Stocks rallied on Friday, led by financial issues that rocketed on expectations for a new merger wave in banking, brokerage and insurance.
The broad market also was higher, boosting hopes that Wall Street's latest slump has hit at least a near-term bottom.
The Dow Jones industrial average surged 172.56 points, or 1.7%, to end at 10,470.25, lifting the blue-chip index's gain for the week to 450.54 points, or 4.5%.
Most broader indexes posted smaller gains, but winners still topped losers by nearly 2 to 1 on the New York Stock Exchange and by 22 to 17 on Nasdaq in very heavy trading.
"Last Friday, we ended the week in a state of despair. This Friday, the market is in a state of euphoria," said Scott Bleier, chief investment strategist at Prime Charter Ltd.
Helped in part by some strong corporate earnings reports, demand for stocks revived this week after heavy losses for most of the last eight weeks.
"This market has had two major worries: short-term interest rates and earnings," said Arthur Hogan, market analyst at Jefferies & Co. "This week, we put interest rates behind us a bit so that we could focus on earnings."
But many experts remain doubtful that stocks can mount a sustained rally. Indeed, concerns about interest rates may revive soon, as bond yields continue to climb. The bellwether 30-year Treasury bond yield edged down to 6.34% on Friday, but it still is up from 6.13% on Oct. 1, and near a two-year high.
"It's going to take a real sign the economy has stopped expanding" to turn the bond market around, said Steve Casella, who invests $600 million of debt at Genoa Management Co. in Dallas.
Many bond traders believe the Federal Reserve is highly likely to raise short-term interest rates again when the central bank meets Nov. 16.
On Wall Street, Friday's stock gains were trimmed late in the day by profit-taking--which some analysts said was discouraging.
The Nasdaq composite index added just 0.5% for the day, though it was up 3.1% for the week.
The Dow had been up as much 223 points Friday, but struggled at the 10,500 mark and fell back. If the Dow can't breach that level soon, some analysts say, another sell-off could ensue.
Remaining corporate earnings reports for the third quarter will play a big role in determining investor sentiment. Traders were encouraged this week as IBM's warning of weaker earnings in the near term--because of a sales slowdown tied to the year-2000 computer bug--didn't slam the entire tech-stock sector.
