No wonder investors are so giddy about the stock market lately. It's human nature to let good news supersede that which could be potentially bad. A surge since late October has...

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NEW YORK — No wonder investors are so giddy about the stock market lately. It’s human nature to let good news supersede that which could be potentially bad.

A surge since late October has lifted the market’s major indexes to levels not seen in three years, leaving a decidedly bullish tone on Wall Street. Fueling that climb: retreating oil prices and strong earnings, which seem to be giving investors plenty of reason to buy.

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But their focus on today’s happenings rather than tomorrow’s prospects raises some questions over whether this rally can last. Maybe for some investors, that doesn’t matter right now.

Stocks started off strong this year, but then got stuck in a narrow trading range that lasted until about two months ago. Things changed after oil prices fell from their record high of $55.17 a barrel in late October. Crude-oil futures are now trading around $45 a barrel.

The Standard & Poor’s 500 stock index and the Dow Jones industrial average both have gained about 10 percent since late October, while the Nasdaq composite index has shot up nearly 13 percent in that time.

There are plenty of market strategists who believe this positive turn has staying power. Their view is that lower oil prices should help consumer spending boost the economy, and even though most see earnings growth slowing next year, companies still have strong balance sheets and solid cash cushions should they run into tougher times.

But that sentiment isn’t embraced by all, and some market-watchers are more cautious about their look ahead — and think that investors should be, too.

One concern is that investors are being somewhat shortsighted by seeing just the positive effects of falling oil prices and not considering that the economic stimulus caused by that decline could spur the Federal Reserve to become more aggressive in its tightening of interest rates.

There is also potential trouble with the falling dollar, which sank to a record low against the euro this year and tumbled against other major currencies. A weak dollar is already spurring foreigners to pare their holdings of U.S. Treasury securities, and there is great worry over whether that will ultimately lead them to retreat from holding equities, too.

A big debate looms over the slowing pace of earnings growth. When the numbers are tallied for 2004, 17 of the 24 industry sectors in the S&P 500 are expected to show double-digit earnings growth, and that’s forecast to drop only slightly next year.

But as Morgan Stanley U.S. market strategist Henry McVey points out, that “optimism seems somewhat inconsistent” with real gross domestic product growth, which is expected to slip from its projected 4.4 percent pace this year to about 3.7 percent in 2005.