NEW YORK, US - WALL Street stocks fell on Monday following sharp market swings as investors fretted about the second quarter earnings season, sensing major banks could unveil further losses.

Large American corporations start revealing their latest quarterly earnings this week and some analysts believe that bank earnings will sustain further hits from a lingering credit crunch.

The leading Dow Jones Industrial Average dipped 56.58 points (0.50 points) to close at 11,231.96. The Dow did recover some ground after falling over 100 points in earlier trading.

The tech-heavy Nasdaq composite dropped a slight 2.06 points (0.09 per cent) to 2,243.32 while the Standard & Poor's 500 index closed down 10.59 points (0.84 per cent) at 1,252.31.

'Everyone is reassessing the widely-held view that the worst of the credit crisis would be over by now, and coming to the same conclusion: The worst may not be over and it might last well into 2009,' said Mr Ed Yardeni of Yardeni Research.

Analysts said earnings season nerves had depressed sentiment despite a sharp fall in oil prices which slumped to US$141 (S$192.2) a barrel in New York.

Economic concerns persisted as a Federal Reserve study argued that large-scale government intervention in the depressed housing market would be counterproductive and prevent a 'necessary' correction in home prices.

The credit crisis sweeping the banking industry has in part been worsened by banks' ailing mortgage investments.

Software giant Microsoft meanwhile said it was prepared to reopen talks on a 'major' deal with Yahoo if the Internet firm replaces its board of directors.

Yahoo's stock surged in the wake of the announcement which comes after talks between the two firms brokedown over an initial deal under which Microsoft had offered to buy Yahoo for US$44.6 billion in January.

Microsoft's stock closed 0.2 per cent higher at US$26.03. Yahoo rocketed 12 per cent to US$23.91.

In other corporate news following the extended holiday weekend break, Belgian-Brazilian brewing giant InBev raised the stakes in its takeover battle for US beer group Anheuser-Busch.

InBev said it had launched a legal salvo aimed at ousting the board of the US brewer in an attempt to smooth the way for its potential US$46 billion takeover after Anheuser-Busch described it as 'financially inadequate.' InBev said it would seek support from Anheuser-Busch's shareholders to replace the board and proposed an alternative line-up.

Anheuser-Busch, which said InBev's latest effort was 'self-serving,' saw its stock rise 0.1 per cent to US$61.74.

And a report said General Motors was mulling job cuts that could affect thousands more white-collar jobs and that it was considering selling more of its vehicle brands.

The Wall Street Journal report said fresh job cuts would likely be approved when GM's board of directors meets in early August.

GM's shares finished 1.2 per cent higher at US$10.24.

Bond prices declined as investors moved back into stocks.

The yield on the 10-year US Treasury bond fell to 3.930 per cent from 3.973 per cent on Thursday and that on the 30-year bond dropped to 4.504 per cent against 4.531 per cent. Bond yields and prices move in opposite directions.

European stocks pushed higher with London's FTSE 100 index gaining 1.85 per cent to 5,512.70. In Paris the CAC 40 was up 1.80 per cent at 4,342.59 while in Frankfurt the Dax rose 1.97 per cent to finish at 6,395.75. -- AFP