Wall Street opened in the negative, pressured by an overnight plunge in the Chinese stock market. Merger activity continued on Monday, helping to limit the downward trend. Dominion (D: chart) added 1% after it agreed to sell most of its U.S. gas and oil operations to Loews (LTR: chart) and XTO Energy (XTO: chart) for a total of $6.5 Billion.

Further in deal news, Avaya (AV: chart) rose over 3% amid reports that it is close to a deal to be bought by TPG Capital and Silver Lake Partners for $17 a share. Digene (DIGE: chart) surged 33% after Qiagen agreed to acquire the company for $1.6 billion in cash and stock. Flextronics International (FLEX: chart) fell 1.6% after it said it agreed to buy electronics maker Solectron in a cash-and-stock deal worth about $3.6 billion.

Acquisition news sent Accredited Home Lenders Holding (LEND: chart) 11% higher. The subprime mortgage firm agreed to be acquired by Lone Star Fund V L.P. for $15.10 a share in an all-cash deal. Among the very few companies reporting quarterly results, Krispy Kreme Doughnuts (KKD: chart) said its Q1 loss widened on falling revenue. The results came in below analyst estimate, and Krispy Kreme stock dropped 4.3%.

In the first hour of trading, the Dow Jones industrial average fell 29.34, or 0.21%, to 13,638.77. The Standard & Poor's 500 index declined 2.35, or 0.15%, to 1,533.99, and the Nasdaq composite index lost 4.07, or 0.16%, to 2,609.85. Bonds edged higher, with the yield on the benchmark 10-year Treasury note falling to 4.95% from 4.96% late Friday.


9:30AM The FTSE 100 is lower in mid-afternoon trade on weak media sector.

The FTSE 100 is 0.4% lower in mid-afternoon, trading at 6,651.2, a drop of 25 points.

Advancers

Royal Bank of Scotland advanced 1% on news that it is set to sell its Southern Water unit for around 4 billion pounds. Reuters Group bucked the downtrend in the media sector and was up 0.9%, after the financial information company was taken over by Thomson Corp of Canada three weeks ago.

Decliners

After Rupert Murdoch approach for the Wall Street Journal, anticipation of a fierce competition weighed on the business publishing stock, sending them lower. Pearson lost 1% and Reed Elsevier, which owns business information services both in Europe and the U.S. dipped 1.3%.

GlaxoSmithKline declined 1.1% as there are still concerns over possible health risks in its Avandia diabetes drug. Whitbread, another decliner, was 0.4% lower despite unveiling the sale of its David Lloyd health club chain to the London & Regional property company.

Segro, known before as Slough Estates, erased early morning gains and was trading down 0.1% after it confirmed the 1.5 billion pounds disposal of its US property concerns. It promised to return 250 million pounds of the proceeds to investors through a special dividend.


9:00AM U.S. stock futures pointed lower amid steep Shanghai drop.

U.S. stock futures pointed lower on Monday as investors digested another steep decline in Chinese stock prices. Although Shanghai plunged 8%, global markets were not seriously hurt.

In corporate news, a number of merger deals were announced early Monday. Real-estate investment trust Health Care Property Investors (HCP: chart) agreed Monday to buy Slough Estates USA from the U.K.'s Segro Plc for $2.9 billion, including the assumption of about $1.2 billion in debt.

In another deal, contract electronics manufacturer Flextronics International (FLEX: chart) said it will buy contract electronics maker Solectron (SLR: chart) in a cash-and-stock deal worth about $3.6 billion. Solectron will become a subsidiary of Flextronics, with Solectron shareholders holding a stake of between 20% to 26%. Flextronics expects the deal to add at least 15% to its earnings. The deal is expected to close by the end of the year with the approval of shareholders and regulators.

Among other companies in focus, Wal-Mart (WMT: chart) rose 2% in pre-open trading, following upgrades from J.P. Morgan and Morgan Stanley. Onyx (ONXX: chart) climbed 9% amid reports of improved survival from patients taking a liver cancer drug. Dow Jones industrial futures expiring in June fell 36, or 0.26%, to 13,653. Standard & Poor's 500 index futures fell 5.60, or 0.36%, to 1,534.00. Nasdaq 100 index futures declined 9.00, or 0.47%, to 1,923.25.


8:30AM Asian markets mostly rise Monday with China bucking the uptrend and declining.