By Leah Schnurr
NEW YORK (Reuters) - Stocks fell on Monday as the collapse of a joint venture between Kuwait and Dow Chemical threatened to unravel one of the larger merger deals of the year and overshadowed gains in energy shares.
Dow
Shares of Rohm & Haas, which Dow agreed to buy for about $15.3 billion, slid close to 22 percent.
Chevron
Trading was expected to be light throughout the week shortened by the New Year's holiday. The market has been unable to mount a significant year-end rally that many investors had hoped for.
"People were anticipating the year-end rally and it's just not happening," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
"That could make it worse because if a lot of people were starting to get long here and then it's not going to happen, they're going to trade out of these (stocks) as fast as they bought them."
The Dow Jones industrial average <.DJI> fell 96.78 points, or 1.14 percent, to 8,418.77. The Standard & Poor's 500 Index <.SPX> lost 11.48 points, or 1.32 percent, at 861.32. The Nasdaq Composite Index <.IXIC> was down 28.74 points, or 1.88 percent, at 1,501.50.
The Nasdaq outpaced the other major indexes, dragged by large-cap tech companies including Research In Motion
Declines were also exacerbated by light volume, analysts said.
Dow Chemicals and Rohm & Haas were among the biggest losers by percent on the New York Stock Exchange, falling 19.8 percent to $15.17 and 21.7 percent to $49.77, respectively.
Oil prices jumped to more than $40 a barrel as Israeli warplanes hit the Gaza Strip for a third day and Israel prepared to launch a possible invasion. The offensive has killed more than 300 Palestinians in the deadliest violence in the territory in decades.
Dow component Chevron gained 1.4 percent to $71.37, while Exxon was up 0.6 percent at $77.64, but analysts noted the rise in energy prices did not bode well for cash-strapped consumers.
The broad S&P 500 is down about 40 percent for the year, putting it behind 1931's 47.1 percent record drop. But investors are hopeful the incoming White House administration will bring another stimulus package to help steer the United States out of a year-long recession.
President-elect Barack Obama has said signing a major economic stimulus package will be his priority when he takes over the presidency on January 20.
Over the weekend, one of Obama's top economic advisors said financial policy should address both immediate job creation and longer-term investment needs.
Lawrence Summers, Obama's pick to head the White House National Economic Council, said spending government money solely to stimulate consumer spending would be a short-sighted mistake.
(Editing by Tom Hals)
