A flurry of merger activity — a buyout of video rental chain Hollywood Entertainment Corp., reported merger talks between Wells Fargo & Co. and British financial giant Barclays PLC and a deal in the wireless telephone sector — was seen as a sign that the economy would remain strong enough to support such deals.

That helped take the edge off of oil prices, which topped $47 per barrel for the first time since Dec. 1 before falling substantially in late trading. A barrel of light crude settled at $45.33, down 10 cents, on the New York Mercantile Exchange.

But while the markets rose in somewhat uncertain trading, analysts said earnings reports were foremost on investors' minds — especially corporate profit outlooks for 2005, which could include how companies feel about the prospects for inflation.

"We're doing all right for now, but earnings will really determine where we're going to go," said Peter Cardillo, chief strategist and senior vice president at S.W. Bach & Co. "And the key with earnings will be guidance for 2005. How concerned is corporate America about inflation? That's the big question."

According to preliminary calculations, the Dow Jones industrial average rose 17.07, or 0.16 percent, to 10,621.03.

Broader stock indicators were moderately higher. The Standard & Poor's 500 index was up 4.05, or 0.34 percent, at 1,190.24, and the Nasdaq composite index gained 8.43, or 0.4 percent, to 2,097.04.

A Commerce Department report showed that wholesale inventories rose by 1.1 percent in November. Economists expected inventories to rise just 0.7 percent, slightly less than the 1.1 percent climb in October. But the report didn't affect stock trading; analysts saw the rising inventories as companies hedging against economic uncertainty, particularly rising wholesale prices and possible inflation.

Inflation likely will continue to be a critical concern on Wall Street through earnings season, as companies discuss their forecasts for 2005. If companies are concerned that interest rates will rise quickly in response to a falling dollar and mounting inflationary pressures, then stocks could fall, putting a definitive end to the markets' postelection rally that sagged last week.

"Right now, you're just seeing people get back in because the prices fell so much last week," said Bill Groenveld, head trader for vFinance Investments. "I mean, how low are you going to let prices go before you see a deal and get back in? Now it's a question of whether the economic numbers and the earnings will keep us there."

In corporate news, Hollywood Entertainment agreed to an $850 million buyout by Movie Gallery Inc., whose offer topped that of Blockbuster Inc. by 15 percent.

According to media reports, Wells Fargo & Co. is in talks to acquire Barclays PLC, a deal reportedly worth more than $100 million. Barclays, considered a prime takeover target, climbed 77 cents to $45.42, while Wells Fargo slipped 4 to $62.13.

Shares of Western Wireless Corp. rose 85 cents to $37.37 after it agreed to a $4.4 billion cash-and-stock buyout by Alltel Corp., which would create the fifth-largest cell phone carrier in the United States. Alltel tumbled $1.37 to $54.75.

Nokia Corp. was upgraded to "outperform" from "neutral" by Credit Suisse First Boston, which said the cell phone maker should be able to regain market share this year and next. Nokia was up 24 cents at $15.49.