US STOCKS-Energy shares weigh on Wall St but merger activity supports

* Baker Hughes rallies, Halliburton tumbles after deal

* DreamWorks shares slide as Hasbro (NasdaqGS: HAS - news) talks stall

* Indexes down: Dow 0.1 pct; S&P 500 0.2 pct; Nasdaq 0.5 pct (Updates to midday, changes comment)

By Rodrigo Campos

NEW YORK, Nov 17 (Reuters) - U.S. stocks fell on Monday, as energy shares dropped alongside crude futures after Japan slipped into recession, while merger and acquisition activity and hopes for more stimulus capped declines and kept indexes near record highs.

The M&A news partly offset the declines as Allergan (NYSE: AGN - news) agreed to be bought by Actavis (NYSE: ACT - news) while Halliburton said it would buy Baker Hughes. Allergan and Baker Hughes were the top point gainers on the S&P 500.

Japan's economy unexpectedly slipped into recession in the third quarter, setting the stage for Prime Minister Shinzo Abe to delay an unpopular sales tax hike and call a snap election two years before he has to go to the polls.

The Japanese data hurt crude futures prices, with Brent off 1.1 percent at $78.55 per barrel. Brent futures prices have fallen in the last eight weeks and are down more than 30 percent from June.

The energy sector fell 0.8 percent, the largest weight on the S&P 500.

"Concern about deceleration of economic growth particularly in Asia" weighed on markets, said Chad Morganlander, portfolio manager at Stifel, Nicolaus & Co in Florham Park, New Jersey.

He said the offset to this worry was monetary policy in Europe and what it will mean for markets in the near term.

European Central Bank President Mario Draghi said stimulus is gaining traction and the ECB is ready to do more to accelerate the recovery.

At 11:54 a.m. (1654 GMT), the Dow Jones industrial average fell 9.08 points, or 0.05 percent, to 17,625.66, the S&P 500 lost 3.01 points, or 0.15 percent, to 2,036.81 and the Nasdaq Composite dropped 23.17 points, or 0.49 percent, to 4,665.37.

The largest percentage gainer on the S&P 500 was Baker Hughes, up 10.6 percent on news Halliburton would acquire it in a cash and stock transaction of about $34.6 billion. Halliburton shares fell 9.3 percent.

Denbury Resources (NYSE: DNR - news) , down 11.2 percent, was the largest S&P 500 decliner. It said it would cut its capital spending for next year in half.

Allergan added 6 percent to $210.46 as the Actavis buyout values the company at $66 billion. Actavis shares rose 2.3 percent to $249.30.

Negotiations between Hasbro and DreamWorks Animation have been hampered by issues regarding the structure of the combined company, according to a person familiar with the matter. DreamWorks shares fell 15 percent to $22.13. Hasbro added 4.7 percent to $56.55.

Declining issues outnumbered advancers on the NYSE by 1,814 to 1,140, for a 1.59-to-1 ratio; on the Nasdaq, 1,682 issues fell and 946 advanced for a 1.78-to-1 ratio.

The S&P 500 was posting 26 new 52-week highs and 2 new lows; the Nasdaq Composite was recording 60 new highs and 45 new lows.

(Reporting by Rodrigo Campos; Editing by Bernadette Baum and Nick Zieminski)