Such comments seem outrageous given the latest batch of scary headlines from UBS, Fannie Mae, Legg Mason, Lazard, et al. But hope springs eternal on Wall Street, and the reality is the crisis in the debt markets has eased since JPMorgan's Fed-engineered purchase of Bear Stearns, which Paulson called "an inflection point." (Critics have used similar terms, but with a far different meaning.)

Meanwhile, even Henry "Mr. Sunshine" Blodget is starting to come around to the idea that the housing market may be hitting bottom, thanks to an op-ed by Cyril Moulle-Berteaux, managing partner of Traxis Partners, in The Wall Street Journal.

In making the case for a housing-market bottom, Moulle-Berteaux notes house price affordability has improved dramatically and the inventory of new homes is falling. (The piece appeared prior to Wednesday's weak report on pending sales of existing homes for March.)

The fund manager makes a compelling case, but omits the key element of financing.

Once again, the financials are dictating market action.

Early Tuesday, the broad market weakened in the wake of crude's latest spike and shocking news from Fannie Mae, which had a big first-quarter loss and slashed its dividend.

Fannie Mae also said it plans to raise $6 billion, which, perversely, was key to its intraday turnaround. In response to Fannie's plan to raise capital, its regulator OFHEO rewarded the company by saying it can lower its capital surplus to 15% from 20%.

The decision seems to fly in the face of logic given Fannie's results, and certainly contradicts the theme of a New York Times story suggesting regulators are worried about having to bail out Fannie Mae and its sister company, Freddie Mac.

"Better than expected" is the mantra on Wall Street this week, and more so after Friday's jobs report. Payrolls fell by 20,000 in April, the fourth-straight month of decline, but not as bad as the 85,000 lost jobs forecast by economists.

Adding more fuel to the "better than expected" sentiment, the government says the unemployment rate fell to 5% in April from 5.1.% in March and vs. expectations for a rise to 5.2 %.

As with other "better-than-expected" data this week, including first-quarter GDP and ISM manufacturing, the jobs report is subject to revision and skepticism, and far from strong on an absolute basis.

But Wall Street moves on relative values and, relatively speaking, the economic data this week has been better than expected, bolstering a view that the economy is bottoming and that the stock market bottomed in mid-March.

Major averages rose in initial reaction to the job data, pushing the Dow and S&P further beyond the key technical levels breached yesterday, respectively 12,950 and 1,400. (Both indicies were recently off their early highs.)

The Nasdaq was also higher early on but has recently turned negative amid very disappointing results from Sun Microsystems and the still unresolved Microsoft-Yahoo situation.

The S&P's breakout from its 1,270-1,400 trading range is bringing more money off the sidelines, even as many argue the "real" economy is far from a bottom, especially given the situation in housing.

Thursday was a tough day for the skeptics and this year has been tough so far for the Jacob Internet Fund. The fund was down 9.2% year-to-date heading into today, but still sports a healthy 22.2% return over the past five years.

In the accompanying video, Darren Chervitz, co-manager of the four-star Morningstar rated fund, explains how it's tough to be betting on sluggish growth when your mandate is to invest in technology stocks.

The fund has big positions in takeover targets Yahoo and Take-Two, as detailed in prior videos. Beyond M&A candidates, Chervitz says the strategy is to find companies in industries that are recession resistant, such as dial-up Internet provider Earthlink -- or those exposed to markets with huge secular growth, such as Chinese Internet plays Sohu.com and Sina.

Here, Chervitz explains the challenges of being a growth stock manager when you think growth will be sluggish, even in China, and why videogames may be a new consumer staple.

The optimism evident ahead of the Fed's announcement resurfaced Thursday in a major way. Many news reports cited "better-than-expected" economic data as the catalyst for the Dow rising nearly 190 points.

The headline numbers on consumer spending and ISM Manufacturing were, indeed, better than expected. But inflation indicators were higher in both reports, jobless claim numbers were higher than expected, and Ford and GM reported lousy car sales.

Clearly, there's plenty to quibble about when it comes to economic data.

