NEW YORK — Lost in all the chatter about heat waves and overheated home prices is the fact that the all-but-forgotten Dow Jones industrial average has also been sizzling hot this summer, scoring its best July gain in almost a decade.

Led by double-digit leaps from heavy-machinery maker Caterpillar, tech icon IBM, home-improvement chain Home Depot and automaker General Motors, the Dow has gained 4.2 percent in July. Barring a collapse today, it will be the top July since 1997, when the blue-chip gauge surged 7.2 percent.

Summer has a reputation for being a sleepy, uneventful period for Wall Street, with most traders opting to flee trading desks and the money-making game for vacation hideaways.

Not so this year. Better-than-expected second-quarter profit reports from U.S. companies — 70 percent of Standard&Poor's 500 companies, Thomson Financial says, have topped analysts' estimates — have given investors a good reason to bid prices higher. The S&P 500, which also has enjoyed its best July since 1997, and the Nasdaq composite are at four-year highs.

The steady rise in stock prices has raised hopes that the year's second half will be profitable.

"This has been a very surprising July," says Janna Sampson, director of portfolio management at OakBrook Investments. "But I actually think we were overdue for a rally. We had such a weak first half. I am fairly hopeful that we will end the year 6 percent to 8 percent higher."

There are still worries that the stock market must hurdle if it is to keep climbing. But the market, it appears, is following the positive lead of the economy, which refuses to crumble under the weight of terrorism in London, oil prices hovering around $60 a barrel and steady increases in short-term rates by the Federal Reserve.

"The U.S. economy refuses to roll over and play dead," says Richard Peterson, senior researcher of capital markets at Thomson Financial.

While the Dow, down 0.7 percent in 2005, is the only major U.S. index still in the red for the year, it has momentum. The debate now is whether the Dow can keep climbing and top its March high of 10,940.54 — or whether this rally is a last gasp for the bull that began in March 2002.

"I don't believe this is the beginning of a major bull," says Scott Kays, president of Kays Financial Advisory.

Neil Hennessy, portfolio manager of Hennessy Funds disagrees: "The bears tried to take the market down after the July 7 London attack, and they have not been able to. All the pieces are in place for the market to take off."