Stocks rose on Wednesday after stronger-than-expected Dell earnings and a flurry of deal news, but concern about tensions between Israel and Iran gave investors reason to pause.
Israel's foreign minister said two Iranian warships planned to sail through the Suez canal en route to Syria and hinted at an Israeli response, pushing oil prices back up to $85 a barrel.
Stocks at first showed little reaction to the statement, but slowly began to fall toward sessions lows.
The benchmark S&P 500 earlier broke above 1,333.58, double the intraday low hit in early March 2009, and was trading just below that level after midday.
With a market that has run as far and fast as this one has, clearly negative headlines, like the ones about Israel and Iran, can have a negative impact, said Gary Flam, portfolio manager at Bel Air Investment Advisors in Los Angeles.
Stocks have been rallying since early September, with the S&P 500 up more than 25 percent in that time.
Underscoring views that technology will continue to be among sectors leading the earnings recovery, Dell Inc , the world's No. 2 personal computer maker, flew past profit and margins estimates. Dell shares jumped 11 percent to $15.45.
French drugmaker Sanofi-Aventis SA agreed to buy Genzyme Corp for $20.1 billion in cash, boosting Genzyme shares 1.5 percent to $75.38.
The Dow Jones industrial average <.DJI> gained 36.14 points, or 0.30 percent, to 12,262.78. The Standard & Poor's 500 Index <.SPX> was up 4.73 points, or 0.36 percent, at 1,332.74. The Nasdaq Composite Index <.IXIC> rose 12.82 points, or 0.46 percent, to 2,817.17.
The Dow Jones industrial average <.DJI> was up 35.27 points, or 0.29 percent, at 12,261.91. The Standard & Poor's 500 Index <.SPX> was up 4.50 points, or 0.34 percent, at 1,332.51. The Nasdaq Composite Index <.IXIC> was up 12.08 points, or 0.43 percent, at 2,816.43.
In another proposed deal, activist investor Nelson Peltz's Trian Group offered to acquire Family Dollar Stores Inc for $55 to $60 per share in cash, giving the company an implied value of $7.6 billion. Family Dollar soared 21.75 percent to $53.50.
Merger and acquisition activity has picked up, raising investor hopes it will bring more fresh cash into the market.
It seems as if the market has a very strong bid underneath stock prices. There seems to be a desire to get invested. So any time there's a pullback, if the next day there's a hint of good news, the market bounces back, said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago.
Trian's bid for Family Dollar helped shares of other discount retailers. Dollar Tree Inc was up 3.18 percent to $52.56 while Dollar General Corp rose 11 percent to $30.01.
(Additional reporting by Ryan Vlastelica; Editing by Dan Grebler)