U.S. Stocks Retreat After Microsoft Pulls Yahoo Offer
NEW YORK (MarketWatch) -- Stocks retreated Monday after Microsoft Corp. dropped its $50 billion offer for Yahoo Inc. and an analyst said Bank of America Corp. should abandon its pending takeover of Countrywide Financial Corp.
"U.S. equities remain underwater and unable to sustain their post-payrolls rally from last week as the counter-weight of crude oil back near $120 and the disintegration of a pair of large M&A deals weigh on investor sentiment," said analysts at Action Economics.
The Dow Jones Industrial Average slid 111.22 points to 12,946.98, with 27 of its 30 components trading in the red. Shares of General Motors Corp. led blue-chip declines, its stock down 3.8%, followed by American Insurance Group Inc. , off 3.3%.
Also weighing on the Dow, shares of Bank of America fell 2.2%, retreating after Friedman Billings Ramsey & Co. analyst Paul Miller said the bank was likely to negotiate a sharply lower price for Countrywide but should just consider walking away, as Countrywide's loan portfolio "will prove a drag on earnings."
Shares of Countrywide , the nation's biggest mortgage company, dove nearly 15.5%.
Blue-chip gains were led by Alcoa Inc. , up 1%, with Microsoft also among the shares advancing, its stock rising 0.2% in the wake of its weekend decision to pull the plug on its takeover attempt of Internet portal Yahoo
.
Outside the Dow, shares of Yahoo were down 15.6%.
"The mentality of Yahoo to continue to think they don't need this deal is a little scary and foreign to me," said Art Hogan, chief market strategist at Jefferies & Co. .
The S&P 500 shed 8.65 points to 1,405.25, with financials leading the decline among S&P component sectors with a 1.6% drop, followed by telecommunication services, down 1.6%.
Advancing sectors on the S&P included energy, up 1.3%, and materials, up 0.03%.
The technology-heavy Nasdaq Composite declined 17.92 points to 2,459.07.99.
Crude-oil futures surged nearly $4 to above $120 a barrel for the first time on concerns about supply disruptions and weakness in the U.S. dollar. The contract for June delivery was recently up $3.77 at $120.09 a barrel after hitting a high of $120.36 earlier on the New York Mercantile Exchange. .
Also on the Nymex, gold for June delivery gained $16.1 to settle at $874.1 an ounce.
On the New York Stock Exchange, nearly 2.1 billion shares changed hands, and declining stocks topped those advancing about 3 to 2. On the Nasdaq, almost 1.4 billion issues were traded, and declining stocks surpassed those on the rise by 8 to 5.
Service sector surprise
The major indexes briefly pared opening losses after the Institute of Supply Management said its gauge of activity in the services sector expanded in April, ending a string of three months of contraction. .
"The April headline print for the non-manufacturing index of the ISM is encouraging but most likely exaggerates the degree of health in the economy. All the talk of a V-shaped recovery is in our view premature," said Stephen Stanley, chief economist at RBS Greenwich Capital.
In its quarterly senior loan officer survey released Monday afternoon, the Federal Reserve reported that both consumers and businesses found it harder to borrow money during the past three months, with more than half the banks surveyed saying they had tightened the screws on virtually all types of loans.
European shares weakened a touch on Monday. London was closed for a holiday.
In Asia, markets began the week on a positive note as investors bought into resource stocks. .
By Kate Gibson