Maybe it was just a case of stocks needing to take a breather after Friday's surge, but another version of Merger Monday did nothing to stoke the flames of this September rally. The CNBC crowd seemed inclined to point out at the today's late-day sell-off was caused by Bob Prechter's appearance on the network, making another one of his bearish calls for stocks. That is a pretty feeble excuse for why stocks sold-off. The reality is the losses today were manageable and the S&P 500 is still up almost 9% this month.

Stats Table

It was business as usual for a down day as financials led the losers, tumbling 1.2%, good for the worst loss of any sector in the S&P 500 and that is bad news for the index because financials are one of the two largest sectors in the index. Regional banks were especially weak, sliding 2.2%. New York-based M&T Bank (MTB) whose largest shareholder is Berkshire Hathaway (BRK-A, BRK-B), slid more than 7% on some mergers & acquisitions news of it own, but not the good kind.

The Wall Street Journal reported over the weekend that talks between M&T and Spain's Banco Santander (STD) regarding the acquisition of Santander's Sovereign Bancorp (SOV) business have stalled because the two sides cannot reach an agreement regarding who will control the combined entity. Some analysts said missing out on Sovereign could work in M&T's favor because the former is littered with bad loans while M&T has remained one of the stronger U.S.-based banks, even during the financial crisis.

Press reports said M&T management and large shareholders, including Berkshire Hathaway, may roll-out a plan to purchase Allied Irish Bank's (AIB) stake in M&T to keep M&T out of harm's way. That plan would make sense as Allied Irish needs the cash and my be compelled to sell its M&T investment.

M&T Bank Chart

Staying with financials, American International Group (AIG), one of the poster boys for ''too big to fail,'' popped by almost 2% on volume that was more than double the daily average on news that the embattled insurance giant is aiming for an IPO for its AIA Asian unit that could raise $10 to $15 billion. That was not the only good news regarding AIG.

Citing unnamed sources, Bloomberg News reported that AIG may reveal a plan as early as this week that details the company's efforts to repay loans received from the Treasury Department to keep the company alive. The plan may include the conversion of $49 billion in preferred shares into common stock, the Bloomberg piece noted. AIG, which has an outstanding tab of $120 billion with Uncle Sam, could initiate the share conversion in early 2011.

AIG Chart

While oil futures traded slightly higher on the day and have firmed up a bit recently, that was not enough to keep airline shares grounded. In fact, airline stocks soared on news that Southwest (LUV), the largest U.S. discount carrier, will acquire rival AirTran (AAI) for $1.4 billion in cash and stock. That news sent the Claymore Airline ETF (FAA) higher by 3.3% on volume that was about a third above the daily average. The deal will allow Southwest to bolster its presence in Atlanta, one of the few hub markets in the U.S. where the carrier did not previously have a strong footprint.

FAA ETF Chart

There is an element to the Southwest/AirTran news that is very suspicious. I am not saying that it has to do with either company, but it is this kind of stuff that makes plenty of investors think the market is rigged and it is near impossible to compete with professional traders. Some lucky duck had the foresight to purchase 759 November $5 AirTran calls last week. Last Tuesday, volume in AirTran options was triple the four-week average, according to Bloomberg.

Those calls were going for 15 cents a piece last week and opened at $2.15 today. Given that AirTran had not traded above $5 since June, I doubt anyone that has followed the market for any length of time would believe traders were buying these calls simply because they had a gut feeling or because they were just bullish on AirTran. There was a similar situation with some bankers that bought deep out-of-the-money Potash (POT) calls right before BHP Billiton (BHP) announced its takeover offer for the fertilizer producer. Those guys were caught and if there was indeed funny business with these AirTran calls, I hope the culprits will be caught as well.

The biggest deal of the day was in the consumer products space with Unilever (UN) paying $3.7 billion in cash to acquire Illinois-based Alberto Culver (ACV). Unilever, the Anglo-Dutch consumer products giant that makes brands such as Dove soap, is paying $37.50 a share for Alberto Culver in what is Unilever's biggest buy in a decade.

