Wall Street report: Monday close

MERRILL Lynch, the stockbroker with a pawing bull as its symbol, turned bearish on share levels as America's leading market index posted its sixth straight decline.

The Dow Jones Industrial Average, which fell 2.7% last week in its biggest weekly decline since September, weakened 96.11 points or 1% to 9,891.42. The Nasdaq, which has gained almost twice as much as the Dow since September's terror attacks, lost 31.72 points or 1.6% to 1990.74. The Nasdaq has dropped 5% from last week's intra-day high just below 2,100.

Sentiment was knocked by a downbeat call from Richard Bernstein, chief US strategist for Merrill. In a note to clients, Bernstein said he was lowering his asset allocation to shares from 60% to 50% because the market had become too 'speculative'.

'We have commented that there is a thin line between a liquidity-driven market that anticipates improving fundamentals and a bubble,' Bernstein said. 'The equity market may have stepped over that line.' He called share valuations 'extreme' and calculated that they were more expensive in relation to earnings than in 1987, the year of the stock market crash.

Techs were restrained by downgrades from brokers who said share levels had outstripped fundamentals. Online auctioneer eBay fell 71 cents or 1.1% to $63.16 after investment firm Lehman told investors to take profits after the shares had run up from below $30 since September.

Cellphone companies retreated amid brokers' concern about 'continued weakness' in the sector. Service provider Nextel tumbled $1.64 or 16% to $8.36, phone maker Motorola lost 15 cents or 1% to $14.19 and Finnish giant Nokia slid $1.32 cents or 5.8% to $21.49.

Conglomerate Tyco International firmed $2.15 or 4.3% to $52.40 after denying it was interested in bidding for Honeywell International. Honeywell shares dropped $1.55 or 4.7% to $31.70. Dow Chemical shed $3.20 or 11% to $27.05 after UBS Warburg had some negative comments about the company's outlook.

K-Mart, the retail chain, slipped another 46 cents or 14% to $2.84, down 40% so far this year, on continued fears over its ability to weather its problems.

Among Dow components, Alcoa fell 65 cents or 1.8% to $35.16, Walt Disney gave up 50 cents or 2.3% to $21.37, Intel rose 29 cents or 0.8% to $34.84 and Philip Morris gained 62 cents or 1.3% to $48.27.