Stocks finished modestly lower Monday, fading from initial peaks after another flurry of merger news lifted the Dow to a new all-time intraday high. Traders were unwinding positions from Friday's quadruple witching, when monthly stock and index option expirations coincide with the quarterly expiration of stock and index futures contracts. Trading was active early but likely to be slow later in the week ahead of Christmas, says Standard & Poor's Equity Research.
On Monday, the Dow Jones industrial average edged down 4.25 points, or 0.03%, to 12,441.27, after touching an all-time trading record of 12,490.70. The broader Standard & Poor's 500 index fell 4.61 points, or 0.32%, to 1,422.48. The tech-heavy Nasdaq composite dropped 21.63 points, or 0.88%, to 2,435.57.
NYSE breadth was negative, with 221 issues declning for every 11 advancing. Nasdaq breadth was 21-10 negative.
In economic news, the U.S. current account deficit widened to $225.6 billion in the third quarter from $217.1 billion in the second quarter, revised from $218.4 billion.
The U.S. National Association of Homebuilders index dipped to 32 in December, weaker than expected, from 33 in November. "Despite the headline decline, the builders group suspect the worst is behind us," says Action Economics.
Looking ahead, Tuesday's economic calendar holds November readings on housing starts and wholesale inflation.
Merger activity was in focus Monday. Health care services was among the top-performing industries as pharmacy benefits manager Express Scripts (ESRX) launched a $26 billion hostile bid for competitor Caremark (CMX).
Medical products maker Biomet (BMET) was lower after the company agreed to be acquired for about $10.9 billion in cash by a private equity consortium.
Casino and gambling stocks were also strong amid reports casino operator Harrah's Entertainment (HET) agreed to a $16.7 billion buyout offer private-equity groups Apollo Management Group and Texas Pacific Group.
Meanwhile, Realogy (H) was sharply higher on news the parent of the Century 21 and Coldwell Banker real estate brokerages is being acquired by an affiliate of Apollo in a deal valued at about $9 billion, including debt assumption, or $30 a share in cash.
Positive analyst notes helped support the Dow. Shares of Citigroup (C) hit an all-time high after Merrill Lynch raised its rating on the financial giant from neutral to buy.
IBM (IBM) was higher after Prudential initiated coverage of the stock with a neutral rating.
Fellow Dow component Home Depot (HD) was modestly higher after the home-improvement retailer reportedly said its board of directors will oppose a shareholder group's request for an independent review of the company's strategic direction. The board will meet with the shareholder group in early 2007, the company said.
Elsewhere, Weight Watchers (WTW) was sharply higher after the company began a modified Dutch auction self-tender offer for up to 8.3 million shares.
In technology, Google (GOOG) was lower following a report the Internet search company's earnings growth may hit a speed bump.
Software maker Oracle (ORCL) was set to report quarterly earnings after the close.
Oil prices fell, weighing on corresponding shares. In the energy markets, January West Texas Intermediate crude oil futures fell $1.22 to $62.21 per barrel.
European markets finished mixed. In London, the FTSE-100 index fell 12.6 points, or 0.2%, to 6,247.4. Germany's DAX index added 8.42 points, or 0.13%, to 6,597.25. In Paris, the CAC 40 index was down 11.3 points, or 0.2%, to 5,530.32.
Asian markets ended higher. In Japan, the Nikkei 225 index gained 47.8 points, or 0.28%, to 16,962.11. In Hong Kong, the Hang Seng index advanced 11.36 points, or 0.43%, to 19,192.91. Korea's Kospi index was up 11.36 points, or 0.8%, to 1,433.23.
Treasury prices drifted. The 10-year note was little changed in price at 100-07/32 for a yield of 4.6%, while the 30-year bond edged down to 96-17/32 for a yield of 4.72%. "Incoming data had little lasting impact as the bond market settled in to a pre-holiday torpor," says Action Economics.