Wall Street ended a volatile session marginally higher Wednesday after stocks first surged on robust retail sales numbers but pared their gains as oil prices spiked.

The Energy Department reported crude inventories fell for a third straight week, which sent oil and gasoline prices sharply higher. Less supply means both oil and gas could cost more, and that was viewed by the stock market as an obstacle to consumer spending.

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The supplies data essentially offset a robust retail sales report that showed strong consumer spending in November. Investors had sent stocks higher on belief higher household spending will drive corporate profits, and help push economic growth.

This helped soothe Wall Street's concerns that the economy is moderating too fast, but also indicated the Federal Reserve won't cut interest rates anytime soon. The report caused a sell off in the Treasury bond market — which had been betting on an interest rate cut as soon as the first quarter.

"I think the oil report is more noise in the background that can drive things intraday, but doesn't rule in the long term," said Jeff Kleintop, chief investment strategist for PNC Financial Services Group. "The real data point is how the next two weeks of the shopping season is, which will give us a better idea of the strength of the consumer and an idea of when the Fed may ease next."

The Dow Jones industrial average added 1.92, or 0.02 percent, to 12,317.50, having pulled back after reaching a new trading high of 12,368.61 earlier in the session.

Broader indicators edged higher. The Standard & Poor's 500 index was up 1.65, or 0.12 percent, at 1,413.21, and the Nasdaq composite index rose 0.81, or 0.03 percent, to 2,432.41.

Treasury prices dropped on the belief that a hoped-for rate cut early next year won't be in the offing. Yields in turn moved sharply higher, with the benchmark 10-year Treasury note jumping to 4.57 percent from 4.48 percent late Tuesday.

Oil prices rallied after the U.S. government reported that crude supplies fell by 4.3 million barrels last week, a bigger drop than analysts expected. U.S. inventories of gasoline and distillate fuel — which includes diesel and heating oil — also fell.

The inventory declines come as OPEC is considering cutting output again at their meeting on Thursday. Crude oil surged, with the price of a barrel of light sweet crude up 35 cents at $61.37 on the New York Mercantile Exchange.

"OPEC is almost surely not going to cut again, so you have a wash in the oil market," said Stephen Leeb, president of Leeb Capital Management, which manages about $110 million of assets. "And face it, we're still around $60 a barrel and you'd have to get between $70 to $80 before investors start reading it as a real threat to the economy."

The retail sales report also injected confidence in the dollar, which rose against other major currencies on the prospect of stable U.S. rates. Gold prices also moved higher.

Retailers moved higher after the Commerce Department said retail sales rose 1 percent last month, surpassing expectations and marking the biggest gain since July. However, many lost steam later in the session as the potential for higher gasoline prices could dent consumer spending.

Wal-Mart Stores Inc., the world's biggest retailer, was up 42 cents at $45.90. Rival discount retailer Target Corp. was up 78 cents at $58.50.

Decliners included Best Buy Co. (BBY) and Circuit City Stores Inc. (CC), which were downgraded by Prudential Securities on concerns about lower retail prices for flat-panel televisions. Best Buy shed 84 cents to $50.46, while Circuit City fell 46 cents to $23.12.

Home Depot Inc. (HD), the nation's biggest home improvement chain, rose 41 cents to $39.11 after it announced a move into China with the acquisition of 12 stores there.

Investors also watched for further news about talks between UAL Corp. and Continental Airlines Inc. on a possible combination. This could trigger a consolidation wave among the nation's airlines, especially after AirTran Holdings Inc. said it made a $290 million stock and cash bid for Midwest Air Group Inc.

UAL (UAUA) rose $2.01, or 4.7 percent, to $45.24; Continental Airlines (CAL) added $1.88, or 4.4 percent, to $44.76. AirTran rose 50 cents to $12.85, and Midwest rose $2.02, or 22.3 percent, to $12.85.

The Russell 2000 index of smaller companies rose 0.34, or just under 0.04 percent, to 788.75.

Advancing issues outnumbered decliners by a 3 to 2 basis on the New York Stock Exchange, where volume came to 1.47 billion shares, compared to 1.44 billion at the same point on Tuesday.

Overseas, Japan's Nikkei stock average closed up 0.33 percent. At the close, Britain's FTSE 100 was up 0.59 percent, Germany's DAX index added 0.69 percent to reach five-year high, and France's CAC-40 was up 0.90 percent.

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