Stocks closed slightly lower as investors focused on rising oil prices and fluctuating interest rates.
"Prices for crude oil are not really moving up as much as they are being pulled up by gasoline," said Stephen Schork, editor of The Schork Report. "Specifically, there's the persistent fear in the market that there is not going to enough gasoline to get us through the season."
The Dow Jones Industrial Average closed down about 24 points, or 0.2%, the S&P 500 ended down 0.10% while the Nasdaq Composite closed slightly below the unchanged mark.
Volume was low and there was little conviction on the part of buyers or sellers. Investors were encouraged by news of more potential mergers and acquisitions, but traders kept a wary eye on Treasury yields.
"As long as we don't see any inflation, we think that bond yields on the 10-year will stay between 5% and 5.25%," said John Massey, co-head of equities at AIG SunAmerica Mutual Funds. "If we do see a bounce up to 5.5%, that's trouble."
"I think we may have reached the plateau here in terms of yields," said Michael Church, senior portfolio manager at Church Capital Management. "We have slightly higher yields, but I don't think that changes too much for the equity backdrop here."
New York light sweet crude futures rose to trade above $69 a barrel on concerns about geopolitical unrest in Nigeria's oil market and lingering worries that the U.S. gasoline supply will not meet summer driving demand.
Four of the S&P 500 sectors were trading higher.Energy was by far the best performing sector as oil rose to $69 a barrel.Interest rate sensitive stocks such as utilities and REITs were hurt. Alcoa was the biggest percentage gainer on the Dow, rising on potential takeover news.
"Overall, in the short run, there will be more focus on interest rates, as well as M&A activity," Subodh Kumar, chief investment strategist at Subodh Kumar & Associates, told CNBC.com. "If bond yields stabilize and M&A continues, that will help the market."
A possible rival to Rupert Murdoch-run News Corp.'s $5 billion offer for Dow Jones emerged as CNBC-owner General Electric and Financial Times publisher Pearson were reported to be in talks about a possible bid for the news provider.
Under the structure of the possible deal, the FT, Dow Jones and CNBC could be combined in a privately-held joint venture, with the Bancroft family holding a 20% stake, the FT and the Wall Street Journal reported.
The Bancroft family, who have a controlling stake in Dow Jones, are currently seeking assurance from Murdoch over the editorial independence of the company's journalistic output.
Also in M&A news, British miner BHP Billiton revived its plans for a $40 billion takeover of aluminum producer Alcoa, the Times newspaper of London said in an unsourced report.
Wendy's is exploring a possible sale of the company. The nation's third-largest hamburger chain also warned that its earnings for the year would miss Wall Street expectations.
Goldman Sachs downgraded Halliburton to neutral from buy and removed the oil services company from its Americas investment buy list. The brokerage said that in a rig count environment that is flattish to slightly up, supply should grow faster than demand and hurt pricing and incremental margins and limit Halliburton's ability to beat estimates and grow faster than its peers.
Treasury prices turned higher, sending yields lower.
Sentiment among U.S. home builders slid in June to the lowest level in more than 16 years. The National Association of Home Builders Housing Market Index for June fell two points to 28. Economists were expecting the index to remain flat. The NAHB said sentiment was affected by tighter lender practices and rising mortgage rates weighing on home sales.European Shares Close Mostly Lower
The London FTSE-100 and Paris CAC-40 were negative, while the Frankfurt DAX finished modestly higher.
In political news, French citizens handed their President Nicolas Sarkozy a firm majority in second-round parliamentary elections on Sunday, but a late surge from Socialist voters prevented an expected landslide victory.
Also in France, the rivalry between aerospace companies Airbus and Boeing took center stage at the Paris air show as the EADS unit sealed a U.S. Airways order for 22 A350 XWB planes worth more than $4 billion at list prices, sources told Reuters. EADS shares gained on the news.
Shares of Imperial Chemical Industries soared 15% after the British chemical firm rejected a takeover approach from Akzo Nobel on the grounds it undervalued the company. A spokesperson for Akzo declined to comment to CNBC Europe about whether a sweetened offer would materialize. Shares of the Dutch company dipped slightly.
And Adecco shares rose, following an announcement from the German staffing group it would buy its national rival Tuja Group for about $799 million.Asian Stocks Rally
Asian bourses continued to rally, as the Shanghai Composite struck a 2.9% increase. Tame U.S. consumer price data encouraged buying in the rest of the region's markets, easing investors' inflation concerns.
South Korea's KOSPI, Singapore's Straits Times Index and Hong Kong's Hang Seng all climbed higher to record levels.
Chinese players took advantage of the government's quiet stance over the past weekend. Dealers were on guard for the past two days, suspecting the government would announce another round of tightening measures to cool the red-hot economy.
Shares in insurance giant, China Life were up almost 6%.
In Japan, the Nikkei 225 hit its highest level in three months. Exporters jumped on the yen's weakness against both the euro and the U.S. dollar.
Shares of Canon soared to a record high.
Major Japanese real estate plays also climbed after industry watchers commented that property prices still had room to grow.
Analysts are predicting South Korea's KOSPI will hit 1,800 points this week. Seoul shares continued to gain after hitting this morning's record high.
Energy shares rocked the Hang Seng index. Shares of Shenhua Energy leapt 8% after London's Brent Crude Oil price rose over $71.
In Australia, increases in base metal prices helped major resource shares lift the S&P ASX 200 nearly 0.8% in afternoon trading.