The Philadelphia Fed Survey of Manufacturing in the tri-state area came in at -12.7. This was an improvement from the prior month's reading of -16.3, and slightly ahead of expectations. Initial unemployment claims were 432,000, which was also an improvement from the prior week's reading of 445,000, and better than expected.

Despite these improvements, these numbers are still quite negative. We may be in the process of forming a short-term bottom. Much of this will depend upon what happens to oil prices. If oil prices stabilize or continue to drop in the near future, this will offer some much needed relief to our consumer-driven economy. However, if the recent drop in oil is only a minor correction, the economic news will get worse.

• Even if oil stabilizes and if the economy starts to form a bottom, I do not believe that we will experience a substantial rebound. There are too many economic pressures which will not be resolved overnight:
  The housing crisis is very similar to the one experienced in the late 1980s and early 1990s. This took a decade to resolve.
• The current banking and credit crisis also resembles the Savings and Loan debacle of that earlier era. This eventually required massive intervention by the Federal government in the form of the Resolution Trust Corporation (RTC) to repair the financial system.

Those people expecting a quick recovery like 1998 will be sorely disappointed.

Doug Roberts is the Founder and Chief Investment Strategist for ChannelCapitalResearch.com, and is the author of Follow the Fed® to Investment Success: The Effortless Strategy for Beating Wall Street. He previously held executive positions at Morgan Stanley Group and Sanford C. Bernstein & Co.

Jobless claims last week unexpectedly fell to 293,000, down 5,000 from the previous week. Economists had been expecting that the weakness in housing would spread to other parts of the economy. However, this latest report indicated that they may be waiting for quite some time.

This report seems to also clearly support the Fed's position that the subprime mortgage crisis is largely contained and is not spreading to the rest of the economy. Dr. Bernanke described this in detail in a speech that he made today. The Philly Fed Report also came in better-than-expected.

The combination of the Bernanke speech, the Philly Fed report and the Jobless Claims report also seemed to put cold water on any hopes by Wall Street for a rate cut in the near future. The economy is still slowing, however, slow growth is still growth. It is not the beginning of a recession which would necessitate substantial rate cuts.

Chairman Bernanke has made it abundantly clear that he will let the economic data dictate changes in the Fed's position rather than anticipating the changes. Wall Street would be well advised to remember this point. It is much more profitable to follow rather than to fight the Fed.

Doug Roberts is the Founder and Chief Investment Strategist for FollowtheFed.com, an investment strategy that uses the Federal Reserve's impact on the stock prices. He previously held executive positions at Morgan Stanley Group and Sanford C. Bernstein & Co.