Stocks Say 'No Deal' to M&A

Few events get Wall Street's juices flowing like M&A activity, primarily because of the fat investment banking fees. Additionally, mergers signal that corporate executives are optimistic about the future (otherwise they'd be hoarding capital) and deals typically remove some supply of stock from the market, which is bullish if demand just stays the same.

But the broader market failed to capitalize on a number of deals announced Monday and speculation of more to come, most notably unconfirmed reports of a Bristol-Myers Squibb (BMY)-Sanofi-Aventis (SNY) combination.

The Dow Jones Industrial Average rose 0.03% to 12,490.78 and the Nasdaq Composite gained 0.2% to 2441.09, while the S&P 500 dipped 0.1% to 1420.62, hurt especially by weakness in the financial sector.

The lackluster action reflects both the nature of the deals themselves, and angst about this week's heavy calendar of macroeconomic and earnings news.

Missing from Monday's deal activity, and deals announced thus far in January, is the kind of "blockbuster" transaction that captures the public's imagination, such as the infamous AOL-Time Warner (TWX) deal in January 2000, or the January 2005 Procter & Gamble (PG)-Gillette transaction.

Coming off 2006's blockbuster year for M&A activity and the re-emergence of private-equity buyers as major acquirers, everyone expected 2007 to be another busy year for deals. That being the case, a number of relatively small deals, such as those announced Monday, isn't enough to really excite investors.