Today's Headlines

Bloomberg:

- The worst U.S. economic slump since the Great Depression abated in the second quarter as government spending programs started to kick in, while the deepest retrenchment by consumers since 1980 augured a muted recovery. Gross domestic product shrank at a better-than-forecast 1 percent annual pace after a 6.4 percent drop the prior three months, Commerce Department figures showed today in Washington. A survey of purchasing managers showed separately that business contracted less than estimated this month. Stabilization in homebuilding and the liquidation of unsold goods sets the stage for gains in GDP starting this quarter, analysts said.

- The cost of protecting bank bonds from default headed for its biggest monthly decline since April 2008 in Europe as trading in fixed-income assets, surging stock prices and record bond issuance boosted earnings. The Markit iTraxx Financial index of credit-default swaps on 25 European banks and insurers is on pace for an almost 30 percent decline, according to JPMorgan Chase & Co. It tumbled as much as 33 basis points to 77, the lowest since Aug. 18, and was trading at 79 basis points at 11 a.m. in London. “The assumption is banks have seen the worst of the losses,” said Mehernosh Engineer, a credit strategist at BNP Paribas SA in London. “Since they were the ones to lead us into this crisis, they will be the ones to lead us out.” Investor demand for financial company debt pushed the Markit iBoxx Euro Corporates Financial index, which tracks 533 bonds sold by companies including Bank of America Corp., BNP Paribas and Deutsche Bank, up 4 percent this month, the biggest monthly gain since April. The gauge is at 87.99, the highest since Sept. 15, the day Lehman Brothers Holdings Inc. collapsed. The extra yield investors demand to own investment-grade financial company bonds instead of government debt fell 62 basis points this month to 2.93 percentage points, the smallest gap in 10 months, according to Merrill Lynch & Co.’s Euro Financial Corporate bond index.

- Lone Star Funds founder John Grayken is securing pledges toward his goal of raising $20 billion to invest in distressed commercial real estate and securities, according to two people familiar with the matter. Grayken may garner as much as $2 billion by the end of August, said one person, who asked not to be identified because the information is private. Dallas-based Lone Star last year raised $10 billion to buy real estate assets. Lone Star is doubling the size of its funds as the deepening crisis in commercial real estate increases opportunities to buy at discounts.

- Crude oil rose after a better-than- expected report on U.S. gross domestic product bolstered speculation that the economy of the world’s biggest energy consuming country is recovering from the recession. “The market is getting some support from stocks, but the more salient feature is the weakness of the dollar against the euro,” said Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois, energy consultant.

- China, the world’s largest consumer of potash, may seek lower prices for the fertilizer than India secured from suppliers in Russia, the Middle East and Canada, because of slack domestic demand and high stockpiles.

- The high in New York City today is forecast to hover around 80 degrees, making it only the second time on record that June and July temperatures failed to reach 90, the National Weather Service said. Central Park thermometers haven’t touched 90 degrees Fahrenheit (32.2 Celsius) since April, and if this holds through today the month would be one of the 10 coolest Julys on record, according to the weather service records. The only other time a June and July passed in the city without temperatures reaching the 90s was 1996. “Daily average temperatures have been at or below normal every day but one this month, and for 54 of the 59 days since June 1,” the weather service office in Upton, New York, said in a statement on its Web site. The average temperature for the month in Central Park so far is 72.6, 3.9 degrees below normal, putting it in a tie for sixth place on the list of coolest Julys, along with 1895, the weather service said. The high for this month was 86 on July 17. The coolest July on record was 1888, with an average temperature of 70.7.

- Staples Inc. and Wal-Mart Stores Inc. are slashing laptop prices and expanding their selections for the back-to-school shopping season, banking on the computer demand to sell more profitable accessories and services. Staples, the largest office-supplies retailer, boosted its portable computer selection by 50 percent, while Wal-Mart, the world’s largest retailer, is selling out of a $298 Compaq Presario model in some stores. Those retailers, along with Best Buy Co., are looking to cheaper laptops to entice customers to buy the external hard drives and bags that are three times as profitable as the computers, according to Stephen Baker, an analyst at NPD Group.

- The House of Representatives will combine three different health-care overhaul measures during the August recess and likely vote on the legislation “sometime in September,” Speaker Nancy Pelosi said today.

Wall Street Journal:

- The House voted Friday to transfer $2 billion in emergency funding from the economic stimulus plan to the "cash for clunkers" program, ensuring it has sufficient funds to continue. The move follows a scramble Thursday after it emerged that the initial $1 billion allocated to the clunkers program may have been close to exhausted after just one week. The legislation would shift $2 billion from the $787 billion stimulus plan to the program. The House voted 316 to 109 to approve the extension. Because the measure was placed on the suspension calendar, it required two-thirds of lawmakers' support to carry it.

- I have been battling non-Hodgkin’s lymphoma, an incurable blood cancer, for the past nine years. Last year, I was also diagnosed with uterine cancer. I didn’t run to Canada for treatment. Medicare took care of my needs right here in New York City. To endure, I just need the freedom to choose my insurance, my doctors, and get the diagnostic scans and care I need. And one more thing: I need hope that a treatment will be developed that can control my diseases the way insulin controls diabetes. Every cancer patient needs these things, especially hope. But the government’s plan to reform the health-care system in this country threatens all of this—particularly the development of new treatments.

