US stocks fell in light trade on Monday, as investors' caution ahead of next week's Federal Reserve meeting and the US transfer of power in Iraq overshadowed Wachovia Corp's $14 billion deal to acquire SouthTrust Corp.
Many investors are hesitant to place large stock orders before the Federal Reserve's policy-setting meeting on June 29-30.
Wall Street widely expects the Fed will start a tightening cycle by raising interest rates by one-quarter of a percentage point at the end of the meeting in a bid to curb inflation.
June 30 also marks the handover of power in US-occupied Iraq to an interim Iraqi government, a date that many investors fear could be marked by an escalation of violence.
The Dow Jones industrial average fell 44.94 points, or 0.43 percent, to 10,371.47. The Standard & Poor's 500 Index lost 4.70 points, or 0.41 percent, to 1,130.32. The technology-laced Nasdaq Composite Index slipped 12.35 points, or 0.62 percent, to 1,974.38.
Trading was light, with 1.12 billion shares changing hands on the New York Stock Exchange, below the 1.4 billion daily average for last year. About 1.36 billion shares were traded on Nasdaq, below the 1.69 billion daily average last year.
Decliners outnumbered advancers on the NYSE by 17 to 16, and 17 to 14 on Nasdaq.
On the New York Mercantile Exchange, crude oil for July delivery settled at $37.63 a barrel, down $1.12, after partial restoration of Iraq's sabotaged exports overshadowed Iran's seizure of three British vessels earlier.
SouthTrust shares climbed after Wachovia, the No 4 US bank, agreed to buy SouthTrust for $14.3 billion in stock. The deal follows recent major US bank acquisitions by Bank of America Corp, J.P. Morgan Chase & Co, SunTrust Banks Inc, Royal Bank of Scotland Group Plc and others looking to add retail customers as the US economy improves.
Wachovia shares fell $1.98, or 4.2 percent, to $45.02 on the NYSE, while those of SouthTrust shot up $4.57, or 13 percent, to $39.37 on Nasdaq.
In other deal news, mall owner Simon Property Group Inc has agreed to buy Chelsea Property Group Inc for $3.5 billion, boosting its outlet shopping centers business and giving it a presence in Asia, the companies said on Monday.
Chelsea shares jumped $7.01, or 12 percent, to $65.25, while Simon's stock lost 32 cents, or 0.6 percent, to $51.98, both on the NYSE. Cisco Systems Inc and Nortel Networks Corp both rose in active trading, helped by a report the chief executives of both companies met on Friday in Toronto, a sign that talks of a partnership between them is getting serious.
Nortel shares rose 10 cents, or 2.3 percent, to $4.54 on the New York Stock Exchange, where they were the second-most active issue. Cisco shares shed 55 cents, or 2.4 percent, to $22.87 on the Nasdaq, where they were among the most-active issues.
Verizon Communications, the nation's largest phone company, also dragged on the Dow after Cablevision Systems Corp cut the cost of its package of cable TV, Internet and phone service to $90 a month - a discount that takes dead aim at Verizon and could spark a price war.
Verizon fell 44 cents, or 1.2 percent, to $35.73 on the NYSE. Cablevision slid 78 cents, or 3.6 percent, to $21.22.