While you were sleeping: UPDATED Wall Street edges lower in flat trading

Wall Street traded lower as stocks struggled for direction in light trading as investors tried to gauge the odds of a US interest rate increase next month.

Two US Federal Reserve officials, St. Louis Fed President James Bullard and San Francisco Fed head John Williams, underpinned recent signals that a rate hike might happen sooner than later.

"I do worry that keeping rates too low for too long could feed into future financial instability even if it doesn't look as though we're in that situation today," Mr Bullard, a voting member of the Fed's policy-setting committee, told reporters, according to Reuters.

A slew of economic data in the coming days will be closely watched.

"The market is just trying to digest what the Fed mentioned in the minutes last week," Mark Kepner, managing director and equity trader at Themis Trading in New York, told Bloomberg. "Everyone is going to be looking at what's coming out this week with housing, PMI and wages especially."

At the close, the Dow Jones Industrial Average was down 8.01 points to 17,492.93, while the Nasdaq Composite Index fell 3.8 points to 4765.78. The Standard & Poor's 500 Index fell 4.28 points to 2048.04.

"The market will be pretty range bound till we get a better sense of what's happening with the Fed," Adam Sarhan, chief executive of Sarhan Capital in New York, told Reuters. "Right now, we're getting a lot of cross currents from the central bank and investors are looking for more direction with [Fed chairwoman Janet] Yellen speaking on Friday."

Corporate news 
Viacom rose 2.3%. Chief executive Philippe Dauman and George Abrams, a director, filed a lawsuit against vice chairman Shari Redstone, challenging their dismissals as stewards of the media giant.

Freeport-McMoRan shares rose 2.7% after the company formally cancelled plans to take its oil-and-gas business public.

Tribune Publishing shares tumbled 15% after the company rejected a sweetened takeover offer from Gannett and said a billionaire entrepreneur would take a $US70 million stake in the company.

US crude oil prices dropped 0.7% to $US48.08 a barrel on concerns that recent supply disruptions may soon abate.

Europe's Stoxx 600 Index ended the session with a 0.4% drop from the previous close. The UK's FTSE 100 index slipped 0.3% while France's CAC 40 index and Germany's DAX index both shed 0.7%.

Bayer falls on Monsanto bid
Shares of Germany's Bayer closed 5.7% lower at €85.18 in Frankfurt after the company said it offered to buy Monsanto for $US62 billion in cash, or $US122 a share, in a bid to create a global agricultural leader.

"The price that has now been disclosed is at the upper limit and it is just about economical," Markus Manns, a fund manager at Union Investment, Bayer's 14th biggest investor, told Reuters. "Should it rise further, which is to be assumed, the takeover will become increasingly unattractive."

While Monsanto shares rose on the offer, the stock traded only as high as $US109.37 and closed at $US106.00 a 4.4% gain from Friday's closing price. The discount to Bayer's offer price reflects both concern that the mega-merger might not be palatable to regulators while it also shows expectations that Monsanto might demand a higher price, analysts said.

Meanwhile, CF Industries, a US maker of fertilisers, and OCI, a Dutch competitor, said they abandoned their $US8 billion merger plans because of the new US tax rules that are aimed at curbing so-called inversion deals.

Shares of OCI sank 9.9% in Amsterdam. Shares of CF Industries climbed 4.4% in New York.

(BusinessDesk)