U.S. Stocks To Open Mixed Amid Mergers, Fed Concerns

NEW YORK (MarketWatch) -- U.S. stocks were poised for a mixed open on Monday, as a slew of merger news -- including Alcoa Inc.'s $33 billion bid for rival Alcan Inc. -- lifted spirit. But the market's momentum is likely to be contained ahead of the Federal Reserve's meeting on interest rates later this week.

Futures for the Dow Jones Industrial Average were up 1 at 13,320, while those for the S&P 500 index fell 0.7 points to 1,513.

Nasdaq 100 futures fell 1.5 points to 1,907.

Monday mergers

Among blue chips, Alcoa dropped 0.4% before the open. The aluminum giant has offered $73.25 a share, or $33 billion, in cash and stock for Canada's Alcan . The offer represents a 32% premium to Alcan's average closing price over the past 30 days.

Alcan's stock jumped 25% in pre-market trading.

Technology shares might see some pressure after a report late Friday said Microsoft Corp. was no longer holding talks about a possible merger with Yahoo Inc. . Yahoo shares eased 1.2% before the open.

Elsewhere, BAE Systems is offering $88 a share, or $4.1 billion, for defense contractor Armor Holdings.

Rio Tinto rose after analysts said BHP Billiton could afford to buy the company. The gains extended a rise in the miner's shares after Merrill Lynch said that a private-equity consortium could afford to buy BHP Billiton .

Merger activity and share buybacks have remained key drivers of the market's advance as cash-rich companies put their money to use. A smaller pool of overall stock, together with speculation about more mergers, helps lift the broad market.

Still, investors are also now faced with the reality of a slowing economy, as shown in last week's below-par employment report for April. Attention will now be turning toward the Federal Reserve, which meets Wednesday to decide on interest rates.

While the Fed is widely expected to leave rates unchanged, investors hope it will acknowledge signs of a slowing economy, which could open the door for rate cuts later this year.

Other markets

The dollar was down against both the euro and the yen in early action, following the weak U.S. jobs report on Friday. The euro also received a slight boost after the as-expected victory of right-wing candidate Nicolas Sarkozy in the French presidential election.

Later in the week, the European Central Bank is expected to leave interest rates unchanged -- but also to signal a June rate rise.

Crude-oil futures slipped 76 cents to $61.17 a barrel, while gold futures rose $2.60 to $692.30 an ounce.

Corporate news

Elsewhere, Motorola shares rose 2.1% to $18.45 in the pre-open as Carl Icahn is due to push for a seat on its board at a meeting in Chicago.

ABN Amro turned down a $24.5 billion offer for its LaSalle operation from banks led by the Royal Bank of Scotland, saying too many conditions are attached. Instead it prefers a $21 billion offer from Bank of America .

News Corp., which is bidding $5 billion for Dow Jones, sold a stake in Australia's Fairfax Media for 380 million Australian dollars. Dow Jones is the owner of the Journal and MarketWatch, the publisher of this report.

Warren Buffett's Berkshire Hathaway said first-quarter earnings rose 12% on insurance gains. He warned over the weekend that global warming could increase hurricane losses at its catastrophe reinsurance unit.

By Nick Godt