Updated from 4:08 p.m. EDT

Stocks in New York closed modestly lower Monday, unable to catch a break, even with news on a trio of mega mergers.

The Dow Jones Industrial Average fell 79.89 points, or 1.2%, to 6547.05, and the S&P 500 slunk back 6.9 points, or 1%, to 676.53. The Nasdaq was lower by 25.21 points, or 2%, to 1268.64.

Industrials and financials managed to outperform for the day, however. Bank of America ( BAC) led the Dow with a 19.4% increase, and the KBW Banking Index added 5.3%.

There were mixed feelings for the morning's first merger announcement. Merck ( MRK), the weakest Dow component, lost 7.7% to $20.99 after proposing a $41 billion cash-and-stock merger deal to Schering-Plough ( SGP), offering shareholders 0.5767 of a Merck share and $10.50 in cash for each of their shares. While Merck was down, Schering's shares surged 14.2% higher to $20.13.

Also, the Wall Street Journalreported that the board of Genentech ( DNA) is near a deal to sell the biotech staple to Swiss pharma company Roche for $95 per share, citing people familiar with the matter. Genentech's shares added 2% to $92.63 in the session.

And in yet another a merger update with mixed results, Dow Chemical ( DOW) and Rohm & Haas ( ROH) have reportedly reached a settlement for the $15 billion merger between the two firms, agreeing to close a deal no later than April 1, according to CNBC. Dow Chemical shares lost 11%, while Rohm & Haas surged 16%.

Meanwhile, Washington continues to fixate on investors, says Paul Nolte, Director of Investments at Hinsdale Associates. "The daily news briefing, the comments about the horrendous economy, floating the possibility of a new stimulus package (just after the second was signed) and little resolution to the banking crisis have kept investors from stepping into stocks with any confidence. In fact, many are stepping away and vowing to never return," he writes.

Stocks abroad lost ground after the U.K government said it was taking a greater, controlling stake in Lloyds Banking Group ( LYG). In addition, the World Bank warned over the weekend that the world is falling into the first global recession since World War II.

Stateside, Capital One ( COF) became the latest bank to cut its dividend. The company said that scaling back to 5 cents a share from 37.5 cents will preserve more than $500 million in capital annually. Its shares tacked on 5.1% to $8.73 Monday.

Wells Fargo ( WFC) cut its dividend on Friday, following banks like PNC ( PNC), JP Morgan Chase ( JPM) and Bank of America.

In other banking news, Credit Suisse ( CS) nominated a new Chairman, Vice Chairman Hans-Ulrich Doerig, in light of Walter Kielholz moving to become the Chairman of Swiss Re. Credit Suisse traded down 5.3% to $19.04.

Meanwhile, the Financial Times and CNBC reported that Bank of America is starting to withdraw offers to some MBA students that graduate from U.S. business schools this year, as one of the provisions of the TARP bailout money prevents the bank from applying for H1-B visas for immigrants if they have recently laid off U.S. workers.

Job cuts continue, as U.S. publisher McClatchy ( MNI), which owns 30 daily newspapers, said it will slash 1,600 jobs, or about 15% of its workforce, as advertising sales struggle. McClatchy shares fell 30.5% to 41 cents.

Not everyone is struggling under the tough economy, though. McDonald's ( MCD) posted a 1.4% rise in February sales at restaurants open at least 13 months, with help from strength in the U.S. Last week, Wal-Mart ( WMT) also had sales growth to report, and went against the grain by raising its dividend.

McDonald's shares were up 0.4%, while Wal-Mart retreated 2.9% on Monday.

A few stem-cell stocks also got a boost Monday as President Obama signed an executive order that would reverse restrictions on stem cell research. Geron ( GERN) and StemCells ( STEM) surged 16.6% and 43.5%, respectively.

In analyst actions, Piper Jaffray upgraded Amazon ( AMZN) to buy and raised its price target to $81 from $55. Also, Collins Stewart named Microsoft ( MSFT) named a top pick.

Amazon and Microsoft shares fell 2% and 0.9%, respectively.

In commodities, oil rose $1.55 to settle at $47.07 a barrel, and gold lost $24.70 to $918 an ounce.

Longer-dated Treasuries were falling. The 10-year note was losing 1.5/32 to yield 2.9%, and the 30-year was giving up 23/32, yielding 3.6%. The dollar was recently stronger against the pound and euro, and weaker against the yen.

Stocks overseas were mixed. The FTSE in London and the DAX in Frankfurt were slightly higher. But in Asia, Hong Kong's Hang Seng and Japan's Nikkei closed lower by 1.2% and 4.8%, respectively.