The bears, especially short sellers, are having to deal with the last thing they want — a positive market response to disappointing economic data.

One of the disappointed is money manager Selwyn Ortz, a principal of Hong Kong-based HK Investments Ltd., whose portfolio of American securities is about 35% short.

“I may have gotten a wake-up call to rethink my American strategy,” he says, following the market’s resiliency in the face of the dismal disclosure from the Commerce Department on Friday that preliminary data showed first quarter GDP grew at a sluggish 1.3% annual rate, well below the consensus forecast of 1.8% growth, and down from 2.5% in last year’s fourth quarter. “I thought you would see the Dow down 100 points or so at the end of the day, that the market had finally found a reason to correct and would do it,” he says.

He was wrong. There was hardly a panic by investors in their initial reaction to the disappointing GDP news, which Wall Street basically responded to with a yawn. After a modestly lower opening, the Dow soon reversed course, moved higher, and wrapped up the day with a gain of 15.44 points. To some pros, the market’s Friday showing suggests stocks are likely headed higher.

Why no big sell-off? “Because if you dig deeper into the numbers, you will find the economic picture was more positive than at first glance,” a National City Corp. economist, Ryan Reed, tells me. “There were a lot of positives.” Chief among them, he says:

• Good news on the housing front. Residential investment was less of a drag than in the previous quarter and is improving slightly.

• Business spending (equipment and software) went from a negative in the prior quarter to a positive.

• The consumer continues to show a lot of muscle, with consumer spending rising 3.8%.

“I think when all is said and done, we’re in for a pleasant surprise,” Mr. Reed says. That means, he believes, the GDP number could be revised upward in the next two months, to growth of 1.5% to 2%.

Mr. Reed sees a rising trend for the balance of the year, with GDP growing at a 2% to 2.5% rate in the current quarter and at about a 3% rate in both the third and fourth quarters. For all of 2007, he envisions GDP growth of 2.5%, followed by a 3% gain in 2008. “By the end of the year, the economy should return to long-term potential growth,” he says.

The economy’s sloppy first quarter showing has spurred speculation that a Fed rate cut could come sooner than later, but a Raymond James Financial economist, Scott Brown, takes issue with such a premise. Granted, he says, “We’re looking at slower growth, but continuing inflationary pressures, led by rapid wage gains, indicates the Fed’s next rate move is as apt to be up as it is down.” (Fed futures currently point to a rate cut around Halloween).

“Disappointing, but not a disaster” is Mr. Brown’s view of first quarter GDP. However, he sees sluggish growth giving way to a perkier second half, as he expects the economic drag from housing to subside. His GDP outlook calls for a 2% to 2.5% gain in the current quarter and a 2.5% to 3% rise in the third and fourth periods.

A professor of economics at the University of Maryland, Peter Morici, also sees the housing sector picking up, starting, he believes, in the next quarter. Even though inventories of new and existing homes are at near record levels and delinquencies are up sharply in prime and sub-prime financings, prices of new and existing homes rose in value both in February and March, Mr. Morici notes. “Keep in mind,” he says, “housing can only slow down so much.”

As far as the economy goes, he shares the widely held view that a second half pickup is in the cards. While the American economy is slowing, a number of areas, he

points out, are doing quite well, such as durable goods, capital goods, high-tech services, and high-end financial services. Ditto, he adds, the global economy. He also thinks exports will be stronger than expected, and expects GDP growth this year to run 2.3%, followed by 2.8% next year.

“It’s easy to see the glass as half empty,” he says, “but we have likely seen the worst of things and consumer spending and stronger business investment will probably raise growth for the balance of the year.”

What does it all mean for the stock market? Our good professor figures that surging corporate profits, moderate growth, steady interest rates at home, and more robust foreign demand for equities here should power up American stock prices. “I think you can saddle up the bull and set your sights on Dow 14,000,” he says.

dandordan@aol.com