Stock rally fizzles
Wall Street abandons advance by the close as enthusiasm about deal news and speculation gives way to hesitation ahead of Federal Reserve meeting.
NEW YORK (CNNMoney.com) -- Stocks ended mixed Monday, giving up gains sparked by Mars' $23 billion buyout of Wrigley, as investors pulled back ahead of the start of the two-day Fed policy meeting and key readings on economic growth and the labor market.
The Dow Jones industrial average (INDU) and the broader Standard & Poor's 500 (SPX) index both lost a few points, while the Nasdaq composite (COMP) ended just above unchanged.
Last week, stocks ended at a nearly 4-month highs, as investors looked beyond rising oil and gas prices and focused on the positives in the mixed batch of quarterly earnings. Those same factors helped lift stocks Monday, along with some merger deals and speculation.
But gains were limited during the session and mostly petered out by the close, as investors geared up for the Federal Reserve meeting Tuesday and Wednesday. The Fed is expected to cut interest rates again, and then perhaps signal that it is done for the time being.
However, what reason the central bankers give for a pause in the rate-hiking campaign could determine the stock market reaction, said Ron Kiddoo, chief investment officer at Cozad Asset Management
"The market will be looking for wording that says the Fed can stop cutting rates because the cuts are working and the fiscal stimulus package will help," he said. "As opposed to if they say they need to stop lowering rates because of inflationary pressures."
Reports due later this week include the April jobs report and the initial reading on first-quarter GDP growth, both critical amid signs that the economy is in a recession.
"I would expect the jobs report to come in a bit weak, but I think the market will brush it off," said Dean Barber, president at Barber Financial Group. "There's been enough bad news on the economy that people are expecting it."
Deal news. Candy maker Mars is buying gum producer Wrigley (WWY, Fortune 500) in an all-cash deal worth nearly $23 billion. The deal will eventually make Wrigley a subsidiary of Mars. Warren Buffett's Berkshire Hathaway (BRK.A) is making a minority equity investment in the new subsidiary. Wrigley shares surged 23%. (Full story).
Kirk Kerkorian's Tracinda Corp. is offering $170 million to buy an additional 20 million shares of automaker Ford Motor (F, Fortune 500). Tracinda already owns 100 million Ford shares. Ford jumped 9.5%. (Full story).
A potential Microsoft (MSFT, Fortune 500)-Yahoo (YHOO, Fortune 500) deal remains up in the air after a weekend deadline passed without Yahoo responding to the $44.6 billion cash and stock offer. In the aftermath of this, the deal could turn hostile or Microsoft could walk away. (Full story).
Airlines. Continental (CAL, Fortune 500) said it wasn't interested in entering into a merger agreement with another company right now, surprising United Airlines' parent UAL (UAUA, Fortune 500), which had been in advanced talks with the air carrier. However, reports say Continental has been in talks with American Airlines' parent AMR (AMR, Fortune 500) about an arrangement that would involve working together but not merging.
Following the news, reports surfaced that UAL is now in advanced talks with US Airways (LCC, Fortune 500) regarding a merger, with a deal possibly to be announced in two weeks.
Earnings. With 53% of the S&P 500 having reported quarterly results, earnings are currently on track to have fallen 14% from a year ago, according to the latest Thomson Financial estimates.
Telecom giant and Dow component Verizon Communications (VZ, Fortune 500) reported higher quarterly earnings that met analysts' estimates on higher revenue that was short of expectations. Shares gained 2.5%. (Full story)
In other earnings news, RadioShack (RSH) reported lower quarterly earnings and sales that nonetheless topped forecasts. Shares slumped 13.5%. (Full story).
Market breadth was positive. On the New York Stock Exchange, winners topped losers 9 to 7 as 1.21 billion shares changed hands. On the Nasdaq, advancers topped decliners by a narrow margin on volume of 1.79 billion shares.
Commodities soar. Both oil and gas prices hit fresh records.
U.S. light crude oil for June delivery rose 23 cents to settle at $118.75 a barrel on the New York Mercantile Exchange after hitting a record $119.93 earlier in electronic trading.
Meanwhile, the national average price for a gallon of regular unleaded gas hit an all-time record of $3.603, AAA reported. (Full story)
COMEX gold for June delivery rose $5.80 to settle at $895.50 an ounce.
Other markets. The dollar gained versus the euro and yen.
Treasury prices advanced, lowering the yield on the benchmark 10-year note to 3.82% from 3.87% late Friday. Bond prices and yields move in opposite directions.
In other news, an afternoon government report showed that the number of vacant homes up for sale in the first quarter hit a record high. 
