NEW YORK – Rising oil prices and the return of a bond market anomaly cut into Wall Street's early gains Wednesday, leaving stocks with only a modest advance.
The Dow Jones industrial average rose 18.49, or 0.17 percent, to 10,796.26. Broader stock indicators were narrowly higher. The Standard & Poor's 500 index rose 1.63, or 0.13 percent, to 1,258.17 and the Nasdaq composite index rose 2.05, or 0.09 percent, to 2,228.94.
The market pulled back in response to a jump in crude oil prices. Oil gained after Iran's oil minister was reported to have said the Organization of Petroleum Exporting Countries should consider lowering its output by 1 million barrels a day at its Jan. 31 meeting. A barrel of light crude settled at $59.82, up $1.66, in trading on the New York Mercantile Exchange.
Investors also worried about the bond market. Stocks fell Tuesday after yields on long-term bonds dropped below those on short-term bonds, a condition called an inverted yield curve that often precedes economic slowdowns. The yield curve last inverted in 2000.
On Wednesday, some short-term bond yields beat longer term bond yields, but Wall Street seemed less concerned. Tuesday's inverted yield curve sparked a selloff in equities, with the Dow falling 105.50, or 0.97 percent.
Still, "the yield curve has people on edge," said Peter Cardillo, chief strategist, senior vice president and market analyst at S.W. Bach & Co. "It's certainly keeping the market in a tight trading range."
Bonds fell, with the yield on the 10-year Treasury note rising to 4.37 percent from 4.34 percent late Tuesday.
The U.S. dollar gained against other major currencies. Gold prices were higher.
Trading on Wall Street was slow. "The market is defined more by a lack of action than anything else," said Brian Bush, director of equity research, Stephens Inc.
Stocks received an early boost from the Conference Board's report that consumer confidence surged in December. The reading, which improved because of declining gasoline prices and better job opportunities, is nearing its August levels, before Hurricane Katrina.
Other economic indicators were mixed. The Mortgage Bankers Association's index of applications to buy a home or refinance an existing mortgage declined 6.8 percent, hitting its lowest level since June 2002 while a weekly index of retail sales showed strength in the week leading up to Christmas, according to UBS.
"The consumer numbers look fairly strong, although at least some of that strength is likely to fade in coming months if housing continues to weaken," said Maury Harris, an economist for UBS. "The mortgage applications data suggest home prices are already weakening."
In company news, Linens N Things Inc. (LIN) jumped $2.61, or 11 percent, to $26.52 after the retailer said it expects to meet the required conditions for its acquisition by a company controlled by Apollo Management LP. In November, Linens N Things agreed to be acquired by a company formed by Apollo Management in a deal valued at $1.3 billion. Its shareholders are expected to receive $28 per share in cash.
Overstock.com Inc. (OSTK) fell for a second straight day after Piper Jaffray cut its rating on the Internet retailer to "underperform" from "market perform," saying "we believe it could prove very difficult for Overstock to achieve profitability under its current business model." The retailer fell $2.35, or 7.5 percent, to $28.80. The stock dropped 7.4 percent Tuesday after it said its earnings would miss previous targets.
Natural foods supermarket chain Whole Foods Market Inc. rose $3.67, or 4.9 percent, to $79.10 after Standard & Poor's said it will include the company in its benchmark 500 index. The chain, currently part of the S&P MidCap 400 index, was replacing credit card issuer MBNA Corp., which is being acquired by Bank of America Corp., in the S&P 500. Separately, a 2-for-1 stock split Whole Foods announced in November was occurring Wednesday.
Auto parts supplier Visteon Corp. (VC) fell 35 cents, or 5.1 percent, to $6.51 when S&P dropped it from the 500 Index. Visteon's market capitalization, currently less than $850 million, pales in comparison to the $4 billion market cap that companies typically have to carry for S&P 500 consideration.
The Russell 2000 index of smaller companies rose 3.50, or 0.52 percent, to 680.08.
Advancing issues led decliners by roughly 2 to 1 on the New York Stock Exchange, where preliminary consolidated volume was 1.47 billion, down from 1.51 billion Tuesday.
Overseas, Japan's Nikkei stock average rose 1.41 percent, hitting a fresh five-year high. Britain's FTSE 100 was up 0.49 percent, Germany's DAX index was up 0.04 percent, and France's CAC-40 was down 0.26 percent.