SAN FRANCISCO -- Hope springs eternal. At least it does on Wall Street, where a weaker-than-expected

retail sales report was the presumed catalyst for a solid advance by major stock proxies


Since few were citing the bounce as just a "rebound" from recent weakness -- save one trader who called the session a "mirror image" of Wednesday -- I'll go with the flow. And what's flowing from Wall Street is a familiar refrain that the economy is slowing, the


next rate hike may be its last, and the happy times will soon be here again.

"This morning's relatively benign

retail sales numbers have temporarily allayed inflation anxieties, allowing investors to focus on the fundamentals, including great earnings," Charles Payne, president and chief analyst at

Wall Street Strategies

, wrote.

Payne was not alone.

James Cramer

twice paid

homage to the potentially

salutary effect of the retail sales report in his daily missives.

The slowdown talk began (did it ever end?) even before the retail sales figures came out. On May 5, Thomas McManus, equity portfolio strategist at

Banc of America Securities

, issued a report titled, "A 50 Basis Point Hike? Bring it On!"

"We are noticing some tell-tale signs of economic deceleration," McManus wrote, citing flattening auto sales and a decline in the latest

National Association of Purchasing Manager's

survey among the signs (signs, everywhere signs). The strategist also noticed a declining confidence among younger households in the most recent consumer confidence report. The point being the 35-and-under crowd -- which has more discretionary income than its child-toting Boomer counterparts -- is more sensitive to the


recent downturn and will restrain spending in its wake.

Meanwhile, the

Dow Jones Utility Average

leapt over 21% from March 14 through Wednesday's close. On Thursday, the index rose another 2.5% to 333.30, within a hair of its all-time high of 336.03, set last June.

Given the market's tech obsession, you may have missed the utility average's recent spike. But that move has piqued some people's attention because a rising utility average has historically augured lower rates. That's because utilities have traditionally been big borrowers in the debt markets; thus, lower interest rates enhance their profitability. It's not coincidental that the "Utes" last peaked right before the Fed embarked on its tightening cycle.

"The strength in utilities is in stark contrast to the swirling speculation of multiple and bigger rate increases," said Greg Nie, chief technical analyst at

First Union Securities

in Chicago.

Skeptics say utilities have risen because of their defensive appeal. They also note the Dow utility index isn't a pure measure of electric utilities because of gas-heavy components such as

Dominion Resources

(D) - Get Report

and non-traditional utilities such as



, which is being perceived more as an

Internet company these days. The

Philadelphia Stock Exchange Utility Index

is a better gauge of utilities and rates, they say, noting that the index remains about 17% below its all-time high set in October 1998.

Nie conceded those points and offered others, including that the changes brought about by deregulation have altered the traditional relationship between utilities and interest rates. The technician admitted a bullish interpretation of the utilities' move is clouded by such mitigating factors.

But still, "the breakout

by the index could be suggesting the utilities are looking for interest rates to eventually come down, implying the market is awfully close to discounting what the Fed is doing," he said.

It could very well be that the economy has peaked and the Fed is nearing the end of its tightening cycle. The problem with all the talk about the economy slowing or the Fed getting ready to hibernate is that it's just talk. It's also nothing investors haven't heard before from a variety of Wall Street sources.

"It's way too early to be talking about a slowdown," said Jim Bianco, president of

Bianco Research

in Barrington, Ill. "There's a hope the economy will slow. As every Fed hike has come down the pike,

Wall Streeters have called it to be the last. The crowd has been completely wrong."

More troubling, Fed rate hikes, to date, have not had the desired (i.e., restraining) effect on a host of economic and wealth indicators, save for notable exceptions such as the new housing permits and the NAPM index. (See table below, courtesy of Bianco Research.)

Noting inflation indicators such as the

employment cost index,

consumer price index, and

producer price index have recently posted multi-year highs, Bianco surmised those looking for signs of a slowdown in the retail sales report or the utility average are practicing "surreal economics" and will be proven wrong again. (The latest PPI report, which is expect to be benign, is due Friday.)

"Slowdown talk has become white noise to me," he continued. "It's non-stop chatter that's been non-stop wrong."

Finally, the researcher said the only thing the central bank has done differently in election years is to not take action between Labor Day and the first Tuesday in November.

With three

FOMC meetings between now and Labor Day, the risk is the fed funds rate will be at 7.50% (vs. 6.00% currently) by summer's end, unless there are "undeniable signs" of economic slowing, Bianco said.

Such a possibility is "scary stuff," he said -- especially for those pinning hopes that the slowdown is finally upon us.

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