“After a long nightmare on Wall Street, the latest profit figures from corporate America have been the stuff of investors’ dreams,” writes Jonathan Fuerbringer in today’s New York Times.

“Corporate earnings are set to have their best quarter since the spring of 2000, with initial estimates of a 21 percent jump over last year’s third quarter. Strong consumer spending, a weakening dollar and further cost- cutting all helped to improve the bottom line for companies that have already reported for the quarter, which ended Sept. 30.”

“Intel’s earnings more than doubled for the period. Merrill Lynch’s profit rose 50 percent. Citigroup reported a 20 percent rise in third-quarter earnings, while 3M posted a 22 percent increase. Apple Computer recorded a profit of $44 million after a loss of $45 million a year earlier. Delta Air Lines cut its quarterly loss nearly in half.”

“Whether this earnings performance can push the stock market much higher after its eight-month rally is open to question, in part because analysts expect earnings growth to be only about half as strong in the first three quarters of next year. That uncertainty, however, is not stopping investors, with many of them seeming to be responding to earnings forecasts by buying stocks in the same speculative way they did at the end of the 1990’s.”

“Shares of the chip maker National Semiconductor, for example, are up 157 percent so far this year, based on investors’ expectations of a turnaround. The company did report a spectacular percentage increase in earnings for the quarter — but mainly because its profit, 18 cents a share, looked so good compared with the mere penny a share it had made a year earlier.”

” ‘There are some pretty heroic assumptions in some of those stock prices,’ said Michelle Clayman, chief investment officer at New Amsterdam Partners, a money manager in New York.”

“The strong corporate profits are being reported as the economy appears to have had its strongest quarter of growth in almost three years, spurred in part by the tax cuts earlier this year. When government data are released later this month, economists are expecting to see growth in the gross domestic product near 6 percent for the third quarter, and they are forecasting strong, if slightly slower, growth for the remaining three months of the year.”

“Among corporations, the pleasant earnings surprises are outstripping disappointments by a big margin. According to data compiled by the research firm Thomson First Call, the total profit for the 163 companies in the Standard & Poor’s 500-stock index that have reported so far is 7.4 percent above analysts’ forecasts.”

“That is two and a half times the average gap in the last eight years, according to First Call, which tracks earnings results and Wall Street forecasts. Standard & Poor’s is predicting that almost 70 percent of the 500 companies in its index will show earnings increases this quarter.”

“And the earnings growth is expected to continue, although the growth rate is expected to slow next year. The consensus earnings forecast for the fourth quarter is for growth of 22.5 percent over last year’s comparable period, followed by 12 to 13 percent growth during the first three quarters of 2004, according to First Call.”