The economy roared out of recession in the first quarter, but signs of fragility linger, the Wall Street Journal is reporting this morning.

Profits, though improving, remain deeply depressed. Business pessimism is restraining capital spending and hiring. And the risk of higher oil prices caused by turmoil in the Middle East clouds the outlook, says the WSJ.

The economy grew at a 5.8% annualized pace in the first quarter, the fastest in two years. But more than half the growth came from businesses increasing production because they emptied warehouses and cut inventories so much last year.

That will give the economy a boost only temporarily. The vitality of the recovery depends on a rebound in business spending on equipment, software and buildings, and that fell at a 5.7% rate in the first quarter.

Signalling doubts about the economy’s continued strength, investors pushed the Dow Jones Industrial Average down 124.34 points Friday to 9910.72, leaving it down 3% for the week and below 10000 for the first time in two months, says the WSJ. “The dichotomy between bullish economic report and bearish market reaction illustrates the continued strains in the economy. The recession that began last March appears to be over. But the optimism that greeted the first evidence of recovery is fading with the latest data that suggest much slower growth in the current quarter.”

Many economic forecasters still predict the economy will grow a respectable 3% or better in the second quarter.