Mortgage stocks were up again last week as merger talk propelled seveal companies to further gains.

However, fear of inflation and rising rates cooled investors ardor toward the end of the week, cutting the gains for some issues.

Shares of North American Mortgage rose rapidly early last week, after Capstead Mortgage announced that it purchased 5% of the company's stock.

Investors, hoping that this signaled a takeover attempt, bid its shares up $1.625 on Monday, whenit closed at $26. After further gains on Tuesday, North American tailed off at the end of the week, closing unchanged $24.375.

Margaretten was another stock that continued to benefit from takeover speculation. With rumors that a major commercial bank was set to close a deal to buy the lender, its stock rose.

After a rocket-fueled rise the previous week, the New Jersey mortgage bank finished up the week 87.5 cents higher at $24.375.

Countrywide Credit Industries also enjoyed a strong week. The Pasadena mortgage lending giant had a three-for-two stock split on Monday. For the week, shares of Countrywide were up $1.125, to $15.125.

The strong market for mortgage stocks was reflected in the Mortgage Bankers Association of America's stock index, which was up more than 4% for the week, ending at 101.12. This marked the first time in more than a month that the closely watched index has broached the 100 mark.

Note: The MBA has recalculated the index readings beginning 12/31/93 in the chart above. The new numbers take into account the 3-for-2 stock split on the part of Countrywide Credit Industries, a major component of the market-value-weighted index.

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