* Texas Instruments to buy National Semi for $6.5 bln
* Trading volume ends at lowest of the year
* Earnings news next week could prove catalyst
* S&P 500 seen testing its 2011 high
* Dow up 0.2 pct, S&P and Nasdaq end flat
* For up-to-the-minute market news see []
(Updates with Texas Instruments-National Semi deal, latest
volume)
By Angela Moon
NEW YORK, April 4 (Reuters) - The S&P 500 met tough
resistance on Monday, failing to break a level that has held
since mid-February and ending flat even as a spate of deals
and underlying strength in the economy spurred optimism.
But caution ahead of earnings season held volume to its
lowest level this year and suggested the recent rally may be
fading.
The benchmark S&P 500 hovered slightly below 1,333, which
it has not closed above since mid-February. The level is
double the 12-year low hit in March 2009 and not far from
1,344, the S&P's highest since June 2008.
"Volume has dried up here as investors and traders are
sitting on their positions to see what happens" in the
upcoming earnings season, said Tim Ghriskey, chief investment
officer of Solaris Asset Management in Bedford, New York.
Larry McMillan, president of McMillan Analysis Corp, said
the market is due for a short-term correction as technical
indicators suggest the market is overbought.
"Overall, the picture is still bullish, but the market is
acting tired because it's overbought. With the month-end
bullish influences winding down, there could be a short-lived
pullback at hand," he said in a note.
The Dow Jones industrial average <> rose 23.31 points,
or 0.19 percent, to end at 12,400.03. The Standard & Poor's
500 Index <.SPX> was up just 0.46 of a point, or 0.03 percent,
at 1,332.87. The Nasdaq Composite Index <> was down 0.41
of a point, or 0.01 percent, at 2,789.19.
On Friday, the S&P recorded its best two-week period since
December, and the Dow industrials hit their highest intraday
level since June 2008. Encouraging jobs data during the week
helped cement hopes of a labor market recovery.
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S&P 500 faces resistance http://r.reuters.com/daf88r
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About 5.94 billion shares traded on the New York Stock
Exchange, NYSE Amex and Nasdaq, the lowest of the year and
below last year's estimated daily average of 8.47 billion.
DANCE OF THE CHIPMAKERS
After the bell, Texas Instruments Inc <TXN.N> said it
plans to buy smaller rival National Semiconductor <NSM.N> for
about $6.5 billion in one of the microchip industry's largest
deals in years. []
Following the announcement, Texas Instruments' stock fell
1.8 percent to $33.50 in extended trade, while National
Semiconductor's shares surged 73.4 percent to $24.39.
During the regular session, the Philadelphia semiconductor
index <.SOX> fell 0.9 percent. It has lost 2.9 percent over
the past four days.
Japanese investment bank Nomura maintained a neutral view
on semiconductor stocks, citing weakened demand, peak gross
margins and higher capital spending in the sector.
Investors were also on the lookout for an expected
increase in euro-zone interest rates this week.
The European Central Bank, at its policy meeting on
Thursday, is expected to raise rates by 25 basis points from a
record low in reaction to rising inflationary pressures in the
euro zone. Two more 25-basis-point rate hikes are factored in
by year-end. <ECBWATCH>
Pfizer Inc <PFE.N> rose 0.8 percent to $20.54 after the
drugmaker agreed to sell its Capsugel unit, the world's
largest maker of hard capsules, to private equity firm KKR &
Co <KKR.N> for nearly $2.4 billion.
Shares of defense contractor General Dynamics <GD.N>
dropped 5.2 percent to $73.37 after one of its Gulfstream
Aerospace jets crashed on a test flight, killing four.
Southwest Airlines Co <LUV.N> shares dropped 1.7 percent
to $12.46 after about 70 flights were canceled for safety
inspections. A Southwest jet made an emergency landing with a
hole in the cabin on Friday. [].
Advancing stocks outnumbered declining ones on the NYSE by
1,602 to 1,344, while on the Nasdaq, advancers beat decliners
by 1,387 to 1,230.
(Reporting by Angela Moon; Additional reporting by Doris
Frankel; Editing by Jan Paschal)
