updated 9/28/2006 7:15:35 AM ET 2006-09-28T11:15:35

Wall Street advanced for the third straight session Wednesday, although the Dow Jones industrial average fell just short of touching its record high close after a jump in oil prices stifled investors’ enthusiasm.

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Falling crude oil prices and an increase in new home sales had helped investors shrug off a weak durable goods report earlier in the session.

“I think most of the activity is this push to make a close at all-time highs,” Ryan Larson, senior equity trader at Voyageur Asset Management, said of much of Wednesday’s early movement. He contends that the early expectation of surpassing the record drove stocks and that later investors were unsettled in part by the rise in oil prices.

“I think it was a little bit exhausted,” he said of the idea of a record-breaking day. He said, however, that the market’s gains shouldn’t be ignored and that optimism remains.

In economic news, the Commerce Department said Wednesday orders to U.S. factories for large manufactured goods fell for a second straight month in August , the first time in more than two years there have been consecutive declines. Demand for durable goods dropped 0.5 percent last month to $209.7 billion.

Some good news came from a report that new home sales rose 4.1 percent in August , their biggest increase in five months. The Commerce Department report raised hopes that a sharp decline in the housing industry could be easing.

The Dow Jones industrial average closed the day up 19.85 points, or 0.17 percent, after coming just 2.21 points away from its best-ever close of 11,722.98, set in January 2000. The broader Standard & Poor’s 500-stock index rose 0.25 point, or 0.02 percent, while the Nasdaq composite index advanced 2.05 points, or 0.09 percent.

Good news for several Dow components could help the Dow industrial average, which has flirted with its Jan. 14, 2000 closing high in recent days, as investors have grown more confident in the strength of the economy.

The enthusiasm grew after the Federal Reserve has signaled interest rates are in check for now and as oil prices have receded from highs seen in recent months.

McDonald’s Corp. rose 76 cents to 39.82 after saying it would boost its dividend 49 percent to $1 from 67 cents.

Another Dow component, Merck & Co., had another legal victory Tuesday in its legal battle over the painkiller Vioxx. A federal jury determined after a two-week trial that there wasn’t sufficient evidence to link Vioxx to a Kentucky man’s heart attack in 2003. Though it was a win for Merck, thousands of cases are still pending over the drug. Merck rose 64 cents at $42.40.

Overseas, Japan’s Nikkei stock average closed up 2.51 percent. In Europe, Britain’s FTSE 100 rose 0.96 percent, Germany’s DAX index was up 0.49 percent and France’s CAC-40 added 0.45 percent.

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