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Morning Note: U.S. to Grow its Way out of Debt Problem?

Can the U.S. grow its way out of its debt problem?

That was a question for Fast Money Traders on Wednesday after a slew of disappointing economic reports sent stocks sharply lower amid reports that the U.S. would hit its debt ceiling by August.

The Institute for Supply Management services index showed U.S. non-manufacturing growth hit its slowest pace in eight months. The index declined to 52.8 in April from 57.3 in March. ISM’s new order index dropped to 52.7 in April from 64.1 in March. The 11.4 percentage point decline was the largest drop in more than a decade and the lowest level in more than a year.

Job data was also disappointing. Employment increased by 179,000 according to ADP employer services. That was far short than the nearly 200,000 jobs economists were expecting on average.

The economic data added more uncertainty to the U.S.’s fiscal situation. The nation will hits its $14.294 trillion debt ceiling no later than Aug. 2, according to Treasury Secretary Timothy Geithner.

The hope is that invigorated U.S. growth will improve the U.S. debt to GDP ratio – now around 84% – and give the government much needed tax revenue to offset its obligations.

Despite the data, Deutsche Bank Chief U.S. Economist and frequent CNBC contributor Joseph LaVorgna was optimistic that the U.S. can grow its way out of at least some of its massive debts.

“We have a lot of hope,” said LaVorgna. “The one thing people don’t realize when they do this budget accounting is that when our deficit turns out to be less than expected –which I am guessing – then it gets carried forward 10 years. So, at least on paper, the debt looks better.”

LaVorgna was emboldened by recent corporate earnings reports that showed record profits. The higher corporate profits are likely to lead to more orders and hiring in the near future, creating a virtuous cycle that will lift GDP.


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Trader disclosure: On May 4, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Weiss owns (BTU); Weiss owns (DVN); Weiss owns (COP); Weiss owns (HK); Weiss owns (MSFT); Weiss owns (INTC); Weiss owns (QCOM); Weiss owns (JPM); Weiss owns (DF); Weiss is long (SLV) puts; Weiss is long (GDX) puts; Weiss owns (NAV); Weiss owns (DZZ); Weiss owns (UUP); Weiss owns (TBT); Weiss is short (FWLT); Weiss is short (X); Weiss is short (AKS) Terranova owns (XOM); Terranova owns (BAX); Terranova owns (SLV); Terranova owns (TCK); Terranova owns (APA); Terranova owns (HOC); Terranova owns (OXY); Terranova owns (UPL); Terranova owns (FCX); Terranova owns (BX); Terranova owns (V); Terranova owns (VRTS); Terranova owns (JPM); Terranova is short (NFLX); Terranova is short S&P Futures; Finerman and Finerman's firm own (AAPL); Finerman and Finerman's firm own (BP); Finerman owns (C); Finreman and Finerman's firm own (CVS); Finerman's firm owns (IBM); Finerman's firm owns (JPM) and is long (JPM) leaps; Finerman owns (JPM); Finerman and Finerman's firm own (MSFT); Finerman's firm owns (TGT); Finerman owns (UNG); Finerman owns (USO); Finerman's firm is short (IWM), (SPY), (MDY); Finerman's firm owns s&p puts; Finerman's firm owns Russel 200 puts; Adami owns (AGU); Adami owns (C); Adami owns (GS); Adami owns (INTC); Adami owns (MSFT); Adami owns (NUE); Adami owns (BTU)

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CNBC.com with wires.