Updated from 8:56 a.m. EDTWall Street's red-hot bond business helped Goldman Sachs ( GS) navigate bear markets in its other lines of business in the second quarter, leading the company to post a much-better-than-expected increase in earnings. Goldman said Wednesday that it earned $695 million, or $1.36 a share, in the quarter, compared with $563 million, or $1.06 a share, for the prior-year period. Thomson First Call had predicted earnings of $1.19 a share. Nonetheless, Chief Financial Officer David Viniar expressed only muted optimism about the second half of 2003 in a conference call. "Investment-banking backlog is up from the end of the first quarter to the end of the second quarter, and there's a slightly more positive tone in the market. We're a little more optimistic, seeing a bit more activity in business, just a little pickup, but I would emphasize the word 'little,' " he said. Goldman also raised its quarterly dividend to 25 cents from 12 cents, citing the new dividend-tax law and the fact its yield is well below that of rivals. But investors were taking profits on Goldman stock Wednesday, after shares hit an 18-month high of $91.98 a week ago. Also, Goldman investors were a little skittish, as 11 million stock options and 51 million shares are eligible for sale on Thursday. At midday Wednesday, the shares were at $85.92, down 68 cents, or 0.8%, putting the dividend yield at about 1.2%. Bond trading continues to prop up Wall Street's bottom line. Goldman's fixed income, currency and commodities group, also known as FICC, posted net revenue of $1.59 billion during the quarter, up from $1.14 billion a year ago but down 15% sequentially. "In some ways we've finished the half-year with about as good of an environment in FICC as you can get," said Vaniar, noting that tightening credit spreads, declining interest rates, a steep yield curve, volatile currency markets and strong customer demand helped boost bond trading. "We think of FICC as one business line, but it's a broad, complex business. It's extremely hard to predict the rest of the year."