(Updates with additional company information beginning in the 8th paragraph.)

   By Geoffrey Rogow Of DOW JONES NEWSWIRES 
 

NEW YORK (Dow Jones)--Investors braced for the start of earnings season by pulling out of AT&T, Verizon and other telecommunications companies, but buying banks such as Bank of America in a light-volume session Wednesday.

Overall, the Dow Jones Industrial Average closed down 5.67 points, or 0.06%, to 9725.58, marking its first decline in three days. Telecom giants AT&T and Verizon Communications paced the index lower as the Federal Communications Commission chairman said he intends to proceed with Internet openness rules for cellular carriers. AT&T closed down 56 cents, or 2.1%, to 26.18, while Verizon fell 31 cents, or 1%, to 29.38.

Other indexes fared much better, with the Standard & Poor's 500 tacking on 2.85, or 0.27%, to 1057.57. The Nasdaq Composite closed up 6.76, or 0.32%, to 2110.33.

After two sessions of steady buying, with the Dow coming into Wednesday's session up 244 points on the week, traders had come into the session with a little more caution. Notably, volume was particularly light as NYSE Composite volume totaled about 4.35 billion shares, compared with a 2009 average of nearly 6 billion.

"A lot of people are looking for every reason to not believe this rally," said Frank Ingarra Jr., co-portfolio manager of Hennessy Funds. "And while I think it's for real, there is real risk in the short term as this earnings season will have a big impact on what we do this winter."

Surprising, given the collapse in banking stocks last year, financials appear to be the one area market veterans have the most confidence going into earnings season. The banking sector has been at the forefront of the market's gains this week, and Wednesday was no exception. Among the leading financials, Bank of America climbed 35 cents, or 2.1%, to 17.35, and Fifth Third gained 28 cents, or 2.8%, to 10.15.

Commodities companies were also strong again, aided by more gains for metals prices and continued weakness for the dollar. Mining giant Freeport-McMoRan was particularly strong, up 3.17, or 4.6%, to 72.78.

Oil and gas giant ConocoPhillips rose 1.29, or 2.7%, to 49.70, after saying it would trim $10 billion in assets over the next two years, cut expenditures and raise dividends in a bid to shore up its finances and restore confidence among investors.

Sunoco became the first major oil refiner to announce the shutdown of a big U.S. refinery during the sector's most recent downturn, though shares closed up 60 cents, or 2.2%, at 28.49. Sunoco, the second-largest U.S. independent oil refiner by volume, also cut its dividend in half.

On the other hand for energy companies, independent natural-gas explorer Linn Energy (Nasdaq) declined 39 cents, or 1.7%, to 22.75, as it disclosed plans to sell six million units to raise funds to help pay down debt.

Costco Wholesale (Nasdaq) increased 1.07, or 1.9%, to 59. The warehouse retailer's fiscal fourth-quarter earnings fell 6%, though the earnings topped Wall Street estimates.

Videogame maker Electronic Arts (Nasdaq) gained 78 cents, or 4.1%, to 20, after the company reported record sales from the launch of soccer game FIFA 10 in Europe. The game launches in North America on Oct. 20.

Abercrombie & Fitch tacked on 1.10, or 3.5%, to 32.66. Morgan Stanley boosted its rating on the company to equal-weight from underweight, saying the retailer's risk/reward profile has grown more balanced.

Estee Lauder was upgraded to overweight by Piper Jaffray, saying it has been "warming" up to the maker and seller of skin care and makeup products. Estee Lauder closed up 1.64, or 4.4%, at 38.56.

Wyndham Worldwide climbed 1.21, or 7.4%, to 17.47, after Goldman Sachs raised its rating on the hotelier to buy, saying the company seems to be focusing on shifting to a recurring and high-margin business model, selling off existing timeshare inventory and managing selling process for distressed timeshare, condos and apartments.