NEW YORK (CNNMoney) - Gains in financial stocks lifted the Dow Jones industrial average to its best finish in nearly nine months Monday in a session that raised more questions about how long the market's advance can last.

Six months to the day that terrorists attacked the nation's financial center, a positive trend remains; the major indexes long ago recouped their post-Sept. 11 losses amid signs the economy is on the mend.

The Dow Industrials rose 38.75 points to 10,611.24, its best finish since June 21. The Nasdaq composite index slipped 0.18 to 1,929.49, keeping its year-to-date loss to 1 percent. The Standard & Poor's 500 index rose 3.95 to 1,168.26, widening its 2002 gain to 1.7 percent.

The modest advance comes amid growing evidence that the Federal Reserve's year-long interest-rate-cutting campaign is working.

"You're supposed to see recovery signs and they really are right on cue," Robert Barbera, chief economist at Hoenig Group, told CNNfn's Street Sweep.

But concerns about corporate profit strength persisted. Communications equipment maker Avaya warned that quarterly results will fall short. Banc of America Securities advised investors to pare stock holdings, saying gains have made most shares fully valued. And at least 20 companies suffered brokerage downgrades Monday.

More stocks rose than fell. On the New York Stock Exchange, advancing shares edged declining ones 8-to-7 as nearly 1.2 billion shares traded. Nasdaq winners beat losers 9-to-8 as 1.7 billion shares changed hands.

In other markets, the dollar slipped against the yen and euro. Treasury securities edged higher, stemming a week of declines.

The Dow's biggest gainer, J.P. Morgan Chase (JPM: up $1.56 to $36.30, Research, Estimates), which has been hurt this year by its exposure to Enron, rose after Barron's said bargain hunters are taking an interest in the company. Gains spread to financial services firms and fellow Dow component American Express (AXP: up $1.08 to $41.55, Research, Estimates), which was upgraded by Deutsche Banc Alex. Brown.

Boeing (BA: up $1.48 to $50.88, Research, Estimates) also rose. The aerospace company said it will hand three top executives new duties and include them in an expanded chairman's office as three other executives retire. Gains in the price of oil, which rose above $24 a barrel, lifted energy stocks including Exxon Mobil (XOM: up $0.58 to $43.49, Research, Estimates), also on the Dow.

A string of upbeat economic data on manufacturing, the job market and factory orders has sent stocks higher in recent weeks. The latest government figures continued the trend, showing that wholesale inventories fell for the eighth straight month in January, dipping 0.2 percent, in a sign that orders for new goods may finally be ready to rebound.

But in the absence of rebounding profits, the stock market's rise, some say, is overdone.

"Valuations are full," Banc of America Securities' Thomas McManus wrote in a note to clients Monday. He cut the firm's model portfolio to 50 percent stocks from 55 percent, while upping the bond weighting to 45 percent. Cash remains at 5 percent.

Communications equipment maker Avaya (AV: down $0.31 to $5.95, Research, Estimates) said it expects to miss fiscal second-quarter revenue and results estimates and plans to cut about 1,900 jobs. Avaya joined Electronics for Imaging (EFII: down $4.41 to $17.66, Research, Estimates), a printing technology company, which lowered its profit outlook for the first and second quarters.

Emulex (EMLX: down $2.80 to $32.01, Research, Estimates) fell 7 percent after Banc of America Securities cut its third-quarter profit target on the data storage company to 12 cents a share from 13 cents.

Intersil (ISIL: down $5.48 to $31.17, Research, Estimates) also fell after the chipmaker said it plans to acquire Elantec Semiconductor (ELNT: up $4.57 to $45.77, Research, Estimates) for about $1.4 billion.

"I don't think there's any major reason to step in [and buy stocks] today," Nick Angilletta, head of retail sales trading at Salomon Smith Barney, told CNNfn's Halftime Report.

Stocks, by historical measures, are not cheap. The price-to-earnings ratio for stocks in the Standard & Poor's 500 index is 23.3, on average, according to earnings tracker First Call. That's not much below the 26 price-to-earnings ratio of the S&P two years ago, when the Nasdaq peaked above 5,000 and few foresaw the steep profit tumble that transpired.

The Dow industrials have risen 10.5 percent since Sept. 11 while the Nasdaq is up 13.6 percent. While stocks tumbled to three-year lows on Sept. 21, the week after markets opened, they have risen ever since.

Ted Weisberg, trader at Seaport Securities, said the market at this point may simply be getting tired.

"My suspicion is that we're a little overbought on the short term," Weisberg told CNNfn's Market Call. "I feel that people are just catching their breath."

In the latest questions about the accuracy of corporate bookkeeping, Qwest Communications (Q: down $0.25 to $9.46, Research, Estimates) said it has received an informal inquiry from the Denver regional office of the SEC related to its accounting practices.

Kmart (KM: up $0.16 to $1.45, Research, Estimates) said Monday that CEO Charles Conaway was leaving and would be succeeded by restaurant executive James Adamson. The move comes after the struggling retailer cut 22,000 jobs Friday.

Federal Reserve Chairman Alan Greenspan last week said the economy's expansion is well under way, a day before the government reported that employers added jobs for the first time in half a year in February. But corporate profits are not expected to snap a five-quarter losing streak until this spring.