updated 10/3/2006 7:15:29 AM ET 2006-10-03T11:15:29

Stocks finished Monday’s seesaw session lower, sinking for a second straight session as investors weighed fresh economic data, falling oil prices and merger news to determine whether the stock market’s impressive third-quarter performance would continue.

Major Market Indices

Investors looking to economic data to help gauge the health of the economy received mixed messages. The Institute for Supply Management said the manufacturing sector grew at the slowest pace in more than a year in September amid weaker U.S. auto sales and a cooling of the housing market.

Meanwhile, the Commerce Department said construction spending in August rose 0.3 percent after falling 1 percent in July.

Wall Street received some support from crude oil prices, which tumbled. The price of a barrel of light crude settled at $61.03, down $1.88 in trading on the New York Mercantile Exchange.

“There are a lot of crosscurrents between earnings, the overall condition of the economy and oil prices,” Jim Herrick, head of equity trading at Robert W. Baird & Co., said of the market’s pullback Monday.

Despite the Dow’s recent climb to near-record territory, Herrick believes the markets will stay tethered near current levels as investors wait for more economic data, such as the government’s employment report due Friday, as well as a read on corporate earnings and profit forecasts.

Jon Brorson, head of growth equities at Lehman Brothers Asset Management, points out that the start of a new quarter often brings activity from investors seeking to rebalance their portfolios, though he noted volume was light because of the the Yom Kippur holiday, which may mean many market players were out.

The economic data follow the strongest quarter for the stock market in about a decade. Investors are eager to find out if the Federal Reserve still sees inflation as a sizable threat. Stocks have risen since the central bank interrupted a two-year string of 17 straight rate hikes and last month left rates unchanged for a second straight time.

The Dow Jones industrial average finished the day down 8.72 points, or 0.07 percent. Earlier, the index made an attempt to reach its record trading high of 11,750.28 set in January 2000.

The broader Standard & Poor’s 500-stock index closed Monday off 4.53 points, or 0.34 percent. The Nasdaq composite index, full of technology stocks, slumped 20.83 points, or 0.92 percent.

In corporate news, casino operator Harrah’s Entertainment Inc. has received a $15.05 billion offer for the company from private equity firms Apollo Management and Texas Pacific Group. The private-equity firms will pay $81 per share, a 22 percent premium to Harrah’s closing stock price on Friday on the New York Stock Exchange. Harrah’s rose $9.25, or 13.9 percent, to $75.68.

Biopharmaceutical concern Myogen Inc. jumped $16.36, or 51.4 percent, to $51.44 after drug research company Gilead Sciences Inc. said it would acquire the company for $2.5 billion , a 50 percent premium. As is often the case with the company doing the acquiring in a merger deal, Gilead fell on the news and was down $4.49, or 6.5 percent, to $64.28.

Apple Computer Inc. fell $2.12, or 2.8 percent, to $74.86 after Citigroup cut its rating on the computer maker to “Hold” from “Buy,” noting that Apple is unlikely to introduce a video iPod with a larger screen and other enhancements before the holidays. The iPods announced last month are likely to comprise the company’s holiday offerings, the analyst contends.

Wal-Mart Stores Inc. fell 88 cents to $48.44, after it reported that September sales at stores open at least a year rose 1.8 percent. The world’s largest retailer had expected such sales, a closely tracked measure of retail performance, would increase 1 percent to 3 percent.

Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.61 percent from 4.63 percent late Friday. The dollar was mixed against other major currencies, while gold prices fell.

Overseas, Japan’s Nikkei stock average closed up 0.79 percent. In Europe, Britain’s FTSE 100 gave up 0.06 percent, Germany’s DAX index was down 0.08 percent and France’s CAC-40 slid 0.13 percent.

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