Speed Bumps on the Road to Recovery

Given the intense focus afforded to second- and third-tier economic reports of late, the fact financial markets were restrained today ahead of tomorrow's jobs data -- the granddaddy of economic data -- isn't terribly surprising.

Equity proxies overcame their midday malaise to end higher, but only marginally so. The

Dow Jones Industrial Average

rose 0.4%, the

S&P 500

gained 0.1%, and the

Nasdaq Composite

climbed 0.3%. The price of the benchmark 10-year Treasury note rose 1/32 to 96 31/32, its yield unchanged at 5.27%.

The consensus view is the government will report that 50,000 nonfarm payroll jobs were added last month and the unemployment rate held steady at 5.6%. Today's report of an unexpected rise in jobless claims for the week ended March 23 -- even if due to recent legislation extending benefits -- raised concerns tomorrow's monthly report will prove disappointing.

Notably, such concerns follow a report yesterday by Ed Hyman's International Strategy & Investment that acknowledged the "perfect recovery story may be developing a few wiggles," as

RealMoney Pro.com's

Doug Kass noted.

While nowhere near forecasting a double dip, the ISI economists said the monthly data "don't yet support" their forecast for first-quarter GDP growth of 4% and the "odds of a touch slower growth" in the second quarter are increasing, citing:

The lifts from tax cuts, 0% financing, and warm winter weather have passed;

Higher mortgage rates and a curtailment of refinancing activity;

A slowdown in the growth of money supply;

A developing "credit crunch" in the commercial paper market;

The stock market's loss of momentum, and;

The rise in oil prices (which retreated today as reported earlier).

Finally, ISI acknowledged "the perfect recovery has a problem:" Inflationary pressures haven't slowed, as the economists expected. "As a result, recovery news is being offset by rate fears" although an "early-recovery interest rate hiccup" is typical, the report said.

Oh yes, ISI also said the stock market is being restrained by valuation concerns.

Such issues restrained equities today, as, of course, did profit warnings by

Bristol-Meyers Squibb

(BMY) - Get Report

, down 14.7%, and

Check Point Software

(CHKP) - Get Report

, which lost 19.3%. As the weekly claims raised concerns about tomorrow's jobless data, those warnings heightened tensions about tomorrow's "official" beginning of the earnings season, with

Alcoa

(AA) - Get Report

reporting, the first from a Dow component.

A Rally by Any Other Name

Coincidentally (or not), the ISI's cautious report was accompanied by one from a strategist who's lately been as bullish about stocks as the ISI has been about the economy.

"If

the market doesn't get cranked up in the next few weeks, I will have to change my short-term tune a little," wrote Don Hays of Hays Advisory Group, who still expects the market's high for the year to occur by May 1. "I have been expecting this 'last rally' in this first phase of the baby bull market to wait on the earnings release, but now the clock is ticking."

Indeed it is.

Still, almost everybody expects a short-term rally if first-quarter earnings prove anything but disastrous -- even I forecast as much during the roundtable of

TheStreet.com's

"Happy Hour" chat. But the consensus optimism suggests the advance either won't happen or will be short-lived, as

RealMoney.com

contributor

Helene Meisler described.

Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.