The Dow Jones industrial average (search) ended up 4.38 points, or 0.04 percent, at 10,682.94. The Standard & Poor's 500 Index (search) was down 0.92 points, or 0.07 percent, at 1,240.56. The technology-laced Nasdaq Composite Index (search) was up 7.32 points, or 0.34 percent, at 2,182.83.
Software maker Siebel Systems Inc. (SEBL) surged 12.7 percent to $10.29 after its rival, Oracle, said it would buy the company in a deal that values Siebel at $5.85 billion. Oracle (ORCL) was up 1.6 percent at $13.49.
"Acquisition news is quite positive because it indicates a looking-ahead and willing-to-spend mentality," said Barbara Marcin, money manager at Gabelli Asset Management in Rye, New York. "This expansion is 2-1/2 years old and the consumer has more than done his or her part. Now is the time you need corporations to be willing to spend their very good earnings and their tremendous cash balances."
Monday's $12 billion in merger activity signaled optimism on Wall Street two weeks after Hurricane Katrina's devastation of the Gulf Coast threatened the U.S. economy. But analysts said market was treading water while waiting to see if the Federal Reserve (search) raises rates again when policymakers meet next week.
Some analysts expected the Fed to refrain from futher moves.
"I think we're coming to the end of it," Rick Meckler, president of LibertyView Capital Management, said of the Fed's yearlong chain of rate increases. "The rise of energy prices and the general impact of the hurricane would make it dangerous for the Fed to push rates higher and higher."
Oil and gasoline futures were pulled lower by reports that efforts to resume production are progressing after Katrina brought much of the Gulf Coast to a standstill, but officials say nearly 60 percent of the region's capacity remains blocked from the market. A barrel of light crude fell 74 cents to $63.34 on the New York Mercantile Exchange (search), where gasoline futures also slipped 9 cents to $1.87 a gallon.
EBay agreed to acquire Internet phone company Skype in a deal worth up to $4.1 billion. Shares of eBay rose 0.8 percent to $38.94.
Shares of Google Inc. (GOOG) and Yahoo Inc. (YHOO), which run their own Internet phone services, also piled on gains. Google shares climbed 3.6 percent to $309.74 and Yahoo rose 1.3 percent to $33.91.
"The dot-com logic of paying big prices to enter new markets has come roaring back," said industry analyst Greg Sterling of Kelsey Group. "There is a buying frenzy, a kind of "me-too" frenzy that we haven't seen since the late 1990s."
Crude oil prices declined, giving a lift to shares of industrials, which are big consumers of fuel. Diversified manufacturer 3M Co. rose 1 percent to $74.23.
But shares of oil company Exxon Mobil Corp. (XOM) fell 1.2 percent to $62.52 as oil settled 74 cents lower at $63.34 a barrel. The American Stock Exchange index of energy companies slipped 2 percent.
In the financial sector, Wachovia Corp. (WB) said it would acquire financial services company Westcorp Inc. and subsidiary WFS Financial Inc. (WFSI) to expand its auto-lending business. Wachovia shares ended 1.6 percent lower at $49.57, Westcorp edged up 23 cents to $61.58 and WFS Financial jumped 8.1 percent to $70.15.
Commerce Bancorp Inc. (CHB) fell 8.9 percent to $30.75 after New Jersey's biggest bank said it expects second-half profit to fall short of analysts' forecasts, citing the impact of rising short-term interest rates.
The airline industry faced more headwinds following reports that cash-strapped Delta Air Lines (DAL) could file for bankruptcy as soon as this week while it arranges $1.7 billion in financing for its restructuring. Mechanics at Northwest Airlines Corp. also walked from the bargaining table Sunday, extending their strike to a fourth week because of disagreements over the carrier's latest labor proposal. Delta plunged 25 cents to an all-time low of 85 cents, and Northwest fell 17 cents to $3.31.
The Dow was carried higher by Citigroup Inc. (C), which added 40 cents to $45.01 after Prudential Equity analyst Michael Mayo raised his rating on the stock to "Overweight" from "Neutral Weight." Mayo said Citigroup stands to benefit from a recovering investment market, room for improved operating results and potential overseas growth.
Campbell Soup Co. (CPB), which also produces Godiva chocolate and Pepperidge Farm cookies, said higher prices and lower marketing costs helped lift its fourth-quarter profit 63 percent to beat Wall Street expectations. Nonetheless, Campbell lost 10 cents to $30.99.
Electronic Arts Inc. (ERTS) rose 5.3 percent to $59.09 after Wedbush Morgan Securities raised the video game maker's investment rating to "buy" from "hold."
Shares of apparel designer Polo Ralph Lauren Corp. (DELL) rose 3.8 percent to $51.76 after financial weekly newspaper Barron's said the stock is poised for a rise.
Trading was active on the NYSE, with about 1.43 billion shares changing hands, below last year's daily average of 1.46 billion, while on Nasdaq, about 1.73 billion shares traded, below last year's daily average of 1.81 billion.
Declining stocks outnumbered advancing ones by a ratio of 9 to 8 on the NYSE, while gainers beat decliners by 4 to 3 on the Nasdaq.
The Russell 2000 index of smaller companies rose 2.77, or 0.41 percent, to 680.82.
Overseas, Japan's Nikkei stock average climbed 1.61 percent. Britain's FTSE 100 was up 0.29 percent, Germany's DAX index declined 0.32 percent, and France's CAC-40 finished unchanged.
Reuters and the Associated Press contributed to this report.