Stocks Fold in Face of Higher Oil, Weak Retail

On the corporate merger scene, drug store operator CVS Caremark (CVS Quote) said it would buy Longs Drug Stores (LDG Quote) for roughly $2.6 billion in an effort to expand its presence in the western U.S. CVS ended the day down 0.1% at $38.03, while Long Drug shot up 31% to $70.70.

Meanwhile, biotech firm Genentech (DNA Quote) rejected a $43.7 billion buyout offer from Swiss drug developer, which already owns a majority of Genentech shares. The stock climbed 0.5% to $98.37.

In analyst actions, Citigroup initiated ratings coverage on homebuilders Toll Brothers (TOL Quote), Pulte Homes (PHM Quote), Ryland (RYL Quote), MDC Holdings (MDC Quote), Lennar (LEN Quote) and Centex (CTX Quote). Toll and Pulte garnered buy ratings, while the remainder received hold recommendations. The bullish take wasn't enough to lift the sector, as the SPDR S&P Homebuilders (XHB Quote), an exchange-traded fund that tracks the group, lost 1% to $18.54.

Elsewhere, Merrill Lynch downgraded both Goldman Sachs (GS Quote) and Lehman Brothers (LEH Quote) to underperform. Merrill also reduced its rating on Morgan Stanley (MS Quote) to neutral from buy. Goldman lost 1.4% to $164.90, and Morgan Stanley gave up 5.5% to $40.15.

Away from stocks, U.S. Treasury prices were decreasing. The 10-year note was down 11/32 in price to yield 3.94%, and the 30-year was shedding 16/32 to yield 4.56%. The dollar was trouncing the pound, but weakening vs. the yen and the euro.

Overseas exchanges, including the FTSE in London, the DAX in Frankfurt, the Nikkei in Tokyo and the Hang Seng in Hong Kong, were mostly trading lower.

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