Optimism boosts US stocks

Better-than-expected profits from Motorola lifted Wall Street higher today as investors grew more optimistic that third-quarter earnings in general will be strong. The Dow Jones industrials rose nearly 90 points to a 16-month high.

Trading was light as the bond market was closed for Columbus Day and Japan’s financial markets were closed for a national holiday.

“It’s a bit of a surprise to see this much strength on a low volume day. You have to give credit to the Motorola numbers,” said Peter Dunay, chief market strategist at Wall Street Access, a New York-based brokerage firm.

But he added: “It’s really anticipation that’s driving the market. Most analysts are now expecting even more from earnings which could put the market under pressure.”

The Dow closed up 89.70, or 0.9%, at 9,764.38, having gained 1.1% last week for its third winning week in four. Earlier in the day, the Dow rose as much as 108.81. Today’s close was the highest level since June 5, 2002, when the blue chips closed at 9,796.80.

The broader market also finished higher. The Nasdaq composite index gained 18.22, or 1%, to 1,933.53, following a weekly advance of 1.9%. It was the Nasdaq’s highest close since January 31, 2002, when the tech-focused index stood at 1,934.03.

The Standard & Poor’s 500 index rose 7.29, or 0.7%, to 1,045.35, having risen 0.8 percent. It was the highest level seen since June 5, 2002, when the index finished at 1,049.90.

Motorola Inc. rose 8 cents to 13.87 dollars after the world’s second-largest mobile-phone maker reported quarterly earnings that beat analysts’ expectations by two cents per share.

“People are feeling pretty good about the Motorola earnings,” said Mark Donahoe, managing director at US Bancorp Piper Jaffray in Minneapolis. “There also was an upgrade of the software sector by Lehman Brothers which helped things. But it’s hard to draw real trends today because of the low volume.”

Stocks have rallied sharply since mid-March, but investors are now looking for strong evidence of economic improvement. Analysts say third-quarter earnings reports, which are released in earnest this week, will be key in determining whether the market can go higher, although some caution that investor expectations might be becoming too high.

“What’s really under the microscope is what investors see for ’04,” Dunay said. “They want to see revenue growth and earnings going forward. It won’t be enough to see companies meeting or beating estimates. They expect all the fiscal stimulus (such as tax cuts) to get the engine moving again.”

Dow component Honeywell International Inc. jumped 1.27 dollars to 28.77 dollars after the company said it would acquire Silent Witness Enterprises Ltd., a maker of video surveillance equipment.

FedEx Corp. advanced 2.79 dollars to 71.35 dollars after Merrill Lynch raised the parcel delivery company’s stock rating to ”buy” from “neutral.”

Computer Associates International Inc. gained 1.17 dollars to 24.67 dollars after Lehman Brothers raised the software company’s stock rating to “overweight” from “equal-weight.”

Losers included Ebay Inc., which dropped 1.47 dollars to 58.99 dollars after Citigroup’s Smith Barney division cut the online auction company’s rating to “sell” from “hold.”

Advancing issues outnumbered decliners 5 to 2 on the New York Stock Exchange. Volume was light.

The Russell 2000 index, a measure of smaller company stocks, rose 8.51, or 1.6%, to 527.57.