Stocks pare gains on Fed minutes

NEW YORK (CNNMoney.com) -- Stocks pared gains after the release of the minutes from the Federal Reserve's latest meeting, but the Dow Jones industrial average remained on track for another record close.

Dow Jones industrial average (up 47.46 to 12,265.47, Charts) rose 0.3 percent with a little more than an hour left in the session. On Tuesday the blue-chip barometer closed at a record for the 15th time since early October.

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The broader S&P 500 (up 4.62 to 1,397.84, Charts) index also added 0.2 percent after closing at a six-year high on Tuesday.

The tech-fueled Nasdaq composite (up 14.67 to 2,445.33, Charts) surged 0.5 percent, extending its gains after reaching its highest level since February 2001 on Tuesday.

The minutes from the Fed's October meeting showed cutting inflation was the biggest concern among central bank policy-makers, raising investor jitteres about what's to come.

"I think it's calling more into question what the Fed will do going forward, but the market is holding up pretty well" said Eugene Peroni, senior managing director at Claymore Advisors.

Stocks have been rallying in recent months on solid earnings and bets that the economy is headed for a so-called "soft landing."

These factors are likely to support the market for the rest of the year, said Harry Clark, CEO of Clark Capital Management.

"There's still a lot of money around to be invested," Clark said. "I think people are scared to miss out on the rally."

He said that seasonal factors are working in the market's favor, as well, with November and December tending to be buoyant months on Wall Street.

Helping contribute to the upbeat tone Wednesday was the NY Empire State index. The reading on manufacturing in the New York region rose to 26.7 in November from 22.9 the previous month. Economists surveyed by Briefing.com were expecting a drop to 14.

The report seemed to reinforce the belief that while economic growth is slowing, it is not heading for a so-called "hard landing."

A potential $8 billion merger in the airline industry also lifted stocks. US Airways made a surprise cash and stock bid for larger rival Delta. (Full story). Shares of US Air (up $8.01 to $58.94, Charts) rallied 12 percent, while shares of bankrupt carrier Delta rallied 10 percent on the over-the-counter market.

US Air's bid for Delta spurred a rise in airline stocks, as investors bet the deal would spark more consolidation in the troubled industry.

JetBlue (up $1.22 to $15.31, Charts) jumped 9 percent, Continental (up $4.67 to $43.03, Charts) soared 12 percent and Airtran Holdings (up $1.89 to $12.96, Charts) climbed 18 percent.

The Amex Airline (up 2.87 to 60.71, Charts) index rallied nearly 6 percent.

Google (up $7.61 to $496.91, Charts) gained nearly 2 percent after Credit Suisse resumed coverage of the search giant with an "outperform" rating and price target of $600 a share.

Comverse Technology (down $2.79 to $17.85, Charts) plunged 14 percent in active Nasdaq trade after the telecom software maker said it found more accounting problems in addition to existing errors related to its stock option practices.

AT&T (down $0.66 to $32.30, Charts) was the biggest decliner on the Dow, losing nearly 3 percent on concerns that its acquisition of BellSouth would be delayed.

Market breadth was positive. On the New York Stock Exchange, winners topped losers three to two on volume of 1.26 billion shares. On the Nasdaq, advancers topped decliners by three to two on volume of 1.6 billion shares.

Treasury bond prices slumped, lifting the yield on the benchmark 10-year note to 4.61 percent, up from 4.57 percent late Tuesday. Bond prices and yields move in opposite directions.

U.S. light crude oil for December delivery rose 43 cents to $58.71 a barrel on the New York Mercantile Exchange after the weekly oil inventory report showed a surprisingly large drop in gasoline supplies and distillate stocks, used to make heating oil.

COMEX gold fell $1.50 to $623.80 an ounce.

The dollar held steady against the euro and edged higher versus the yen.

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