Stocks give back gains

NEW YORK (CNNMoney.com) -- Stocks turned mixed Wednesday morning, giving up some early gains, as investors welcomed strong November retail sales and mergers in the airline industry but showed caution amid higher oil prices and Treasury bond yields.

The Dow Jones industrial average (up 1.20 to 12,316.78, Charts) was little changed about 80 minutes into the session, after rising in the morning to a new all-time trading high.

The broader S&P 500 index (up 0.49 to 1,412.05, Charts) was little changed as well, giving back early gains. The tech-fueled Nasdaq (down 4.46 to 2,427.14, Charts) composite lost a few points after rising in the first hour of trade.

Stocks had risen in the first hour of the session, but lost some steam following an about-face in the price of oil.

U.S. light crude oil for January delivery jumped 68 cents to $61.70 a barrel on the New York Mercantile Exchange after the weekly energy inventory report showed a drop in crude oil and gasoline supplies.

The runup in oil prices combined with higher bond yields and lingering concerns about Federal Reserve policy to keep stocks in a tight range late Wednesday morning.

Stocks slipped Tuesday after the Federal Reserve held interest rates unchanged as expected, but issued discouraging comments about the housing market and the economic slowdown in its statement.

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

Wednesday brought some upbeat economic and company news.

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

Among stock movers, air carriers were active. UAL (up $1.42 to $44.65, Charts)'s United Airlines and Continental (up $1.73 to $44.61, Charts) are reportedly in talks about a merger, according to published reports.

Additionally, AirTran (up $0.00 to $12.35, Charts) said it has made an offer to buy Midwest Air (up $2.04 to $11.12, 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.

Apple Computer (up $1.22 to $87.36, 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.

Treasury prices tumbled, boosting the yield on the benchmark 10-year note to 4.54 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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