Stocks Finish Mixed

Oil prices surged to a new high despite Saudi Arabia's move to raise crude output

Stocks struggled for direction Monday in a session marked by low trading volume as crude oil prices surged to a new high as early optimism from Saudi Arabia's decision to raise output faded.

The Dow Jones industrial average fell 8.31 points, or 0.08%, to 9,958.43. The Nasdaq composite index added 10.89 points, or 0.57%, to 1,922.98, helped by gains in Internet, telecom, and chip stocks. The broader Standard & Poor's 500-stock index was up 1.78 points, or 0.16%, at 1,095.34.

Saudi oil officials said Friday that the country would produce 9 million barrels a day of oil in June, up from 8.35 million in March, to help reduce prices and meet higher global demand. However, oil prices resumed the uptrend -- closing at a record high of $41.72 a barrel for July delivery on the New York Mercantile Exchange -- as the market digests the reality that an increase in production is unlikely to have a meaningful impact, says S&P MarketScope.

Also helping boost oil were reports that Shell's Mars platform in Gulf of Mexico will be shut down for 2 weeks and the Olympic pipeline in Washington state has been damaged, reports S&P MarketScope.

There were no economic data on Monday. Tuesday brings investors a fresh read of consumer confidence for May -- forecast to come in at 93.0, close to 92.9 in April. Also being reported is existing home sales for April, which economic research outfit Action Economics expects to edge up to 6.5 million units from March's 6.48 million units reading.

Earnings reports coming Tuesday include Computer Associates (CA ), H.J. Heinz (HNZ ), Krispy Kreme (KKD ), La-Z-Boy (LZB ), Williams-Sonoma (WSM ), and more.

Among stocks on the move Monday, Dow component Alcoa (AA ) shares climbed after the company announced plans to build a $1 billion smelter in Trinidad which will produce at least 250,000 tons of aluminum annually.

Shares of Caterpillar (CAT ), another Dow member, rose after Merrill Lynch upgraded them to buy from neutral.

Dow component Altria Group (MO ) fell nearly 9% on reports that a U.S. judge is refusing to limit the $280 billion worth of fines the government is seeking at a September trial. The suit says tobacco companies deliberately mislead the public about the risks of smoking.

In merger news Monday, Wiser Oil (WZR ) agreed to be acquired by Forest Oil (FST ) in a deal valued at $330 million, including $160 million in debt, or about $10.60 per Wiser share.

Omnicare (OCR ) offered to buy pharmacy services provider NeighborCare (NCRX ) for $30 per share in cash. NeighborCare shares soared on the news.

Lucent Technologies (LU ) agreed to acquire Telica, a provider of voice over Internet protocol communications systems for next-generation networks, for about $295 million in stock, options, plus employee-related cash payments.

Verizon Communications (VZ ) agreed to sell its wireline-related businesses in Hawaii to The Carlyle Group for $1.65 billion in cash.

Coinstar (CSTR ) will purchase American Coin Merchandising and its parent company, ACMI Holdings Inc., for $235 million in cash.

Companies on Monday's earnings calendar were Campbell Soup (CPB ), Medtronic (MDT ), and Novell (NOVL ).

Treasury Market

Treasury prices ended higher. Oil was closely watched and the uptick in prices, implying a weaker economy, gave Treasuries the bid it needed to end the day in positive territory, says Informa Global Markets.

World Markets

European stock markets finished mixed. London's FTSE 100 index fell 2.5 points, or 0.06%, to 4,428.9 amid worries about Britain's manufacturing sector.

Germany's DAX index rose 36 points, or 0.94%, to 3,867.84 on hopes of lower oil prices. In Paris, the CAC 40 index gained 21.8 points, or 0.6%, to 3,628.82.

Asian markets finished higher. In Japan, the Nikkei index gained 31.39 points, or 0.28%, to close at 11,101.64, helped by banking names such as Mizuho Financial, which strengthened after returning to a profit in the year ended Mar. 31. The index's rise was capped by continued concerns over the high price of oil, although Saudi Arabia said it wanted the OPEC cartel to raise output by 2 million to 2.5 million barrels a day.

In Hong Kong, the Hang Seng index increased 86.96 points, 0.75%, to close at 11,662.97. Property stocks rose on expectations for aggressive bidding at the government land auction on Tuesday, while easing world oil prices helped boost transport shares, according to Standard & Poor's MarketScope.

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