The Dow posted modest gains on Wednesday as crude oil prices dove by another $4, tumbling below $125 a barrel for the first time since early June. 

Today's Market

The Dow Jones Industrial Average rose 29.88 points, or 0.26% to 11632.38, the Standard & Poor’s 500 index gained 5.19 points, or 0.41%, to 1282.19 and the Nasdaq Composite Index picked up 21.92 points, or 0.95%, to 2325.88. The consumer-friendly FOX 50 added 7.57 points, or 0.84% to 910.15.

Wall Street closed well off the highest levels of the day, as the blue chips had been almost 100 points higher during the morning. Still, the stock market has improved significantly over the past weeks, including positive closes on the Dow in five out of the past six sessions. 

Despite an avalanche of mixed earnings reports on Wednesday, including four from blue-chip companies, the talk on Wall Street was all about the diving price of oil. 

“For oil to be the key driver means the earnings, for the most part, are more good news than bad news. I think we’ve set the bar so low for expectations for the second quarter that it hasn’t been hard to come in high,” said Art Hogan, chief market strategist at Jeffries & Co. “It’s hard to say if this is just a dead cat bounce or this is the end of the worst part.”

Insurer AIG (AIG) led the blue chips on Wednesday, jumping 7%. Also, AT&T (T) rose sharply on its earnings report. On the downside, Boeing (BA) slid on its quarterly results and Wal-Mart (WMT) fell on a profit warning from rival Costco (COST). 

The Nasdaq Composite advanced further than the broader market, gaining 1%. Intuitive Surgical (ISRG) led the way up on the Nasdaq 100 on its 66% surge in second-quarter profit. United Airlines (UAUA) built on its massive 65% gains from a day ago, rising an additional 12%. 

Wall Street continues to closely track the price of crude oil, which has pulled back significantly since hitting records of more than $140 a barrel. Crude prices fluctuated greatly during Wednesday's trading, bringing the stock market along for the ride.

Oil slid $3.98 on the day, closing at $124.44 a barrel -- the first sub-$125 close in six weeks. There were several bearish factors impacting oil on Wednesday, including less worries that Hurricane Dolly will cause production problems, the stronger U.S. dollar and a larger-than-expected increase in gasoline stockpiles. 

At the same time, oil prices were bid up earlier when Hurricane Dolly was briefly upgraded to a Category 2 storm and as the government said crude oil stock piles declined last week. Still, crude closed in the red for the sixth day out of the past seven, plunging more than $20 since all-time records were set on July 3. 

Even with the pullback in oil prices the broader stock market failed to post a larger rally.

"I think it’s great that oil came down but [the market is] taking into account that we are kind of in a morass economically," said Stephen Carl, head trader at Williams Capital. “I think it’s a positive and a step in the right direction...but it could be back up tomorrow. It's just so unpredictable." 

The steep decline in crude oil sent energy stock plunging, closing almost 4% in the red as a group. Names like Chevron (CVX) and Hess (HES) posted significant declines. It also helped boost consumer discretionary stocks like JC Penney (JCP) and Radioshack (RSH). 

The market was hit with another deluge of earnings on Wednesday, including reports from four Dow members. Fast food giant McDonald's (MCD) and drug maker Pfizer (PFE) beat the Street with their quarterly results while Boeing (BA) missed estimates and telecom AT&T (T) reported mixed results. 

Much of the focus on the earnings front remains on the financial sector, which has reported some dismal results this week but seen its shares surge anyway. Even after Washington Mutual (WM), the nation's largest savings and loan, posted ugly results a day ago, financial stocks closed flat on Wednesday. Shares of WaMu fell sharply on the company's third-straight quarterly loss, which widely missed estimates. 

Meanwhile, Wall Street mostly shrugged off another downbeat economic assessment from the Beige Book, which is a snapshot of economic conditions that is released eight times a year. The latest Beige Book detailed a gloomy combination of slower growth with rising food and energy prices. "The pace of economic activity slowed somewhat since the last report," the Beige Book read, referring to the June report. 

The Beige Book also reported that consumer spending was "sluggish or slowing" in just about all of the 12 Fed regions. Consumer spending accounts for more than two-thirds of the nation's economy. 