What really seemed to be going on Thursday is that it's a new month and traders swapped out of prior winners -- namely commodities and related stocks -- and into laggards such as tech, financials, biotech, and retail. Chinese stocks were also big winners, continuing their recent momentum.

ExxonMobil's disappointing results, a strong dollar, and "the worst is over" comments from the Bank of England each contributed to the rotation out of commodities: Crude fell 2.2% to $111 per barrel, gold slid 1.6%, and copper tumbled 5.4% as the dollar hit a seven-week high vs. a basket of major currencies.

Again, the movements were likely exacerbated as many traders believe the Fed is done easing and because it's the start of a new month, when a lot of hedge funds get a "fresh start."

Adobe did raise its forecast, Research In Motion launched its first clam phone (a "Motorola killer"?), and Steve Ballmer said a decision on Yahoo is coming "in very short order."

I'm still betting on short-term upside, especially now that the Dow and S&P have closed above technical resistance at 12,950 and 1,400, respectively. That should entice some more players off the sidelines in the coming days (if not hours).

But in reality, there was no fundamental reason for the Nasdaq to be up 2.8% today. Sometimes the market moves to the beat of its internal rhythm -- and Friday brings the always-crucial jobs report, so the beat could change again.

From Silicon Alley Insider, May 1, 2008:

The recession-deniers were out in force yesterday after the "better-than-expected!" GDP figures came out: See? The economy GREW in Q1! We aren't in a recession! All that horrendous economic and housing data is just media hysteria!

Here's what they didn't tell you:

First, those are just preliminary numbers. Hold the champagne until the several rounds of revisions are out.

The Fed met expectations with at 25 basis rate cut Wednesday, but its accompanying statement was less-clear-than-expected about its future intentions. Perhaps the lack of clarity contributed to the market's post-Fed swoon.

After trading above 13,000 intraday, the Dow closed down 12 points at 12,820 -- the S&P and Nasdsaq followed similar patterns.

Tech stocks were hurt by disappointing results and guidance from SAP and (to a lesser extent) Alcatel-Lucent, while Citgroup was a major drag on blue-chip proxies after issuing $4.5 billion of stock to boost its cash position.

Still, the Fed meeting was the day's big story.

The Fed's two-day policy meeting is widely expected to conclude today with a 25 basis point rate cut and signals of a pause in the easing campaign.

Clearly the Fed has already done a lot -- having already cut the fed funds rate six times from 5.25% to 2.25% since September, while simultaneously injecting massive amounts of liquidity into the financial system. There was also that little matter of the Fed-financed takeover of Bear Stearns by JPMorgan.

Many observers and some Fed officials (past and present) believe the Bernanke Fed has already gone too far in cutting rates and weakening the dollar. The Fed now risks having to deal with runaway inflation while the economy continues to decelerate. This morning's advance first-quarter GDP report showed anemic growth while recent data show the housing market's woes are worsening.

On Wall Street, meanwhile, the stock market is on the upswing in recent weeks amid a growing sense of optimism that the worst of the credit crisis is over -- never mind Citigroup's latest fundraising efforts, economic data, inflation, etc.

The widespread consensus is the Fed's two-day meeting will conclude tomorrow with a 25 basis point rate cut, accompanied by hints that the Fed is done with its rate-cutting campaign (for now).

To be sure, there is evidence for the Fed to declare "victory" over the credit crunch -- the financial markets have rebounded and many believe the Fed-engineered takeover of Bear Stearns marked the nadir of this crisis.

There's also more-than-ample evidence Ben Bernanke should focus more diligently on the inflation issue -- most notably soaring commodity prices.

If Bernanke is able to thread the needle -- stave off financial market distress and then quell inflationary pressures -- he will be hailed as the greatest Fed chairman since... well, Alan Greenspan.

But if the Fed finds itself later this year facing an economy that continues to slow while inflationary pressures continue to rise and its credibility to fight them damaged, Bernanke will be ridiculed as the worst Fed chairman since... well, Alan Greenspan.