GDP report

GDP report is likely to show recession eased in 2Q WASHINGTON — The recession likely eased in the spring, with the U.S. economy no longer in free-fall. Many analysts predict that when the Commerce Department releases its first estimate of second-quarter activity Friday, it will say the economy shrank at a 1.5 percent pace from April though June. If they are correct, it would mark a vast improvement from the 5.9 percent annualized drop recorded over the prior six months — the weakest showing in 50 years.

“The recession kind of came in like a lion and is going out like a lamb,” said economist Ken Mayland of ClearView Economics. Less drastic spending cuts by businesses, a resumption of spending by the federal government and an improved trade picture factor into expectations for a better performance. Consumers, though, probably pulled back a bit. Rising unemployment, shrunken nest eggs and lower home values have weighed down their spending.

President Barack Obama said Thursday that while he thinks economic activity contracted in the spring, Friday’s report also should show that the United States has “stepped away from the precipice.” Business inventories could be the key swing number in Friday’s report. If companies slash the stockpiles on their shelves more deeply than expected, the report could show the economy suffering from an unexpectedly big contraction.

MarketWatch

Longer-term Treasury prices remained lower Monday, pushing yields up, after data on the services sector from the Institute of Supply Management came in better than economists expected. Ten-year note yields rose 4 basis points to 3.54%. ISM's index on the health of the non-manufacturing sector rose to 47 in June, from 44 in May and better than the 46 reading predicted by analysts surveyed by MarketWatch. Readings below 50 indicate contraction. Short-term Treasury prices remained higher, benefiting from renewed concerns about the trajectory for growth in the global economy, worries that weighed on equities to start the week.

The benchmark sector exchange-traded fund, Financial Select Sector SPDR Fund /quotes/comstock/13*!xlf/quotes/nls/xlf (XLF 11.33, -0.14, -1.22%) , was off 0.3% to 11.43 in morning trade. On Thursday, the ETF fell almost 3.5% after the U.S. Labor Department said the economy lost jobs at a faster pace in June than in May, suggesting the economic turnaround is further on the horizon. See full story. Analysts at Stifel, Nicolaus & Company Inc. were busy Monday revising their outlook on a number of credit card issuers amid new legislation that will significantly affect the industry.

First, the broker upgraded shares of American Express Co. /quotes/comstock/13*!axp/quotes/nls/axp (AXP 22.90, +0.63, +2.83%) to hold from sell, saying the firm is well positioned to manage new provisions in Card Act legislation that could hinder the overall credit card sector's profitability. "In our view, American Express is least exposed to the new rules due to its spend-centric model and low subprime exposure," wrote Chris Brendler at the broker in a note to investors. Additionally, concerns over the credit card maker's loan losses have abated, according to Brendler, as delinquencies dropped significantly in the current quarter.