updated 10/12/2004 9:24:58 AM ET 2004-10-12T13:24:58

Stocks drifted higher Monday, brushing aside another record high for oil prices amid hopes the impending tide of third-quarter profit reports will override worries about a struggling economic recovery.

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With no major economic or earnings data to steer market sentiment on Columbus Day, investors appeared to be betting that the quarterly reporting season might divert attention from Friday’s disappointing employment report and rising fuel costs.

However, analysts were dubious the market could build much momentum on profit news alone without some resolution to the big question marks dogging the near-term outlook.

“The big troika here is economic data, oil and the election, and those things are keeping a stranglehold on the market,” said David D. Legeay, investment strategist for McDonald Financial Group. “Barring anything to the extreme in earnings season, we’re just in a market now that will move sideways and in concert with economics, whether jobs data or retail sales data” and energy prices.

Stocks managed to hold their modest gains even as oil futures pushed toward $54 a barrel. Contracts for next month’s shipments rose 33 cents a barrel to $53.64 on the New York Mercantile Exchange as a strike began in Nigeria, Africa’s largest exporter of crude, adding to supply concerns at a time of reduced output in the hurricane-ravaged Gulf of Mexico.

At Monday’s close the Dow Jones industrial average was up 26.77 points, or 0.27 percent, at 10,081.97 — a modest rebound following a drop of 1.35 percent last week.

Broader stock market indices also posted modest gains. The Nasdaq composite index, full of tech stocks, rose 8.79 points, or 0.46 percent, to 1,928.76, while the Standard & Poor’s 500-stock index rose 2.25 points, or 0.20 percent, to 1,124.39.

The biggest movers among the Dow 30 were The Home Depot Inc., up $1 to $40.02; Altria Group Inc., up 58 cents to $47.09; and American International Group Inc., up 58 cents to $67.48. Drug makers also lifted the Dow, with Merck & Co. rising 45 cents to $30.80 and Pfizer Inc. rising 46 cents to $30.26.

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Despite a spate of worrisome earnings previews over the past month, Wall Street expects the companies in the Standard & Poor’s 500 to show at least a 10 percent increase in profits from a year ago, and the newly tempered outlook may enable most of the reports to top Wall Street forecasts.

But even with a strong showing, third-quarter profits are expect to come in lower than the second quarter’s results, breaking a string of six straight quarters with improving profits.

“The stall in sequential earnings growth in Q3 has been accompanied by a stall in the equity market. We doubt that this is a coincidence,” Ed Keon, chief investment strategist for Prudential Financial, said Monday in a note to investors.

“We think that growth will be hard to come by for the next several quarters. ... Without much earnings growth and with valuations still higher than historical averages [although our valuations concerns are mitigated by low inflation and interest rates], we continue to think that the equity market will struggle for a while,” he added.

The reporting season will hit full stride Tuesday with updates from Intel Corp., Yahoo! Inc. and Merrill Lynch & Co. Other big names reporting later in the week included General Motors Corp. and Citigroup Inc. In all, more than 100 companies were scheduled to report by week’s end.

Advancing and declining issues were nearly even on the New York Stock Exchange, while decliners held a small lead on the Nasdaq Stock Market. Volume was extremely light, with many traders taking a long holiday weekend.

Overseas, Britain’s FTSE 100 fell 0.3 percent, France’s CAC-40 fell 0.3 percent, and Germany’s DAX index rose 0.1 percent. Japanese markets were closed for a holiday.

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