATO and Yugoslavia.
Internet unwinds
Investors sold Web-related stocks with gusto after one of the sector's premier players, bookseller Amazon.com (AMZN), said revenues continue to surge but operating losses could deepen in the quarters ahead.
Shares of Amazon tumbled 22-5/8, or nearly 12 percent, to 170-7/8. The company reported a pro-forma first-quarter loss late Wednesday that was smaller than expected as revenues jumped 236 percent. But Amazon also warned that losses are likely to increase in the rest of the year as the company continues its aggressive expansion.
Despite Amazon's bearish bottom-line outlook, Donaldson, Lufkin & Jenrette increased its revenue projection for the company and kept its "top pick" rating of the stock. BT Alex. Brown, however, lowered its recommendation to "buy" from "strong buy."
Amazon's warning was enough to cool investors' appetite for practically the entire Internet sector, with shares of Yahoo! (YHOO) losing 3-15/16 to 169-9/16, @Home (ATHM) shedding 7 to 137, CMGI (CMGI) falling 12-1/2 to 238-1/16, and eBay (EBAY) sliding 2-9/16 to 190.
Meanwhile, speculation of an Internet deal sent shares of Chancellor Media (AMFM) up 1-5/8 to 53-9/16 after America Online (AOL) was said to be discussing buying a stake in the broadcasting company.
The icy selling currents in the Internet sector strengthened investors' recent resolve to take some money out of technology stocks, leaving Microsoft (MSFT) down 3/4 at 81-3/8 and Intel (INTC) down 13/16 at 60-3/8, while Cisco (CSCO) fell 3 to 108-3/4.
Not even robust earnings from communications giant MCI WorldCom (WCOM) could save that company's stock from the high-tech undertow. Even though profits beat the Street, shares slid 4-1/8 to 83-9/16.
Financials save the Dow
Much of the Dow's continued stamina came from its financial components, which rallied after the ECI and accompanying bond market bounce confirmed investor hopes of tame interest rates ahead.
Shares of American Express (AXP) climbed 3-11/16 to 136-3/4, Citigroup (C) rose 2-1/16 to 76-7/16, and J.P. Morgan (JPM) advanced 3-9/16 to 139-3/8.
Investors also continued to gobble up shares of cyclical companies, which draw strength from the health of the economy, pulling funds out of the more volatile and growth-oriented technology sector to compensate.
Shares of Alcoa (AA), which Wednesday was the leading gainer on the Dow, added 1-11/16 to 63-11/16. Caterpillar (CAT) rose 3/4 to 64-5/16, while 3M (MMM) gained 1-3/16 to 85-11/16.
Oil defies analysis
Despite a rocky start, oil shares were back at the forefront of the cyclical upturn by early afternoon, soaring as investors discounted a number of bearish comments from Wall Street research firms.
Michael Young, energy analyst at Deutsche Morgan Grenfell, cut his ratings on four major oil drillers after concluding that the sector is overvalued relative to crude oil price forecasts.
"We feel oil in general has exceeded its price targets," he told CNNfn. "With (NYMEX light sweet) oil at $18 per barrel, we believe OPEC will re-open the production spigot, and as a result we are making the call that $18 is a ceiling, not a floor. As such, it is wrong to price oil stocks on the $18 per barrel figure, when that is not likely to be sustainable."
Young downgraded Texaco (TX) and Dow driller Chevron (CHV) to "sell" from "hold," as well as cutting his rating of prospective merger partners Mobil (MOB) and the Dow's Exxon (XON) to "hold" from "accumulate."
PaineWebber joined in Young's lowered expectations for the sector, cutting its ratings of Conoco (COC) and Texaco to "neutral" from "attractive."
However, investors seemingly concentrated on the short term, rationalizing that there was little point in selling while oil prices remain near 15-month highs. Chevron shares climbed 1 to 103-7/8 and Exxon surged 3-3/8 to 84-7/8. 
-- by staff writer Malina Poshtova Zang with Robert Scott Martin
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