Bears getting drowsy?

Market bears Morgan Stanley cautiously look at recent indicators;

As confirmed bears on the economy, we’re always looking out for contrary indicators, so we are paying close attention to the manufacturing and other economic indicators that turned less negative in the past couple of months. While still deeply in recessionary territory, the ISM manufacturing index has turned up almost 3 points from a near 30-year low in December, the nonmanufacturing composite advanced more than 5 points in January over November’s trough, and our own Business Conditions Index rose by ten points in February from the depths of last autumn. The composite index of leading economic indicators (LEI) has risen two months in a row. Could those straws in the wind mean that an inflection point is here?

In our view, these data do suggest that the intensity of the declines is beginning to fade, and with fiscal stimulus in the pipeline, recovery is likely to emerge by year-end. But the improvement in the second derivative is coming off the deepest recession in 60 years, and investors should be wary of the volatility in these data, especially following the breathtaking plunge of the past few months. With needed policy actions yet to be implemented and the financial and economic headwinds still strong, we believe the trough of this downturn is still several months off.