The tone from Industrials is modestly more positive
An employee works on a Rolls-Royce V2500 engine, which powers the Airbus 320 family of passenger aircraft, on the final assembly line inside Rolls-Royce Holdings Plc's aerospace unit factory in Dahlewitz, Germany.

Industrials: there is a change in tone. I've been talking this week about watching what the big industrials have to say about the global economy.

The markets have recovered. We are a long way from the worries about a global recession that dominated markets in February.

But is there really any signs of improvement, even modest improvement? Last quarter, conference calls were dominated by phrases like "cautious."

Has the message changed? Yes, modestly.

It started this week with Illinois Tool Works , which reported Wednesday. Management repeatedly stated that conditions were " firm" and "stable" in most end markets, but were "not accelerating."

OK, that's better than "cautious."

General Electric reported today, and reaffirmed full year guidance with respectable organic growth of 2-4 percent. On the conference call, GE CEO Jeff Immelt was blunt in calling the oil & gas business "challenging," but he also said the aviation business was seeing "sustained strength," that healthcare was "rebounding" and that he was seeing "improvements in our business" in China. Overall, Immelt concluded "there's plenty of business out there to achieve our goals."

That is marginally more positive than last quarter.

Even companies that have had a tough time are modestly more optimistic. Take Caterpillar . No one is trying to gild this lily: there were sales declines in all the key businesses, including construction, oil and gas, mining and rail.

But CEO Douglas Oberhelman came on our air and said, "Overall I think we are close to the bottom." He talked about a bounce in China,

good orders in Europe, while acknowledging that Brazil was still bad and mining was flat.

For a company that has seen declining revenues since 2012, saying we are close to a bottom is a definite change in tone.

For Honeywell , each of the segments exceeded the sales guidance they provided earlier in the year. Earnings were up 9 percent year-over-year; HON has been a consistent earnings grower. The two biggest sectors by revenue showed respectable gains: Aerospace had 3 percent organic growth, while automation and control solutions saw organic growth of 4 percent.

On the conference call, Honeywell officials noted that growth "accelerated" in key categories like aerospace. They raised the low end of their 2016 earnings guidance, expecting earnings to grow 7-10 percent. Core organic sales guidance is 2 percent in the second half of the year, better than the 1 percent growth in the first quarter.

In energy, Schlumberger CEO Paul Kibsgaard, on the conference call last night, said that the oversupply in the oil market will narrow to zero by the end of 2016. "So yes, we believe and I think we agree with you that the oil market is in the process of balancing," he said in response to a question.

So what's this mean for the markets? There's a change in tone, however modest, and that's a good sign for earnings in the second half of the year and increases the chances that we can end this earnings recession (four consecutive quarters of earnings decline in the S&P 500).

There's two problems. First, many investors have anticipated a modest uptick in the global economy and started buying these names when they were beaten-up at the end of February at what now looks like a bargain-basement price. As a result, the stocks are not cheap anymore.

Industrials: expensive

(forward P/E ratios)

Caterpillar 21.8

GE 20.6

Honeywell 17.4

Illinois Tool Works 18.9

Source: Factset

The second problem is that the whole world has become a momentum investor, and will dump stocks with perfectly good earnings reports that have run up in anticipation of a decent report.

This was the problem with Google , Microsoft , Visa and Starbucks all of which are trading down today as growth was just not quite as strong as the most bullish holders of the stocks anticipated. Not surprisingly, none of these are cheap either.

But have you noticed something? Despite big declines from these huge names, the S&P 500 is trading on either side of up or down a half

percent through the morning. There almost two stocks advancing for every one declining on the NYSE.

Surprised? Everyone is looking for some kind of correction due to weakness in those stocks, but it's not happening. Investors want to own stock! The pain trade still appears to be higher.