Mergers Offset Pfizer Woes

Marc Pado, U.S. market strategist with Cantor Fitzgerald, said that while there was no economic data on the docket during the session, Tuesday's ISM services index will be a key report, as will Friday's employment numbers. "Traders should be nervous ahead of these data," he said.

About 2.75 billion shares changed hands on the New York Stock Exchange. Advancers beat decliners by a 3-to-1 margin. Volume on the Nasdaq was roughly 1.99 billion shares, with winners outpacing losers 7 to 3.

By sector, semiconductors were the big winners of the session. The Philadelphia Semiconductor Sector Index was up 2%. Oil stocks were among few losers, with the Philadelphia Oil Service Sector Index losing 0.6% and the Amex Oil Index easing 0.3%.

As a new week unfolded, Bank of New York (BK Quote) and Mellon Financial (MEL Quote) said they would merge in a $16.5 billion stock swap.

The deal will form the world's biggest securities-processing and custodial bank. Bank of New York surged 12% to $39.75. Mellon Financial gained 6.8% to close at $42.78.

Elsewhere, chipmaker LSI Logic (LSI Quote) said it will acquire Agere (AGR Quote) in a $4 billion stock transaction. The combined company would start out with annual revenue of around $3.5 billion. LSI tumbled 13.6% to $9.12. Agere jumped 8.5% to $19.30.

Station Casinos (STN Quote) received an $82-a-share buyout bid led from its CEO and private equity firm Colony Capital. Shares of the casino operator vaulted 23% to $84.90.

Shares of Home Depot (HD Quote) finished higher even after the home-improvement retailer said it hasn't been involved in buyout talks with private equity firms.

The stock had added 5.1% over the previous four sessions amid rumors of a $100 billion leveraged buyout. Home Depot ended the session up another 23 cents, or 0.6%, to $39.20.