Stocks Fall amid Higher Oil, Mergers

GM warned that the mortgage mess was hurting sales and oil prices spiked, while deal news enlivenened some stocks

Stocks finished lower Monday amid higher oil prices, while international merger activity boosted some names. The biggest loser in the Dow Jones Industrial average was General Motors (GM), which got hit after the company's vice chairman Bob Lutz warned that troubles in the mortgage market has hurt U.S. auto sales this month. Analyst downgrades hurt Dow average components Exxon Mobil (XOM) and Pfizer (PFE).

The Dow Jones industrial average fell 42.58 points, or 0.33%, to 12,919.4. The broader Standard & Poor's 500 index lost 3.42 points, or 0.23%, to 1,480.93. The tech-heavy Nasdaq composite edged down 2.72 points, or 0.11%, to 2,523.67.

In the energy markets, June NYMEX crude oil jumped $1.83 to $65.94 a barrel. Nigerian elections continued to support the market, and some expect violence to flare up again, which could have further impact on oil exports, says Action Economics.

Some analysts think that after the Dow average's run to record territory last week, the market has gotten ahead of itself and that it might be anticipating an economic recovery that's not there, says S&P. There were no economic reports to influence the market today.

On Tuesday, the S&P-Case Shiller Home Price Index will be reported, and is expected to fall. Existing home sales are also expected drop to 6.435 million units.

On Monday, General Motors (GM) shares lost 3% after the company's vice chairman Bob Lutz told Reuters that the crisis in the mortgage market has hurt U.S. auto sales this month.

Prudential lowered its recommendation of Pfizer (PFE) to neutral weight from overweight. On Friday, the drug maker posted better-than-expected first-quarter earnings, but it reduced its revenue outlook for the year amid lost sales of its second best-selling drug, blood pressure treatment Norvasc, due to generic competition.

And Deutsche Bank downgraded Exxon Mobil (XOM) to hold from buy.

The big loser on the Nasdaq was Applied Micro Circuits (AMCC), which plunged 22% after warning that fiscal fourth-quarter revenue would be down about 8.5% sequentially vs. its previous guidance for 2%-5% sequential drop. It sees 15% sequential decline in first-quarter fiscal year 2008 revenue.

Meanwhile, merger news stole the show on Monday. ABN Amro Holding (ABN) announced it will merge with Barclays PLC (BCS) in a deal valued at $91.16 billion. ABN Amro shareholders will get 3.225 ordinary Barclays shares for each ABN Amro ordinary share. Barclays shareholders will own 52% of new company and ABN's will hold 48%.

Bank of America (BAC) says it will buy ABN Amro's North America Holding Co., the parent of LaSalle Bank Corp. for $21 billion in cash. After a return of $5 billion in excess capital, its net cost would be $16 billion.

AstraZeneca PLC (AZN) says it agreed to acquire MedImmune (MEDI) for $58 per share cash, or total consideration of about $15.6 billion (including about $340 million net cash).

Affiliated Computer Services (ACS) received a higher buyout offer from its chairman Darwin Deason and Cerberus Capital Management, by $2.75 to $62 a share.

Interpool (IPX) agreed to be acquired by certain private equity funds managed by affiliates of Fortress Investment Group LLC in a deal valued at $2.4 billion, including assumed debt, or $27.10 per share cash.

L-3 Communications (LLL) posted higher first-quarter earnings on a 14% sales rise. Separately, it says it acquired Geneva Aerospace Inc., and will purchase Global Communications Solutions Inc.

Bausch & Lomb (BOL) jumped on speculation that the company might be a takeover target, reported S&P MarketScope.

European stock markets lost ground Monday. In London, the FTSE-100 index fell 0.1% to 6,479.7. Germany's DAX index edged down 0.09% to 7,335.62. In Paris, the CAC 40 index lost 0.4% to 5,917.32.

China's market kept moving up. The Shanghai Composite Index jumped 3.5% to 3,710.89, while the CSI 300 index climbed 4.3% to 3,431.32. In Hong Kong, the Hang Seng index fell 0.05% to 20,556.57. And in Japan, the Nikkei 225 index edged up 0.02% to 17,455.37.

Treasury Market

Treasurys were higher on a flight to safety and perception that the Fed might be closer to cutting rather than raising rates, says S&P. The benchmark 10-year yield fell to 4.65%.

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