NEW YORK (CNN/Money) - Stocks rallied at the open Wednesday, boosted by Kmart's $11 billion merger with Sears, Hewlett-Packard's upbeat earnings and some encouraging economic news.

After 10 minutes of trading, the Dow Jones industrial average (up 103.68 to 10,591.33, Charts), the Standard & Poor's 500 (up 12.48 to 1,187.91, Charts) index and the Nasdaq composite (up 33.18 to 2,111.80, Charts) all rallied.

Kmart (up $17.33 to $118.55, Research) said it is buying Sears (up $10.06 to $55.26, Research) in an $11 billion merger that would create a new retail behemoth under the name Sears Holdings.

After the close of trade Tuesday, Hewlett-Packard (up $0.95 to $20.63, Research) reported earnings of 41 cents per share, up from 36 cents a year earlier and 4 cents more than expected. Revenue also rose and surpassed estimates. Fiscal year 2005 guidance was mostly in line.

Investors seemed to take in stride the morning's economic news.

The consumer price index, the most widely watched measure of inflation, rose 0.6 percent in October, after rising 0.2 percent in September, Economists surveyed by Briefing.com thought it would rise 0.4 percent.

The "core" CPI, which excludes volatile food and energy, rose 0.2 percent after rising 0.3 percent in September. Economists thought it would rise 0.1 percent.

A separate report showed strength in factory output in October. Industrial production rose 0.7 percent in October after rising 0.1 percent in September. Economists thought it would rise 0.4 percent. Capacity utilization rose to 77.7 percent from 77.2 percent in September. Economists thought it would rise to 77.4 percent.

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Treasury prices fell, pushing the yield on the 10-year note up to 4.21 percent from 4.20 percent late Tuesday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar fell versus the euro and yen.

Oil prices fell ahead of the weekly inventory report due later in the morning. U.S. light crude for December delivery fell 28 cents to $45.83 a barrel in electronic trading.

In global trade, Asian markets mostly rose and European markets were higher at midday.