Reports that Merrill Lynch & Co. is in talks to buy nearly half of BlackRock Inc. drew a positive reaction from the market, but an article warning of intensifying competition for Google Inc. saddled the tech sector and sent the Nasdaq composite index sliding about 1 percent.

Trading was quiet while investors anticipated Bernanke's first testimony before Congress on Wednesday, said Jack Ablin, chief investment officer for Harris Private Bank. Many thought January's interest rate hike would be the last for a while, but recent signs of economic growth have renewed debate over whether the Fed will go further to stifle inflation, he said.

"Right now, the transparency we had with (former Chairman Alan) Greenspan is gone. We're trying to get some semblance of which way the Fed is going to go," Ablin said, adding that a strong first-quarter gross domestic product figure would likely guarantee another rate increase at the Fed's May meeting.

According to preliminary calculations, the Dow Jones industrial average declined 26.73, or 0.24 percent, to 10,892.32.

The broader stock indicators also moved lower, with the Nasdaq dropping 22.07, or 0.98 percent, to 2,239.81. The Standard & Poor's 500 index lost 4.13, or 0.33 percent, to 1,262.86.

Bonds were flat although the yield curve remained inverted, with the 10-year Treasury note yield unchanged at 4.58 percent and the two-year Treasury yield down slightly at 4.67 percent. The inversion signals a lack of short-term confidence and has preceded economic recessions six of seven times in the past, Ablin said.

Meanwhile, the dollar was mixed against most major currencies, and gold prices plunged.

Energy prices slumped despite a heavy weekend snowstorm that blanketed the northeastern states, a major consumer of heating oil. A barrel of light crude lost 60 cents to settle at $61.24 on the New York Mercantile Exchange.

Investors will be closely monitoring Bernanke's testimony for his perspective on economic growth and inflation, which could set the stage for a strong response to wholesale price data — seen as a precursor to consumer-level inflation — when those numbers are released Friday, said Rick Pendergraft, equity trader for Schaeffer's Investment Research. Other data slated for this week include retail sales, manufacturing activity, housing orders and consumer confidence.

Merrill Lynch is looking to trade its asset management business for a 49 percent stake in BlackRock, according to The Wall Street Journal. BlackRock surged $10.48 to $141.99 and Merrill Lynch added $1.04 to $73.83.

The Justice Department may challenge Whirlpool Corp.'s $1.79 billion acquisition of Maytag Corp. for antitrust violations, the Journal also reported. The combined firm would produce half of the nation's dishwashers and more than 70 percent of laundry machines. Whirlpool dropped $1.45 to $85.83, while Maytag rose 40 cents to $16.61.

Home improvement retailer Home Depot Inc. is reportedly in talks to acquire 49 percent of Orient Homes, one of China's top do-it-yourself chains, for more than $200 million, the Financial Times said. Home Depot gained 48 cents to $39.70.

A downbeat report on Google Inc. pulled the Web search engine $16.91 lower to $345.70. The Barron's article said Google's stock price could be cut in half this year amid mounting competition from Microsoft Inc. and Yahoo Inc., which respectively fell 30 cents to $26.39 and 47 cents to $32.04.

In earnings news, Agilent Technologies Inc. said its first-quarter profit soared on a $1.84 billion gain from selling its semiconductor products business, and forecast 2006 results in line with estimates. Agilent nonetheless tumbled $1.42 to $34.45.

Declining issues outpaced advancers by about 5 to 3 on the New York Stock Exchange, where volume of 1.37 billion shares lagged the 1.71 billion shares changing hands at the same point Friday.

The Russell 2000 index of smaller companies fell 6.60, or 0.92 percent, to 710.53.

Overseas, Japan's Nikkei stock average plunged 2.34 percent. Britain's FTSE 100 added 0.51 percent, Germany's DAX index gained 0.96 percent and France's CAC-40 was higher by 0.95 percent.