(RTTNews) - The recent market rally has solely been based on optimism that the worst is behind us. Continued hand holding by the governments, a few better-than-expected economic readings and positive guidance lent support to the view that the global economy is on track to stage a recovery. Last week, the Japanese government doled out a 15.4 trillion yen stimulus package, which is primarily in the form of spending and tax cuts.

Another thinking behind the market buoyancy is that the negative responses to bad news are having smaller impacts, which go on to suggest that people are getting adjusted to the negative developments in the economy. According to Joel Naroff from TD Bank, the adjustment is the start of changing the course of the economy.

Most of the economic reports released last week are suggestive of still-wobbly conditions of the economy. The U.S. trade balance for February declined unexpectedly to $26 billion from $36 billion, as imports fell 5.1% and exports rose 1.6%. It was the first time since July last year that exports showed an increase. The decline in deficit is a positive to first quarter GDP, and is likely to add 1.5 percentage points. The rise in exports may have been due to stimulus spending outside the U.S. However, the decline in imports should be a cause of concern as it shows that domestic demand hasn't picked up.

Wholesale inventories, which make up a quarter of business inventories, showed a bigger-than-expected drop of 1.5% in February. Economists had expected a mere 0.7% monthly decline. Meanwhile, wholesale sales rose by 0.6%, rendering the wholesale inventories to sales ratio to 1.31 from a revised 1.34 in January.