(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, April 28 (Reuters) - Oil struck a record near
$120 a barrel and U.S. stocks were little changed on Monday as
caution ahead of a key Federal Reserve decision on interest
rates this week overshadowed optimism over a $23 billion
takeover offer for chewing gum icon Wm Wrigley Jr Co <WWY.N> .
The Dow closed lower in a late sell-off that also dragged
down the broad S&P 500, while the Nasdaq managed to eke out a
small gain.
A recent rally in the dollar stalled as investors bought
euros to square up positions ahead of the Fed's interest rate
decision.
Oil prices hit a fresh peak as supply outages in Nigeria
and Britain cut output, but prices retreated from their peaks
as the dollar slipped against the euro, reflecting rising but
still minor speculation that the Fed may not cut interest
rates.
Trading was sluggish before the two-day meeting of the
Federal Reserve Open Market Committee gets under way on
Tuesday. The FOMC's decision to be released on Wednesday is
expected to include a quarter-point rate cut and could mark the
end of a campaign that has reduced the Fed's benchmark lending
rate by 3 percentage points to 2.25 percent since September.
Another Fed rate cut would further erode an already weak
dollar and likely fuel higher prices, especially of
dollar-denominated commodities. But if the Fed holds the line
on further rate cuts that could cause oil prices to drop.
"We're doing quite well, considering how much we've bounced
back from the March lows," said Joseph Battipaglia, market
strategist at Stifel Nicolaus in Yardley, Pennsylvania.
"You had a push with that major buyout in the food category
but now you're now starting to get comments about the Fed
bringing an end to the rate cuts and we're doing well despite
that."
Uncertainty over the Fed tempered Wall Street's mood.
The Dow Jones industrial average <> was down 20.11
points, or 0.16 percent, at 12,871.75. The Standard & Poor's
500 Index <.SPX> was down 1.47 points, or 0.11 percent, at
1,396.37. The Nasdaq Composite Index <> was up 1.47
points, or 0.06 percent, at 2,424.40.
Tech bellwethers Microsoft Inc <MFST.O>, Cisco Systems
<CSCO.O> and International Business Machines <IBM.N> led tech
shares lower.
Microsoft shares closed down 2.8 percent at $28.99 after
Yahoo Inc. <YHOO.O> let the deadline for it to respond to the
software maker's threat to take its acquisition offer for the
Internet company directly to shareholders pass with no new
development.
But the proposed takeover of Wrigley by M&M's candy maker
Mars Inc and billionaire investor Warren Buffett, and an
investor's bid to boost a stake in Ford Motor Co <F.N> showed
investors are still willing to put money in areas that hold
promise.
Wrigley's shares surged 23.2 percent to $76.91.
Ford shares shot up 9.5 percent to $8.21 after Kirk
Kerkorian's Tracinda Corp said it intends to make a cash tender
offer for up to 20 million shares of the automaker's common
stock at a price of $8.50 per share.
A bleak assessment of the economic outlook, however, by
Buffett injected a note of caution. Buffett told CNBC
television that the United States could be mired in a longer
and deeper recession than most people think.
Weighing heavily on the financial sector was a report from
Morgan Stanley cutting its profit forecasts on several U.S.
banks, including Bank of America Corp <BAC.N>, whose stock
declined 0.3 percent to $38.18 .
European shares advanced, led by banks such as Swiss bank
UBS <UBSN.VX> on hopes that asset write-downs are over and
miners such as Xstrata <XTA.L> thanks to higher metals prices.
The FTSEurofirst 300 <> index of top European shares
ended 0.6 percent higher at 1,338.60 points -- the highest
close since Feb. 27 and fourth consecutive gain.
With UBS up 3.2 percent and rival Swiss bank Credit Suisse
<CSGN.VX> 2.7 percent higher, the DJ Stoxx bank index <.SX7P>
was the day's top sectoral performer with a gain of 1.1
percent, followed by insurance <.SXIP>, up 1.06 percent.
Among mining stocks, Xstrata rose 2.4 percent and
Antofagasta <ANTO.L> gained 2.6 percent, lifted by higher
copper prices <MCU3>.
The DJ Stoxx basic resources index, which includes miners
<.SXPP> rose by just over 1 percent.
Energy prices were higher, but off the day's peak. Prices
are up almost 25 percent since the start of the year.
U.S. crude <CLc1> settled up 23 cents to $118.75 a barrel.
London Brent crude <LCOc1> settled up 40 cents to settle at
$116.74.
"Continued attacks in Nigeria and refinery closures in
Scotland ... may see the U.S. target $121-122 a barrel this
week, with longer-term charts all pointing to $130 or higher,"
said Ben Coleman, senior commodities trader at TradIndex.
In currencies, the dollar was down against a basket of
major trading-partner currencies, with the U.S. Dollar Index
<.DXY> down 0.19 percent at 72.589 from a previous session
close of 72.728.
The euro <EUR=> was up 0.10 percent at $1.5639 from a
previous session close of $1.5623. Against the Japanese yen,
the dollar <JPY=> was down 0.25 percent at 104.14 from a
previous session close of 104.40.
U.S. gold futures ended higher on the back of strong
physical demand following a 3 percent drop last week.
The June contract <GCM8> in New York settled up $5.80 at
$895.50 an ounce.
Investors remained on the sidelines ahead of the FOMC
meeting and the release of non-farm payroll data on Friday.
Overall commodity prices remained strong. The
Reuters-Jefferies CRB index <.CRB> of 19 commodity futures,
already up 16 percent this year, rose 0.7 percent.
U.S. Treasury debt prices were higher.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
10/32 to yield 3.83 percent. The 2-year U.S. Treasury note
<US2YT=RR> gained 4/32 to yield at 2.36 percent. The 30-year
U.S. Treasury bond <US30YT=RR> rose 21/32 yield 4.56 percent.
Investors have pared bets that the Fed will aggressively
cut benchmark interest rates. Fed funds futures indicate an 82
percent implied chance of a quarter percentage-point cut in the
recommended overnight lending rate between banks when the Fed
concludes its meeting.
In Asia, Japan's broader TOPIX index <> gained 1.6
percent or 21.84 points to 1,361.75. MSCI's index of stocks
across the rest of Asia <.MIAPJ0000PUS> rose 0.5 percent.
(Reporting by Ellis Mnyandu, Gertrude Chavez-Dreyfuss and
Chris Reese and Matthew Robinson in New York, Peter Starck in
Frankfurt, and Jane Merriman and Atul Prakash in London;
Editing by Leslie Adler)
