U.S. Stocks Mixed In Early Trade

NEW YORK (MarketWatch) -- U.S. stocks were mixed in early trading Monday, as investors hesitated to extend last week's rally, although prices drew some support from deal-making news, including a report that BHP Billiton is planning a bid for Alcoa Inc.

The major indexes opened higher, then gave back most of their gains. Analysts said the market could be in for some rather tepid price action, following recent dramatic price swings.

"Stocks continue to plow through any news that comes their way - neither good nor bad will keep prices down for long," said Paul Nolte, director of investments at Hinsdale Associates.

The Dow Jones Industrial Average was up just 7 points at 13,765, while the S&P 500 fell a little more than 1 point to 1,531.

The Nasdaq Composite dropped 4 points to 2,622.

Breadth was negative with 15 rising shares for every 13 on the decline on the New York Stock Exchange, and 15 rising stocks for every 11 losing strength in the Nasdaq markets.

Among blue chips, Alcoa rose 2%, after a report in The Times (of London) newspaper said BHP Billiton Ltd. is reviewing plans to buy the aluminum producer.

Wal-Mart Stores Inc. rose 0.2%. The giant retailer has asked a state court in Michigan to dismiss the lawsuit filed by fired advertising executive Julie Roehm, contending that she lives in Arkansas.

Boeing was in focus as the Paris Air Show began. Airbus won orders from Middle Eastern airlines Qatar Airways and Emirates as well as US Airways , while Boeing inked two smaller deals. But the stock traded flat at t $98.15 as investors also absorbed news of contracts for its rival Airbus .

Among technology shares, Google Inc. will be in focus. Ebay Inc. said it expects to keep adds off Google's search engine for about a week, as it tests how effectively the ads drive visitors to its auction site and produce sales.

Google shares rose 0.7% to $509.30 a share.

Yields on back burner?

Stocks rallied last week, as investors cheered economic data pointing to tame inflation, which helped to contain a surge in bond yields. Higher bond yields provide an attractive alternative to riskier bets in the stock market, while also lifting borrowing costs for businesses and consumers.

Treausry opened higher, then gave up their gains, ahead of data which might point to further weakness in housing. The benchmark 10-year Treasury bond was down 4/32 at 94-25/32, while its yield rose to 5.183% from 5.17% at Friday's close.

Deal-making

After being eclipsed by rising bond yields in recent weeks, deal-making returned as a catalyst for the market.

Yields and deals, meanwhile, are not unrelated.

"The enthusiasm for lower rates has less to do with the odds of a rate cut, and much more to do with 'borrowing costs'," said Marc Pado, chief market strategist at Cantor Fitzgerald, in a note. "This bull market has been fueled by M & A activity. The fear is that higher rates might choke off borrowing and stem the tide of stock being taken private."

In other deal-making news Monday, shares of Dow Jones & Co. , publisher of this report, gained 1.7%. General Electric Co. and the publisher of the Financial Times, Pearson PLC, are in talks about making a joint bid for the publishing company, according to the Wall Street Journal.

Such a bid would rival the $60-a-share, or $5 billion proposal for Dow Jones made by News Corp. . The stock rose 0.7% to $58.60.

Elsewhere, Nymex Holdings fell 2.2% after the Chicago Mercantile Holdings said it's not in talks to buy the New York commodities exchange.

By Nick Godt