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Wall St. posts strong gains
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January 10, 2000: 5:42 p.m. ET
AOL, Time Warner deal sparks big rally as Dow Jones hits record
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - U.S. stocks rose strongly Monday, lifting the Dow Jones industrial average to a new high and the Nasdaq composite index to a record point gain, after a merger between America Online and Time Warner sparked demand for Internet and media issues.
The tie-up between a traditional media company and the nation’s largest Internet service provider fueled optimism over the two industries’ inter-dependence and growth. But stock gains were strongest among Internet shares, reversing last week’s big losses, as investors bet that similar deals are ahead.
"There’s no question that this will be a further catalyst for further deals of this type,” Stewart Halpern, media analyst at Banc of America Securities told CNNfn
Paul Meeks, portfolio manger at Merrill Lynch Technology fund, agreed
"I think you are going to see a lot more deals between the traditional media companies and the new media companies,” he said.
Helped by one such company, Disney, the Dow Jones industrial rose 49.64 points to a record 11,572.20.
The Nasdaq composite index jumped 167.05 points, or 4.30 percent, to 4,049.67. The largest point gain on record surpassed Friday’s 155-point advance and wiped out most of last week’s 4.59 percent drop.
The broad S&P 500, meanwhile, jumped 16.13 points to 1457.60, 11 points shy of a record.
Breadth was positive, as advancers on the New York Stock Exchange led decliners 2,572 to 1,611. And volume was heavy, with 1.7 billion shares changing hands on the Nasdaq, the third busiest day on record.
(Click here for a look at CNNfn’s hot stocks.)
In other markets, bonds fell while the dollar rose against the euro and was little changed vs. the yen.
Mega merger
The Time Warner (TWX)-AOL deal lifted many related stocks, but none more than Time Warner itself. Shares of the media giant and parent of CNNfn leapt 25-7/16, or 39 percent, to 90-3/16.
Higher in before-hours trading, America Online (AOL) stock fell 2-1/2 to 71-1/4 Monday. More than 88 million shares changed hands, making AOL the most actively traded New York Stock Exchange stock.
But investor enthusiasm didn’t end with Time Warner, as the deal lifted other entertainment companies, media providers and Internet firms.
"Everybody has been talking about convergence between traditional media and new media,” Paul Noglows, analyst at Chase Hambrecht & Quist, told CNNfn. "What this really does is raise the bar. If a traditional media company does not have a viable Internet strategy, they are not going to succeed, period.” (For more of Noglow’s comments, click here (339K WAV) or (339K AIFF)
As such, Dow component Walt Disney (DIS) rose 4-3/4 to 35-7/8. Viacom (VIA) gained 5-5/8 to 59-1/2 and CBS (CBS) leapt 4-3/8 to 62-3/8.
Internet service providers and portals also rose. Earthlink (ELNK) advanced 2-1/16 to 43-11/16. PSINet (PSIX) leapt 11-7/16 to 72-7/16. Yahoo! (YHOO) soared 28-13/16 to 436-1/16. Lycos (LCOS) rose 9 to 79-3/4.
"This (deal) starts the process where media companies on both sides of the digital line start to blur those lines,” Paul Cook, portfolio manager at Munder Capital Management, told CNNfn.
Lucent, Alcoa edge higher
In other movers, Lucent Technologies (LU), which fell 25 percent in after-hours trading Thursday after warning that its fiscal first-quarter income will fall short of analysts’ forecasts, clawed 3-3/4 higher to 57-3/4.
Alcoa Inc. (AA), the world’s largest aluminum producer and the Dow’s best performer last year, gained 9/16 to 85-3/16. The company reported fourth-quarter earnings of $334 million, or 89 cents a diluted share, topping Wall Street forecasts and year-earlier results.
But the Dow’s gains were held in check by losses to Merck (MRK), Johnson & Johnson (JNJ) and Caterpillar (CAT), all of which fell more than 2 percent.
What’s next?
The day’s broad stock market advance comes after a seesaw week on Wall Street in which the Dow ultimately rose 0.2 percent to a record while the Nasdaq, which posted a record last Monday, lost 4.6 percent. The S&P dropped 1.89 percent on the week.
While the Monday’s gains were largely linked to the AOL-Time Warner deal, analysts see a major positive for stocks in the days ahead. That’s because with the fourth-quarter earnings season set to pick up steam, many companies are forecast to post solid profits. 
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