U.S. Stocks Hold to Declines

The three major indices continue to track lower as gold and oil climb. Yahoo! is hard hit on a broken courtship with Microsoft.
By Sarina Penn ,

Updated from 11:03 a.m. EDT

Stocks in New York were falling Monday as prospects unraveled for at least one big proposed merger, and oil prices again charged into uncharted territory.

The

Dow Jones Industrial Average

was off 69 points at 12,990, and the

S&P 500

gave up 5 points to 1409. The

Nasdaq Composite

was losing 7 points to 2470.

Even amid the apparent collapse of an anticipated tie-up between

Microsoft

(MSFT) - Get Report

and

Yahoo!

(YHOO)

, however, Peter Cardillo, chief market economist with Avalon Partners, believes that stocks' broader action represents "a normal pullback after last week's healthy run-up" as the surge in oil put further pressure on equities.

Crude futures got past the $120 mark for the first time earlier before paring back to a $3.26 gain at $119.58 a barrel. Gold took back $12.30 to $870.30 an ounce. At the same time, the U.S. dollar yielded 0.5% to the euro at $1.5490 and sank marginally against the yen.

Bruce Zaro, chief technical strategist with Delta Global Advisors, cited oil as a worry and agreed that today's market action encompasses heavy technical factors. "This is pretty typical from what I've seen, that Mondays at least start with some weakness," he said. "But certainly I think the market will continue to exhibit this two-steps-up and one-step-back phenomenon."

Zaro added that the "old highs," roughly 1,000 points away on the Dow, are on his radar screen. "The upside from here on out might be a little bit slower than what we've had over the past month or so," he said, tentatively predicting that the current run-up will take several months to unfold. "I would expect this rally to play itself out in fairly dramatically overbought conditions. Right now we're only slightly overbought."

As for the dreary merger-related news, Zaro believes it could be having a "muted" negative effect on stocks, but remarked that it wouldn't surprise him if the market closed higher today, or at least firmed up within the next couple of days.

Over the weekend, Microsoft announced it had

thrown in the towel

on its months-long efforts to take out Yahoo!. The software maker said it was willing to sweeten its offer by some $5 billion, to $33 a share, but claimed Yahoo! wanted at least $5 billion more than that.

As for Microsoft's prior threats that it would go hostile if Yahoo! didn't accept its original bid, the company decided against that path, believing that Yahoo! would in that case try to make itself unattractive as a buyout target.

On the heels of the news, Yahoo! was downgraded to sell by Citigroup, Soleil Securities and ThinkPanmure. RBC Capital Markets and Stanford Research each slashed their price targets on the stock. Yahoo! shares were plummeting 14% to $24.67. Microsoft, a Dow component, added 1.2%.

Countrywide

(CFC)

was a drag, as well, a trading day after Dow member

Bank of America

(BAC) - Get Report

disclosed it might not assume part of Countrywide's debt in its deal to take out the struggling mortgage lender.

Friedman Billings cut Countrywide to underperform, saying that BofA should abandon the merger entirely, or at least sharply lower the buyout price. On Friday, Standard & Poor's downgraded Countrywide's credit rating to junk. The stock was sinking 14.1%, and BofA was down 1.8%.

As for the day's earnings, gold miner

Goldcorp

(GG)

topped the consensus estimate by 2 cents a share in a quarter that saw gold prices reach record-breaking levels. The company's earnings soared 84% to $229.5 million, or 32 cents a share. Shares bumped up 2.1%.

Entertainment company

Marvel Enterprises

(MVL)

jumped 7.4% after sailing past first-quarter analyst targets and lifting its full-year guidance. Marvel also announced that its

Iron Man

film took the top spot in its opening weekend, raking in $100.75 million in domestic box-office receipts.

Elsewhere,

Apple

(AAPL) - Get Report

added 2.1% on an upgrade to buy at AmTech Research. In more analyst calls, Stifel Nicolaus brought

Google's

(GOOG) - Get Report

price target up $65 to $675, after which the search giant's shares climbed 1.8%.

Lehman Brothers shaved down

Nortel's

(NT)

price target, pressuring the stock by 2.4%, but lifted its price targets on mining-equipment makers

Joy Global

(JOYG)

and

Bucyrus International

(BUCY)

. Shares advanced 1.3% and 2.0%, respectively.

On the data side, the Institute for Supply Management said its April nonmanufacturing index came in at 52, indicating expansion -- albeit slight -- for the first time in four months. Improved employment, among other things, buoyed the reading, which has a break-even point of 50. Economists were projecting slight contraction to 49.1.

Treasury prices were erasing early gains. The 10-year note was off 2/32 in price to yield 3.87%, and the 30-year bond lost 13/32 in price, yielding 4.60%.

Markets abroad were mixed. Hong Kong's Hang Seng Index slipped 0.2%. In Europe, Germany's Xetra Dax was up 0.1%, and the Paris Cac dipped by roughly that same amount. Tokyo's Nikkei 225 and London's FTSE 100 were each closed for a public holiday.

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