WASHINGTON (AP) – A flurry of better-than-expected bank earnings reports this week, coupled with some tentatively encouraging economic data, suggest the economy and the financial system might not be quite as sick as many had believed.

Or are they?

Many analysts say it’s too soon to declare a recovery on the horizon. Instead, they warn, the economic crisis is likely to worsen in the months ahead.

“I don’t think we should oversell these flickers of improvement,” said Brian Bethune, an economist with IHS Global Insight. “An actual recovery is still several months into the future – it’s not imminent.”

But the stronger-than-anticipated earnings Friday from Citigroup Inc. and General Electric Co. – among the most beleaguered companies in their industries – also buttress the idea “that just maybe we can see some light at the end of the tunnel now,” said Mark Vitner, senior economist at Wachovia Corp. He projects an end to the recession toward year’s end but high unemployment well into 2010.

Citigroup lost money in the first quarter, and General Electric’s profits fell, but both beat Wall Street’s expectations. Their performance is being dissected for signs of where the economy might be heading.

Citigroup, which has been the weakest of the large U.S. banks, reported its smallest loss since 2007. And before paying dividends, which were tied to the government’s $45 billion investment in Citigroup, it earned $1.6 billion.

That report followed surprisingly solid earnings from JPMorgan Chase & Co., Goldman Sachs Group Inc. and Wells Fargo & Co. earlier in the week.

Some analysts, though, say the earnings announcements are concealing the depth of the financial industry’s woes.

Goldman Sachs changed its calendar so a $780 million loss in December wouldn’t drag down its reported $1.81 billion earnings for the quarter. Wells Fargo minimized possible future losses on its purchase of failed bank Wachovia. And thanks to a recent rule change, many banks were able to pump up the values of the toxic assets at the heart of the credit crunch.

The rule change is “like a gain that goes right to their bottom line,” said Lawrence Brown, an accounting professor at Georgia State University.

Looming over the banks’ financial results is uncertainty over “stress tests” that regulators are running on the 19 largest financial institutions. With the results expected to be announced May 4, investors still don’t know how much information will be made public. Even faint reports of trouble could threaten the industry.

GE, meantime, said its first-quarter earnings fell 36 percent on sharply lower profits at its troubled finance arm. GE has a stake in almost every sector of the economy, from light bulbs to locomotives.

“We’ve come from a period where people thought the world was going to end to a period that is a little better,” Keith Sherin, GE’s chief financial officer, told analysts in a conference call.

On Wall Street, stocks seesawed before closing moderately higher, giving the market its sixth straight week of gains. The Dow Jones industrial average closed up 5 points.

The number of Americans receiving jobless aid has topped 6 million for the first time. And housing construction unexpectedly plunged in March. Still, even those outwardly negative reports carried some silver linings suggesting the recession might be easing: A second straight drop in new jobless claims, for example, and some stability in single-family home construction.

Consensus is building that a bottom has been reached in sales of new and previously occupied homes. Homebuyers are rushing to take advantage of lower prices, incentives and interest rates. February sales of new and existing homes showed monthly gains.

Other bad news that emerged this week coincided with hopeful signs, too: Production at U.S. factories, mines and utilities fell in March for the fifth month in a row, faster than analysts had predicted. But a series of Federal Reserve snapshots from around the country found some faint signs that the steep drop in economic activity that began last fall is starting to level off.

Administration officials this week pressed their economic agenda by pointing to signs of hope among the mostly dire economic news.

“By no means are we out of the woods just yet,” President Barack Obama said in a speech on the economy. “But from where we stand, for the very first time, we are beginning to see glimmers of hope.”

Some experts cautioned that new problems could emerge. A wave of defaults linked to commercial mortgages has caused concern for companies that loaded up on securities backed by the those loans. Securities tied to credit cards pose a similar fear.

This week, the second-largest owner of shopping malls in the nation, General Growth Properties Inc., buckled under $27 billion in debt and filed for Chapter 11 bankruptcy protection.

General Motors Corp. acknowledged Friday that a bankruptcy filing remains probable given the restructuring goals set by the government for the automaker to get more than the $13.4 billion in federal aid it’s already received.

Other CEOs have been more positive. There are signs of mild optimism from the technology sector, especially the claim by Intel Corp. CEO Paul Otellini that the PC market had “bottomed out” after going through its worst stretch since 2002. The next day, research group IDC said the PC industry could turn around by the end of the year.

Other signals weren’t as good. Cell phone maker Nokia Corp. reported a 90 percent drop in profits and said it still looks like the market for mobile devices will shrink this year. Rival Sony Ericsson lost money.

And even the Internet’s biggest profit engine, Google Inc., showed it was singed by the recession, posting its weakest revenue growth in nearly five years as a public company.

In the skies, American Airlines parent AMR Corp. and low-cost carrier Southwest Airlines both reported losses and saw weak demand continuing at least in the near term. Fewer people are flying, and airlines must reduce fares to lure those who still fly.


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