Stocks edged lower in directionless trading Monday as investors tried to absorb the impact of two energy mergers along with persistent worries over the nation's economic health.

Some investors took profits after last week's strong market showing while many chose to stay on the sidelines in hopes for another interest-rate cut by the U.S. Federal Reserve at next week's meeting.

``With the market having come up as much as it has from the lows, we need positive economic data to push stocks higher,'' said Bill Meehan, chief market analyst at Cantor Fitzgerald. ``I just don't see where that's going to come from.''

The Nasdaq Composite Index  shed 17.96 points, or 0.82 percent, to end at 2,173.57. The technology-laden index has risen more than 30 percent from its nearly 2-1/2-year low set on April 4 amid hopes the economy will bounce back by year's end.

The Dow Jones industrial average fell 16.07 points, or 0.15 percent, to 10,935.17. Last week, the blue-chip gauge clawed into positive ground for the year as investors bet the Fed's four deep interest-rate cuts this year will spark a turnaround in the economy.

The broad market measure, the Standard & Poor's 500 Index, slipped 3.10 points, or 0.24 percent, to 1,263.51. The S&P had been on an uptick for four straight weeks.

Dow stock component JP Morgan Chase & Co. lost $1.40 to $49.20 after Prudential lowered its rating on the financial powerhouse, saying the slower economy should cause problem loans to increase. Financials American Express Co. and Citigroup also dragged on the Dow.

Lucent Technologies Inc., the most active on the New York Stock Exchange, lost 63 cents to end at $10.52. The telecom gear maker ousted its chief financial officer.

Home builders such as Centex Corp. were among the best-performing stocks in the S&P 500 as investors bet the Fed will lower rates at its meeting next week. Home builder and other construction stocks particularly benefit from lower interest rates, which reduce the cost of financing new homes.

Centex rose 67 cents to $44.40 and Pulte Corp. gained $1.35 to $45. The Standard & Poor's Homebuilding index added 2.17 percent.

U.S. bond dealers are almost unanimous in forecasting the central bank will slash short-term rates by another half percentage point to 4 percent on May 15, according to a Reuters poll. The mounting rate hopes lifted the market on Friday, despite news that the economy lost jobs in April at the fastest rate in a decade.

``The market is bland ... It will take some time for direction,'' said Tom Sparico, stock trader at Bengal Partners in Stamford, Conn. ``But after the employment report (on Friday) ... the market is feeling it will see further Fed easing, probably 50 basis points,'' he said. ``And that suggests longer term that the equity market will be in better shape.''

Top Web gear maker Cisco Systems Inc. fell 39 cents to $19.25, and was Nasdaq's most active issue. All eyes are peeled for the quarterly results and outlook from the New Economy bellwether, which reports after the close on Tuesday. Cisco last month warned its results would lag forecasts by a wide margin and said it plans to cut 8,500 jobs.

The soft economy spurred another round of profit warnings.

Transmeta Corp, a start-up computer chip maker, sank nearly 24 percent, or $3.40 to $11.17 when a majority of its shares were freed from trading restrictions related to the company's initial public offering last November.

Portal Software dropped $3.35 to $5.93, or 36 percent, after the software provider cut its revenue and earnings forecast amid a slump in orders and said it would cut jobs.

Express package shipping giant FedEx Corp lost $1 to $40.28. Battered by a slowdown in the economy, the company issued another profit warning for its fiscal fourth quarter and said fiscal first-quarter earnings would likely fall ''significantly'' below the previous year's results.

The energy sector was in focus on news of two takeover deals and another tie-up was announced in the financial industry.

Ultramar Diamond Shamrock Corp. bolted up $7.79 to $50.50 in active Big Board trade after Valero Energy Corp. agreed to buy Ultramar for about $4 billion, creating the No. 2 U.S. refiner. Valero lost $2.77 to $42.70.

Williams Cos Inc. fell $2.39 to $39.28 after it said it is in advanced talks to buy Barrett Resources Corp. for $2.5 billion, topping a hostile bid from Royal Dutch/Shell Group. Barrett rose $2.85 to $70.15.

Midwest regional bank U.S. Bancorp said it agreed to buy credit-card payment services provider NOVA Corp. for $2.1 billion in cash and stock, building up its payment-processing arm. NOVA rose $5.53 to $29.05 and U.S. Bancorp fell $1.44, or 6.35 percent, to $21.24.

Economic data showed consumers took on new debt in March at the slowest pace in a year and a half, a sign they are growing more cautious in their spending habits as the economy slows. The Fed said the amount of consumer installment debt outstanding -- which includes car loans, student loans and credit card debt -- grew by $6.16 billion in March, the smallest rise since a gain of $5.33 billion in October 1999.

The market is gearing up for other more important economic reports later this week, including Friday's retail sales and wholesale inflation numbers, traders said.

``The jury is still out on the economy and people are hoping that things recover in the third or fourth quarter -- but they are not certain,'' said James Volk, co-director of institutional trading at D.A. Davidson and Co.

Overseas markets were mixed on Monday. In Europe, Germany's DAX index was off 0.48 percent at 6,108.70. France's CAC-40 was up 0.47 percent at 5,481.00, and Britain's FT-SE 100 was up 1.81 percent at 5,870.30.

The benchmark 225-issue Nikkei Stock Average rose 107.77 points, or 0.74 percent, to 14,529.41. It was the strongest close since the index registered 14,552.29 on Dec. 15.

— The Associated Press contributed to this report.