Stocks and high-yield corporate bonds are back to appropriate levels, the world's biggest bond fund manager said on Friday, a day after fears of spreading problems in the housing market triggered a rout in global stock and credit markets.

Speaking on CNBC Television, Bill Gross, chief investment officer for Pacific Investment Management Co., also said he does not believe an economic recession is looming.

Corporate earnings are holding up fine in a reasonably performing U.S. economy, Gross said, dismissing a notion that the turmoil in markets was signaling a sharp deceleration in the economy.

After he spoke, the government reported that the U.S. economy grew at a 3.4 percent annual pace in the second quarter, higher than Wall Street economists had predicted.

There's nothing wrong with stocks at this point, Gross said. That said, he would be neither a buyer nor seller of stocks at the moment.

His comments came a day after U.S. and global stock markets swooned, corporate credit markets tumbled and government bonds soared. Major U.S. stock indexes fell by more than 2 percent each, with the largest 3,000 U.S. stocks losing some $420 billion in value.

On a price-to-earnings basis, stocks are now the cheapest they've been since early April, with the S&P 500 valued at 15.34 times prospective 2007 earnings. A week ago the benchmark U.S. equity index was trading at a multiple of more than 16.

Investors fled to the safety of U.S. Treasuries. Benchmark government note yields, which move opposite to their price, fell to their lowest in two months, ending Thursday just above 4.8 percent. They were lower still on Friday morning, dropping to 4.75 percent.

At the heart of the market's anxiety are questions about how far the meltdown in the U.S. housing market will spread. Already it has resulted in tightening credit for both consumers and corporations. Investors are worried it could stall consumer spending and limit access to the financing needed for the corporate buyouts that have supported stock prices recently.

Gross' comments come three days after he said defaults on subprime mortgages were spreading into U.S. credit markets, producing a sudden liquidity crisis in the high-yield bond sector. These loans go to borrowers with spotty credit.

On Thursday, buyers went essentially on strike in the U.S. junk bond market thanks to a mounting backlog of derailed corporate buyout financings. The concern also afflicted high-grade corporate bonds, widening the yield spread on top-quality bonds by about 5 basis points.

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