NY Times:

- As the nation girds for a possible swine flu pandemic, one of the big weapons may come from an unexpected source — a vaccine squirted or dropped into the nose. MedImmune, which already makes the nasal spray vaccine FluMist for seasonal flu viruses, says it is on track to produce about five times as much swine flu vaccine as it had expected — so much, in fact, that it will run out of nasal spray devices and is looking to administer the vaccines with droppers instead.

Morningstar:

- The U.S. Commodity Futures Trading Commission said Thursday it plans to regularly include some data it receives from ICE Futures Europe in its weekly large trader reports starting this Friday.

ocregister:

- The California Association of Realtors reported that Orange County’s inventory of houses for sale continued its five-month slide in June, due mainly to fewer homes on the market. CAR reported that: It would take 5.8 months to sell all the houses for sale in June at that month’s sales pace. That’s the lowest “inventory” level for Orange County since the housing slump began in October 2005. That’s down from a maximum inventory of 21.5 months in January 2008 (see chart).

LA Times:

- After months of marching in line as senior Democrats worked with the White House to develop healthcare legislation, liberal lawmakers from solidly Democratic districts are threatening a revolt that could doom President Obama's bid to sign a major bill this year. In the House, liberals are furious at their leaders for striking a deal with conservative Democrats that would weaken the proposal to create a government insurance program, a dream long cherished on the left. On Thursday, 57 of these liberals sent a letter to Speaker Nancy Pelosi (D-San Francisco) warning that they would vote against any bill that contained the terms of the deal. The rising tide of liberal anger sent the White House scrambling, with Obama calling at least one left-leaning lawmaker to offer reassurance before Congress leaves town for its August break. On Thursday, Pelosi and other House Democratic leaders also met privately with a group of labor leaders, consumer advocates and AARP to enlist their support. Scores of liberal Democrats favor a single-payer system similar to those in Canada and Britain, where the government controls the delivery of healthcare. (Eighty-six House Democrats are cosponsoring a bill to create a single-payer system in the U.S.) Senior House and Senate Democrats are contending with a growing cadre of party centrists, many of whom are uneasy about expanding government's role in healthcare. "We're at a point where there's no retreat, and we can and must hold the line," said Rep. Raul M. Grijalva (D-Ariz.), co-chairman of the liberal Congressional Progressive Caucus. "We regard the agreement reached by Chairman Waxman and several Blue Dog members of the committee as fundamentally unacceptable," they wrote. "This agreement is not a step forward toward a good healthcare bill, but a large step backwards."

Washington Post:

- President Obama's $787 billion stimulus plan is having little effect on job creation within the general-construction industry, the trade association for the sector said Thursday. Construction spending was "disappointingly slow" five months into the recovery program, with firms working on stimulus-funded construction projects hiring at no greater rates than those without such work, according to the Associated General Contractors of America, known as AGC. The findings are based on a survey of almost 1,000 construction companies. Polling has shown that confidence is dropping in the measure's ability to reverse the economic decline, and its success or failure could become a central plank in the 2010 midterm elections.

NJ.com:

- Jack Shaw, the Hudson County political consultant found dead in his apartment just days after his arrest on bribery charges, had agreed to cooperate with federal authorities in their sweeping government corruption probe, according to two people with knowledge of the investigation. Shaw, 61, was to help develop new information on those already charged in the case and to possibly identify new targets, said the sources, who spoke on condition of anonymity because they were not authorized to discuss the arrangement.

Rassmussen:

- The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 28% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Thirty-nine percent (39%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -11 (see trends).

AllThingsDigital:

- Once the plucky underdog in the browser battle, Mozilla’s Firefox is today the second most popular browser worldwide, after Internet Explorer. Since it was first released in November 2004, the browser has succeeded not just in dislodging Microsoft’s (MSFT) IE from its dominant market position, but in proving that an open-source project can become a widely used consumer application. Now, it is fast approaching its billionth download and is likely to hit that milestone this afternoon.

MoneyNews:

- China's economy is growing at 2 percent, not the 7.8 percent its government claims, says economist Marc Faber, publisher of the Gloom, Boom and Doom report. “The Chinese government is one of the few governments in the world that knows its GDP numbers three years in advance,” Faber told CNBC. “I’d be a bit careful about China.” “If you throw money at the system, lots of things go up in value — but maybe they go up for the wrong reasons. What disturbs me today … is that the lows in March and late last year, sentiment was incredibly bearish about everything.” Now, Faber observes, “there’s this incredibly bullish sentiment when insiders are actually selling and the technical picture of the market doesn’t look that great.” Faber believes the market faces headwinds because there’s a huge supply of available shares and a record number of new issues, which dampens share-price increases.

Reuters:
- Government regulators could prohibit incentive-based pay packages at large U.S. financial institutions that encourage "inappropriate risks" under a bill approved on Friday by the U.S. House of Representatives.

- A measure of future U.S. economic growth climbed higher in the latest week while its yearly growth rate hit a fresh five-year high, signaling a stronger recovery than originally forecast, a research group said on Friday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index rose to 119.6 in the week ended July 24 from a downwardly revised 118.3 the previous week, which was originally reported at 118.4. The index's annualized growth rate continued to soar, reaching a new five-year high of 8.8 percent from 7.7 percent the prior week. ECRI Managing Director Lakshman Achuthan has said the recession is already beginning to wane, and that increased stimulus from Washington is not necessary for economic growth. "Not only is the U.S. recession set to end this summer, but the recovery is apt to be stronger than many expect."