A late rally in the bond market carried over to Wall Street, lifting financial stocks and pulling the Dow industrials out of the narrow range in which they had traded for most of the session.
The Dow Jones industrial average rose 92.76 to close at 10,394.89. Much of the Dow's gains came in the final hour of trading.
Broader indicators were mixed. The Standard & Poor's 500-stock index rose 14.80, to 1296.71, but the Nasdaq composite index fell 8.95, to 2802.52.
Bond prices rose for the first time in a week after a report in Europe suggested the European Central Bank may raise interest rates on Nov. 4, making its own effort to head off inflation before it endangers economic growth.
"There are signs that the falling inflation rate has begun to turn higher in some countries," said Thomas M. McManus, equity portfolio strategist at NationsBanc Montgomery Securities. "Clearly it's happening in the United States."
But while fears of inflation have pounded bond and stock prices in recent months, analysts said bonds benefited from the sense that central bankers around the world are working to hold off inflation.
The yield on the 30-year Treasury bond fell to 6.33 percent, from 6.37 percent late Tuesday, as the price rose $6.25 per $1,000 in face value. Rising yields can make bonds more attractive than stocks, so today's drop heartened Wall Street.
Many economists expect the Federal Reserve to raise interest rates for the third time this year when its Open Market Committee meets Nov. 16. Speculation that Europe will move first on interest rates fostered hopes that resolution of the inflation problem is drawing near, analysts said.
Bank stocks rose solidly. J.P. Morgan soared 7 1/8, to 128 1/2; Citigroup gained 2-13/16, to 51-5/16; and Chase Manhattan rose 4-15/16, to 82 3/4.
"Those stocks have really been laggards" amid fears of rising rates, McManus said. "It finally appears that it's time for them to come back," he said.
Stocks got a modest lift from a Commerce Department report that showed orders to U.S. factories for big-ticket manufactured goods fell 1.3 percent in September, the first decline in five months.
Technology stocks were mostly lower. Hewlett-Packard, a Dow component, fell 6 1/4, to 70 3/8, after a Merrill Lynch analyst raised concerns about sales and earnings in the company's fourth quarter.
Intel fell 2, to 69-7/16, after Salomon Smith Barney cut its earnings estimates for the fourth quarter and for 2000.
In the past two weeks, corporate earnings reports have given the market some sporadic relief from the lingering worries about inflation. But as the profit reports end and are no longer a distraction, the market may remain in a relatively narrow range, said Brian G. Belski, chief investment strategist at George K. Baum & Co. in Kansas City, Mo.
"With most of the third-quarter earnings news out, stocks will likely return to an interest rate and Fed-watch stance over the next several days," he said.