It looks as if, sometimes, the stock markets go … up.

The TSX climbed 173 points on Tuesday, while the Dow was up 179.

Economists have noticed the trend, although they appear a little shy about it.

"I'm not suggesting the recession is over by any means. I'm just suggesting that we're beginning to get some evidence that some sectors appear to have bottomed," said Bank of Montreal chief economist Sherry Cooper. "Retail sales appear to have bottomed.… They're still weak, but I think we probably saw the weakest in January, February and things will begin to improve."

U.S. housing starts surged 22 per cent last month, U.S. wholesale sales edged higher, and Canadian factory shipments surprised on the up side.

'Employment is key. You'll need the income flows to sustain some of these tentative signs of improvements we've seen in retail sales and housing.'— Paul Ferley, Royal Bank assistant chief economist

The New York Times also tentatively wondered on the weekend if the economy had hit bottom, citing stock market gains of more than 10 per cent in a week, consumers returning to the malls, General Motors saying it wouldn't need its $2 billion US lifeline in February and two troubled large banks reporting operating profits.

Before popping the champagne and singing Happy Days Are Here Again, remember — both the Canadian and U.S. economies are struggling. The Canada Mortgage and Housing Corp. reported housing starts were down 20,000 units in February from the month before and the Canadian manufacturing numbers for January were –5.4 per cent.

But after months of issuing reports that the economy was "worse" or "far worse" than expected, economists are taking some encouragement in finding any evidence of a heartbeat.

"It's better news," said Paul Ferley, assistant chief economist with the Royal Bank, but he put most of the gains, meagre as they are, in context.

Stock markets may be responding to retail sales improvements, which may be due mostly to consumers having more money to spend because of lower gas prices. The dominoes could all reverse themselves quickly, he said.

"We're still looking at very pronounced weakness in labour markets," he noted. "Employment is key. You'll need the income flows to sustain some of these tentative signs of improvements we've seen in retail sales and housing."

In one sense, what is happening now is pretty much what was predicted. Canada's gross domestic product shrank 3.4 per cent last quarter and is widely expected to shrink another six per cent this quarter, the January-March period.

'If U.S. housing were to go to 1 million, which is still less than half what they were two years ago, that would give them 100-per-cent growth rate. It would still be a pitiful number, but it's a pretty good growth rate quote.'— Don Drummond, TD Bank chief economist

But as TD Bank chief economist Don Drummond pointed out, it is now mid-March and that means the economy's worst period, in terms of pace of deterioration, is all but over.

On Tuesday, the International Monetary Fund announced new forecast numbers that project the economy doing worse than previously reported. But its new numbers — a two per cent retreat in 2009 and a 1.2 per cent advance in 2010 in Canada — are mostly catch-up of previous private-sector forecasts.

In some sense, the more encouraging signals are a case of being so far down, there's no place to go but up.

Drummond pointed out that it would be difficult for the U.S. not to show progress in housing starts, since at about 500,000 a year, they currently represent about one-quarter the level of two years ago.

"If U.S. housing were to go to 1 million, which is still less than half what they were two years ago, that would give them 100-per-cent growth rate. It would still be a pitiful number, but it's a pretty good growth rate," he noted.

Still, Drummond also believes that the economic numbers, while continuing to fall, will start looking more promising next month.

And he agreed with U.S. Federal Reserve chairman Ben Bernanke, with one big caveat, that the industrial countries likely avoided a depression by moving swiftly on massive monetary and fiscal stimulus that has cut interest rates, grown the money supply and ramped up government spending.

The caveat is Treasury Secretary Timothy Geithner's approaching April 2 deadline to deliver a credible plan to take billions of dollars in toxic assets off the books of U.S. banks.

The markets are optimistic that Geithner will have learned his lesson from the market jitters that occurred about a month ago when he offered only generalities, "but if he fails, watch out," Drummond warned.

"There is still a lot of things that can go wrong."