"The fewer of those types of things people have to worry about, the more people can focus on the fact that the economic news is not all that bad and the prospects for the stock market in 2003 are pretty good," said Scott Wren, equity strategist for A.G. Edwards & Sons.

The Dow Jones industrial average climbed 147.21, or 1.8 percent, to close at 8,512.01, according to preliminary calculations. In the previous three sessions, blue chips fell 262 points to their lowest level in nearly six weeks.

The broader market also finished higher. The Nasdaq composite index rose 9.62, or 0.7 percent, to 1,363.72. The Standard & Poor's 500 index gained 11.60, or 1.3 percent, to 895.85.

For the week, the Dow rose 0.9 percent, while the Nasdaq edged up 0.1 percent and the S&P 500 gained 0.7 percent.

Greenspan told the Economic Club of New York late yesterday that since the Fed's last rate cut on Nov. 6, there is some evidence that the "U.S. economy has been working its way through a soft patch." He added that the United States faces no immediate threat of deflation.

Meanwhile, the Commerce Department reported today that the U.S. economy posted a solid growth rate of 4 percent in the third quarter, unchanged from the estimate made a month ago, even as worries persist about just how much the economy is weakening.

And 10 of the nation's largest brokerages, including Citigroup and Goldman Sachs, agreed to pay about $1.5 billion to resolve conflict-of-interest allegations in one of the largest settlements ever with securities regulators.

That helped lift financial sector stocks, with Citigroup rising $1.14 to $38.14 and Morgan Stanley jumping $1.74 to $42.04.

Analysts say investors have been hesitant to commit to stocks in recent weeks, particularly amid escalating rhetoric about a possible war with Iraq.

In addition, some investors are still looking to cash in some gains from the blue chips' eight-week surge in the autumn, and are uncertain whether Wall Street can stage its traditional holiday rally in the last two weeks of December.

News of Lott's resignation helped boost stocks today.

Analysts said investors believed the departure of Lott, who has been criticized for racially insensitive comments, will allow the Republican-controlled Congress to move forward on business-friendly initiatives such as tax cuts.

Nike climbed $3.57 to $45.10 after the sneaker giant said net profit grew 18 percent in the second quarter on strong international sales.

But Halliburton fell 42 cents to $19.08 after it said the Securities and Exchange Commission had formalized its investigation of the company's accounting practices.

Trading was brisk as Wall Street worked through its first quadruple-witching session, the quarterly expiration of index futures and options as well as individual stock futures and options.

Advancing issues outnumbered decliners 2 to 1 on the New York Stock Exchange. The Russell 2000 index rose 3.46, or 0.9 percent, to 386.87.

In Europe, France's CAC-40 climbed 0.9 percent, Britain's FTSE 100 rose 1.3 percent and Germany's DAX index gained 2.1 percent.