Stocks up. Investors shake off Iraq jitters

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NEW YORK (CNNMoney)

Here are the four things you need to know:

1. Stocks move beyond Iraq jitters: The Dow Jones industrial average, S&P 500 and Nasdaq indexes are now trading slightly higher, with the Nasdaq leading the way by rising almost over 0.2%

Related: CNNMoney's Fear & Greed Index still in 'extreme greed' mode

Oil prices ticked above $107 a barrel Monday amid concerns the fighting in Iraq could threaten the country's ability to export oil. Natural gas prices were mostly flat, but investors will continue to monitor for signs of higher energy costs to Western consumers and businesses.

There are also worries that images reportedly showing the mass execution of Iraqi soldiers could spawn an all-out sectarian civil war in the country. The White House said it is considering military options and may even work with Iran to help Baghdad fend off the terrorist threat.

"Last week's fast-paced developments in Iraq have the potential to turn into a serious threat for the bull market," Ed Yardeni, president of Yardeni Research, wrote in a note to clients. "My hunch is that the latest geopolitical crisis could set the market up for yet another relief rally."

Meanwhile, Russia said it has cut off supplies to Ukraine after negotiators failed to fix a payment dispute before a key deadline.

Related: Russia cuts off natural gas supplies to Ukraine

"Pictures of atrocities in Iraq, the breakdown of talks between Ukraine and [Russia's state-owned gas supplier] Gazprom, even scandal within the Polish central bank ... it all makes for a risk averse start to the week," said Kit Juckes, a strategist at Societe Generale.

The geopolitical concerns helped drive European and Asian stock markets mostly lower on Monday.

2. Merger mania: On the positive side, cheap borrowing rates and tax policy continue to drive M&A activity.

Medical device giant Medtronic (MDT) unveiled a $42.9 billion takeover Irish rival Covidien (COV). The deal is the latest "tax inversion" combination aimed at taking advantage of relatively low tax rates in some foreign countries by relocating corporate headquarters.

Related: Medtronic buys Covidien for $42.9 billion

There were also a number of smaller deals flying around.

Level 3 Communications (LVLT) agreed to scoop up business ethernet provider TW Telecom (TWTC) for $5.7 billion in cash and stock. TW stock jumped over 8% Monday.

Steven Spencer on Stocktwits wondered if there was something fishy about the trading of TW stock

"#SEC really needs to take a look at friday's trading activity in $TWTC. #insidertrading," he wrote.

Williams Cos. (WMB) spiked 22% as investors cheered the energy company's $6 billion deal to take full control of Access Midstream Partners (ACMP).

In the tech world, SanDisk (SNDK) inked a $1.21 billion buyout of smaller data-storage company Fusion-io (FIO), representing a 21% premium to its closing price on Friday.

3. Corporate movers -- Yahoo, Goodyear: Yahoo (YHOO, Tech30) retreated as much as 5% in early trading after Alibaba, the Chinese e-commerce giant it owns a chunk of, revealed new details of its planned initial public offering. The latest documents show Alibaba's revenue growth has slowed, though it was still up 39% year-over-year.

Related: Alibaba grows 39%, but is that good enough?

Shares of Goodyear Tire (GT) revved 3% higher after Barron's said the tire maker's stock could surge 50% within two years thanks to stronger demand.

4. Focusing on the economy: Home builders like PulteGroup (PHM) and Lennar (LEN) ticked higher after an industry group said home builder sentiment has climbed to the highest level since January.

Manufacturing activity in the New York area gained momentum in June, a new report showed. The New York Fed's manufacturing index unexpectedly ticked up this month to 19.28 from 19.01.

Investors are also looking ahead to Wednesday's Federal Reserve decision. The central bank is expected to once again dial back its bond-buying program even as it dims its economic growth outlook.

Likewise, the International Monetary Fund trimmed its forecast for U.S. economic growth this year to 2% amid the struggling housing market. Despite the gloomier view, the IMF still expects the U.S. to grow 3% next year.

First Published: June 16, 2014: 9:49 AM ET

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