Techs weaken, blue chips drift

NEW YORK (CNNMoney.com) -- Tech stocks slipped and the broader market was mixed Wednesday afternoon as investors weighed upbeat November retail sales, mergers in the airline industry, higher oil prices and a run-up in Treasury bond yields.

The Dow Jones industrial average (down 13.62 to 12,301.96, Charts) lost a few points with around 2-1/4 hours left in the session, after hitting a fresh all-time trading high in the morning.

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The broader S&P 500 index (up 0.54 to 1,412.10, Charts) was little changed. The tech-fueled Nasdaq (down 5.66 to 2,425.94, Charts) composite lost 0.3 percent.

The strong retail sales and deals news had set stocks up for a positive session, but that was countered by a run-up in oil prices, after a weaker-than-expected weekly energy inventories report.

Adding to the market's hesitation: higher bond yields and lingering concerns about Federal Reserve policy following Tuesday's policy meeting.

Stocks are bound to be choppy in the short run, said Joseph Saluzzi, co-head of equity trading at Themis Trading, with volume likely to thin out in the next week or so, as people head off for vacations.

Investors may also be a bit reluctant to push stocks much higher after a big rally over the past four and a half months. In the year to date, the Dow is up almost 15 percent, as of Tuesday's close, and the S&P 500 is up 13.1 percent. The Nasdaq is up 10.3 percent, and the Russell 2000 (down 1.87 to 786.54, Charts) small-cap index is up 17.1 percent.

Stocks slipped Tuesday after the Federal Reserve held interest rates unchanged as expected. In its statement, the Fed issued discouraging comments about the housing market and the economic slowdown, while at the same time maintaining a cautious stance on inflation.

The Fed's statement seemed to dampen hopes that the central bank will begin cutting interest rates as soon as the first quarter of next year.

Retail sales in November surged, the government reported Wednesday morning, in an encouraging start to the all-important holiday shopping period. Full story.

U.S. light crude oil for January delivery jumped 53 cents to $61.55 a barrel on the New York Mercantile Exchange after the weekly energy inventory report showed a drop in crude oil and gasoline supplies.

Among stock movers, air carriers were active. UAL (up $2.22 to $45.45, Charts)'s United Airlines and Continental (up $1.70 to $44.58, Charts) are reportedly in talks about a merger, according to published reports.

Additionally, AirTran (up $0.05 to $12.40, Charts) said it has made an offer to buy Midwest Air (up $1.74 to $10.82, Charts) for about $210 million in a deal that would merge the two regional air carriers.

That gave a lift to a variety of airline stocks, with the Amex Airline (Charts) index adding 2.5 percent.

In other deals news, Home Depot (up $0.16 to $38.86, Charts) said it is buying Chinese home improvement chain The Home Way for an undisclosed amount, in its first foray into retailing in China.

The spike in oil prices lifted oil services stocks such as Exxon Mobil (up $0.91 to $77.16, Charts) and Valero Energy (up $0.15 to $54.86, Charts). The Amex Oil (up 4.74 to 1,215.87, Charts) index added 0.8 percent.

Apple Computer (up $1.59 to $87.73, Charts) rallied on a pair of bullish analyst notes. Morgan Stanley boosted its price target, and UBS reiterated a "buy" rating on the stock, saying that it thinks Apple will have a branded cell phone by the start of the second quarter of 2007, The Wall Street Journal reported.

Atmel (up $0.56 to $5.84, Charts) surged 12 percent in active Nasdaq trading after the chip maker announced job cuts and said it was selling certain facilities as part of a restructuring.

Market breadth was negative. On the New York Stock Exchange, losers edged winners by a narrow margin on volume of 910 million shares. On the Nasdaq, decliners narrowly topped advancers on volume of 1.15 billion shares.

Treasury prices tumbled, boosting the yield on the benchmark 10-year note to 4.57 percent from about 4.49 percent late Tuesday. Bond prices and yields move in opposite directions.

In currency trading, the dollar rose against the yen and euro.

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