US stocks slipped on Monday as oil climbed towards a 10-month high near $70 a barrel, taking a toll on energy-dependent sectors, while more worrisome data from the housing sector weighed on home builders.
Adding to the wary mood, the Wall Street Journal said Merrill Lynch & Co took control of $400 million of loan assets underlying a troubled hedge fund at Bear Stearns Cos. Inc Merrill was a chief lender to the fund, which was heavily invested in subprime loans. "Oil above $69 is balancing out any positive the market would have enjoyed from pullback in yields," said Sam Rahman, portfolio manager at Baring Asset Management Inc.
Benchmark US Treasury yields were on pace for a second day of declines on easing inflation worries. The Dow Jones industrial average was down 23.81 points, or 0.17 percent, at 13,615.67. The Standard & Poor's 500 Index was down 1.78 points, or 0.12 percent, at 1,531.13. The Nasdaq Composite Index was down 0.11 point at 2,626.60.
Trading was light on the NYSE, with about 1.24 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 1.76 billion shares traded, below last year's daily average of 2.02 billion.
Declining stocks outnumbered advancing ones by a ratio of about 9 to 8 on the NYSE and the Nasdaq. The Dow Jones US Home Construction Index was down 1.07 percent after a survey showed sentiment among US home builders fell in June to the lowest level since February 1991.
Centex Corp was one of the biggest drags, falling 1.5 percent to $43.13 on the NYSE. The dreary home building data pushed the yield on the benchmark 10-year Treasury note down to 5.15 percent, alleviating concerns that higher borrowing costs could cut into corporate profits and slow the pace of take-overs, which have been the engine of this spring's equities rally.
US crude oil futures settled up over $1 at $69.09 a barrel, the highest settlement for a front-month crude contract since last September 1. Freight and logistics companies were one of the worst performing subsectors as oil prices gained. Further weighing on the group, Bear Stearns cut its fourth-quarter earnings outlook for FedEx Corp.
Shares of logistics operator CH Robinson World-wide Inc was down 2.6 percent at $53.33. FedEx stock fell 1.4 percent to $109.87, while rival United Parcel Service Inc fell about 1 percent to $73.32. Bear Stearns shares were down 1.4 percent at $147.95, but were off their session lows after CNBC reported that Merrill had postponed a planned auction of the seized loans until it hears the fund's plan to recapitalize.
Shares of Apple Inc was the top-weighted gainer on the Nasdaq and S&P 500, gaining 3.8 percent to $125.09, after the company said its iPhone will have a longer-lasting battery than expected, topping those in rival phones.
Shares of Genesco Inc jumped 8.4 percent to $53.75 on Monday after athletic shoe retailer Finish Line Inc said it agreed to buy the shoe and hat retailer for $54.50 per share or about $1.5 billion. Shares of Finish Line slid 8.7 percent to $11.53.
Shares of Cadence Design Corp fell 3 percent to $22.60 after The New York Times reported that talks aimed at a possible take-over by two private equity firms of the maker of software for designing computer chips had stalled over price.
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