Stocks retreat into the red

NEW YORK (CNNMoney.com) -- Stocks retreated Monday after early-session gains despite a rally in Asian markets and merger talk.

The Dow Jones industrial average edged lower an hour into the session, while the broader S&P 500 index also eased around 0.1 percent.

The tech-laden Nasdaq composite fell 0.2 percent.

Asian markets finished sharply higher, with Japan's benchmark Nikkei index climbing about 1 percent to a three-month high. In Europe, stocks were mixed in midday trading.

U.S. markets capped last week with a three-day rally, as easing bond yields and tame inflation readings both at the wholesale and consumer level soothed investor fears that the Federal Reserve will have to raise interest rates sometime this year.

No major U.S. economic reports were scheduled for Monday.

In corporate news, mining group BHP Billiton is reconsidering a takeover bid for aluminum producer Alcoa (up $0.44 to $41.60, Charts, Fortune 500), the Times of London reported.

The fast-food chain Wendy's (down $1.43 to $38.30, Charts) said it was exploring a possible sale of the company and also cut its 2007 earnings forecast, sending the stock down about 3 percent in early trading.

Boeing (up $0.04 to $98.19, Charts, Fortune 500) rival Airbus collected a number of plane orders at the Paris Air Show, including an $8 billion deal with U.S. carrier US Airways.

British media outfit Pearson (down $0.08 to $17.13, Charts) is in talks with General Electric (down $0.10 to $38.02, Charts, Fortune 500) about a joint bid for Wall Street Journal publisher Dow Jones (down $0.31 to $58.70, Charts) that would permit the controlling Bancroft family to keep a minority interest, according to a report published Sunday afternoon.

Bond prices edged lower, pushing up the benchmark 10-year yield to 5.17 percent from 5.16 percent late Friday. Bond prices and yields move in opposite directions.

Oil prices inched higher, with the U.S. light crude for July delivery climbing 5 cents to $68.05 a barrel.

In currency trading, the dollar eased against the euro, but was higher versus the yen.

COMEX gold for August delivery added $1.10 to $659.80 an ounce.