The U.S. dollar topped the psychologically important 140 yen level Monday amid ongoing concern over the future of Japan's economic recovery.
Many on Wall Street believe the recent pullback in stocks has run its course. But while a huge merger plan from Wells Fargo and Norwest initially sent blue chips sharply higher, it failed to ignite a broad market rally in the way similar deals have in the past.
The Dow Jones industrial average ended up 31.89 points, or 0.35%, at 9,069.60.
The broad market also extended Friday's gains, although the beleaguered technology group fell back after a two-session rebound.
The Standard & Poor's 500-stock index rose 1.86 points, 0.2%, to 1,115.72, about 15 points from April 22's record of 1,130.54. The technology-heavy Nasdaq composite index rose 4.85 points, or 0.3%, to 1,787.77, but sits about 30 points from record terrain.
"There are a lot of pushes and pulls and folks are not sure how enthusiastic they should be," said Henry Herrmann, chief investment officer at Waddell & Reed.
Wells Fargo and Norwest said they will merge in a $32-billion deal to create a banking giant. The stock-swap marriage would create a colossus with $191 billion in assets reaching from California to the Midwest. (See stories A1, D1.)
Financial shares accounted for nearly all of the Dow's gain as takeover speculation heated up again with the latest in a series of big merger announcements that began two months ago with the Citicorp-Travelers Group deal.
American Express jumped $4.50--or the equivalent of 20 Dow points--to $109 after Norwest and Wells announced their merger.
Travelers rose 50 cents to $64.88 and J.P. Morgan, another frequent focal point of the recent speculation, rose $1.31 to $123.69 to lift the Dow. Merck rose $1.94 to $121.50 as the Dow's second-biggest gainer.
The dollar topped 140 yen for the first time since June 1991 as investors grew more confident that the major industrial powers would not agree to assist Japan support its currency.
Overnight, Japanese Vice Finance Minister Koji Tanami said the U.S. and Japan had agreed to cooperate on excessive yen falls.
The dollar rose as high as 140.79 Japanese yen, its strongest since June 19, 1991, when it traded at 141.20 yen. In late New York trading, it was at 140.71 yen, up from 139.75 yen late Friday in New York. Concern that Japan faces recession has undermined investor confidence in its currency.
The U.S. currency rose to 1.7793 German marks from 1.7754 marks amid persistent concern Russia's financial troubles make it difficult for it to meet its obligations to Germany, Russia's largest lender and trading partner.
Investors expect the G-7 or other lenders to provide Russia with $5 billion to $10 billion in credit, to help cover more than $5 billion in debt payments this month and $33 billion this year. If Russia doesn't secure the funding, the dollar could rise to 1.84 marks, said Alan Kabbani, senior trader at First Union Corp.
In commodities, crude oil prices fell as traders continued to doubt the latest attempts by the Organization of Petroleum Exporting Countries and other world oil producers to restrain output.
At the New York Mercantile Exchange, crude oil for July delivery ended 52 cents lower at $14.55 a barrel.
On overseas exchanges, London's FTSE-100 closed up 1.52%. Tokyo's 225-share Nikkei average closed down 0.19%. Hong Kong's Hang Seng index closed up 0.20%.