Market Closes Up

Stocks rose sharply Friday, led by financial shares that soared on the possibility that legislation will soon allow banks, stock brokerages and insurance companies to combine.

At the close of trading on Wall Street, the Dow Jones industrial average was up 172.56 at 10,470.25, erasing Thursday's 94-point decline. The Dow ended a volatile week with a gain of 450.54.

Broader stock indicators also closed higher. According to preliminary calculations, the Standard & Poor's 500 rose 18.04 to 1,301.65, and the Nasdaq composite index rose 14.88 to 2,816.83.

Advancing issues outnumbered decliners by nearly a 2-to-1 margin on the New York Stock Exchange, with 1,945 up, 1,076 down and 527 unchanged.

NYSE volume totaled 951.92 million shares as of 4 p.m., vs. 984.67 million in the previous session.

The Russell 2000 index of smaller companies rose 4.42 to 418.69.

Financial stocks drove the market higher after Republicans and Democrats settled a dispute on bank lending rules that threatened to derail legislation that would overhaul the financial services laws.

Ultimately, the legislation would dismantle Depression-era laws that restrict banks, brokerage firms and insurance companies from merging. The prospect of new business combinations and a fresh wave of mergers lifted the sector, analysts said.

Among the Dow 30, American Express, J.P. Morgan and Citigroup rose solidly.

But analysts suggested financial-services stocks were also ready for a rebound after being deflated by worries about higher interest rates.

"Many of these stocks had been beaten down and left for dead," said Scott Bleier, chief investment strategist at Prime Charter Ltd. "The market has known about this legislation for a long time, so I don't think it's entirely responsible for the strength of the group."

With no major economic reports to steer the market, investors were able to focus on the continuing flood of company reports on the just-ended third-quarter.

"This market has had two major worries: short-term interest rates and earnings," said Arthur Hogan, chief market analyst at Jefferies & Co. "This week, we put interest rates behind us a bit so that we could focus on earnings."

Shares of Gillette slid following a report late Thursday that met most profit forecasts but warned of weak fourth-quarter sales and earnings due to inventory problems.

On Thursday, the Dow closed with a loss of 94.67 after recovering from a 213-point slide. The broad market also rallied late in the day, with the technology-dominated Nasdaq composite turning higher despite the discouraging news from IBM.

Late Wednesday, IBM warned that customers are postponing purchases of network and database machines, fearful that complex system upgrades will make them more vulnerable to the Year 2000 computer bug. Today, IBM rose.

The stream of corporate earnings reports peaked this week, lading many market watchers to believe investors will once again focus on interest rates next week. Government reports on the gross domestic product and employment costs are expected to provide the latest sense of whether inflation is escalating.

Investors are concerned that the Federal Reserve will raise short-term interest rates at its next meeting Nov. 16.