Stocks managed to squeak by with gains at the close as a flurry of mergers helped investors shrug off weaker manufacturing data.
Breadth turned positive on the NYSE with advancing shares outpacing decliners by almost two to one. Eight of 10 sectors in the S&P 500 closed higher as utility stocks such as Exelon and TECO Energy moved higher. Financial stocks such as American Express and Citigroup were the notable laggards of the day.
Gains in shares of Altria Group accounted for much of the Dow's advance Monday. Shares of the parent company of cigarette maker Philip Morris USA rose after it completed the spinoff of Kraft Foods, which saw its stock close lower on Monday.
The markets opened the day higher after First Data said it would be acquired for $29 billion, but pared gains on a lower-than-expected U.S. manufacturing data and weakness in the financial sector after M&T Bank warned that its mortgage business will hurt quarterly earnings.
"We had a mixed dose of positive and negative news," said Mike Malone, trading analyst at Cowen, in an interview with CNBC.com. "The (First Data) deal on the tape was relatively significant, it suggests that private equity remains very much in the game despite concerns for depressed economic growth."
"We did get the weaker ISM number, which sent the market down, but we recovered from intraday lows," Malone noted. "It's indicative of the trading that we saw last week, generally sideways trading with a fair amount of intraday volatility."
Subprime mortgage lender New Century Financialdeclared bankruptcy, as widely anticipated, adding to negative sector sentiment due to lowered earnings expectations at M&T Bank.
Shares of First Data jumped after the payments processor said it agreed to be acquired by private equity firm Kohlberg Kravis Roberts but also plans to seek other bids.
Google has emerged, along with Microsoft, as a contender to buyDoubleClick , presenting competition that stands to increase the final sale price of the online-advertising company, according to the Wall Street Journal.
AT&T said ended flat after the telecom giant said it and Mexican cell phone operator America Movil were in talks to buy stakes in Telecom Italia'sparent company Pirelli for about $6.4 billion.
Shares of Sun Microsystems fell after research firm Sanford Bernstein downgraded the stock to "underperform" from "market perform," in anticipation of a weak quarterly earnings report.
Music label EMI Group said Monday it will make all of its digital music available without any antipiracy software through iTunes, the online music service from Apple Computer . EMI is the first major label to strip out the anti-piracy protection.
In other deal news, Xerox said it agreed to buy office technology products provider Global Imaging Systems for about $1.5 billion. Global Imaging shares surged 47%.
Shares of Starwood Hotels & Resorts Worldwide rose on Monday after the company said CEO Steven Heyer resigned after losing the board's confidence. Chairman Bruce Duncan will take over as interim CEO.
New York light sweet crude futures closed slightly lower, down from recent highs triggered by geopolitical tensions.
Treasury prices moved slightly higher, pushing yields down.
Europe, Asia Close Mixed
European stocks ended mixed on Monday as the recent surge in M&A activity continued unabated. London's FTSE 100 fell, while the Paris CAC-40 and Frankfurt DAX posted slight gains.
Alliance Boots could face a fresh takeover bid as Celesio, the German owner of the Lloyds pharmacy chain, is in talks with several private equity groups to form a rival bidding consortium for Alliance Boots, the Times reported.
Tokyo's Nikkei 225 Average closed with a decline of 1.5%, dropping below the 17,000 level for the first time since mid-March. Nippon Steel and other steel stocks fell after the Bank of Japan's tankan survey of corporate sentiment showed a drop in quarterly business sentiment among steelmakers.
The Kospi index closed in Seoul at a five-week high following the signing of a highly anticipated trade deal with the United States. Export firms in the auto and tech sectors, including Hyundai Motor and LG.Philips LCD, moved higher on the news.
Hong Kong blue chips tested the 20,000 level as Esprit Holdings hit a record high and real estate developers jumped following strong weekend property sales.