NEW YORK, Nov 30, 2007 (AP) -- Wall Street soared Friday, resuming this week's rally after Federal Reserve Chairman Ben Bernanke gave investors more reason to believe further interest rate cuts are on the way.

The Dow Jones industrial average rose more than 120 points in early trading.

In a speech late Thursday, Bernanke said persistently tight credit conditions, the housing slump and high energy prices will probably create some "headwinds for the consumer in the months ahead."

The central bank will have to be "exceptionally alert and flexible," Bernanke said, echoing comments by Fed Vice Chairman Donald Kohn earlier in the week that helped Wall Street recover some of its recent steep losses. Investors read those words as a sign that the Fed is willing to lower interest rates again, after cutting rates at the past two meetings.

The Fed meets again on Dec. 11, and a rate cut could help reinvigorate the slowing economy. Evidence of a more reticent consumer came Thursday in the Commerce Department's latest report, which showed consumer spending rose a modest 0.2 percent in October, the slowest pace in four months.

In early trading, the Dow advanced 121.85, or 0.92 percent, to 13,433.58.

Broader stock indicators also rose. The Standard & Poor's 500 index rose 14.80, or 1.01 percent, to 1,484.52, and the Nasdaq composite index added 16.83, or 0.63 percent, to 2,684.96.

Government bonds fell as investors pulled their money out of the safe securities and put it back into stocks. The yield on the benchmark 10-year Treasury note, which moves opposite the price, rose to 4.02 percent from 3.94 percent late Thursday.

Crude oil fell $1.41 to $89.60 a barrel on the New York Mercantile Exchange, dipping below $90 for the first time since October.

The Dow is on pace to make its fourth straight gain, having piled on 568 points over the past three sessions on renewed confidence that credit problems are on the mend.

Wall Street was also cheered by more reassuring news on the mortgage front: The White House and major banks reportedly are nearing a pact that would temporarily freeze interest rates on some subprime home loans. That could hearten investors, who have poured money into safer shelters while credit markets remain tight.

The Russell 2000 index of smaller companies rose 12.19, or 1.59 percent, to 778.25.

The dollar was mixed against other major currencies, while gold prices fell.

Stocks gained overseas. Japan's Nikkei stock average rose 1.08 percent, and Hong Kong's Hang Seng index rose 0.57 percent. In afternoon trading, Britain's FTSE 100 rose 1.54 percent, Germany's DAX index rose 1.65 percent, and France's CAC-40 rose 1.43 percent.