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NEW YORK : US shares swung lower on Monday after Microsoft pulled the plug on its Yahoo takeover bid and fresh record high for oil prices hurt momentum on Wall Street after three positive weeks.
The Dow Jones Industrial Average closed 88.66 points (0.68 percent) lower at 12,969.54 while the tech-dominated Nasdaq composite retreated 12.87 points (0.52 percent) to 2,464.12.
The broad-market Standard & Poor's 500 index shed 6.41 points (0.45 percent) to 1,407.49.
Al Goldman at AG Edwards said the failure of the Microsoft-Yahoo deal and other possible merger collapses sapped some of the enthusiasm from the market.
"The Street is taking a second look today at the market for mergers," he said.
In addition to Microsoft-Yahoo, Goldman said: "There is also concern, voiced by an analyst, that Bank of America might back out of its bid to buy (troubled mortgage firm) Countrywide Financial."
The market got some positive economic data as the Institute for Supply Management's April non-manufacturing index jumped to 52 percent from 49.6 percent in March, showing expansion in the vast services sector of the US economy.
But Goldman said crude oil's new records overshadowed the positive news.
New York's main oil futures contract, light sweet crude for June delivery, surged to an intraday record high of 120.20 dollars following fresh unrest in Nigeria, Africa's largest oil producer, and rising tensions between the West and Iran.
The benchmark contract closed at an all-time high of 119.97 dollars, a hefty gain of 3.65 dollars from Friday's close.
Paul Nolte at Hinsdale Investments said that after three strong weeks for stocks, "our short-term momentum indicators point to a market that is stretched and in need of a rest."
Commenting on the market's recent gains, Nolte said: "The financial markets are now expecting a short/shallow recession and are pricing stocks accordingly - heaven forbid any disappointments."
Leading the downside, Yahoo plunged 15 percent to 24.37 dollars. Several major banks lowered their outlook on the Internet giant, including Citigroup, which advised stockholders to sell.
Briefing.com analyst Jeffrey Ham said Yahoo shares were under pressure "as confounded investors try to assess the company's muddled future."
"Without a merger or distinct strategic alternatives, Yahoo will most likely continue to lag a more innovative and faster growing Google," he added.
Shares in Microsoft, the world's biggest software company, fell a modest 0.55 percent to 29.08 dollars after walking away from its offer for Yahoo.
Citigroup analyst Brent Thill said Microsoft's move "is a win for its shareholders in the near term as investor attention will revert back to a strong enterprise product cycle opportunity."
Google, the leading Internet search firm that would be threatened by a tie-up, rallied 2.34 percent to 594.90 dollars.
Bank of America dropped 2.06 percent to 38.97 dollars and Countrywide Financial slid 10.37 percent to 5.36 dollars amid concerns the deal to buy up the troubled mortgage giant may fail.
Sprint Nextel meanwhile surged 10.52 percent to 8.72 dollars amid swirling reports about the future of the telecom giant. One report said Deutsche may be preparing a bid for the US firm, and another said the company may spin off its Nextel arm and concentrate on the WiMax wireless Internet service in a deal with Clearwire.
UAL, the parent of United Airlines, skidded 5.60 percent to 15.00 after a Wall Street Journal report saying it wants to tie up with smaller rival US Airways, down 4.59 percent at 8.32.
Bonds were mixed. The yield on the 10-year US Treasury bond held steady from Friday at 3.845 percent and that on the 30-year bond rose to 4.581 percent from 4.565 percent. Bond yields and prices move in opposite directions. - AFP/de
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