Without much fanfare, the Dow Jones Industrial Average is closing in on its all-time high, set at the beginning of 2000 before Americans became disenchanted with stocks and turned to real estate.

Despite soaring oil prices, the Dow, watched as a barometer of the economy and Main Street, has regained more than 4,000 points that slipped away after the dotcom bust and the 2001 recession. Now, the average is closer than it's ever been to its Jan. 14, 2000, high of 11,723 - a number that brings back memories of taxi drivers talking about their stock portfolios and a book predicting a 36,000 level for the Dow.

Behind the rebound is a solid economy, emphasized last Friday when the Commerce Department reported that the nation's gross domestic product grew at a swift 4.8 percent, the best growth in 2-1/2 years. Indeed, the healthy economy is pumping up corporate earnings, which have been growing at double-digit rates. Some of the fastest-growing engines of economic growth are at the nation's smallest companies, whose stocks have averaged about a 20 percent gain per year for the past five years.

Some analysts expect the next leg in the economy to be powered by the capital spending of cash-rich companies.

"The economy is fundamentally sound," says Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Fla. "Even though economists have been expecting the economy to slow, recent data suggest it's not that soft."

Last week, companies from Chevron to Microsoft to GlaxoSmithKline reported healthy earnings increases. "The last few years, Wall Street analysts have continued to underestimate earnings, and that's true today. The majority of companies are beating the estimates," says Art Nunes of IMS Capital Management in Portland, Ore.

One reason is that even though times are good, US companies still act as if they might have to close their doors tomorrow, squeezing productivity gains out of their machines and workers. This was evident again last Friday, when the government reported that wage and salary growth was flat in the first quarter despite a relatively low 4.8 percent unemployment rate. "After the big recession, companies really pulled in their horns, trimmed their capital expenditures, became leaner and meaner," says Mr. Nunes.

In addition, reforms enacted in the wake of the Enron scandal and other corporate lapses have helped boost Wall Street's confidence in profit-and-loss statements. For example, the Sarbanes-Oxley Act mandates more corporate accountability in earnings reports. "The Sarbanes-Oxley legislation maybe brought some confidence back," says David Chalupnik, head of equities at First American Funds, which manages $90 billion in investments. "The market's been solid ever since."

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