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News Stories Point to Recovery

This is one of those days when the news flow all comes together to show clear signs of recovery on all fronts: earnings, as well as U.S. and international economic news:

1) U.S. economic news continues to improve, with retail sales above expectations, and the Consumer Price Index (CPI) continuing to show inflation under control.

2) Earnings news better, with topline growth this quarter

3) The three big companies reporting earnings—JP Morgan, Intel, and CSX—all said they were preparing to hire more people.

4) Strong economic news from Singapore (GDP), China (GDP), and Korea (lowest unemployment in 10 years)

Look at the evidence from smaller companies as well. Fastenal, which distributes industrial supplies—think fasteners, screws, bolts, paints—reported earnings well above consensus, with sales up 6.4 percent, also well above consensus of up 4.5 percent. The stock is approaching its HISTORIC high that it reached in 2008.

So why wasn't Mr. Bernanke more exuberant in his testimony? Because without concurrent strong data points from jobs and housing, he can't be. The recovery is still fragile, but it is a recovery.

Joe LaVorgna, Economist at Deutsche Bank, put it this way in a note to clients this morning discussing strong March retail sales:

"The March sales figures demonstrate an impressive recovery in consumer discretionary spending, which we expect to carry over into the current quarter. Indeed, the behavior of consumer spending is looking more consistent with previous strong V-shaped recoveries. Combined with extraordinarily low inflation, the mix between faster demand and low retail inflation-prices are firming on the industrial side of things-are extremely bullish for risky assets, stock prices in particular."

Counterpoint:

  • Economic Recovery Still Not Spurring Jobs: Bernanke

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