NEW YORK — U.S. stocks rallied Friday but still fell on the week, with sentiment boosted by falling oil prices and talk that Lehman Brothers may be acquired, while a speech by Federal Reserve Chairman Ben Bernanke confirmed that the Fed sees inflation moderating this year.
The Dow Jones industrial average jumped 197.85 points, or 1.7 percent, to end at 11,628.06, with 28 of its 30 components gaining ground, led by financial stocks JPMorgan Chase, American Express, Citigroup and Bank of America.
The Dow posted a 0.3 percent weekly drop after being battered earlier in the week on concerns about the fate of mortgage giants Fannie Mae and Freddie Mac, and about distress at investment firm Lehman Brothers.
But Friday, shares of Lehman leapt 5 percent after a Korean bank in talks with the troubled Wall Street firm was quoted as saying that one of the options on the table was an outright acquisition.
"The market is rising not so much on Mr. Bernanke's speech but renewed hope that Lehman Brothers may have a buyer," said Peter Cardillo, chief market economist at Avalon Partners.
Adding to the upbeat market sentiment, investment guru Warren Buffett told CNBC he thinks stocks are more attractive than they were a year ago and that he wouldn't bet against the dollar.
Among Dow components in the spotlight, Boeing shares rose 3 percent after The Wall Street Journal reported that the company may withdraw its bid for a tanker contract if it's not given more time by the Pentagon to prepare. A venture between Northrop Grumman and EADS is the rival for that contract.
The Journal also reported that Verizon is close to choosing Google as its search provider on mobile phones. Shares of Verizon rose 2 percent, while those of Google rose nearly 1 percent.
The S&P 500 index gained 14.48 points, or 1.1 percent, to 1,292.20, while the Nasdaq Composite rose 34.33 points to end at 2,414.71.
By sector, financials led the gains on the S&P, rising 2.9 percent, followed by consumer discretionary, up 2.4 percent, and industrials, up 1.5 percent. Energy was the only sector ending in the red, off 2.4 percent, as crude-oil futures fell back sharply after a surge in the previous session.
Trading volumes remained light, with 888 million shares exchanging hands on the New York Stock Exchange and 550 million shares trading on the Nasdaq stock market. Advancing issues topped decliners by nearly 3 to 1 on both the NYSE and the Nasdaq.
Concerns about the fate of mortgage giants Fannie Mae and Freddie Mac were cast aside for the moment by the broad market, even as shares of Freddie Mac slumped another 11 percent.
Stocks had ended Thursday with a mixed performance, as a nearly 5 percent rise in crude-oil futures helped energy-exploration firms advance.
But crude-oil futures fell back sharply Friday, with a stronger U.S. dollar weighing on dollar-denominated commodities prices. Crude for October delivery lost 5.4 percent to end at $114.59 a barrel on the New York Mercantile Exchange.Takeover talk, oil-price drop spur rebounding stocks
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