Shares of A.G. Edwards surged Thursday as merger speculators turned their attention to the St. Louis brokerage.

A.G. Edwards rose $2.125, or 4.34% to $51.0625 on a day when most brokerage stocks languished. Elsewhere in the market, bank stocks rose as concerns about higher interest rates abated. The Labor Department said the employment cost index rose only 1% in the second quarter, indicating that Federal Reserve policymakers are less likely to raise rates at their meeting next month. The American Banker index of 50 largest banks gained 0.43%, and its index of 225 banks fell 0.2%.

In the two weeks since UBS AG said it would buy PaineWebber Group Inc., merger speculation has taken off in the brokerage industry. In the last few days rumors about Bear, Stearns & Co., fueled by an analyst report saying the company was open to a deal, and Advest Group have circulated in trading rooms.

The shares of Lehman Brothers Inc., Morgan Stanley Dean Witter & Co., and Donaldson, Lufkin & Jenrette Inc. also have gotten boosts. A.G. Edwards, however, has gained the most since the UBS announcement.

"We have heard a rumor a day since that announcement," said Scott Edgar, director of research at the Sife Trust Fund of Walnut Creek, Calif. Rumors about A.G. Edwards have been the most persistent, he said.

"These rumors are very plausible," said Adam J. Lewis, senior vice president at Keefe, Bruyette & Woods Inc. of New York. The company's $4 billion market capitalization makes it affordable, he said.

A range of institutions, including foreign investment banks, could be interested in the company, Mr. Lewis said.

Shares of Northern Trust Corp. of Chicago, itself an occasional topic of merger rumors, rose $2.625, or 3.61%, to $75.3125. Analysts tend to view the company favorably, but generally have refrained from recommending aggressive buying of the stock because of its already high price.

"We would like them in the lower $60s," said Diane Yates, an analyst at A.G. Edwards. "We are looking for 'the next Northern Trust.' "

Thomas McCandless, an analyst at CIBC World Markets, said Northern Trust is "outstanding in what they do," but he hesitated to express enthusiasm for the stock, saying he remained comfortable with his "buy" rating, CIBC's second-highest rating behind "strong buy."

Credit card companies, fueled by good earnings reported this week and generally solid lending quality, also gained Thursday. MBNA Corp., one of the biggest credit card issuers, gained $2.3125, or 7.41% to $33.50.

"A lot of growth concerns have been put away," said Tierney E. Reilly, an analyst at Fox-Pitt, Kelton Inc. "Credit card companies had good quarters" and will continue to do well in a comfortable economic environment, he said.

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