updated 11/21/2006 7:11:44 AM ET 2006-11-21T12:11:44

Wall Street finished Monday’s erratic session mixed after a flurry of merger news failed to erase investors’ concerns that a recent run-up has left stocks overbought.

Major Market Indices

Monday’s merger agreements, including a deal by Freeport-McMoRan Copper & Gold Inc. to acquire Phelps Dodge Corp. for $26 billion , totaled more than $50 billion in activity. While the deals indicate companies are optimistic about the future, investors appear unconvinced about the health of the economy and were more cautious than usual given the spate of merger announcements. The buyout news battled with a sense that stocks were due for a pullback after the major indexes rose more than 1 percent last week.

Matthew Smith, vice president and portfolio manager at Smith Affiliated Capital, contends investors could be wary of sending stocks much higher and in many cases will simply try to hold their gains until the end of the year.

“I just don’t think right now it’s warranted to take more risk on given the moves we’ve had. We might see trending sideways,” he said.

The Dow Jones industrial average finished the day down 26.02 points, or 0.21 percent, having hit another trading high of 12,355.23 earlier in the day. The broader Standard & Poor’s 500-stock index gave up 0.70 point, or 0.05 percent, but the Nasdaq composite index added 6.86 points, or 0.28 percent.

Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.60 percent from 4.61 percent late Friday. The dollar was mixed against other major currencies, while gold prices fell. Light, sweet crude fell 17 cents to $58.80 a barrel on the New York Mercantile Exchange.

An overall drop in oil prices has helped lift investor sentiment about the ability of the economy to pull off a soft landing. That notion helped the Dow achieve four straight record closes last week and helped push the S&P 500 index to close at a six-year high Friday.

Readings last week showed that a drop in oil prices last month helped hold back inflation. If inflation can be neutralized, the Federal Reserve would be more likely to eventually lower short-term interest rates. The central bank has left rates unchanged at its last three meetings after a string of 17 straight advances.

In broader economic policy, Treasury Secretary Henry Paulson said in a speech Monday the Bush administration would examine regulations that affect how U.S. financial markets operate to ensure they don’t hamper the country’s ability to compete abroad.

Investors appeared unmoved by a report from the National Association of Realtors that showed sales of existing homes fell 12.7 percent to a seasonally adjusted annual rate of 6.27 million units in the third quarter. The year-earlier period saw the second highest level ever recorded.

In corporate news, Freeport-McMoRan said it would acquire copper miner Phelps Dodge for $25.9 billion in cash and stock. Freeport-McMoRan was down $1.77, or 3.1 percent, at $55.63, while Phelps Dodge jumped $25.45, or 26.8 percent, to $120.47.

Adding to the series of recently announced private equity deals, the Blackstone Group said it would pay $20 billion for Equity Office Properties Trust, the real-estate investment trust. Equity Office Properties was up $3.42, or 7.7 percent, at $48.14.

Lowe’s Cos., the country’s No. 2 home improvement chain behind Home Depot Inc., rose 10 cents to $30.58, after reporting a 10.8 percent increase in its third-quarter profit and despite lowering its fourth-quarter forecast.

Charles Schwab Corp. rose 38 cents, or 2.1 percent, to $18.94 after agreeing to sell its wealth management division, U.S. Trust, to Bank of America Corp. for $3.3 billion. Bank of America was up 5 cents at $54.90.

The London Stock Exchange rejected a second takeover bid from Nasdaq Stock Market Inc. as too low. Nasdaq offered $5.1 billion for the 70 percent stake in the exchange it doesn’t already own. Nasdaq was up $1.14, or 3.1 percent, at $37.71.

Overseas, Japan’s Nikkei stock average closed down 2.27 percent. Britain’s FTSE 100 closed up 0.20 percent, Germany’s DAX index rose 0.62 percent and France’s CAC-40 was up 0.28 percent.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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