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The Economy's Mixed Bag

The reports out this morning are very typical of the mixed bag of economic and earnings news: some bright spots, but a lot of uncertainty.

Look at two areas: retail sales and the earnings report from rail giant CSX.

Retail sales: mixed bag. Retail sales ex-autos were up 0.3 percent, up several months in a row. But it is a very mixed mag.

Sales up in June: electronics, food and beverage, sporting goods.

Sales down in June: furniture/home, building materials, health stores, department stores, restaurants.

The bull case for retail is as follows:

1) everyone knew June was a terrible month

2) weather was a factor: it rained for 22 days out of 30 in Chicago, New York and Boston

3) Q2 has seen much tougher sales comps due to last year's rebate checks

4) inventories are low, and retailers have become cost-cutting champions

5) investors traditionally want to own retail in the second half

This scenario rests on very thin reeds; even though Target, JC Penney, Ross Stores and TJX raised guidance a while ago, no one doubts that back to school is likely to be very lean.

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CSXbeat estimates, much of it due to cost cutting. But rail volumes were down 21 percent (coal was particularly weak)! So why is the stock up 6 percent today?

1) the CEO indicated that rail volumes in the third quarter would be down double digits again, but would improve over the 21 percent decline in the second quarter;

2) the company has indicated they expect to continue to push through price increases above the 5 to 6 percent increases they had previously targeted.

Bottom line: the market has been sloping slightly to the downside in the last month as it awaits news that the recovery will be more than just anemic. The jury is still out.

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Questions? Comments? tradertalk@cnbc.com

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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