"We continue to be taking some comfort in improving economic data," said Jack Caffrey, equities strategist at J.P. Morgan Private Bank. But "while investors want to anticipate the (good) news we have been getting recently, they are at the same time being cautious about prices."

The major indexes fluctuated throughout the session. After falling as much as 60.72, the Dow Jones industrial average closed up 16.45, or 0.2 percent, at 9,428.90, according to preliminary calculations. Yesterday, the Dow gained 90.76 to close at its highest level in 14 months, or since June 20, 2002.

The market’s broader gauges were also higher. The Standard & Poor’s 500 index advanced 2.59, or 0.3 percent, to 1,002.33.

The Nasdaq composite index rose 21.50, or 1.2 percent, to 1,760.99. Analysts said the Nasdaq was able to post a bigger gain than the other major indexes because its smaller company components haven’t rallied with the same intensity as Dow and S&P stocks.

The Russell 2000 index, which tracks smaller company stocks, advanced 7.77, or 1.6 percent, to 488.69.

Investors were optimistic that earnings growth will pick up after Broadcom Corp. raised its sales forecast and Agilent Technologies Inc. said profit may exceed estimates.

"Many of the conference calls I’ve listened to have said business is picking up," said Rose Papp, who helps manage $600 million for L. Roy Papp & Associates in Phoenix. Companies such as Applied Materials Inc. have cut costs so much that "a small gain in revenue will have a larger impact on earnings."

While economic data have been improving, the market has advanced only modestly during the month of August, typically a slow time on Wall Street as traders and investors take summer vacations.

"We’re obviously in the summer doldrums, but you know this market wants to go up," said Scott Wren, equity strategist for A.G. Edwards & Sons.

The market’s upward momentum was slowed somewhat by a Dow Jones Newswires report on the University of Michigan’s preliminary August consumer sentiment index. Sentiment so far this month stands at 90.2, below July’s 90.9 level and beneath analysts’ forecast of 91.2.

Investors closely monitor consumers’ moods because their spending accounts for two-third of the economy. By the end of today, investors had decided that consumer sentiment is at healthy levels.

"Consumer confidence, while not as high as expected, is still rather positive at comfortably over 90," Caffrey said.

The rally was also restrained by concern about terrorism after a truck bombing in Baghdad killed at least 15 people, including the United Nations envoy, and an explosion on a bus in Jerusalem caused at least seven deaths. The effect was more pronounced because trading was slow, said Matthew Johnson, head of trading at Lehman Brothers Inc., the fourth-biggest U.S. securities firm.

"The market has a keen interest in what happens around the world in terms of terrorism," said Johnson. "It’s generally quiet trade, kind of directionless."

Stocks got some support from a Commerce Department report that home construction rose in July to the highest level in more than 17 years. The housing market showed no indication it might pull back as mortgage rates began to rise.

Housing construction totaled 1.87 million units at a seasonally adjusted annual rate last month, an increase of 1.5 percent over June’s 1.85 million units. The gain, which put housing starts at their highest level since April 1986, was much better than analysts’ forecast, calling for a dip.

Home builders were among the winners today. Centex climbed $2.69 to $78.59, while Lennar rose $2.40 to $68.55.

The Nasdaq got a boost from Staples and Broadcom. Staples advanced $2.15 to $22.53 after posting second-quarter earnings that topped analysts’ expectations by 2 cents a share and raising its outlook for the rest of the year.

Broadcom, the world’s biggest maker of semiconductors for cable modems, climbed $2.50 to $25.35. The company raised its third-quarter sales forecast to $416 million from an earlier estimate of $400 million to $410 million because it has been selling more chips for wireless Internet access. Second-quarter sales were $377.9 million.

CIBC World Markets and Thomas Weisel each upgraded Broadcom.

Agilent, a maker of equipment used to make computer chips, added $1.83 to $24.29. The company predicted it will break even or earn up to 10 cents a share this quarter after firing workers and selling units. Its third-quarter loss widened to $1.56 billion from $228 million a year earlier.

Advancing issues outnumbered decliners about 3 to 2 on the New York Stock Exchange. Trading volume was moderate.