Stocks barely budged today, ending narrowly mixed after yields on the 30-year Treasury note briefly hit 5% and investors grew skittish a day ahead of the Federal Reserve's first meeting of the year.
After a volatile week in which stocks lost ground, merger and acquisition news gave a boost to stocks for much of the session before the 30-year yield moved higher. Merrill Lynch & Co. agreed to acquire wealth manager First Republic Bank for $1.8bn (€1.4bn) in cash and stock and Citigroup Inc. struck an agreement to buy British insurer Prudential PLC's Egg Banking PLC online bank for about $1.13bn (€872,277).
Many on Wall Street were girding for a busy week of economic and earnings news as they tried to determine whether an indecisive market can resume its advance from the second half of 2006.
A two-day Fed meeting begins tomorrow, after which investors will receive the central bank's latest read on the economy and interest rates, and a torrent of fourth-quarter earnings reports is due. The Fed has left short-term interest rates unchanged at its last four meetings.
"The market really can't find any direction," said Todd Leone, managing director of equity trading at Cowen & Co., describing recent sessions as "rudderless" ahead of the Fed meeting. He said investors appeared unnerved after the yields on the 30-year Treasury note moved higher.
The Dow Jones industrial average rose 3.76, or 0.03%, at 12,490.78.
Broader stock indicators were mixed. The Standard & Poor's 500 index was down 1.56, or 0.11%, at 1,420.62, and the Nasdaq composite index was up 4.96, or 0.63%, at 2,441.09.
Yields on the 30-year Treasury note hit 5% and then slipped back as investors wrestled with questions over the direction of interest rates. The Fed sets short-term interest rates - the rates banks charge each other for overnight loans - but the central bank's pronouncements can affect all interest rates.
The yield on the benchmark 10-year Treasury note was unchanged at 4.89% from late Friday. The dollar was mixed against other major currencies, while gold prices fell.
Oil fell sharply, though not enough to sends the major indexes higher. Oil settled down $1.48 at $53.94 per barrel on the New York Mercantile Exchange amid concerns OPEC members would increase production. Exxon Mobil Corp. fell 41 cents to 73.20, while ConocoPhillips slipped 12 cents to 64.65.
Denis Amato, chief investment officer at Ancora Advisors, said that while the buyout news Monday could give stocks a short-term boost, he believes investors haven't reconciled their hopes with reality as far as the Fed stands. "I think (the market) still needs to come to terms with the fact the Fed is probably not going to drop interest rates anytime soon."
Leading the buyout news was Merrill Lynch's plan to acquire First Republic Bank. As is typical for the company doing the acquiring, Merrill fell, ending down 2.14, or 2.3%, at 92.39. First Republic jumped 15.33, or 40%, to 53.63. Citigroup, meanwhile, was off 61 cents at 54.06.
Drug developer MDS Inc. agreed to acquire Molecular Devices Corp., which makes bioanalytical measurement systems, for €615m ($474.6m). MDS rose 21 cents to 17.31, while Molecular Devices jumped 11.18 dollars, or 47%, to 35.06.
Bowater Inc. and Canada's Abitibi-Consolidated Inc. agreed to an all-stock deal in which Bowater shareholders would hold a 52% stake and make the combined company the third-largest publicly traded paper and forest products company in North America. Bowater rose 4.97, or 22.4% to 27.12 dollars, while Abitibi jumped 66 cents, or 25%, to 3.30.
"I think it's indicative that there is still a lot of liquidity sloshing around. The capitalisation rates that seem to be implied aren't really great so it's kind of amazing that they're able to get the money to do it," Amato said, questioning whether a bump in the economy could cause such deals to dry up as liquidity shrinks.
In other corporate news, earnings from Verizon Communications Inc. met with a tepid response from investors although the telecommunication company's per-share earnings came in a penny ahead of Wall Street's forecast. Verizon was up 20 cents at 38.03 after reporting its fourth-quarter profit fell amid taxes and costs related to a spinoff.
Tyson Foods Inc. rose 48 cents, or 2.9%, to 17.17 after the company's fiscal first-quarter profit jumped 46% in the first quarter as the meat producer saw increased chicken sales and lower costs.
Advancing issues outpaced decliners by about 6 to 5 on the New York Stock Exchange, where volume came to 1.54 billion shares.
The Russell 2000 index of smaller companies rose 4.96, or 0.63%, to 793.10.