Stocks closed higher yesterday as investors took a cautious but mostly optimistic view of another batch of strong second-quarter earnings reports.

Analysts said investors traded cautiously in the wake of a strong rally yesterday, which many believe was a so-called technical rally, or one in which stocks rise temporarily despite broader trends that indicate stocks may be in a long-term slump.

Nonetheless, investor optimism has been fed by strong earnings in several key sectors, including technology and financial services.

Furthermore, investors have apparently taken temporary comfort in the fact that fuel costs appear to have stabilised, as well as a general belief that the Federal Reserve Board may be finished raising interest rates for the time being.