By Kristina Peterson, MarketWatch

U.S. blue-chip stocks edged lower on Monday, as corporate downgrades and worries about the health of euro zone finances overshadowed the weekend's deal activity.

The Dow Jones Industrial Average (DJI) slipped 17 points, or 0.1%, to 12,256. Weighing on the measure, Wal-Mart Stores Inc. (WMT) fell 1% after J.P. Morgan cut the company's stock investment rating to neutral from overweight, predicting that same-store sales deterioration could last for years, not quarters. Verizon Communications (VZ) was also weak, down 1.2%.

Keeping the Dow's losses in check, General Electric Co. (GE) rose 1.1% after the conglomerate agreed to buy the well-support division of U.K. firm John Wood Group PLC for $2.8 billion in cash to bolster its oil and gas services business in areas like extracting natural gas from shale.

The Nasdaq Composite (RIXF) edged up 0.3% to 2,818. The Standard & Poor's 500-stock index (SPX) turned slightly higher, trading up 0.1% at 1,331.

Investors on Monday waited for details of President Barack Obama's budget proposal for fiscal year 2012, which will be released at 10:30 a.m. EST. The White House projected that the federal deficit would spike to $1.65 trillion in the current fiscal year, the largest dollar amount ever, fueled in part by a tax-cut extension that the president and Republican lawmakers brokered in December.

A stronger dollar weighed on stocks Monday morning as the euro sank to a three-week low against the dollar. Worries about the strength of German bank WestLB added to renewed euro-area sovereign concerns, sending the euro to $1.3484, down from $1.3560 late Friday in New York.

Investors worried about the region's ability to regain its footing.

"There's just no way those countries can come up with the money," to bail out troubled euro zone nations, said Barry James, president and chief executive of James Investment Research. "They have more debt coming due than the size of their economy," he said. "Bailout or no bailout, something's going to give

Meanwhile, Asian equities were largely higher, boosted by a surge in Chinese imports last month.

Among stocks in focus, Netflix (NFLX) shares rose 5.2% after the company became the only paid video service to be a top-ten video service on the web by total number of streams and unique visitors, according to Nielsen.

MGM Resorts International (MGM) shares fell 2.8% after the casino company's fourth-quarter loss narrowed significantly from a year earlier but revenue declined and revenue per available room fell on the Las Vegas strip.

U.S.-listed shares of Nokia Corp. (NOK) dropped 4.1%, extending their Friday decline after the telecom equipment maker announced a partnership with Microsoft. J.P. Morgan Cazenove downgraded Nokia to underweight from overweight, saying that "the degree to which the [Microsoft] deal is beneficial to Nokia is still unclear." On Monday Nokia chief executive Stephen Elop said the company hopes to launch its first smartphone based on Microsoft's Windows Phone platform this year.

Seahawk Drilling (HAWK) shares tumbled 56% after the firm said late Friday it would file for bankruptcy protection and sell its assets to Hercules Offshore (HERO) , whose shares rose 21%.

Demand for U.S. Treasurys was mixed, with the two-year note (UST2YR) flat and the 10-year note (UST10Y) up, sending its yield down to 3.63%.

Crude-oil prices edged up, while gold futures advanced.