Japan recession weighs on Wall Street but M&A supports

U.S. stocks dipped on Monday, following four consecutive weeks of gains on Wall Street, as energy shares fell alongside crude futures after Japan slipped into recession.

Merger and acquisition news offset the declines as Halliburton said it would buy Baker Hughes and Allergan agreed to be bought by Actavis.

Japan's economy unexpectedly slipped into recession in the third quarter, setting the stage for Prime Minister Shinzo Abe to delay an unpopular sales tax hike and call a snap election two years before he has to go to the polls.

The Japanese data took crude futures prices lower, with Brent LCOc1 off 0.8 percent at $78.74 per barrel. Brent futures prices have fallen in the last eight weeks and are down nearly 30 percent from June.

The energy sector was the largest weight on the S&P 500, down 0.8 percent.

"Japan took the markets by surprise and it is weighing, but I don't see a major reversal, just a market consolidating," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

At 10:07 a.m. EST (1507 UTC) the Dow Jones industrial average .DJI fell 2.02 points, or 0.01 percent, to 17,632.72, the S&P 500 .SPX lost 0.92 points, or 0.05 percent, to 2,038.9 and the Nasdaq Composite .IXIC dropped 4.34 points, or 0.09 percent, to 4,684.20.

The largest percentage gainer on the S&P 500 was Baker Hughes (BHI.N), up 10.8 percent on news Halliburton (HAL.N) would acquire it in a cash and stock transaction of about $34.6 billion. Halliburton shares fell 6.4 percent.

Denbury Resources (DNR.N), down 10.1 percent, was the largest S&P 500 decliner after announcing it cut its capital spending for next year in half.

On the Nasdaq 100 the largest gainer was Mylan (MYL.O), which rose 2.0 percent, while the largest decliner was VimpelCom (VIP.O), down 2.4 percent.

Allergan (AGN.N) added 7.1 percent to $212.82 as the Actavis buyout values the company at $66 billion. Actavis shares rose 3.7 percent to $252.73.

Negotiations between Hasbro (HAS.O) and DreamWorks Animation (DWA.O) have been hampered by issues regarding the structure of the combined company, according to a person familiar with the matter. DreamWorks shares fell 15.3 percent to $22.04. Hasbro added 4.7 percent to $56.58.

Declining issues outnumbered advancing ones on the NYSE by 1,526 to 1,266, for a 1.21-to-1 ratio on the downside; on the Nasdaq, 1,318 issues fell and 1,112 advanced for a 1.19-to-1 ratio.

The S&P 500 was posting 21 new 52-week highs and 2 new lows; the Nasdaq Composite was recording 48 new highs and 27 new lows.