Dow rises by more than 140 points

A burst of optimism about second-quarter earnings propelled stocks sharply higher today, lifting the Dow Jones industrials more than 140 points.

And the Nasdaq composite index shot above 1,700 for the first time in 14 months.

A report that Microsoft might pay a special dividend and a survey from Goldman Sachs predicting a turnaround in tech spending contributed to the market’s gains.

Analysts say investors are upbeat about second-quarter earnings, which companies start releasing this week, and are eager to buy stocks before a full-fledged rally gets under way.

“Market psychology has so much to do with where the market goes. All of a sudden people feel good again and they want to come to the stock market,” said Michael Murphy, head trader at Wachovia Securities in Baltimore.

After barrelling up as much as 190.91, the Dow closed up 146.58, or 1.6%, at 9,216.79. Last week, the Dow gained 0.9% despite a 72.63-point loss on Thursday. The market was closed on Friday for Independence Day.

The broader market also surged higher. The Nasdaq composite index advanced 57.79, or 3.5%, to 1,721.25. The last time the Nasdaq finished above 1,700 was on May 20, 2002, when it closed at 1,701.59 and the last time it was higher at the end of a session was on May 17, 2002 when it stood at 1,741.39.

The Standard & Poor’s 500 index rose 18.80, or 1.9%, to 1,004.50.

Analysts credited the advance mostly to investors feeling confident that companies will report better-than-expected second-quarter earnings, building on the strong first-quarter results that triggered the market’s current rally. Some on Wall Street have already been calling this buying spree, which began in mid-March, the start of the next bull market.

“Come Friday, this bull market is four months old and hasn’t corrected. When a bull market lasts that long and doesn’t give ground, you embrace it,” said Larry Wachtel, market analyst at Prudential Securities.

Among today’s winners, Microsoft rose 97 cents to 27.42 following a report in The Financial Times that the software giant might pay a special dividend of 10 billion to shareholders.

Wachtel said investors cheered the report in part because they have been more attracted to dividend-paying stocks.

Technology shares rose after Dow Jones Newswires reported that Goldman Sachs predicted companies’ spending on technology could soon rise.

The investment firm made the forecast after a survey of businesses. Goldman analyst Laura Conigliaro said: “Although spending intentions remain guarded, our panel shows some increased optimism on second-half spending and early expectations of moderate growth in 2004.”

Other tech gainers included Intel, rising 1.18 to 22.91, and Cisco Systems, advancing 72 cents to 18.22.

Brokerage house upgrades also contributed to today’s gains.

Morgan Stanley climbed 1.38 to 46.18 on an upgrade to ”buy” from “neutral” by Merrill Lynch, while bebe (correct) stores advanced 1.50 to 22.41 after First Albany raised its rating to “buy” from “neutral”.

Kroger rose 39 cents to 17.27 after Sanford Bernstein upgraded the supermarket company to “outperform” from ”market perform.”

Alcoa advanced 41 cents to 25.71 ahead of earnings due out tomorrow. Alcoa is the first Dow industrial to report quarterly results.

Advancing issues outnumbered decliners more than 2 to 1 on the New York Stock Exchange. Volume was moderate.

The Russell 2000 index, which tracks smaller company stocks, rose 9.36, or 2.1%, to 465.71.