Updated from 2:41 p.m. EDT

Financial stocks were red-hot Friday, propelled by the soaring broad market and sector-specific good news.

Nymex

( NMX) was one of the biggest winners, jumping 8% earlier in the day after

Bloomberg

reported that it's

exploring a possible sale

to another exchange that could fetch $155 a share, or $14.3 billion. The commodities exchange is in talks with

NYSE Euronext

(NYX)

,

Chicago Mercantile Exchange

(CME) - Get Report

and Deutsche Boerse, according to two people involved.

But the stock's gain was tempered after a former Nymex board member said he was

unaware of any merger discussions

. Nymex closed up 1.7% at $142.12. NYSE closed down 1% while CME gained that same amount.

Also climbing on M&A news were the

Bank of New York

(BK) - Get Report

and

Mellon Financial

( MEL), whose December

stock-swap merger proposal

was cleared by both the

Federal Reserve

and the Justice Department. The banks said they expect to close the deal on or about July 1. Shares of the banks closed up 1.2% and 1.3%, respectively.

Mortgage lender

Freddie Mac

( FRE) was upgraded to outperform at Friedman Billings, pushing shares slightly up earlier in the day; they closed down 24 cents at $65. Wachovia raised

Bear Stearns'

( BSC) 2007 earnings estimate by a dime to $14.01, citing a record backlog and favorable broad-market trends. Shares traded actively and closed up 49 cents to $150.09 following somewhat wobbly trading.

Credit-card company

MasterCard

(MA) - Get Report

gained 4.9% to $157.65 after

detailing

a previously announced plan for converting Class B shares into Class A shares on an accelerated basis. And

Ladenburg Thalmann Financial Services

(LTS) - Get Report

was one of the sector's biggest percentage gainers Friday, surging 13.9% to $2.71 after announcing it has been preliminarily added to the Russell 3000 Index.

Among very few financial losers Friday was asset manager

Fortress Investment Group

(FIG)

, which slid 6.5% after

agreeing to take out

casino operator

Penn National Gaming

(PENN) - Get Report

for $8.9 billion. Fortress shares lost $1.64 to $23.47 as Penn surged 21.5% to $62.12.

Elsewhere,

Doral Financial

(DRL)

tumbled 11.1% to $1.60 after the Puerto Rico lender swung to a first-quarter loss of $37.3 million, or 42 cents a share. Stifel Nicolaus slapped a sell rating on

Progressive

(PGR) - Get Report

. Shares of the insurer were off 3.6% to $23.80.

More broadly, however, both the

NYSE

Financial Sector Index and the KBW Bank Index climbed 0.7% and 0.5%, respectively.