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U.S. Stocks Mixed After Mega Bank Deal

NEW YORK (MarketWatch) -- U.S. stocks were mixed on Monday, as investors weighed the need to consolidate the previous week's strong gains against news of two mega mergers, including the UK's Barclays Plc's plan to buy Dutch bank ABN Amro Holdings NV for $91 billion, the biggest bank deal in history.

The Dow Jones Industrial Average rose 12 points to 12,974, as 16 of its 30 components advanced. It earlier hit another record intraday high of 12,983.

The S&P 500 index rose 1 point to 1,485, while the Nasdaq Composite fell 0.6 points to 2,525.

Weighing on the tech-heavy Nasdaq, Applied Micro Circuits Corp. plunged 18% after warning that it expects fourth-quarter revenue that fell below analysts expectations.

Dow 13,000?

Leading the Dow, Caterpillar Inc. gained 1.6% after Morgan Stanley upgraded the stock to equal weight from underweight, citing solid first-quarter results.

IBM shares rose 0.7% after receiving an upgrade to overweight from equal weight by Lehman Brothers, which said 2008 expectations for the company appear to be too low.

Pfizer Inc. weighed the most on the blue-chip average, losing 1.6% after Prudential downgraded the stock to neutral from overweight, citing a lack of catalysts to drive the stock price any higher.

The Dow's impressive run - it powered ahead 2.8% last week for its third straight week of gains - could continue with more blue-chips due to report earnings later this week.

"Blue chip earnings and weakness in the dollar gave the large cap, multinationals the boost that sent the Dow rocketing on Friday," said Marc Pado, market strategist at Cantor Fitzgerald.

Earnings expectations were driven so low (to growth of 3.3% year-on-year for S&P 500 companies) that the market was able to cheer profits growing at around 5.2%, he said.

"We have another week of important and potentially market-moving earnings, but then the impact of earnings will slow," Pado said. "As we start to focus in on May, the market should look to settle back from this impressive run."

Money driving markets

While a slowing U.S. economy and earnings may not do much for the stock market, investors have remained heartened by a seemingly endless pool of money that keeps finding its way into equities - either through share buybacks, higher dividends, leveraged buyouts or mergers.

Monday's news that Barclays reached a deal to buy ABN Amro for $91 billion and change is yet another sign that such activity remains in full gear.

As part of the deal, ABN would sell Chicago-based LaSalle Bank to Bank of America Corp. .

But many analysts predict that a rival bid for ABN might still appear. ABN is still holding talks with a consortium, which includes the Royal Bank of Scotland, Banco Santander Central Hispano and Fortis .

Separately, British drugmaker AstraZeneca PLC agreed to pay $15.6 billion, or $58 a share, for U.S. biotech company MedImmune Inc. .

Medimmune shares jumped 17.9%, while AstraZeneca slumped 4.5%.

Other markets

Crude oil futures rose 16 cents to $64.27 amid tensions in Nigeria. The gains helped lift shares of oil companies, including Exxon Mobil Corp. , which gained 0.1% even after Deutsche Bank downgraded the stock to hold from buy, citing valuation.

The dollar was slightly higher against both the yen and the euro.

Gold dropped as the dollar rose, with futures for the precious metal falling $1.4 to $694.40 an ounce.

Treasury bonds were slightly lower, amid a dearth of economic data Monday. The benchmark 10-year Treasury bond was down 1/32 at 99 19/32 while its yield, which moves inversely, rose to 4.684%.

By Nick Godt

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