NEW YORK (CNN/Money) - The U.S. economy may be recovering -- in fact, no doubt IS recovering. So why isn't that enough to put conviction back into the stock market or to rescue the ailing dollar? Because in the face of terrorism scares and quality-of-earnings doubts, the recovery remains too young and fragile to boost investors' confidence.

Take new claims for unemployment benefits today. They fell in the latest week, to 410,000. That compares with a 2002 peak of 492,000 in the March 30 week, a nice move down. But they're still above 400,000, where they have been for eight straight weeks. And the number of folks who remain unemployed and collecting benefits rose again.

So the theme remains the same: companies may not be laying off workers as much as they were last year, but it doesn't look like there's much hiring going on out there. That means unemployment could stay up around six percent, and that income growth will remain anemic, a risk to future spending.

The housing sector is another bright spot that has a cloud or two around. On the upside, take a look at the latest 30-year fixed mortgage rate from Freddie Mac: 6.76 percent!! (vs. 6.81 percent the week before). That says interest rates won't choke off demand any time soon.

The bigger worry in the U.S. right now is that we are in a housing bubble, i.e,. a frenzied state where people are paying any inflated price necessary to buy real estate because stocks look sick and bonds don't yield enough. Nearly every economist I've spoken to lately doubts it, because outside the "hot" metro areas prices are rising but not skyrocketing, because low mortgage rates are keeping housing affordable, and because it's as much tight supply as it is rising demand that is pushing prices higher. And Fed chairman Alan Greenspan is on record saying that housing markets are local, you can't trade houses the way you do stocks, ergo, no bubble. Fair enough.

But take a look at the U.K. A report out today shows that home prices rose 2.1 percent in May to leave the annual rate of house price inflation at 17.9 percent -- the highest since 1989. I say, Mr. Greenspan, dost thou think there's any chance the housing market has gotten a bit bubbly globally? The Bank of England meets next week to set interest rate policy and while there's no expectation of an immediate increase, bets are that rate hikes will come soon.

Then there's the dollar, which is coming under increasing pressure. Right now, the case against the buck is pretty simple. Our economic recovery isn't looking all that robust, and our stock market looks downright dodgy, so a lot of global-type money managers are saying it's time to diversify out of U.S. stocks into other stock markets. And the more they do that, the more dollars get sold and the more foreign currencies get bought. And of course that pressures the dollar more, and the cycle continues.

In a chat today, Marc Chandler of HSBC wondered aloud what could shift the dollar's course. Number One: the Federal Reserve raising interest rates, he said. But if anything, more and more economists are saying the Fed won't be raising rates for the foreseeable future, not with stocks weak, the possibility of military conflict looming between India and Pakistan, domestic terror threats being issued daily, etc.

So let's look at Marc's Number Two Potential Dollar Booster: global fund managers waking up and realizing that they aren't making as much money as they hoped by going into foreign stocks. He notes that in the second quarter to date, while the S & P 500 has dropped by 7 percent, French stocks have fallen by 9 percent, German stocks by 11 percent, and Italy is down 9.5 percent.

Yes, Japan's Nikkei is up, nearly 7 percent, but he thinks that may be at least partly related to some pending changes in how stocks trade in that market. If this trend continues, at some point fund managers will put money back into U.S. stocks and that could halt the dollar's slide, he hypothesizes.

And in a recent editorial, the Financial Times reminds us that global currency markets took a similar tack on the dollar last year about this time, and in 2000 and in 1999. But the dollar regained its footing and moved higher again. Time will tell if this year the dollar's fate is really different.

Time will also tell us more about the U.S. economy.

One minor bright spot today: air cargo shipments. According to the Air Transport Association, scheduled global air traffic rose 0.4 percent in April compared with April of 2001 -- the first such increase since January of last year. And the numbers for domestic freight and express shipments look even better: up 15 percent in April over the previous year -- the fourth month in a row shipments have risen. This may be a small indicator of overall demand but when you look back over the last decade or so it appears to move in tandem with upturns and downturns in the economy. So put it in the category of another hopeful straw in the wind.

Friday brings reports on University of Michigan Consumer Sentiment, Factory Orders and revised first quarter productivity. Hard to imagine that any of these will do much to appease the fears of those who believe there's not yet enough oomph in the recovery to turn the tide for stocks or the dollar.

But stay tuned. Fridays in the summer can be interesting.

Kathleen Hays co-anchors Money & Markets, airing Monday to Friday on CNNfn, and appears throughout the day reporting on the economy and how it affects financial markets. As part of CNN's Business News team, she is also a regular contributor to Lou Dobbs Moneyline.