CAUTIOUSLY RECOVERING...

The government reported our first quarter of positive economic growth last week, indicating the recovery has begun. Yet investors kept the Dow moving up and down over 100 points four out of the five days, ending the week with a startling 249-point drop. Was this a bull market correction, or the return to a bear market? Who knows? The only thing certain is that investors aren't quite sure the economy is back on track.

Makes you wonder what it will take to convince them. The initial estimate for Q3 real GDP revealed the economy growing at a 3.5% annual rate -- way better than expected and the first rise in GDP in over a year. Happily, most of the advance was driven by consumption. Q3 GDP also showed home building UP at a 23.3% annual rate, its fastest rise since the '80's. Plus, Q3 corporate earnings reported so far show over 80% of the companies beating estimates, the highest rate in history.

On the jobs front, Initial Unemployment Claims dropped and the 4-week moving average hit a new low in the recovery of 526,000. Continuing Claims fell to 5.8 million. Positive news also included Durable Goods Orders UP for September, their fourth boost in six months. Most impressive of all, the Chicago PMI measuring Midwest manufacturing, shot up to its highest level in over a year. And the Richmond Fed index for Mid-Atlantic manufacturing logged its sixth straight month in expansion territory. All are favorable signs for U.S. manufacturing.