Have we reached bottom yet?

That is what the U.S. treasury yield curve would have led you to believe earlier in the week following all the ongoing balance sheet write offs and the Fed's desperate attempt to jump start what was increasingly being perceived as an economy on the brink of recession. But just as the long end started rising, steepening the overall shape of the yield curve, the release of the ISM report (a gauge for the more important services sector) had the effect of a slap on the face. Indeed, if the figures are to be taken at face value, services are technically in contraction (to be fair, it should be noted that ISM reports are notoriously unreliable predictors). This was to be compounded by further weakness in home sales (no surprise there), disappointing January retail sales figures and higher than expected jobless claims for last week.
So despite a 125bp cut in rates and a government fiscal stimulus package in the pipeline it seems that we have not hit bottom yet. To be fair, the economy needs time to digest the more accommodative policies of recent weeks and so relying on backward looking indicators to gauge the state of the economy is not very useful. As such, it would seem that stock markets have become increasingly sensitive to the vagaries of economic releases, in the process losing part of its more traditional leading indicator characteristics.
To sum it up, although it is clear that we have not reached bottom yet (more turbulence is on the way), with recent and future anticipated Fed and government action and with all the write downs going on, we may be approaching a sweet spot that may very well lead to a sustainable recovery.