Tough session on Wall Street

NEW YORK (CNNMoney.com) -- Stocks ended a tumultuous session little changed Wednesday, as investors welcomed bullish November retail sales, but showed caution amid rising oil prices and Treasury yields.

The Dow Jones industrial average (up 1.92 to 12,317.50, Charts) ended the session little changed,after hitting a fresh all-time trading high in the morning.

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The broader S&P 500 index (up 1.65 to 1,413.21, Charts) added less than 2 points. The tech-fueled Nasdaq (up 0.81 to 2,432.41, Charts) composite was little changed.

The strong retail sales and deal 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.

In addition, "there's been some divergence between the government retail sales number and what some of the retailers have been saying," said Paul Mendelsohn, president and chief investment strategist at Windham Financial Services.

He said that investors may have been reacting to that disconnect Wednesday.

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

Wednesday's choppy session was probably a harbinger for the rest of the week, said Joseph Saluzzi, co-head of equity trading at Themis Trading.

"This week's tough because we've got an options expiration," he said, referring to Friday's quarterly event in which individual stock futures and options and stock index futures and options all expire at the same time. This can lead to fluctuations in the prices of the underlying stocks in the days leading up to the expiration.

Friday also brings a key read on inflation, with the release of the November consumer price index and the so-called core CPI, which excludes volatile energy and food prices.

Investors may also be a bit reluctant to push stocks much higher right now 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 Wednesday's close, and the S&P 500 is up just over 13 percent. The Nasdaq is up 10.3 percent, and the Russell 2000 (up 0.34 to 788.75, Charts) small-cap index is up just over 17 percent.

After the close Citigroup (Charts) said it was buying Grupo Cuscatlan, a Central American bank, for $1.51 billion in cash and stock.

Thursday brings quarterly earnings reports from Bear Stearns (Charts), Lehman Brothers (Charts) and Ciena (Charts), among others.

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

The report also served to temper some worries about the economy heading into the end of the year.

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.

U.S. light crude oil for January delivery gained 35 cents to $61.37 a barrel on the New York Mercantile Exchange after the weekly energy inventory report showed a drop in crude oil and gasoline supplies.

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.

Among stock movers, air carriers were active. UAL (up $2.01 to $45.24, Charts)'s United Airlines and Continental (up $1.88 to $44.76, Charts) are reportedly in talks about a merger, according to published reports.

Additionally, AirTran (up $0.50 to $12.85, Charts) said it has made an offer to buy Midwest Air (up $2.02 to $11.10, 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 3 percent.

In other deal news, Home Depot (up $0.41 to $39.11, 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 $1.11 to $77.36, Charts) and Sunoco (up $1.05 to $67.48, Charts). The Amex Oil (up 8.19 to 1,219.32, Charts) index added 0.7 percent.

Apple Computer (up $2.91 to $89.05, 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.

Advanced Micro Devices (down $0.30 to $20.17, Charts) slipped after Banc of America Securities cut its earnings per share forecast on the chipmaker.

AMD was one of a number of stocks dragging on the Philadelphia Semiconductor (down 5.82 to 467.01, Charts) index or the SOX.

Atmel (up $0.62 to $5.90, Charts) surged 11.7 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 mixed. On the New York Stock Exchange, winners edged losers by a narrow margin on volume of 1.47 billion shares. On the Nasdaq, decliners narrowly topped advancers on volume of 1.82 billion shares..

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