Monday's merger deals totaled more than $50 billion in activity, indicating that companies are very optimistic about the future. But investors, still unconvinced about the health of the economy, were more cautious than usual amid a spate of merger announcements. The buyout news battled with a sense that stocks were due for a pullback after the major indexes rose more than 1 percent last week.

Matthew Smith, vice president and portfolio manager at Smith Affiliated Capital, contends investors could be wary of sending stocks much higher and will likely to hold their gains until the end of the year without bidding stocks higher.

"I just don't think right now it's warranted to take more risk on given the moves we've had. We might see trending sideways," he said.

In late morning trading, the Dow Jones industrial average was up 2.66, or 0.02 percent, at 12,345.22. The Dow hit another trading high of 12,354.91.

Broader stock indicators also rose. The Standard & Poor's 500 index was up 1.26, or 0.09 percent, at 1,402.46, and the Nasdaq composite index was up 6.33, or 0.26 percent, to 2,452.19.

Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.60 percent from 4.61 percent late Friday. The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude fell 61 cents to $58.36 a barrel on the New York Mercantile Exchange, declining further from a 17-month low Friday.

Falling oil prices have helped lift investor sentiment about the ability of the economy to pull off a soft landing. That notion helped the Dow achieve four straight record closes last week and helped push the S&P to close at a six-year high Friday.

Readings last week showed that a drop in oil prices had helped hold back inflation. If inflation can be neutralized, the Federal Reserve would be more likely to eventually lower short-term interest rates. The central bank has left rates unchanged at its last three meetings after a string of 17 straight advances.

In corporate news, Freeport-McMoRan said it would acquire copper miner Phelps Dodge for $25.9 billion in cash and stock. Freeport-McMoRan was down 46 cents at $56.94, while Phelps Dodge jumped $28.60, or 27 percent, to $122.20.

Adding to the series of recently announced private equity deals, the Blackstone Group said it would pay $20 billion for Equity Office Properties Trust, the real-estate investment trust. Equity Office Properties was up $3.15, or 7 percent, at $47.87.

Lowe's Cos., the country's No. 2 home improvement chain behind Home Depot Inc., rose 22 cents to $30.70, after reporting a 10.8 percent increase in its third-quarter profit and lowering its fourth-quarter forecast.

Charles Schwab Corp. rose 35 cents to $18.91 after agreeing to sell its wealth management division to U.S. Trust to Bank of America Corp. for $3.3 billion.

The London Stock Exchange rejected a second takeover bid from Nasdaq Stock Market Inc. as too low. Nasdaq offered $5.1 billion for the 70 stake in the exchange it doesn't already own. Nasdaq was up 50 cents at $37.07.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 441.3 million shares.

The Russell 2000 index of smaller companies was up 3.33, or 0.42 percent, at 791.80.

Overseas, Japan's Nikkei stock average closed down 2.27 percent. In afternoon trading, Britain's FTSE 100 was up 0.28 percent, Germany's DAX index was up 0.63 percent, and France's CAC-40 was up 0.30 percent.

___

On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com