NEW YORK – Stocks rose Friday as a settlement was reached with Wall Street firms over the long-festering issue of biased stock research and amid comments from Federal Reserve Chairman Alan Greenspan that growth could accelerate next year with little risk of deflation.
The Dow Jones industrial average closed up 147.21 points, or 1.76 percent, at 8,512.01. The broader Standard & Poor's 500 Index rose 11.58 points, or 1.31 percent, at 895.83. According to latest figures, the technology-laced Nasdaq Composite Indexrose 9.53 points, or 0.7 percent, at 1,363.63.
For the week, the Dow rose 0.9 percent, the Nasdaq gained 0.09 percent, and the S&P 500 climbed 0.7 percent.
Investors also took heart from easing worries about Iraq, the price of oil fell and data showed the U.S. economy expanded briskly in the third quarter.
But traders said the rally had more to do with an over-sold market. As of Thursday, the broad-based Standard & Poor's 500 index and the blue-chip Dow Jones industrial average had each come off about 6 percent since peaking in late November.
"We were due for a little rally, coming off the levels we were at," said Jay Finkel, senior equity trader at Lord Abbett.
Trading was heavy, as investors positioned themselves during the expiration of futures and options contracts. This Friday marked quadruple witching -- when stock index futures, stock index options and individual stock futures and options expired simultaneously.
The expiration on the same day of so many contracts can lead to wild gyrations in prices in the underlying stocks, though that was absent on Friday.
"This expiration has been moderate. It has not been big or small. The expiration of individual stock options was quiet," said Jonathan Flatow, stock option index trader at the Chicago Board Options Exchange. "Index options saw a little action, but it was not extreme."
Changes to the Nasdaq 100 and S&P indexes also took effect at the close of trading. The rebalancing can spark market swings, as index managers whose portfolios track the S&P 500 and the Nasdaq 100 must buy and sell shares to adjust for the weight change of each constituent.
Almost 1.78 billion shares changed hands on the Big Board, or about 500 million more than recent sessions, while almost 1.7 billion Nasdaq shares traded.
In a long-awaited settlement of multiple government probes, top brokerages agreed to pay around $1.4 billion and accept new rules of conduct to settle charges they issued biased stock research.
Citigroup Inc. (C), Credit Suisse First Boston and another eight brokerages said they will more clearly separate research analysts from bankers working on underwriting deals, pay $900 million in relief for investors, $450 million to fund independent research and $85 million for investor education.
Among payments agreed to, Salomon Smith Barney parent Citigroup will pay $400 million; Merrill Lynch will pay $100 million in addition to the $100 million it already has agreed to pay; Morgan Stanley will pay $125 million, and Goldman Sachs $110 million.
The payments are a drop in the bucket, however, for most of the companies. Citigroup, for example, averaged about $65 million in profit each business day in the third quarter, meaning one good week would cover its payment.
Bank shares rose as a festering issue on Wall Street comes to a close, said Gary Wedbush, head of trading of regional investment bank Wedbush Morgan.
"That's typical when something is resolved," Wedbush said. "You'd think a $1.4 billion settlement would be negative news, but now you've removed some uncertainty."
Citigroup closed up $1.14 to $38.14, Merrill rose 30 cents to $40.15, Morgan Stanley added $1.74 to $42.04 and Goldman gained $1.56 to $71.86. The S&P diversified financial services index rose 2.53 percent,
Heightened tensions over Iraq eased after U.S. officials said the next milestone would be Jan. 27 when U.N. weapons inspectors are scheduled to make their first substantial assessment to the Security Council. The United States said on Thursday Baghdad was in "material breach" of a United Nations arms resolution, a term that could trigger war.
Nike Inc. (NKE) jumped $3.57, or 8.6 percent, to $44.10 after the world's largest maker of sport shoes said quarterly earnings rose 18 percent. Nike rival Reebok International Ltd. (RBK) rose $1.92, or 7 percent, to $29.50.
Oilfield services company Halliburton Co. (HAL) sagged 42 cents to $19.08 after saying the U.S. Securities and Exchange Commission had launched a formal investigation into its disclosure and accounting practices.
The Russell 2000 index, a barometer of smaller company stocks, rose 1.32, or 0.3 percent, to 384.73.
Overseas, Japan's Nikkei stock average finished 0.2 percent higher Friday. In afternoon trading in Europe, France's CAC-40 climbed 0.6 percent, Britain's FTSE 100 rose 0.3 percent and Germany's DAX index gained 0.5 percent.
Reuters and the Associated Press contributed to this report.