Retail Report Bolsters Case for a Big Spring

NEW YORK ( TheStreet) -- Mystery solved: The weather did it.

Today's retail sales report should resolve any lingering doubt that the economic lull during the last few months was mostly about the bitter winter cold in the Northeast, Midwest and even parts of the South. That means the case for a spring surge looks to be on. And that's great for stocks -- except to investors who still think the sky would fall if interest rates move above zero.

The Census Bureau reported that March retail sales rose 1.1%, the best showing since September 2012, bringing the 12-month gain to a relatively healthy 3.8%.

The figure for March beat expectations for a 0.9% gain. And February's estimated 0.3% gain was revised upward to 0.7%, bolstering the case that the winter slowdown wasn't a sign of any weakening in the recovery.

The recovery-within-the-recovery looks exactly like what economists for cyclically sensitive industries such as home building and automobiles have been predicting -- an economic recovery led by spending on cars and home remodeling. Building materials sales rose 1.8% and furniture jumped 1% for its best gain since October.

A 1% jump in clothing spending and a 1.1% jump in restaurant spending also point to confident consumers spending money.

Heading into the spring, that should mean a pickup in real estate, especially with 30-year fixed mortgage interest rates still around 4.3% and five-year adjustables readily available for less than 3%.

Reports this week on home builders sentiment Tuesday and housing starts on Wednesday will give more clues about whether there's really a pickup in real estate. 

The retail-sales numbers would have been even better, if it weren't for lower gasoline prices, as spending at gas stations dropped 1.3%. The only other down sector was electronics and appliances, whose sales dipped 1.6%.

Interest rates rose this morning, as they should. The 10-year Treasury bond yield is up 0.02 percentage points to 2.65%.

With rates as low as they are, there are good and bad rate increases. The kind that seem to stem from fears of inflation is bad. But what's happening today is the good kind, the kind that happen when an economy begins to produce more-normal financial conditions after years of unprecedented easy-money policy.

Still, the Federal Reserve has made clear that rates will stay very low until there is broad-based strength in the labor market, including an acceleration in wages.

And although there are some signs that wages are increasing, it's not enough that the Fed will materially hit the brakes any time before 2016.

Wall Street has been atwitter over a week-long selloff that has shaved about 4% off the Standard & Poor's 500 index, but data like the March retail sales report are the tonic a nervous market needs.