Stocks lower on correction concerns

Stocks lower on correction concerns

	Published : Mon, 26 Feb 2007 20:19 By : Agencies Print this Story

NEW YORK (AP) - Stocks fell Tuesday as concerns about a market correction offset investor optimism that acquisition activity is on pace to set a record this year.

The $45 billion buyout of electric utility TXU Corp. injected confidence into the market that merger and acquisition activity could surpass last year's record $4 trillion level. The deal, led by a consortium of buyout shops that include Kohlberg Kravis Roberts & Co. and Texas Pacific Group, would go down as the largest leveraged buyout in U.S. history.

Other deals announced before the opening bell included Station Casinos Inc., which agreed to be bought by a private equity firm started by the company's founding family. Temple-Inland Inc., a conglomerate that offers everything from packaging material to financial services, announced it plans to separate itself into three standalone public companies.

However, stocks were unable to sustain gains amid speculation that the market may be in for a correction. The Dow Jones industrials, after hitting a peak last week, fell for three straight sessions in their worst weekly decline since August.

'Despite the buyout news, we are seeing the broader market a little concerned that we have had such strength without a correction,' said Peter Dunay, an investment strategist with New York-based Leeb Capital Management. 'We may be in a period where the market wants to step back for a bit.'

In mid afternoon trading, the Dow fell 28.44, or 0.22 percent, to 12,619.04. The index has had 31 record closes since the beginning of October, and is up about 8 percent in that time.

Broader stock indicators also fell. The Standard & Poor's 500 index was down 4.56, or 0.31 percent, at 1,446.63, and the Nasdaq composite index fell 18.33, or 0.73 percent, to 2,496.77. The Nasdaq was the only index that finished last week in positive territory, while the Dow and S&P dipped.

Bonds continued to rise from last week's sell-off, with the yield on the benchmark 10-year Treasury note falling to 4.64 percent from 4.68 percent late Friday. Bonds had been weaker amid concerns that subprime lenders would be forced to take write-downs if consumers defaulted on mortgage payments.

The dollar was mixed against other major currencies, while gold prices rose.

Oil prices rose after a winter storm plowed across the United States, spurring expectations of strong demand for heating oil. A barrel of light sweet crude rose 8 cents to $61.22 on the New York Mercantile Exchange.

Todd Salamone, director of trading at Schaeffer's Investment Research in Cincinnati, said rising oil prices are adding some pressure to the market. He said overall, the S&P 500 hasn't had a 2 percent correction in 121 sessions -- and that might be making some investors nervous.

'Some selling is actually good for the market, there's less of a possibility for any panic selling if we do decline because they'll already be out of the market,' he said. 'And, remember, the last time we went this number of days without a 2 percent correction was in 1995 -- right ahead of one of the biggest bull markets in history.'

TXU rose $7.96, or 13.3 percent, to $67.98 after it agreed to be bought by private equity firms. Directors of the electric utility voted Sunday night to recommend shareholders approve the sale, which values its stock at a 15 percent premium.

Meanwhile, Dow Chemical Co. spiked $2.65, or 6.1 percent, to $46.10 on speculation it could be the target of a leveraged buyout. London's Sunday Express newspaper, in an unsourced report, said the chemical company might be given an offer of about $54 billion from buyout funds.

Station Casinos rose $3.37, or 4.1 percent, to $86.67 after it agreed to go private in a $5.4 billion deal, which represents an 8 percent premium over its closing price on Friday. The deal still allows Station to solicit acquisition proposals from third parties for 30 days.

Temple-Inland rose $7.68, or 14 percent, to $62.63 after it agreed to spin off its real estate and financial services arms, and sell its timberland business. The decision came days after activist shareholder Carl Icahn said he'd wage a proxy fight to seize control of the board.

Merck & Co. rose $1.80, or 4.2 percent, to $44.74 after the third-biggest U.S. maker of prescription drugs was upgraded to 'Buy' from Citigroup.

Broadband communications maker Arris Group Inc. fell $1.79, or 12 percent, to $13.50. Ericsson AB, the world's largest maker of wireless network gear, offered $1.4 billion to buy Norway's Tandberg Television ASA, topping a bid by Arris.

Advancing issues barely outpaced decliners on the New York Stock Exchange, where volume came to 977.2 million shares.

The Russell 2000 index of smaller companies fell 6.26, or 0.76 percent, at 820.38.

Overseas, Japan's Nikkei stock average closed up 0.15 percent. At the close, Britain's FTSE 100 was up 0.52 percent, Germany's DAX index added 0.50 percent, and France's CAC-40 rose 0.81 percent.