Corporate Movers

XM Satellite Radio (XMSR) and Sirius (SIRI) saw their stock prices jump after The Wall Street Journal reported a tentative deal at the FCC has been reached on the proposed merger, potentially bringing a 13-month review to a close. The breakthrough came as Republican commissioner Deborah Taylor Tate is expected to give the deal a green light in exchange for a consent decree on enforcement issues and a combined fine of $20 million, the newspaper reported. The deal had been held up with a 2-2 vote after a Democratic commissioner voted the deal down earlier in the day. 

Fannie Mae (FNM) and Freddie Mac (FRE) soared on the expectation that Congress will pass legislation that would provide a backstop for the mortgage giants as early as this week. President Bush also said he would sign the housing bill into law. The plan, which was introduced by Treasury Secretary Henry Paulson, would give Fannie and Freddie an unlimited credit line and allow the government to buy stock in the companies. The mortgage giants own or back more than $5 trillion of U.S. mortgages. 

Costco (COST) warned its fourth-quarter results will likely disappoint Wall Street due to the economy, energy costs and lower margins. Shares of Costco fell sharply as the company expects its earnings to fall "well below" the $1.00 per share mean estimates by analysts. 

Boeing's (BA) second-quarter earnings slumped 19% as it missed estimates. The company, which is a member of the Dow, said it earned $1.16 a share, compared to average estimates of $1.23. The company did reaffirm its full-year guidance and said its aircraft order backlog currently stands at $346 billion. 

AT&T (T) posted an adjusted-profit of 76 cents a share, in line with what analysts were looking for from the telecom. The company's revenue rose by 4.7% to $30.9 billion. AT&T said its wireless subscriber pool rose by 1.3 million, topping average estimates of 1.25 million. AT&T has benefited from being the only carrier of Apple's (AAPL) iPhone.

McDonald's (MCD) easily beat the Street with adjusted-earnings of 94 cents per share, compared to average estimates of 86 cents. The food chain's revenue increased by 4% to $6.07 billion, also topping estimates. U.S. same-store sales rose by 3.4% during the period while they increased by 7.4% in Europe. 

Pfizer (PFE) traded higher after the drug giant reported its second-quarter profit doubled despite slumping Chantix sales. Excluding one-time items, Pfizer earned 55 cents per share, topping estimates by a penny. Pfizer's revenue jumped 9% to $12.13 billion, compared to average estimates of $11.47 billion. 

Apple (AAPL) rose 2% after The New York Times reported CEO Steve Jobs has been telling associates that rumors of health problems have been greatly exaggerated. The tech heavyweight has resisted characterizing Jobs' health, calling it a "private matter." Jobs was successfully treated for pancreatic cancer four years ago. The newspaper reported that Jobs told friends his recent loss of weight is related to nutritional problems in the wake of that cancer surgery. 

Yahoo! (YHOO) closed sharply lower a day after saying its second-quarter earnings slid 18%. The Internet company posted adjusted-earnings of 10 cents per share on adjusted-revenue of $1.35 billion. The average estimates from analysts polled by Thomson Reuters was for 11 cents on $1.37 billion in sales. 

The New York Times Co. (NYT), owner of the iconic national newspaper and the Boston Globe, reported an 82% plunge in second-quarter profit, falling shy of average estimates. The company earned 15 cents a share on a 6% decline in revenue to $741.9 million. Analysts polled by Thomson Reuters had been looking for 22 cents per share on $754 million in revenue.

World Markets

The Dow Jones Euro Stoxx 50 Index, a gauge of the 50 biggest companies in Europe, rose 61.26 points, or 1.84%, to 3387.50. The FTSE 100, London's benchmark index, gained 85.80 points, or 1.60%, to 5449.90.

On the continent, Paris' CAC 40 picked up 81.48 points, or 1.88%, to 4408.74, while Germany's DAX added 93.30 points, or 1.45%, to 6536.09.

In Asia, Hong Kong's Hang Seng fell 5.42 points, or 0.02%, to 22537.48. The Nikkei 225 gained 381.26 points to 13184.96.