By Emily Chasan (Reuters)

U.S. blue chips ended lower on Monday as buyers took money out of stocks after a series of record-high closes and a drop in oil prices hit energy shares.

U.S. stocks had started higher after a flurry of corporate deals, but traders said the market lost steam throughout the day. A brokerage upgrade of Microsoft Corp. helped the Nasdaq end slightly higher.

"This market is so stretched, I think a lot of people are waiting for any kind of break in it and are a bit leery," said Bruce Zaro, chief technical strategist at Delta Global Advisors in Plymouth, Massachusetts. "We're overdue for a kind of a sell-off. I expected the deals to give a much bigger boost."

The Dow Jones industrial average was down 26.02 points, or 0.21 percent, at 12,316.54. The Standard & Poor's 500 Index was down 0.70 points, or 0.05 percent, at 1,400.50. The Nasdaq Composite Index was up 6.86 points, or 0.28 percent, at 2,452.72.

Shares of General Motors Corp. were the biggest weight on the Dow, falling 3.4 percent to $34.18, after an executive from the No. 1 U.S. carmaker said it is open to a deal with its No. 2 rival Ford (F.N: Quote). Traders said a tie-up would be viewed negatively by GM shareholders. Ford shares fell 2.5 percent to $8.67 on the NYSE.

Oil for January delivery ended down 19 cents a barrel at $58.78 a barrel on ample supplies and concern about demand. Shares of Exxon Mobil Corp., the world's largest publicly traded oil company, dipped 0.9 percent to $72.43 and was the top negative influence on the S&P 500.

Helping the Nasdaq, Credit Suisse lifted its investment rating on Microsoft, sending the company's shares up 1.7 percent to $29.89. The software company's shares earlier touched a two-year high of $30.

On Friday, the S&P 500 index finished above the 1,400 mark for the first time in six years and the Dow climbed to its 18th record close since the beginning of October.

The Chicago Board Options Exchange Volatility Index -- known as the market fear gauge -- closed below 10 on Monday for the first time since January 1994, suggesting stocks' month-long rally may have further to go.

But traders said some investors were taking profits on Monday, which was a light trading day before Thursday's Thanksgiving holiday, despite the usually positive news of corporate deal making.

Among the biggest deals were a proposed $19 billion buyout for office building owner Equity Office Properties Trust from the Blackstone Group and Freeport-McMoRan Copper & Gold Inc.'s $25.9 billion bid for much larger Phelps Dodge Corp.

Shares of Equity Office, which were among the most actively traded stocks on the NYSE, jumped 7.7 percent to $48.14, and earlier touched an all-time high of $48.52. Phelps Dodge shares shot up 26.8 percent to $120.47, while Freeport-McMoRan shares dipped 3.1 percent to $55.63.

In another major deal, Nasdaq Stock Market Inc. made a $5.1 billion bid for the London Stock Exchange to create a trans-Atlantic market, but the London exchange rejected Nasdaq's offer.

Shares of Nasdaq rose 3.1 percent to $37.71.

Bank of America Corp.'s also agreed to buy to buy Charles Schwab Corp.'s U.S. Trust Corp. wealth management unit for $3.3 billion. Bank of America shares rose 0.1 percent to $54.90, while Charles Schwab shares climbed 2.1 percent to $18.94.

Trading was moderate on the New York Stock Exchange where about 1.5 billion shares were traded, below the 1.61 billion daily average for last year. On Nasdaq, about 1.7 billion shares were traded, below the 1.8 billion daily average last year.

Advancing shares were about even with declining shares on both the Nasdaq and the NYSE.