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AP / TIM PARADIS, AP Busi · Guest

NEW YORK (AP) -- Wall Street pulled back Monday as investors
digested Microsoft Corp.'s decision to withdraw its bid for Yahoo
Inc. and oil prices rose to a new record over $120 a barrel. The Dow
Jones industrial average at times lost more than 100 points.
Microsoft had offered $43.7 billion to buy Yahoo Inc., but
scrapped the bid late Saturday after the software maker and the
Internet provider could not agree on a sale price. The failed deal
came as a disappointment to Wall Street, as merger-and-acquisition
activity tends to boost shareholder value, and also signals to the
broader market that corporate America is optimistic about the
future.
A jump in oil prices raised concerns that inflation could
force consumers, who account for more than two-thirds of the
economy, to cut their spending on discretionary items. Crude oil
futures for June delivery surged to a new trading high of $120.21 a
barrel on the New York Mercantile Exchange before pulling back. The
jump followed news of an attack on a Nigerian oil facility.
"Energy is a very important piece," said Russell Croft,
portfolio manager at Croft Leominster Investment Management in
Baltimore, referring to the mood of both investors and consumers.
"It's the price at the pump, it's what people read about."
Despite their concerns about inflation, investors briefly
took some encouragement from a key reading on the U.S. service
sector. The Institute for Supply Management said its April index of
nonmanufacturing activity rose to 52 from 49.6 in March. A reading
above 50 signals economic expansion; analysts had expected the
figure would come in at 49.3, according to economists surveyed by
Thomson Financial/IFR.
In late afternoon trading, the Dow fell 81.58, or 0.62
percent, to 12,976.62.
Broader stock indicators also declined. The Standard &
Poor's 500 index fell 5.81, or 0.41 percent, to 1,408.09, and the
Nasdaq composite index fell 13.00, or 0.52 percent, to 2,463.99.
Bond prices rose as stocks dropped. The yield on the
benchmark 10-year Treasury note, which moves opposite its price,
fell to 3.83 percent from 3.86 percent late Friday.
Gold prices also climbed, while the dollar traded mixed
against other major currencies.
In general, first-quarter earnings reports and economic data
have been coming in weak, but were not as poor as many on Wall
Street had braced for. Investors have lingering concerns, however --
not only is the housing market still weak, but commodities besides
oil remain near record levels, threatening consumers' discretionary
spending and their ability to pay off debt.
John Merrill, chief investment officer at Tanglewood Capital
Management in Houston, noted that despite investors' concerns, Wall
Street has logged a sizable rebound since its March lows. He said
the back-and-forth in stocks is to be expected, particularly after
recent gains.
Last week, the Dow rose 1.29 percent, while the S&P 500
advanced 1.15 percent.
"The market can only go in one direction for so long before
you just have to change," he said.
"Our idea is that we're in a long, soft patch," Merrill
said. "The economic problems we have with homebuilding and the
over-leveraged consumer and the over-leveraged banking system -- they
are problems that are going to be with us for a while."
Helping to offset some of investors' disappointment over the
abandoned Yahoo deal was a report from The Wall Street Journal,
which said Deutsche Telekom AG is considering a bid to buy Sprint
Nextel Corp., according to people familiar with the discussions.
Sprint rose 87 cents, or 11 percent, to $8.76 on the report
and as the newspaper reported that Spring is considering spinning
off its Nextel arm.
Meanwhile, Yahoo fell $4.28, or 15 percent, to $24.39 after
Microsoft's decision to walk away. Shares of Microsoft slipped 11
cents to $29.13.
Overseas, Japan's and Britain's markets were closed for
holidays. Germany's DAX index rose 0.13 percent, and France's CAC-40
fell 0.13 percent.
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