Wall Street closed a quiet session modestly higher Wednesday as companies reported generally positive earnings news. But some investors were disappointed by faltering merger talks between BellSouth and AT&T.;
The market seemed to be taking a rest after Tuesday’s big rally -- which followed the Federal Reserve’s decision to leave interest rates unchanged -- and ahead of the government’s gross domestic product report today, said Peter Cardillo, president and chief strategist of Global Partner Securities Inc. The break gives traders and investors “time to position themselves,” he said.
Bond prices suffered their biggest drop in almost a month, however, as fixed-income investors worried about accelerating economic growth.
The Dow Jones industrial average, which gained 140 points Tuesday, closed up 26.22 points, or 0.3%, at 9,774.53. The Nasdaq composite index rose 4.30 points, or 0.2%, to 1,936.56, after jumping almost 50 points the day before. The Standard & Poor’s 500 index inched up 1.32 points, or 0.1%, to 1,048.11.
Advancers outnumbered decliners by about 8 to 5 on the New York Stock Exchange and by 3 to 2 on Nasdaq. Trading was heavy.
BellSouth closed up 67 cents at $26 after reports that the telephone company had called off its latest round of merger discussions with AT&T.; AT&T; lost 87 cents to $19.07.
“It’s the third time we’ve danced this dance, so we’re in an ‘I’ll-believe-it-when-I-see-it’ situation,” said Tim Smalls, a managing director and trader at SG Cowen Securities. “I don’t think the market was taken by surprise that it didn’t happen this time.”
Merger news can have a powerful effect on the market.
The major indexes surged earlier this week when Bank of America announced a $43-billion deal to acquire FleetBoston Financial. Those gains were extended Tuesday after the Fed said it would leave rates unchanged.
A pickup in merger activity, combined with good economic data, strong earnings and promising fourth-quarter forecasts, could easily start a longer rally, said Peter Dunay, chief market and options strategist at Wall Street Access, a New York-based brokerage firm.
But evidence of economic strength had the opposite effect on the bond market at a time when the government is selling more debt to fund a record budget deficit.
The yield on the benchmark 10-year Treasury note -- which moves in the opposite direction of the security’s price -- climbed to 4.30% from Tuesday’s close of 4.18%.
The Fed on Tuesday characterized the U.S. labor market as “stabilizing,” compared with its previous assessment that it was “weakening.” On Wednesday the government sold $26 billion of new two-year notes, the most since April, at a yield of 1.74%.
“We have a growing economy, ballooning deficits and an accommodative Fed -- all of which is putting pressure on bonds,” said Sadakichi Robbins, head of fixed-income trading at Bank Julius Baer & Co.
In other trading, oil fell to its lowest level in a month after a government report showed U.S. inventories increased last week as refineries boosted output. Crude oil for December delivery fell 65 cents to $28.91 a barrel in New York trading.
In other highlights:
* Bank of America regained some of the ground it has lost since investors reacted sourly to its plan to acquire FleetBoston. BofA rose $1.51 to $74.36; it closed last Friday at $81.86.
* Halliburton got a revenue boost from government contracts, including work in Iraq, but its earnings missed analyst forecasts, partly because of a proposed asbestos settlement. The oil services company dropped 56 cents to $23.52.
* Marsh & McClennan fell $1.79 to $45.52. The company’s Putnam mutual fund unit was slapped with civil fraud charges by state and federal authorities Tuesday as part of the widening scandal in the fund industry.
* High fuel prices helped ConocoPhillips beat analyst expectations by a wide margin, but the largest U.S. oil refiner still fell 43 cents to $56.97.