Fidelity and Lehman spokesmen played down a report in The Wall StreetJournal that Lehman officials are pondering a more formal link-up with theBoston-based Fidelity and have even have drawn up plans on what a combinedcompany might look like. The newspaper, in its "Heard on the Street" column,said that a Fidelity acquisition of Lehman, which has a current market valueof about $11 billion, was "a long shot."

Lehman's stock price gained 3/4 to 87-1/16 on Friday morning's trading onthe New York Stock Exchange. Other financial shares also gained as tradersanticipated that the US Federal Reserve will slow its series of interestrate hikes after a government report indicated that inflation remained tamelast month.

"We are thrilled with the Fidelity alliance," a Lehman spokesman said."There are no plans to change the structure of that alliance."

Under a 1999 agreement, Lehman exclusively provides research and investmentbanking services to Fidelity's 11 million-plus retail accounts. The dealgives Fidelity's wealthiest clients access to red-hot initial publicofferings, and helps Lehman distribute harder-to-sell secondary stockofferings and gain brand recognition without any advertising.

Fidelity on Friday said it had no plans to broaden this agreement to amerger.

"We have no such plan and there is nothing under discussion," a Fidelityspokesman said. Closer links may be limited to entering into an official"joint venture" rather than the current loosely defined alliance, the WallStreet Journal said. Discussions so far have excluded the companies'chairmen, Lehman's Richard Fuld and Fidelity's Edward Johnson, the paperadded.