Analysts say that strong fundamentals drive stock prices, but these days in the market it just seems to take a few good rumors.

That's what happened last week when scuttlebutt that Chase Manhattan Corp. was in talks with Merrill Lynch & Co. rippled through Wall Street.

How such a rumor could gain altitude immediately after Chase disclosed it would lay off 4,500 people is unknown.

"Chase looks like it has to get its own house in order" before it starts with someone else's, one analyst quipped.

Other market watchers pointed out that in spite of last year's surfeit of bank and brokerage marriages, such unions are still difficult to make work.

"Certainly Chase could buy Merrill - or Donaldson, Lufkin Jenrette or Lehman, for that matter," said analyst James P. Hanbury of Schroder & Co.

"But a large brokerage is difficult to fit inside a bank's section 20 subsidiary. The culture is also very different. Investment banks or brokerage firms usually have a flat organizational structure; the structures of banks are usually large, lumbering, and conservative, which is what they should be because you just can't give credit to anyone."

Nevertheless, investors, many of whom apparently believe that Chase and Merrill would make a good fit, sent shares of Merrill soaring on Wednesday.

"It has been known in the market for quite some time that Chase has been approaching Merrill informally," said one market participant.

The Chase-Merrill rumblings also lifted the shares of other brokerages. The stock prices of Donaldson, Lufkin & Jenrette Inc., Lehman Brothers Inc., PaineWebber Inc., and Hambrecht & Quist Group either reached or neared new 52-week highs.

"It only takes one rumor to get the market going," said brokerage analyst Raphael Soifer of Brown Brothers Harriman. "I don't think brokerage firms look more attractive today than they did before."

But talk persists that it is just a matter of time before some of the largest banks bid for some of the bigger brokerage and investment firms. And in the last week, some brokerage firms-which tend to be among the most volatile stocks-had gains as high as 22.4%.

"Banks are very interested in getting an equity platform for their corporate platform," said Mr. Hanbury. "They either have to buy or build and because it takes forever to build, many are opting to buy."

In the last few months, First Union Corp. quietly picked up private advisory firm Bowles, Hollowell Conner & Co., Charlotte, N.C., while BankAtlantic Bancorp, Fort Lauderdale, Fla., unveiled plans to buy brokerage firm Ryan & Beck & Co., Livingston, N.J.

Two clear trends seem to be pushing banks and brokerage firms toward the altar, said brokerage analyst Sallie L. Krawcheck of Sanford C. Bernstein.

"As financial services globalize and converge, (investment banking) is the business banks need to be in and there are only a few securities firms to buy," said Ms. Krawcheck. Second, "we are at the peak of a bull market and the securities market looks attractive because they have above-normal earnings level."

In the fourth quarter, many brokerage firms exceeded analysts' expectations, while most banks came just in line.

Market experts noted that a number of brokerage stocks, which trade cheaper than banks to the market, still have a considerable upside. The rise in some of the stocks is mostly the result of strong fundamentals and some consolidation speculation, analysts said.

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