NEW YORK U.S. stocks and oil prices gave back early gains and fell on Monday as a slew of corporate takeover activity, usually a sign of investor optimism, was outweighed by concerns about the global economy.
The dollar strengthened against major currencies, including the euro, which was further hurt by poor European economic data and prospects of loose monetary policy for a longer period in the region.
Stocks initially rose on news of several merger and acquisition deals, a sign that companies are making use of high cash balances and historically low borrowing costs to expand their businesses.
But M&A activity also means companies will trying to grow profits through cost-cutting -- a bad omen for the jobs market.
"Overriding the M&A buzz -- which didn't have a lot of longevity -- is the fact that economic data still remains very poor and there's concern that the much-discussed soft patch has the potential to become something greater," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
Campbell Soup Co (CPB.N) was said to be considering a bid for Britain's United Biscuits, while HSBC started talks to buy a stake in South Africa's Nedbank in a potential $8-billion-plus deal. In Asia, M&A deals worth an estimated $58 billion worth were playing out on Monday.
Hewlett-Packard Co (HPQ.N) offered $24 a share in cash for data storage company 3PAR Inc (PAR.N). The $1.6 billion offer topped a competing bid by technology rival Dell Inc DELL.O and sparked fears of a bidding war, dragging tech stocks down.
Shares of 3PAR surged 44.6 percent to $26.09, while HP dropped 2 percent to $39.04 and Dell fell 1.1 percent to $11.94.
The three main U.S. stock indexes rose nearly 1 percent after the market opened but erased their gains in the afternoon.
The Dow Jones industrial average .DJI finished down 39.21 points, or 0.38 percent, at 10,174.41, while The Standard & Poor's 500 Index .SPX lost 4.33 points, or 0.40 percent, to 1,067.36. The Nasdaq Composite Index .IXIC fell 20.13 points, or 0.92 percent, to 2,159.63.
The MSCI All-Country World equity index .MIWD00000PUS ended little changed, supported by gains in Europe, where markets closed before U.S. stocks slid.
The FTSEurofirst 300 index .FTEU3 of top European shares closed up 0.67 percent, following three consecutive session of losses.
Mining shares gained in Europe as financial markets bet Australia's inconclusive weekend elections would lead to a change of government, halting a plan to impose taxes on major iron ore and coal mines.
The STOXX Europe basic resources index .SXPP rose 2.96 percent, while BHP Billiton (BLT.L), Anglo American (AAL.L), Antofagasta (ANTO.L) and Rio Tinto (RIO.L) gained 0.6 percent to 1.6 percent.
U.S. crude oil prices fell 72 cents, or 0.98 percent, to $73.10 a barrel, the lowest close since July 6, as a stronger dollar made it more expensive for investors using other currencies to buy the commodity.
The dollar rose 0.2 percent against a basket of major currencies measured by the U.S. Dollar Index .DXY.
The euro continued its slide, down 0.35 percent to $1.266, as the number of investors betting against it increased, according to data from the Commodity Futures Trading Commission.
Adding to the negative sentiment, a survey of euro zone purchasing managers on Monday showed slower manufacturing growth in the region in August.
"August's deceleration in activity (in Europe) has dented some of the euro bulls' arguments about economic outperformance vis-a-vis the United States and as such put a cap on any euro rally for now," said Boris Schlossberg, director for currency research at GFT in New York.
U.S. Treasuries prices rose late in the session as traders banked on the Federal Reserve's plan to keep interest rates low. The benchmark 10-year U.S. Treasury note gained 6/32 in price, with the yield at 2.5928 percent.
Also supporting Treasuries prices was a well-bid sale of $7 billion in 30-year Treasury Inflation-Protected Securities. The successful sale was seen by some analysts as a presage of a friendly reception for the two-, five- and seven-year conventional notes the Treasury will sell in the coming days.