NEW YORK (Dow Jones)--U.S. stocks rose Wednesday morning, stoking hopes that investors may yet see a Christmas rally, as the market drew support from a spate of merger deals, including Seagate Technology's $1.9 billion acquisition of its rival Maxtor Corp.

The Dow Jones Industrial Average was up 89 points at 10895.

The S&P 500 rose 8.48 points to 1268.10 and the Nasdaq Composite gained as much as 18.70 points to 2241.12.

There were more than 522 million shares traded on the New York Stock Exchange, where rising shares outnumbered decliners by 22 to 9. More than 591 million stocks traded in the Nasdaq market, with 18 advancing stocks for every 8 trading lower.

On Tuesday stocks gave up morning gains and closed lower as strategists suggested the year-end rally may have peaked.

"Everyone has been lulled into thinking that since we haven't yet had a Christmas rally, there won't be one," said Philip Dow, director of equity strategy at RBC Dain Rauscher. "But there are a few days left this week, and I still think there could be a surprise rally."

Michael Metz, chief investment strategist at Oppenheimer & Co., said, "I think there are some buyers in the wings. There's no real news behind today's gains. People took some money out of the market earlier in the month. Now they are ready to go back in."

The Commerce Department reported that the gross domestic product increased at a 4.1% rate in the third quarter, slightly lower than previous estimates of a 4.3% growth rate. Economists surveyed by Dow Jones had expected growth of 4.3%.

Crude futures fell after news from the Energy Department of a 1.3 million barrels increase in inventories in the latest week. Given cold weather on the East Coast, investors may be paying closer attention to heating oil stocks, which fell 2.8 million barrels in the latest week.

The February crude contract last was off 39 cents at $57.70 a barrel.

Gold futures were under pressure, trading near a one-month low, as the February contract fell $1.30 to $495.70 an ounce.

The Treasury market was under pressure, sending yields higher, despite the weaker GDP revision. The GDP report's core personal consumption deflator, which is carefully monitored by the bond market, was boosted to 1.4% from 1.2% annualized.

The benchmark 10-year Treasury note last was down 6/32 at 100-3/32 with a yield of 4.488%.

The dollar was higher in morning trade, rising 0.3% to 117.39 yen as the euro fell 0.04% to $1.1815.

Allergan agreed to pay more than $3 billion for Inamed, sealing a deal that topped Medicis Pharmaceutical's earlier bid. Inamed stock rose 1% to $86.96.

Seagate Technology will pay $1.9 billion for Maxtor Corp. Both companies make hard disks. Seagate stock dropped as much as 2.2% to $19.16 while Maxtor stock catapulted as much as 45% higher to $6.57.

Palm Inc. shot up as much as 4% to $32.15. Late Tuesday the company reported quarterly earnings that topped expectations and an 18% increase in sales.

International Business Machines, a Dow component, will buy Micromuse for $865 million in cash.

Micromuse stock vaulted as high as 36% to $9.80 as IBM shares rose as much as 1.6% to $83.77.

Elsewhere on the Dow, embattled General Motors extended its recent slide, at one point falling 1.7% to $19.50. Investor Kirk Kerkorian's Tracinda Corp. disclosed in an SEC filing that it reduced its stake in the auto maker to 7.8% from 9.9% by selling 12 million shares over the past few days.

FedEx Corp. rose 4% to $102.60, after the package-delivery company turned in earnings that exceeded analysts' expectations.

(END) Dow Jones Newswires