Wall Street Greek: Recession, The End

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The Doors said it best: "This is the end, beautiful friend. This is the end, my only friend, the end"... yada yada yada... "I'll never look into your eyes...again." Recession! The end.

(Related Tickers: WFC, C, JPM, BAC, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD, XLF, IWM, TWM, IWD, SDK)

Recession's End

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Three significant developments this past week affirmed market suspicions that the end of the Great Recession may be within sight. The first two data messengers offered a very direct case for it, while the third signaled a positive change in a troubling trend. Still, the stock market, she's a swift cookie, and she seemed to already know. The S&P 500 Index is up 26.6% since the Three Kings Rally began from the March 9 closing low.

This past Wednesday, the Federal Reserve's Federal Open Market Committee (FOMC) released the meeting minutes from its February and March gatherings. Needless to say, the informational value of this accounting of Fed thought and discussion proved enlightening. While the Fed lowered its forecast, hardly a tear was shed. What the market found most useful from within the tower of words was that the group of economic captains sees GDP contraction flattening out in the second half of '09. Even better, the Fed expects growth to ensue in 2010. Just seeing a little light from this deep desperate hole was enough to lift us for now.

On Friday, we learned of similar expectations from The Blue Chip Economic Survey of private economists. Some 86% of the seers expect the recession to come to an end in the second half of this year. Those two data points were akin to receiving good directions when seriously lost. We have some idea where we are heading now, and that clarity goes a long way with the stock market.

The kicker bit of news came on Thursday morning, when Wells Fargo (NYSE: WFC) announced what appeared to be a stellar quarter, especially compared to recent times. The news was so far beyond belief, that had it been reported on April 1st, nobody would have believed it was real. And I quote from the release, "Business momentum in the quarter reflected strength in our traditional banking businesses, strong capital markets activities, and exceptionally strong mortgage banking results."

Many a guru has declared that housing would have to improve for the entire market to improve (and it may be happening too), but what has clearly been intimated over the past month is that the financial sector is that key cog. Of course this makes perfect sense, and is the reason why the government has worked so hard at preserving and restoring banks and the figurative Wall Street.

The market has rallied from the beginning of March, when the CEOs of Citigroup (NYSE: C), Bank of America (NYSE: BAC) and J.P. Morgan Chase (NYSE: JPM) all offered the street a tasty treat, that being the news of a profitable quarter under way. Wells Fargo's confirmation this week added fuel to that fire.

It seems the market has either already set its low for this recession, or it will do so by the middle of this year. We can say this with some degree of confidence based on historical statistical testing that shows the stock market is a leading economic indicator, and usually a six-month forerunner of economic recovery. This is the end, beautiful friend...