Bear Stearns ( BSC) extended Wall Street's hot streak Thursday, becoming the third big investment firm this week to report better-than-expected first-quarter profits.

In the quarter, Bear Stearns said profits rose 36% to $514 million, or $3.54 a share, on the strength of strong revenue gains from investment banking work and stock-related trading for both its customers and itself. A year ago, the investment firm earned $378.8 million, or $2.64 a share.

Net revenue at Bear Stearns rose 19% to $2.2 billion.

Analysts, as surveyed by Thomson Financial, were expecting Bear Stearns to earn $2.95 a share and generate revenues of $2 billion in the quarter.

In early trading, shares of Bear Stearns rose $2.79, or 2%, to $137.

Bear's results weren't quite as impressive as the big earnings beat announced Tuesday by Goldman Sachs ( GS), which exceeded analyst expectations by nearly $2 a share. Bear Stearns' profit report was more in line with the 24% profit gain reported Wednesday by Lehman Brothers ( LEH).

Still, the results were very strong, especially since one of Bear Stearns' core businesses posted somewhat disappointing numbers. The firm's big clearing division, which provides back-office trading services and financing to hundreds of small brokerages and hedge funds, reported a 2% decline in net revenue to $264 million. The firm blamed the decline on "lower transaction volumes," which generate fewer commission dollars.

Bear Stearns' solid earnings performance may be overshadowed by the expected confirmation Thursday of a $250 million settlement with the Securities and Exchange Commission, stemming from the role the firm's clearing division played in the mutual fund trading scandal. In December, Bear Stearns announced a tentative settlement and said it had fully reserved enough to pay for the penalty.

But sources say documents filed by the SEC are expected to provide lots of details about the firm's role in providing trading assistance and financing to numerous hedge funds that profited from abusive mutual fund trading.

The settlement, however, probably will have little impact on the firm's shares, which have been on a tear since the tentative settlement was announced.

Investors and analysts are likely to focus Thursday on the strong performance of Bear Stearns' capital markets group, which includes investment banking and trading.

Investment banking revenues were up 36% to $297 million, fueled by fees from corporate deal advisory work. Institutional equities, which include trading on stock-related derivatives, rose 56% to $488 million.

Bond trading, a core business for Bear, rose 3% to $899 million. The firm said "credit businesses were extremely strong, led by the credit derivatives and leveraged finance areas." Bear Stearns also said its big mortgage banking business remained strong, despite the tricky interest rate environment.

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