Today's $12 billion in merger activity signaled optimism on Wall Street two weeks after Hurricane Katrina's devastation of the Gulf Coast threatened the U.S. economy, but the market treaded water while waiting to see if the Federal Reserve raises rates yet again at next week's meeting. Analysts are split over the Fed's action, with some saying policymakers will stay on course while others believe rates should stay unchanged to fend off an economic retreat.

Investors felt some relief as oil and gasoline futures sank, pulled lower by reports that efforts to resume production are progressing after Katrina brought much of the Gulf Coast to a standstill. A barrel of light crude fell 74 cents to $63.34 on the New York Mercantile Exchange, where gasoline futures also slipped 9 cents to $1.87 a gallon.

The tech sector rallied on news that software maker Oracle Corp. plans to acquire rival Siebel Systems Inc. and online auctioneer eBay Inc. is buying Internet-telephone firm Skype Technologies SA for a combined $8.45 billion. Wachovia Corp. also agreed to acquire car-financing firm Westcorp.

At the close of trading, the Dow Jones industrial average gained 4.38, or 0.04 percent, to 10,682.94.

Broader stock indicators were mixed. The Standard & Poor's 500 index dropped 0.92, or 0.07 percent, to 1,240.56, while the Nasdaq composite index climbed 7.32, or 0.34 percent, to 2,182.83.

Declining issues outpaced advancers by about 6 to 5 on the New York Stock Exchange, where preliminary consolidated volume of 1.93 billion shares fell short of the 1.98 billion shares traded Friday.

Bonds ended lower, with the yield on the 10-year Treasury note jumping to 4.18 percent from 4.12 percent on Friday. The dollar was mixed against most major currencies in European trading, while gold prices inched up.

Wall Street has been speculating about the Fed's rate policy, with many hoping the central bank will halt its string of 10 consecutive quarter-point raises to the nation's benchmark interest rate in order to keep lending costs lower while the Gulf Coast rebuilds.

"I think we're coming to the end of it," Rick Meckler, president of LibertyView Capital Management, said of the Fed's rate increases. "The rise of energy prices and the general impact of the hurricane would make it dangerous for the Fed to push rates higher and higher."

But some analysts say the Fed has spelled out clearly its intention of boosting rates to balance growth and inflation, and that Fed governors will stay on course despite widespread fears that higher rates will restrict consumer spending.

"If the Fed doesn't raise rates, it's strictly for morale," said Ed Peters, chief investment officer at PanAgora Asset Management. "Given the recent market swings, they're going to go ahead with the increase. There will probably be two more hikes."

Investors will get a glimpse of the nation's economic health when the government reports several key indicators later this week, including price inflation, retail sales and trade balance. Peters, however, said much of that data will be brushed aside since it measures activity for the month of August, before Katrina hit the Gulf Coast.

The day's takeover deals were led by Oracle's purchase of Siebel, a maker of customer-management software, for $5.85 billion in cash and stock. Oracle's $10.66-per-share bid was a 16.8 percent premium to Siebel's closing price of $9.13 on Friday. Oracle rose 21 cents to $13.49, and Siebel jumped $1.16, or 12.7 percent, to $10.29.

Wachovia also unveiled plans to buy Westcorp for $3.42 billion, and said it will pay another $490 million to acquire the remaining 16 percent stake in subsidiary WFS Financial Inc. not held by Westcorp. And eBay is paying $2.6 billion for Skype in a deal that could expand to $4.1 billion if performance targets are reached over the next three years. Wachovia fell 81 cents to $49.57, Westcorp rose 23 cents to $61.58 and eBay advanced 32 cents to $38.94.

Meanwhile, the airline industry faced more headwinds following reports that cash-strapped Delta Air Lines Inc. could file for bankruptcy as soon as this week while it arranges $1.7 billion in financing for its restructuring. Mechanics at Northwest Airlines Corp. also walked from the bargaining table yesterday, extending their strike to a fourth week because of disagreements over the carrier's latest proposal. Delta plunged 25 cents to an all-time low of 85 cents, and Northwest fell 17 cents to $3.31.

The Dow was carried higher by Citigroup Inc., which added 40 cents to $45.01 after Prudential Equity analyst Michael Mayo raised his rating on the stock to "Overweight" from "Neutral Weight." Mayo said Citigroup stands to benefit from a recovering investment market, room for improved operating results and potential overseas growth.

Campbell Soup Co., which also produces Godiva chocolate and Pepperidge Farm cookies, said higher prices and lower marketing costs helped lift its fourth-quarter profit 63 percent to beat Wall Street expectations. Nonetheless, Campbell lost 10 cents to $30.99.

The Russell 2000 index of smaller companies rose 2.77, or 0.41 percent, to 680.82.

Overseas, Japan's Nikkei stock average climbed 1.61 percent. Britain's FTSE 100 was up 0.29 percent, Germany's DAX index declined 0.32 percent, and France's CAC-40 finished unchanged.