NEW YORK – Stocks barely moved Monday, with Wall Street greeting Verizon's (VZ) $6.7 billion takeover of MCI with indifference, while American International (AIG) fell after the insurer said that it received new subpoenas from U.S. regulators.
The Dow Jones industrial average (search) fell 4.88, or 0.05 percent, to 10,791.13. The Standard & Poor's 500 index (search) closed up 0.84, or 0.1 percent, at 1,206.14, The Nasdaq Composite Index (search) ended up 6.25 points, or 0.30 percent, at 2,082.91. The S&P 500 inched to a fresh high for 2005 while the Dow closed just a fraction lower than the 2005 high it hit Friday.
There was some caution ahead of Federal Reserve Chairman Alan Greenspan's (search) comments later this week on the economy and the pace of interest-rate increases going forward.
Greenspan will testify on the economy Wednesday and Thursday to committees of the Senate and the House of Representatives, respectively.
"Greenspan's comments later this week will be pored over very carefully," said Thomas McManus, equity strategist at Banc of America Securities.
"People will be especially interested to see expectations for growth and will be trying to garner some information about the pace of Fed tightening -- when, if at all, will the Fed take a rest from its program of raising interest rates 25 basis points at every meeting?"
Mergers generally provide the markets with a boost, but with the telecom sector facing stiffer competition, investors saw the Verizon-MCI deal only as a necessary step in dealing with those competitive pressures. Most investors kept to the sidelines while the sector's consolidation sorts itself out.
A rise in oil prices also kept investors out of the market. A barrel of light crude was quoted at $47.44, up 28 cents, on the New York Mercantile Exchange (search).
Among stocks moving, Apple Computer Inc. (AAPL), maker of the popular iPod music device, rose 4.2 percent, or $3.42, to $84.63. UBS Monday raised its price target on the stock to $99 from $85 and said Apple's momentum was set to build throughout 2005. On Friday, Apple announced a stock split.
But AIG fell 2.2 percent, or $1.63, to $71.49 after it said it received new subpoenas from New York Attorney General Eliot Spitzer and the Securities and Exchange Commission related to insurance products that might have helped companies smooth earnings.
Verizon Communications Inc. slipped 12 cents, or just 0.3 percent, to $36.19 as it said it would buy long-distance telephone company MCI Communications Inc. (MCIP) in a deal worth $6.75 billion -- beating out a rival bid by Qwest Communications International Inc. (Q) Qwest shares fell 4 percent, or 17 cents, to $3.98. MCI fell 4 percent, or 82 cents, to $19.93.
While the implications for the embattled telecom sector will likely be profound, Wall Street's lack of enthusiasm was due to the fact that the merger talks had been in the news for some time, and that investors' attention has been focused on the economy rather than individual sectors.
"I think the merger really was built in to both MCI and Verizon's stock prices already," said Neil Massa, equity trader at John Hancock Funds in Boston. "Investors are looking forward now to later in the week, when you have retail sales reports coming out and Greenspan before Congress."
Meanwhile, Hewlett-Packard Co. (HPQ), which last week ousted its chairman and chief executive, Carly Fiorina, was down about 2.5 percent, or 53 cents, at $20.77. HP will release quarterly earnings Wednesday.
OfficeMax Inc. (OMX) tumbled $1.73 to $30.02. OfficeMax's Chief Executive Christopher Milliken resigned on Monday after less than four months on the job, the second top official to leave the office products retailer amid a billing scandal.
ConocoPhillips (COP) rose nearly 2 percent, or $1.93, to $100.97 after Deutsche Bank analyst Paul Sankey Monday raised his investment rating on the stock to "buy" from "hold," citing the oil company's successful resolution of its Venezuela issues. Rival oil company Exxon Mobil Corp. (XOM), a Dow component, rose 1.3 percent, or 72 cents, to $56.83.
Pfizer Inc.helped limit losses on the Dow, rising 1.3 percent, or 33 cents, to $25.48. It said its Lyrica epilepsy drug reduced the frequency of partial seizures when given as an add-on therapy to other anti-epileptic treatments, according to a study in the journal Neurology.
General Motors Corp. (GM) announced it would pay Italy's Fiat SpA $2 billion to get out of a deal to eventually purchase the company's struggling auto manufacturing unit. GM added 10 cents to $37.24.
Shares of No. 1 U.S. mortgage funder Fannie Mae (FNM) climbed 1.2 percent, or 76 cents, to $63.18 and Freddie Mac jumped nearly 4 percent, or $2.55, to $66.91. Their shares dropped last week, as both houses of the U.S. Congress held their first hearings of the session on the government-sponsored housing enterprises to consider whether the companies need stiffer regulation.
"I think what we're seeing here is just the stock regaining some of the ground that was lost last week," said Ed Groshans, equity analyst at Fox-Pitt, Kelton in New York.
Trading was moderate, with 1.29 billion shares changing hands on the New York Stock Exchange, below the 1.46 billion daily average for last year. About 1.64 billion shares were traded on Nasdaq, below the 1.81 billion daily average last year. Advancers outnumbered decliners on the New York Stock Exchange by about 9 to 7. Advancers and decliners were almost even on Nasdaq.
The Russell 2000 index of smaller companies was up 0.26, or 0.04 percent, at 635.02.
Overseas, Japan's Nikkei stock average rose 0.68 percent. In Europe, Britain's FTSE 100 closed down 0.05 percent, France's CAC-40 lost 0.12 percent for the session, and Germany's DAX index dropped 0.03 percent.
Reuters and the Associated Press contributed to this report.