More good economic tidbits dribbled out today, spurring a 150-point rally in the Dow as of this writing.
Another surprise increase in pending home sales for February — marking gains for two of the past three months — provides more evidence of a bottom in housing. Remember, both new and existing home sales themselves were up in February, as were housing starts.
What seems to be happening is that while prices fall, sales are rising. In other words, markets work. This effect is especially strong in some of the hardest-hit states, like California and Florida (hat tip to Mark Perry of the Carpe Diem blog).
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Another mustard seed that could grow into recovery is the ISM manufacturing index for March, which picked up slightly from February and came in above the average for both the first quarter and last year’s fourth quarter. Inside the index, production increased, reaching its highest level since September, while new business orders also gained, registering its highest level since last August. This is not yet a recovery signal, but it is an important bottoming signal.
The bad news today was the ADP private-employment survey, which was down big. And the Wall Street consensus for Friday’s jobs report is running towards an 800,000 payroll decline. So I’m not overlooking the bad news, but I’m simply trying to balance it with some better news.
Behind all these numbers is a very easy-money position from the Fed. Please note the following two charts, which foreshadow economic recovery in the second half of this year.