Associated Press Mixed signals abound, but economy remains weak

Companies are turning in surprisingly good quarterly earnings -- including better-than-expected news Friday from two relative weaklings in the banking and manufacturing industries -- but economists say a recovery is probably still months away.

Of the 52 companies in the Standard & Poor's 500 stock index that have reported first-quarter earnings so far, 62 percent have posted results that beat Wall Street expectations. And recent data has provided faint hope of a comeback.

Not so fast, economists say.

Mark Vitner, senior economist at Wachovia Corp., said that despite "that just maybe we can see some light at the end of the tunnel now," an end to the recession won't likely come until closer to year's end.

Even under that scenario, high unemployment would stretch well into 2010.

"I don't think we should oversell these flickers of improvement," said Brian Bethune, an economist with IHS Global Insight. "An actual recovery is still several months into the future -- it's not imminent."

On Friday, Citigroup Inc. and General Electric Co., two of the most beleaguered companies in their industries, turned in first-quarter results that beat Wall Street expectations.

Citi lost money for the quarter, but before paying dividends -- which were tied to the government's $45 billion investment in the company -- it actually earned $1.6 billion.

That report followed surprisingly solid earnings from JPMorgan Chase & Co., Goldman Sachs Group Inc. and Wells Fargo & Co. earlier in the week. But some analysts say the earnings announcements are concealing the depth of the financial industry's woes.

Goldman Sachs changed its calendar so a $780 million loss in December didn't drag down its reported earnings for the quarter. Wells Fargo minimized possible future losses on its purchase of failed bank Wachovia.

And thanks to a recent rule change, many banks were able to pump up the values of the toxic assets at the heart of the credit crunch. The change is "like a gain that goes right to their bottom line," said Lawrence Brown, an accounting professor at Georgia State University.

Looming over the banks is uncertainty over "stress tests" that regulators are conducting. Investors don't know how much information will be made public when results are announced May 4. But even faint reports of trouble could threaten the industry. more...