Stocks were mixed in a tight range Monday, after an early boost from merger-and-acquisition activity, as weakness cut into techs, banks and homebuilders.
The Dow Jones Industrial Averagebobbed in and out of negative territory, after being up more than 70 earlier.
Wal-Mart , Merck and ExxonMobil led the gainers on the index while Caterpillar and Hewlett-Packard were among the laggards.
The S&P 500 was flat, while the tech-heavy Nasdaq was lower. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell near 25.
This came after the Dow and the S&P 500 saw two straight weeks of losses, with the S&P moving lower in three of the past four weeks.
Some strategists were encouraged by the recent boost in M&A and said they will eventually lead the markets higher.
“The M&A environment will ultimately determine the fate of the market,” said David Sowerby, chief market analyst at Loomis Sayles & Co. “But in the near-term, the economy’s getting macro-ed — data’s not robust and hasn’t been for the last 6 to 8 weeks. That has truly proven to be the dog days of August for stocks.”
AIG shares rose following news that the company's aircraft-leasing unit ILFC has repaid nearly $4 billion in loansto the US government.
3M shares rose after executives said the company, which makes everything from Scotch tape to Post-It notes, plans to spend about $2 billion on acquisitions in 2010.
Hewlett-Packard was among biggest drag on the Dow after the tech titan made a bid for data-storage company3Par at $24 a share, which represents a 33 percent premium against a previous offerfrom Dell .
Other techs also declined, including Intel , Apple and Cisco .
Weakness also nagged at banks and homebuilders, with Morgan Stanley down almost 1 percent and Beazer Homes off more than 2 percent.
Another potential bidding war in the making: BHP Billiton's hostile offer for Canada's Potash could see competition as two potential rival bidders have emerged, according to reports. BHP is due to launch a charm offensive in Canada this week to strengthen its chances of securing the deal.
The news pushed other companies in the space higher, including Compellent Technologies and Isilon.
Blackstone Group agreed to a deal with Hong Kong's Great Eagle Group to build high-end apartments in China, according to the Financial Times.
Campbell Soup shares rose following news that the world's largest soup producer may be weighing a $2.3 billion break-up bid for Britain's United Biscuits, according to London's Sunday Times.
And UK bank HSBC announced it plans to buy up to 70 percent of South Africa's Nedbank.
Meanwhile, some traders attributed the day's weakness to comments from Europe. Earlier, Hungarian Central Bank president Andras Simor’s said he has no information that the government plans to continue to talk with the IMF after negotiations collapsed last month, mainly over Hungary’s 2011 budget shortfall target and fiscal policy.
“I have no knowledge of any initiative from the government's part to relaunch the talks," Simor said at a press conference following the central bank's rate setting meeting.
Johnson & Johnson is recalling almost 100,000 boxes of daily disposable contact lensesfrom Asia and Europe following customer complaints. The pharmaceutical giant's reputation has been tarnished over the past year by numerous recalls of Tylenol, Motrin and other nonprescription medicine brands.
Researchers at Gilead Sciences have announced that it a treatment it is developing for alcoholism may also be effective in treating cocaine addiction.
Meanwhile, Jazz Pharmaceuticals plunged more than 20 percent after advisory panel rejected the company's fibromyalgia treatmentamid concerns that it could be used as a "date-rape" drug.
In the commodities markets, the price of wheat rose once againin the wake of the Russian drought and oil fell below $73 a barrel.
Kansas City Federal Reserve Bank President Thomas Hoenig said larger banks perceived as "too big to fail" have a lower cost of capital, putting smaller banks at a disadvantage. Hoenig said it was not clear whether the financial reform act would put big and small banks on an equal footing.
Hoenig has been the lone dissenter on the Fed's policy-setting committee in recent months, arguing the economy is beginning to recover and that the Fed should start to shrink its balance sheet and end its pledge for an extended period of low interest rates.
Still to come, reports are due this week on the housing market, durable goods orders, consumer sentiment and a revision to second-quarter gross domestic product.
Housing remains especially weak following the expiration of the government's tax credit earlier this year. Reports on existing and new home sales are due out Tuesday and Wednesday, respectively.
And auctions of 2-year, 5-year, and 7-year notes are expected from Tuesday through Thursday.
TUESDAY: Existing home sales, Richmond Fed survey, 2-year Treasury note auction; Earnings from Burger King
WEDNESDAY: MBA mortgage applications, advance report on durable sales, new home sales, weekly oil inventories, 5-year Treasury note auction; Earnings from BHP Billiton, Toll Brothers
THURSDAY: Weekly jobless claims, 7-year Treasury note auction.
FRIDAY: GDP, corporate profits, consumer sentiment; Earnings from Tiffany
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