Stocks were slightly lower Monday amid a flurry of merger and acquisition activity and in the absence of significant economic news.
The Dow Jones Industrial Average fell more than 20 points, led by Bank of America, JPMorgan and Alcoa. Hewlett-Packard and Verizon rose.
The move lower comes after the major indexes each gained about 2 percent Friday, extending the September rally for four straight weeks.
The S&P 500 and Nasdaq also slipped. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 22.
Financials, health care and consumer discretionary sectors declined, while telecom and utilities rose.
The weakness in the market Monday is most likely a temporary pause as investors regroup from the significant gains of last week, where the major indexes broke out of trading ranges that had kept prices in check since mid-May, said Jeffrey Saut, chief market strategist at Raymond James
"We broke out of the May through September trading range that we’ve been, and we broke out with some vigor," Saut said.
The strategist said he could see the market rising back to April's price levels, when the Dow was above 11,000, and the S&P 500 Index was at 1,217. One reason is portfolio managers are underinvested and need to buy stocks, he said.
"The underinvested portfolio managers are just manic," Saut said. "They are going into the end of the quarter underweight stocks."
Also weighing on the market was Moody's Investors Service's decision to downgrade the unguaranteed senior debt of Anglo Irish bank, triggering concern among some investors about the health of European debt. The rating agency also said on Monday that it remained concerned about the health of Greek banks. The euro fell against the dollar.
In economic news, about 70 percent of respondents to a CNBC survey said the Federal Reserve will begin quantitative easing,while 80 of those believe the easing will start before the end of the year. The economists, strategists and fund managers surveyed say the Fed will boost its balance sheet by about half a trillion dollars over a six-month period, beginning in November.
The M&A deals included Southwest Airlines, which said it would buy AirTran Holdings, sending AirTran's shares soaring more than 50 percent. The deal was valued at $1.4 billion, or $7.69 a share. The news sent shares of other airline companies higher, including JetBlue Airways and AMR. JetBlue also got a boost from an article in Barron's that said earnings-per-share for the airliner could rise to 60 cents in 2011 and $1 in 2011.
Anglo Dutch consumer-goods group Unilever , which agreed to buy U.S. hair-care groupAlberto Culver for $3.7 billion in cash.
In other retail news, Wal-Mart Stores sought to boost its presence in Africa by offering more than $4 billion for Massmart , a South African wholesaler.
Sanofi-Aventis, meanwhile, was searching for more financing toward its $18.5 billion bid for Genzyme , according to the Wall Street Journal.
General Electric bought an initial chunk of a 20 percent stake in NBC Universal from Vivendi for $2 billion, the French conglomerate said. Vivendi added it would sell its remaining 12.34 percent in the media group after the approval of Comcast's takeover of NBC Universal. CNBC is a unit of NBC.
Over the weekend, Comcast announced that Chief Operating Officer Steve Burke would take the top job at NBC Universal when the deal closes.
In financial news, global stock underwriting proceeds fell 9 percentso far in 2010 to $496.14 billion for far this year from $544.96 billion. The number of deals, however, rose 5.6 percent to 2,817 deals compared with a year earlier as banks have been willing to underwrite smaller offerings. JP Morgan was the top underwriter.
Susquehanna cuts its third quarter views for rivals Goldman Sachs , Morgan Stanley , Bank of America , PNC and Citigroup , because of weak underwriting and trading volumes.
Meanwhile, the government may miss its deadlineto sell all of its Citigroup shares by the end of the year. As a result, the U.S. Treasury may have to offer shares to the public from its 17 percent stake instead of selling small quantities of stock in the market, bankers and analysts said.
In technology news, advance orders for the Apple iPhone 4 exceeded 200,000 in China, after the handset launched on Saturday, according to China Unicom. The tech company also got a boost after Canaccord Genuity raised its price target for Apple to $366 from $356.
NetApp's shares fell after JP Morgan removed the data storage company from its focus list, and raised its price target for the company to $58 a share from $49.
Sprint Nextel got a boost from UBS, which represented the telecom company as a short-term buy on Monday.
Among energy companies, Shares of Harvest Natural Resources rose after the indepdendent energy company said it would consider a sale or merger.
Also, Gulf Resources's shares gained after the company said it would buy back $10 million in stock.
Meanwhile, the results of a two-year Treasury note auction will be released at 1 pm.
European shares were mixed, but mostly higher due to acquisition news. Asian stocks ended higher following the strong Friday close on Wall Street.
In commodity news, gold hit a new record as European central banks called a stop to gold reserve sales. Oil was also higher.
On Tap For Next Week:
MONDAY: Chicago Fed Midwest Manufacturing Index, 2-year note auction, Schapiro, Breeden, Pitt on future of SEC; BlackBerry's Devcon 2010, FedEx shareholder meeting
TUESDAY: S&P/Case-Shiller home price index; Richmond Fed survey; consumer confidence index; 5-year note auction; Atlanta Fed Pres Lockhart speaks; Barnes & Noble shareholder meeting; HP analyst meeting
WEDNESDAY: Weekly mortgage applications; oil inventories; Minneapolis Fed Pres Kockerlakota speaks; Philadelphia Fed Pres Plosser speaks; Boston Fed Pres Rosengren speaks; 7-year note auction
THURSDAY: Reading on GDP; Weekly jobless claims; Corporate profits; Chicago PMI; Hearing on J&J recalls
FRIDAY: Personal spending; NY Fed Pres Dudley speaks; Consumer sentiment; ISM manufacturing index; Construction spending; Monthly auto sales; BP's Hayward steps down
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