NEW YORK (

TheStreet

) -- Stocks fell on Monday as investors locked in gains on the previous week's advance despite heightened deal activity.

Selling intensified in the final half hour of trading, with the

Dow Jones Industrial Average

closing the day 48 points or 0.4% lower at 10,812. The

S&P 500

shed 6 points or 0.5% to 1142, while the

Nasdaq

declined 11 points at 2369.

Stocks began the session on a weak note, as investors reacted to a spate of mergers and acquisitions news with cautious optimism. Market sentiment was pretty evenly split, with 51% of the stocks advancing while 45% declined.

"It is tough to find a catalyst to keep prices up after the 2.5% rally we had last week," said Art Hogan, chief market strategist at Jefferies. But he felt that the market still had some steam left. "The stories on M&A do not suggest that things are overdone. There will be ample opportunity to topple over the applecart but we will have to wait till Q3," said Hogan.

Volumes also remained light as investors awaited fresh news to drive up stocks.

"We're seeing minor losses on light volume but transportation and utilities are still up. I wouldn't put too much into the decline," said Peter Cardillo, chief market strategist at Avalon Partners.

"For the rest of the week, I think the market will be concentrating on two things: window-dressing and, later in the week, personal consumption and personal income data. Plus, I think ISM manufacturing on Friday could be a market-mover," Cardillo said.

Economists are anticipating a slightly lower September ISM reading of 55 on Friday, compared with August's level of 56.3, according to Briefing.com.

A three-notch downgrade to

Anglo Irish Bank's

debt by Moody's Investors Service also may have been weighing on global markets. According to a

Wall Street Journal

report, the bank is expected to need more support from the government.

Overseas, Hong Kong's Hang Seng gained 1%, and Japan's Nikkei added 1.4%. The FTSE in London slipped 0.5% while the DAX in Frankfurt lost 0.3%.

The increased uncertainty likely contributed to

gold prices that inched closer to the $1,300-an-ounce mark. The December gold contract settled at $1298.6 an ounce.

Meanwhile, the dollar was trading lower against a basket of currencies, with the dollar index down by 0.1%, and the benchmark 10-year Treasury note strengthening 24/32 and diluting the yield to 2.522%.

On the Dow,

Hewlett-Packard

(HPQ) - Get Report

,

AT&T

(T) - Get Report

,

Verizon

(VZ) - Get Report

and

American Express

(AXP) - Get Report

were the session's best performers.

The transportation sector was showing strong gains lifted by news that

Southwest Airlines

(LUV) - Get Report

agreed to buy

AirTran Holdings

( AAI) in a cash and stock deal valued at roughly $1.4 billion. Southwest's stock gained 8.7% to $13.35 while AirTran shares soared 61% to $7.34.

Shares of competitors such as

Delta Airlines

(DAL) - Get Report

and

US Airways

(LCC)

ended down 2.6% at $11.39 and up 3.2% to $9.28, respectively.

Ocean transport company

Dryships

(DRYS) - Get Report

was also contributing to the sector's strength as the stock jumped 8.6% to $4.48 on a Morgan Stanley upgrade to equal weight and a price-target increase to $5.50 a share.

In other deal news,

Wal-Mart

(WMT) - Get Report

made a nonbinding bid to acquire

Massmart Holdings

, South Africa's third-largest store group by value, for more than $4 billion. Wal-Mart's stock shed 1% to $53.50.

Unilever(UL) - Get Report agreed to acquire beauty products maker Alberto Culver (ACV) - Get Report

for $3.7 billion. Shares of Unilever added 1.1% to $28.89. Alberto Culver shares advanced 19.6% to $37.66.

IBM

(IBM) - Get Report

picked up

Blade Network Technologies

, a privately held blade servers, switches and software company, for a rumored price of $400 million. IBM's stock gained 0.4% to $134.70.

The stock of

M&T Bank

(MTB) - Get Report

was down 7.1% to $84.15 on reports that

it may consider buying back Allied Irish's 22.5% stake in the bank.

According to a

Journal

report, French pharmaceutical company

Sanofi-Aventis

(SNY) - Get Report

is talking to new lenders about additional financing options as it considers raising its $18.5 billion bid for

Genzyme

( GENZ). Sanofi's stock was down by 1.7% at $33.43 and shares of Genzyme were off by 0.5% at $71.20.

Elsewhere in equities, shares of

Sprint Nextel

(S) - Get Report

jumped 3.2% to $4.59 helped by a UBS report projecting a turnaround on the back of strong wireless sales growth.

Comcast

(CMCSA) - Get Report

Operating Chief Steve Burke will step in as CEO of NBC Universal after Comcast completes its takeover. Burke takes the place of Jeff Zucker who will step down by the end of 2010 when the deal is expected to close. Comcast's stock ended lower by 1.4% to $18.31.

Shares of

AIG

(AIG) - Get Report

rose 1.7% to $37.11 as it gets closer to repaying $70 billion in government bailout money. It has begun premarket the IPO of its Asian insurance business. Separately, a judge refused to dismiss a lawsuit against AIG that alleged that the company misled investors about its exposure to toxic assets.

Ford

(F) - Get Report

CEO Alan Mulally said he expects the auto company to post "solid" profits and also aims to invest roughly $2.37 billion in the U.K. over the next five years, according to

The Wall Street Journal

. The stock was down 0.6% to $12.48 amid market weakness.

Jewelry retailer

Zale

(ZLC)

said its fourth-quarter loss narrowed to 89 cents a share, which came in better than analysts' estimates for a loss of $1.21 a share. Sales of $345 million, however, fell short of the $354.6 million in quarterly revenue that Wall Street had been anticipating. The stock fell 6.4% to $2.05.

LDK Solar

(LDK)

gained 18% to $10.46 after it announced that it has received a loan guarantee package of close to $9 billion ($8.9 billion to be exact), from the China Development Bank.

Seattle Genetics

(SGEN) - Get Report

surged 17% to $14.30 on news of the successful clinical trials for its drug to treat lymphoma.

In commodity markets, November crude settled slightly higher at $76.52 a barrel.

--Written by Melinda Peer and Shanthi Venkataraman in New York

.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.