Markets cheer for RIM, Merrill

Stocks rally on Research In Motion's blowout quarter and a possible cash infusion for Merrill Lynch.

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By David Ellis and Ben Rooney, CNNMoney.com staff writers

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NEW YORK (CNNMoney.com) -- Stocks flirted with session highs in a high volume session Friday afternoon, thanks to strong earnings by Research In Motion and speculation that troubled banking giant Merrill Lynch will receive an infusion of foreign investment capital.

The Dow Jones industrial average (INDU) gained about 1.6 percent with one hour remaining in the session.

The broader S&P 500 index (SPX.X) climbed nearly 1.6 percent, while the tech-fueled Nasdaq (COMPX) rose about 1.7 percent.

Research in Motion (RIMM) said late Thursday that it more than doubled its third-quarter results, helped by robust demand for its BlackBerry smart-phones. Shares gained nearly 11 percent on the Nasdaq.

"I think the market was waiting for something positive like the RIMM report to get going and that carried through tech and rest of the market," said Joseph Saluzzi, co-head of equity trading at Themis Trading.

Also spurring the rise was news that Merrill Lynch (MER, Fortune 500), one of the investment banks hardest hit by the credit crisis, is in talks to nab a $5 billion investment from Singapore's state investment firm, Temasek Holdings, The Wall Street Journal reported. Such a deal would provide encouragement to investors worried about the health of the financial sector.

The news did provide a boost to the broader financial services sector. Shares of Morgan Stanley (MS, Fortune 500) and Goldman Sachs (GS, Fortune 500) gained 3 percent each in afternoon trading.

Wall Street also enjoyed some encouraging news about the health of the U.S. consumer as spending posted its biggest gain in three-and-a-half years during the month of November, the Commerce Department reported.

Personal income also came in higher than expected, according to the government report, but a key reading on inflation provided a mixed picture.

The core PCE reading, which strips out volatile food and energy costs and is favored by the Federal Reserve as a measure of inflation, rose 0.2 percent during the month, as expected. But for the year, core inflation is now running at 2.2 percent, higher than the 2 percent expected.

Treasury prices retreated sending the yield on the benchmark 10-year note to 4.16 percent from 4.03 percent in the previous session.

The Federal Reserve said Friday it was lending another $20 billion to banks at an interest rate of 4.67 percent as part of its continuing effort to fire up the credit markets.

The central bank said it received bids for $57.7 billion worth of loans, illustrating strong demand by banks that need short-term funds. The Fed added that it planned to conduct such biweekly auctions for as long as necessary to help alleviate the credit crunch.

In other corporate news, Philips (PHG) of the Netherlands said it has agreed to acquire Respironics (RESP), which specializes in ways to combat sleep disorders, for $5.1 billion.

Consumer electronics retailer Circuit City (CC, Fortune 500) reported a wider-than-expected third-quarter loss blaming the dismal results on ongoing store reorganization and double-digit sales declines of gadgets like camcorders and DVD players. Shares of the retailer plunged 27 percent in afternoon trading.

And insurance broker Marsh & McLennan (MMC, Fortune 500) said it is looking to replace its chief executive after concerns over the company's recent financial performance.

Volume was heavy due to the expiration of a number of contracts including stock index futures and options as market breadth was positive. Advancers beat decliners by more than 3 to 1 on the New York Stock Exchange on volume of 1.55 billion shares. Winners topped losers on the Nasdaq as 1.89 billion shares traded hands.

Commodity prices were higher Friday as U.S. light crude for February gained $2.34 to $93.40 a barrel on the New York Mercantile Exchange.

COMEX gold for February rose $12.20 to $815.40 an ounce.

The dollar was lower versus the euro but gained against the yen. To top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.