Mergers, but No Mania

Merger mania may be the only thing preventing a full-blown stock market correction these days.

The busiest merger Monday in the U.S. thus far in 2007, according to Thomson Financial, included Texas utility company TXU's(TXU Quote) agreeing to the largest leveraged buyout ever. TXU's $32 billion buyout by private equity firms Kohlberg Kravis Roberts, Texas Pacific Group and Goldman Sachs beats KKR's $25 billion buyout of RJR Nabisco in 1998. Including assumed debt, the TXU deal amounts to $45 billion.

But the $50 billion tally of announced deals couldn't sustain an early spark in the major stock indices. With oil over $60 per barrel, a spate of probably soft manufacturing reports out this week and traders expecting a setback after seven months of gains, the market slipped despite the acquisition frenzy.

The Dow Jones Industrial Average and the S&P 500, both slid for a third consecutive day, down 0.1% Monday to close at 12,632.26 and 1449.37, respectively. The Nasdaq Composite was down for its second straight day, dropping 0.4% to close at 2504.52.

"I think the deals are holding the market up," says Todd Leone, head of listed trading at Cowen & Co. "They've repriced all the stocks, and people are afraid to be short."

If left alone, stocks might have fallen farther, says Leone. "Everyone is talking correction, correction, correction, and to some extent a little bit of that is coming true."