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Small gains on good earnings

The Associated Press

NEW YORK — Wall Street closed a quiet session modestly higher Wednesday as companies reported generally positive earnings news, but some investors were disappointed by faltering merger talks between BellSouth and AT&T.

The market seemed to be taking a rest after the Federal Reserve’s decision to leave interest rates unchanged and ahead of the government’s gross domestic product report Thursday, said Peter Cardillo, president and chief strategist of Global Partner Securities Inc. The break gives traders and investors “time to position themselves,” he said.

“I think the market has gone up in a rather vivacious way the last couple of days and what we’re seeing here is a bit of hesitancy on the part of investors and traders to commit money ahead of key numbers,” Cardillo said. “The upside today was limited.”

The Dow Jones industrial average closed up 26.22, or 0.3 percent, at 9,774.53.

The broader stock gauges also saw slight gains. The Nasdaq composite index rose 4.30, or 0.2 percent, to close at 1,936.56. The Standard & Poor’s 500 index gained 1.32, or 0.1 percent, to close at 1,048.11.

BellSouth Corp. closed up 67 cents, at $26, after The Wall Street Journal reported it had called off its latest round of merger discussions with AT&T Corp. Quoting anonymous sources, the newspaper said BellSouth had balked at the prospect of buying the nation’s largest long-distance carrier for about $19 billion in cash and stock.

AT&T lost 87 cents, or 4.4 percent, to close at $19.07.

“It’s the third time we’ve danced this dance, so we’re in an ’I’ll-believe-it-when-I-see-it’ situation,” said Tim Smalls, a managing director and trader at SG Cowen Securities. “I don’t think the market was taken by surprise that it didn’t happen this time.”

Merger news can have a powerful effect on the market. The major indexes surged earlier this week when Bank of America Corp. announced a $47 billion deal to acquire FleetBoston Financial. Those gains were extended Tuesday after the Fed said it would leave rates unchanged.

A pickup in merger activity, combined with good economic data, strong earnings and promising fourth-quarter forecasts, could easily start a longer rally, said Peter Dunay, chief market and options strategist at Wall Street Access, a New York-based brokerage firm.

“If we can break through the old highs, that will help get a leg up, too,” Dunay said. “It’s very funny, one of the things we wonder is whether we’ll see 10,000 on the Dow, and that’s nothing, it’s 2 percent. We could make 10,000 in two strong days. It’s a psychological barrier.”

Investors were betting on old-fashioned industrial stocks Wednesday, including several defense contractors that reported solid earnings.