Unilever said the deal will add to earnings in its first full year. There is a $125 million break-up fee the company will be on the hook for if the deal is not completed. With all the emphasis on emerging markets these days, it might be logical to assume that is why Unilever is buying Alberto Culver. That is not the case. Unilever is doing this deal to bolster its presence in places like Australia, Canada, the U.S. and the U.K.

Alberto Culver, which makes brands such as Nexxus, Tresseme and VO5, had $1.6 billion in sales and EBITDA of $250 million for its fiscal year that ended on June 30. Nearly two-thirds of the company's sales come from the U.S. and while that may not sound exciting, the deal will make the Unilever the biggest maker of hair conditioner, the second-biggest maker of shampoo and the third-largest producer of hair styling products.

That has analysts wondering if Dow component Procter & Gamble (PG) will feel compelled to make an acquisition to strengthen its dominance in the personal care products arena.

Alberto Culver Chart

In dollar terms, Wal-Mart's (WMT) $4.25 billion offer for South Africa's Massmart is Monday's biggest deal, but this is more of a preliminary offer, and was deemed a non-binding proposal by both parties, so that is why I called the Unilever/Alberto Culver deal Monday's largest. Massmart does not appear to consider this a firm offer, but it is entering into exclusive talks with Wal-Mart, a Dow component and the world's largest retailer.

Massmart operates 290 stores in 13 African countries. Most of the stores are in South Africa, an emerging market to be sure, but probably the least risky market on the continent. The company operates the Game chain, Africa's largest discount retailer. Wal-Mart is clearly searching for growth beyond the confines of U.S. borders as revenue has declined for five consecutive quarters.

Wal-Mart gets about a quarter of its sales from global markets and is looking to the potential acquisition of Massmart as a platform for growth in Africa.

In one final tidbit of noteworthy M&A news, there were some conflicting reports about French pharma giant Sanofi-Aventis and its $69-a-share offer for biotech firm Genzyme. To this point, Genzyme has not been impressed with that offer and analysts have said Sanofi would probably need to bump the offer to $75 to get Genzyme interested. Some Genzyme investors are reportedly holding out for $80.

Over the weekend, the Wall Street Journal reported that Sanofi had approached Bank of America (BAC) and Citigroup (C) about securing additional financing to increase its offer for Genzyme, but a Sanofi spokesman denied that report in an interview with Reuters. Something to keep an eye on.

Looking at the charts, it is clear that 1150 is the next hurdle the S&P 500 must clear. The index bumped up against that area twice last week and retreated to 1142 today. Volume has been nothing to crow about this month and if 1150 is not conquered, support at 1130 could come into play. Remember that October is not the best of months for stocks either.

S&P 500 Chart

There was not much in the way of follow through on Friday after Dow's big gap up at the open and there was even less today. The blue chip index could not even must a challenge of resistance at 10,900 today. Assuming that level can be taken out, 11,200 is the next mountain to climb. The Dow still hovers above 10,800, a good distance away from support at 10,500.

Dow Chart

Enthusiasm for tech waned a bit on Monday, but that breather was probably long overdue. Amazon (AMZN) and Apple (AAPL), two stocks whose parabolic September moves had been driving the Nasdaq higher, took breaks today and absorbed small losses. The Nasdaq has to deal with round-number resistance at 2400 and then more significant resistance at 2430.

Nasdaq Chart

It was a ho-hum day for small-caps as the Russell 2000 predictably faltered at 670 and that is the level the index needs to traverse to get buyers interested in small-caps. I still think 675 is what it is going to take, but either way, small-caps are not the asset class of choice among money managers these days.

Russell 2000 Chart

Thursday will be a busy day in terms of economic releases, but the rest of the week is light on that front and with volume remaining anemic, I am betting on some sideways trading over the next couple of days. Before earnings season starts again, I would look to M&A activity and share buybacks to be the stock-specific stories that fuel the September rally a bit more.