* HP shares slide after 3PAR offer
* Utilities sector leads gains as buyers seek safety
* Dow, S&P down 0.4 pct, Nasdaq down 0.9 pct (Updates to close)
By Leah Schnurr
NEW YORK, Aug 23 (Reuters) - U.S. stocks slipped in one of the lightest volume sessions of the year on Monday as investors took refuge in defensive shares after the latest corporate M&A failed to soothe concerns the recovery is stalling.
Technology shares weighed on the broad market and sent the Nasdaq composite lower as a possible bidding war over data storage company 3PAR between Hewlett-Packard Co and Dell Inc sent shares of HP 2 percent lower.
The bid comes on the heels of other deals last week, including acquisition offers from Intel Corp and BHP Billiton and had pushed indexes higher at the session's open.
"Overriding the M&A buzz -- which didn't have a lot of longevity -- is the fact that economic data still remains very poor and there's concern that the much-discussed soft patch has the potential to become something greater," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
Analysts said the recent spate of M&A also points to companies continuing to make profits through cost cutting rather than through revenue growth and highlights the economy's weakness.
Mergers also typically lead to job cuts, casting another shadow over an already weak labor market.
"Companies can do well versus the overall economy for a certain length of time, but pretty soon they are going to have to see better top-line growth," said Scott Wren, senior equity strategist at Wells Fargo Advisors in St. Louis.
The Dow Jones industrial average slipped 39.21 points, or 0.38 percent, to 10,174.41. The Standard & Poor's 500 Index lost 4.33 points, or 0.40 percent, to 1,067.36. The Nasdaq Composite Index fell 20.13 points, or 0.92 percent, to 2,159.63.
Composite volume on the New York Stock Exchange, the American Stock Exchange and Nasdaq was one of the lightest of the year at about 5.99 billion as investors stayed to the sidelines and others were away.
Michael O'Rourke, chief market strategist at BTIG LLC in New York, wrote that weekly equity volumes the past couple weeks have been 24 percent below the weekly averages for all of 2010.
The S&P 500 also broke through a support level of 1,170 after holding up earlier in the day. The level had formed a floor for the index of late and represents the 50 percent retracement of the most recent rally from July 1 to August 9.
Gains by utilities, healthcare and other defensive sectors stemmed declines. The S&P 500 utilities sector gained 0.6 percent, while the healthcare group added 0.3 percent.
Cyclical sectors led the way down, including industrial shares, which are more economically sensitive. Caterpillar Inc gave up 2.9 percent at $66.84.
The Nasdaq fared worse than the other two indexes, extending losses late in the day as technology shares slipped. Lingering concerns about the stalling economic recovery weighed on tech.
The Dow and S&P 500 have notched two straight weeks of losses on gloominess over softer-than-expected data in recent days. Investors will get more data this week, with July existing-home sales due on Tuesday and the government's revised reading for gross domestic product due on Friday.
HP, the computer maker, bid $24 a share in cash for 3PAR, topping an earlier bid from Dell. Shares of 3PAR surged 44.6 percent to $26.09, while HP dropped 2 percent to $39.04. Dell shares fell 1.1 percent to $11.94.
3M Co's Chief Executive George Buckley said the Dow component may spend about $2 billion on acquisitions in 2010, twice its previous estimate. 3M shares added 0.5 percent to $81.08. (Reporting by Leah Schnurr; Editing by Kenneth Barry)