The Dow Jones industrials and the S&P500 dipped in light trade yesterday as investors booked profits following Friday's record-setting rally and exercised caution ahead of the third-quarter reporting season which begins in earnest later this week. Merrill Lynch and Ryder Systems also dragged on the overall market, but the Nasdaq got a boost when Google hit a record-high on optimism about the strength of its advertising technology.

The Dow Jones Industrials lost 22 points to 14,044; the S&P500 shed 5 to 1,553, but the Nasdaq lifted 7 points to end at 2,787 - its highest since January 2001.

In company news, the saga continues on Wall Street, with shares in Merrill Lynch dropped 3.33% to $74.12. J.P. Morgan cut its rating on the stock to "neutral" from "overweight" and said a recovery for Merrill's fixed income business will be challenging given its significant exposure to collateralized debt obligations and subprime loans. Credit Suisse also downgraded the investment bank's stock according to theflyonthewall.com.

Meanwhile, shares in JP Morgan Chase & Co shed 0.29% to $47.44 after the Financial Times reported an analyst expects it to report mark-to-market losses on leveraged loans of about $1.4 billion and an additional $700 million in write-downs of mortgages and mortgage-backed securities. The same analyst estimates Bank of America will take write-downs of $700 million for leveraged loans and mortgage write-downs of $300 million.

In takeover news, Textron has agreed to buy United Industrial in a deal valued at $1.1 billion in cash sending its shares down 2.1% to $64.01. The move is designed to strengthen its aerospace and defense business. Shares of United Industrial, whose customers include the US army and air force rose as much as 6.7 per cent to a lifetime high of $80.70.

With reporting season about to get underway some disappointing news came from Ryder System. Shares in the truck leasing company sank 6.76% to $45.92 following its announcement that softness in the US economy and housing market has hurt its bottom line. Ryder's performance also hit the share prices of other publicly traded truck operators which are susceptible to fluctuations in the economy.

Turning to the best and worst performers in the Nasdaq Top 100. Making the most gains were shares in Akamai Technologies after it introduced a service to expanding its client base to business customers beyond online media. Shares were up 8.41% to $33.92. Broadcom and Garmin also helped lift the Nasdaq into positive territory.

Amylin Pharmaceuticals took a beating, sliding 5.47% to $48.03. NII Holdings was down and Tellabs also performed poorly for the second day in a row after it posted earnings below expectations.