Despite the latest edition of Merger Monday coming to pass today, stocks ended a four-day winning streak even as financials moved mostly higher on the day. Weak volume may have been the culprit as trade was anything if not lethargic, especially for a Monday and especially for a day on which the biggest acquisition of 2010 was announced and another sizable offer was extended to one firm from another.

Overall, the losses were manageable with the Dow Jones Jones Industrial Average shedding less than 19 points to close at 10,383.38. The S&P 500 lost just over one point to finish the day at 1108.01 and the Nasdaq declined by nearly two points to close at 2242.03. The Russell 2000 eked out a small gain.

Stats Table

Among the decliners were energy issues, a curious fact considering that it would have been logical to assume that most eyes would have been on that sector after Schlumberger (SLB) announced on Sunday evening that it would acquire rival Smith International (SII) in an all-stock deal valued at north of $11 billion. The price tag of that deal is high enough to earn the top spot among U.S. mergers and acquisitions thus far in 2010, but aside from the pop that Smith got, energy shares were mostly in the red today.

It could be argued that news of the deal was not all that surprising given that the rumors started swirling on Friday, leading to a 13% jump in Smith's shares that day, and with the official announcement coming on Sunday, the impact of the news may have been tempered somewhat. Still, the performance of the Oil Services HOLDRs ETF (OIH) can only be characterized as disappointing. The ETF that is home to both Schlumberger, the largest oilfield services provider in the world, and Smith, was down on Monday. OIH's volume was higher than usual, but not by a noteworthy margin.

OIH Chart

Making the performance of the energy group even more disappointing to many investors is the point that when these deal announcements are made, the market longs to find the next company to be taken out. That was the case when Exxon Mobil (XOM) announced its massive $41 billion buyout of XTO Energy (XTO) late last year and the Schlumberger-Smith news had folks speculating about what oil services provider would be the next logical target of a larger suitor's affections.

Weatherford International (WFT) was the name that seemed to come up the most and to be fair, the volume in the name today was more than 50% higher than the three-month daily average. Then again, that robust volume was only enough to lift the stock, another OIH constituent, by less than 1%. No official word on who might be interested in Weatherford, but National Oilwell Varco (NOV), which was rumored to be in talks with Smith, has the size and the balance sheet to buy a company of Weatherford's size. Based on Monday's close, Weatherford has a market cap that is approximately 50% heftier than Smith's was on Friday.

Other oil services that have market values that may make them appealing include Cameron International (CAM), which was up fractionally on Monday, and Rowan (RDC), which traded lower. Those names were not mentioned as possible targets, at least not that I heard, so Weatherford might be the one to continue to watch.

Weatherford Chart

The other deal that should have helped stocks higher but did not was an announcement by Thermo Fisher Scientific (TMO), a maker of laboratory equipment, that it had offered to acquire Millipore (MIL), a maker of laboratory filters and purifiers, for $6 billion. That is a hefty premium to Millipore's Friday market value of around $4 billion and the news sent Millipore shares on a wild ride today as the stock opened at $71.19 and traded as high as $102.91 before settling at $87.35.

Millipore Chart

All and all, $17 billion in fresh deals, while not earth shattering, should have done a little more to illicit excitement from investors and it did not. As I mentioned earlier, Monday's benign trade is even more surprising when considering that financials were the top performers among the 10 industry groups tracked by the S&P 500. Dow components Bank of America (BAC) and JPMorgan Chase (JPM), the two largest U.S. banks both gained 2.1% on Monday.

Bank of America moved higher on news that it had reached a settlement to compensate shareholders to the tune of $150 million related to mismanagement of the Merrill Lynch takeover. That is a paltry sum for a company with a $140 billion market cap and may indicate, if nothing else, that a particular attorney general has failed in his attempts to demonize and vilify Bank of America.

I say that because this settlement comes with a twist. The $150 million is only going to legacy shareholders of the largest U.S. bank. Meaning that if you became a BofA shareholder via your ownership of Merrill Lynch stock, you are not entitled to any part of the $150 million. Not that it should matter. Bank of America is one of the most widely held stocks in the U.S. and $150 million distributed to shareholders is not going to be a big deal to any of them.

Bank of America Chart

In another testament to just how apathetic investors were feeling on Monday, Lowe's (LOW), the second-largest home improvement retailer in the U.S. got little credit for turning in a fourth-quarter profit report that showed a 27% increase in earnings. Ah, but there is a catch. Revenue fell 2.1% for fiscal 2009 and the company is saying bad weather in certain parts of the U.S. will hamper sales for the current quarter.

So despite the fact that Lowe's said it sold more big-ticket items on a year-over-year basis, perhaps offering some faint signs that an economic recovery is underway, the outlook was not enough to please investors and with rival and Dow component Home Depot reporting earnings tomorrow, there might be more pain to come for investors in the home improvement sector. Analysts are expecting Home Depot to post a profit of 17 cents a share.

Lowe's Chart

Something else to keep an eye on this week is a heavy slate of Treasury auctions, which got going today with the sale of three-month, six-month and 30-year TIPS. All told, our friends at the Treasury will sell around $120 billion in new debt this week. It should be noted that China has started to reduce some of its U.S. debt holdings, though when Beijing does that they must reinvest the proceeds in another dollar-denominated security. Chinese consumption of Uncle Sam's debt offerings over the past decade has been nothing short of amazing, but it might be in the best interest of Uncle Sam to find some more willing buyers or to not have to issue all this debt at all.

China Purchases of U.S. Debt

As I mentioned earlier, Monday's volume was slack to say the least, a continuation of a trend that started building last week, and that makes it difficult to decisively say where the market is headed this week, let alone be overtly bullish or bearish. New resistance for the Dow appears to be 10,500 and the index came to rest today a mere five points above its 50-day moving average.

While a move over 10,500 would be nice, the next stumbling block comes up at 10,750, assuming the former level can even be broken. Getting to 10,750 from here could be asking for a lot unless volume dramatically improves. Failure at 10,500 could mean a break of 10,000 on the downside and 9650 may not be that far behind.

Dow Chart

The S&P 500 also came to rest came to rest within earshot of its 50-day moving average on Monday and is less than eight points from serious resistance at 1116. An upside break there probably takes the index back to its January peak at 1150, but as is the case with the Dow, volume will need to improve. If 1100 fails as support, another stop in the 1050-1060 area could be seen, or worse, a tumble to 1035 would not be all that far flung.

S&P 500 Chart

It is encouraging to see the Nasdaq back above 2200, but with today's close at 2242, 2250 becomes the immediate level of significance the tech-heavy index must conquer. Failure there could mean a retreat to 2200 or to the 2185 neighborhood. The 50% Fibonacci retracement from the January peak is at 2063. In other words, it would behoove the bulls to start showing some real strength.

Nasdaq Chart

I continue to remain cautious about the near-term fortunes of equity markets due to the anemic volume we have been seeing lately. The case for prudence may have been highlighted on Monday when a fresh round of M&A news did nothing to spur volume higher. Look at all the positives that we have seen in recent weeks that have done nothing but help stocks to a middling performance at best. Solid earnings reports. A heavy dose of analyst upgrades. Over 70 dividend increases. Combined, this confluence of factors has offered little help to the bulls and I find that worrisome.