European markets tumbled as British authorities said 24 people were arrested in a widespread plan to destroy numerous international flights, and the United States raised its terror alert to the highest levels ever for air travelers. But while U.S. and international airline stocks fell as a result, strong earnings reports from Dow component American International Group Inc. and others lent support to U.S. markets.

Wall Street also benefited from lower crude prices, which fell on the belief that reduced travel in the coming weeks and months would curtail demand for fuels. A barrel of light crude settled at $74, down $2.35, on the New York Mercantile Exchange.

"With the whole issue of what's happening in London, we could have seen a major sell-off, but we didn't," said Stuart Freeman, chief equity strategist for A.G. Edwards & Sons. "All these things that have happened lately, with inflation and interest rates and oil, you'd think the market would have had a really difficult time with that. But there's some upside here."

The Dow Jones industrial average rose 48.19, or 0.44 percent, to 11,124.37.

Broader stock indicators also rose. The Standard & Poor's 500 index added 5.86, or 0.46 percent, to 1,271.81, and the Nasdaq composite index gained 11.46, or 0.56 percent, to 2,071.74.

In Europe, Britain's FTSE 100 slid 0.63 percent, Germany's DAX index tumbled 1.26 percent, and France's CAC-40 fell 0.97 percent. Japan's Nikkei stock average slipped 0.16 percent in earlier trading.

Bonds edged higher in listless trading, with the yield on the benchmark 10-year Treasury note falling to 4.93 percent from 4.94 percent late yesterday. The dollar was mixed against most major currencies, while gold prices fell.

In economic news, the nation's trade deficit slipped 0.3 percent in June due to strong sales of U.S. products abroad, while first-time jobless claims edged higher last week. The trade data shows economic strength, which could spur inflation and higher interest rates, while the unemployment report shows a slowing economy, which ought to help reduce inflation risk. Such conflicting data has been a hallmark of the economy over the past few months, giving Wall Street little direction.

Among individual stocks, airlines suffered due to flight cancellations and concerns about future terrorist attacks. British Airways PLC dropped $2.85 to $70.48 as it took the brunt of the cancellations out of Europe. Among U.S. airlines, Continental Airlines Inc. fell 35 cents to $23.86 and United Airlines parent UAL Corp. slid 31 cents to $23.52.

Yet most of the terror-related selling was limited to that sector, and even the hardest-hit stocks recouped some of their early-session losses by the close.

"Yes, you're seeing weakness in airline stocks, but ultimately, and I don't mean to sound cold-hearted, these terror arrests are not an important economic or financial event, and I think the market reflects that," said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. "It's a piece of the puzzle, but it's a small piece. Oil prices, earnings, those are much bigger pieces."

Among companies reporting earnings, AIG rose $1.83 to $60.32 after the insurer posted a 29 percent drop in second-quarter profits that nonetheless beat Wall Street forecasts.

Viacom Inc.'s acquisition of the DreamWorks live action film studio helped the media conglomerate post strong results that beat analysts' expectations by 4 cents per share before one-time items. Viacom gained $3.27, or 9.7 percent, to $37.05.

Retailer Target Corp. rose $2.44 to $47.72 on a 13 percent rise in quarterly profits. The company said increasing sales at existing stores and a strong credit card business fed its results.

Advancing issues outnumbered decliners by more than 9 to 7 on the New York Stock Exchange, where preliminary consolidated volume came to 2.44 billion shares, compared with 2.68 billion traded yesterday.

The Russell 2000 index of smaller companies was up 5.22, or 0.77 percent, at 686.27.