) -- Stocks finished slightly higher Wednesday on light volume as investors mostly stayed on the sidelines following a mild

upward revision in third-quarter GDP and a

stronger-than-expected rise in existing home sales.

The major U.S. equity indexes did close right around their two-year highs though, underlining the dramatic run-up for stocks so far this month. The financial sector was a bright spot with regional banks leading the pack on renewed M&A activity.


Dow Jones Industrial Average

gained 26 points, or 0.2%, to close at 11,559. The blue-chip index traded in a narrow range of less than 40 points for the session. The

S&P 500

closed up 4 points, or 0.3%, at 1,259, while the

Nasdaq Composite

added 4 points to finish the day at 2,671.

Breadth within the Dow was positive with 22 of the index's 30 components moving higher. Shares of

JPMorgan Chase

(JPM) - Get Report


Bank of America

(BAC) - Get Report


General Electric

(GE) - Get Report

were the best performers among the blue chips, while

Hewlett Packard

(HPQ) - Get Report



(INTC) - Get Report


American Express

(AXP) - Get Report

weighed the index down.

Volume on the New York Stock Exchange was above 783 million while the Nasdaq exchange saw 1.63 billion shares change hands. Breadth was positive with advancers far outpacing decliners 1,838 to 1,163 on the Big Board, although it was a tighter split on the Nasdaq with 1,391 gainers vs. 1,254 losers.

December has been an exceptionally strong month for equities -- the Dow is up 5% month-to-date -- with buying fueled by expectations that the recovery in the U.S. economy is gaining traction. Much of the most recent economic data has been better than expected and the extension of Bush-era tax cuts for another two years has also buoyed sentiment.

Wednesday's economic reports weren't quite compelling enough to spark a full-fledged rally but they were enough to keep profit-takers at bay. The Commerce Department's Bureau of Economic Analysis said in its final estimate that

the U.S. economy grew 2.6% during the third quarter, slightly higher than the previous estimate of 2.5%. Economists were expecting third quarter GDP to be revised to 2.7%, according to consensus estimates from


Also, the National Association of Retailers said

existing home sales rose 5.6% in November to 4.68 million units, higher than the 4.65 million analysts were expecting.

Homebuilder stocks including


(LEN) - Get Report


D.R Horton

(DHI) - Get Report

climbed 2.4% and 3%, respectively.

Early Wednesday, the Mortgage Bankers Association said

mortgage applications fell 18.6% last week on a seasonally adjusted basis as

mortgage rates pushed higher for the sixth straight week .

The latest economic reports might dampen some investor optimism, according to Jim Paulsen of Wells Capital Management. "The drop in mortgage applications for refinancing was probably more significant than anything else we saw today. It served as a reminder that there are some forces that are beginning to bear on consumers again, one of them being

higher mortgage rates," said Paulsen.

Paulsen added that higher energy costs might also be another issue for consumers. "The last time oil was at $90 a barrel was in April and that was one of the many reasons we had a summer soft patch. We have got that up again and that too at a heavy travel period when people are more likely to notice the prices at the pump."

Crude oil prices hit a two-year high above $90 Wednesday, with cold weather driving demand for heating and inventories tightening. The Energy Information Administration said crude oil inventories fell by 5.3 million barrels last week.

That was higher than the 2.4 million drawdown that analysts were expecting, according to a Platts Survey. The American Petroleum Institute said Tuesday that crude oil inventories fell by 5.8 million barrels last week.

Crude oil futures for February delivery rose 83 cents to $90.65.

Asian markets finished on a mixed note on Wednesday. Hong Kong's Hang Seng rose 0.2%, while Japan's Nikkei closed lower by 0.2%.

Trading was mixed in Europe as well following a report that the UK economy grew slower than expected in the third quarter. The FTSE in the UK closed higher by 0.5%, while the DAX in Frankfurt was down 0.1%.

The euro was trading slightly lower against the dollar at $1.3096. The dollar was trading lower against basket of currencies, with the dollar index down less than 0.1%.

In corporate news,

Hancock Holding


agreed to acquire

Whitney Holding


in a stock-for-stock transaction valued at $1.49 billion. Shares of Hancock closed down 6.6% at $34.58 while shares of Whitney jumped 28.8% to $14. In the other bank deal of the day,

Berkshire Hills Bancorp

(BHLB) - Get Report

snapped up

Legacy Bancorp


for around $110 million in cash and stock.

The deals inspired buying across the financial sector, sending the KBW Bank index up almost 2%. The regional names, including


(STI) - Get Report


First Horizon

(FHN) - Get Report


Regions Financial

(RF) - Get Report

, surged on the M&A buzz with each stock gaining at least 3% on volumes running beyond their typical daily averages.

Bed, Bath & Beyond

(BBBY) - Get Report

surged 6.2% in afterhours trading after posting better-than-expected third-quarter earnings of 74 cents per share.

Playboy Enterprises


shares spiked after Caris analyst David Miller upgraded the media company to above average from average, and raised his price target to $6.50 from $5. Playboy shares added 1.6% to close at $5.17.

Arena Pharmaceuticals

(ARNA) - Get Report

shares plunged 11.8% to close at $1.80. Arena insisted it is on a "path forward" towards convincing U.S. regulators to approve its weight-loss drug lorcaserin, but that path is long and may end with the drug being rejected again.


(NAV) - Get Report

said Wednesday that fourth-quarter earnings declined 55% as the North American truck market remained depressed. The stock lost 3.4% to $57.17.

Shares of



jumped 5.5% to $38.85 after saying first-quarter 2011 profits grew 26.5% to 62 cents per share from 49 cents a year ago. Analysts were expecting 54 cents per share.


(NKE) - Get Report

stock was under pressure, however, shedding 5.8% to $86.95. The company released better-than-expected earnings lateTuesday, but future orders rose less than expected. The company reported that futures orders, which refer to Nike merchandise to be delivered between December 2010 and April 2011, were up 11% to $7.7 billion.

Jacob's Engineering

(JEC) - Get Report

rose 4.9% to close at $46.32 after it agreed to buy the process and construction units of

Aker Solutions ASA

for $675 million in cash.

Shares of

Red Hat

(RHT) - Get Report

shed 2.5% to finish at $46.70 after the Linux distributor delivered results in-line with expectations.

The stock of



fell 2.8% to $61.44 after it rejected the latest $70 per share offer from

Air Products

(APD) - Get Report

, calling it inadequate.

Shares of

Office Depot

(ODP) - Get Report

surged 9.1% to $5.28 after it reported a new Change in Control Agreement with key executives to "diminish the potential distraction due to personal uncertainties and risks that inevitably arise when a change of control is threatened or pending." The filing prompted speculation that the stock could become the next takeover target in the retail sector.


February gold contract was off by $1.40 to $1,385.30 an ounce.

The benchmark 10-year Treasury note was down 12/32, raising the yield to 3.348%.

-- Written by Shanthi Bharatwaj and Miriam Marcus Reimer in New York


Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.