Investors looking for signs of a recovery got a mixed bag yesterday.

Alcoa (NYSE:AA) reported third-quarter income from continuing operations up 40% year over year to $283 million, or $0.33 per share, beating the analyst estimate of $0.29. Strength in the alumina market and cost cutting helped to offset traditional seasonal weakness in automotive and European markets.

The market has bid up Alcoa shares 50% since March expecting improvement, and Alcoa has delivered. Management produced additional quarterly cost savings of $23 million and is within $36 million of its goal of $1 billion in annual cost savings by year end. These savings helped produce a gross margin of 20.8%, the company's healthiest in two years.

But some are concerned that sales, up just 3% to $5.3 billion, aren't driving the recovery. Aluminum prices showed slight improvement during the quarter, and capacity reductions and industry consolidation should further alleviate pricing pressures. So far, however, prices remain weak due to overcapacity.

From Alcoa specifically, the first Dow component to report this season, investors got what they were looking for, but we may have to look elsewhere for signs of a broader sales-driven recovery.

Jeff Hwang can be reached at