A.M. MARKET UPDATE: 07.31.09:STREET SEEKS TO EXTEND RALLY

GDP REPORT: U.S. ECONOMY
SHRANK 1% IN 2ND QUARTER
MARKETWATCH: Treasury prices remained lower Friday, pushing yields up, after the government said the economy shrank 1% in the second quarter, less than economists expected. . . . Economists surveyed by MarketWatch predicted gross domestic product would contract 1.2% in the three months ended in June. The report also includes revisions to past data, which may cause some short-term volatility, traders said . . . READ MORE

SHARP DROP IN CONSUMER SPENDING
BLOOMBERG: Revisions showed the economic downturn last year was even deeper than previously estimated. . . . Consumer spending, which accounts for 70 percent of the economy, shrank more than twice as much as forecast last quarter; analysts anticipate it will take months to recover as job losses mount . . . READ MORE

MORGAN DOWNGRADES DISNEY
fOX BUSINESS: Analysts at J.P. Morgan on Friday cut their rating on Walt Disney Co. . . . "We are downgrading Disney ... based on our thesis that ESPN, parks and consumer products will continue to be a headwind for the company's earnings" . . . READ MORE

CHEVRON 2Q EARNINGS DECLINE
WELT ONLINE: Chevron Corporation today reported earnings of $1.75 billion for the second quarter 2009, compared with $5.98 billion in the 2008 second quarter. Foreign-currency effects reduced earnings in the 2009 quarter by $453 million . . . READ MORE

OBAMA, DEMS TRYING TO SAVE
'CASH FOR CLUNKERS' PROGRAM
CNBC: The Obama administration and Capitol Hill sources told NBC News that efforts are underway to protect the auto sales incentive program, also known as "Cash for Clunkers." . . . "Administration and Congressional officials are working to keep it up and running" . . . READ MORE

• 'CASH FOR CLUNKERS' BROKE

CEO SALARIES HIGHER THAN
EARNINGS AT BAILOUT BANKS
REUTERS: Bonuses paid to executives at nine banks that received U.S. government bailout money in 2008 were greater than net income at some of the banks, the office of New York Attorney General Andrew Cuomo said on Thursday. Cuomo said employee pay "has become unmoored from the banks' financial performance." . . . READ MORE

ANALYSTS 'LIE' ABOUT EARNINGS
BLOOMBERG: Stock analysts continue to promote corporate earnings lies, insisting that net income isn't really what investors need to know. Instead, their earnings estimates ignore often huge expenditures that can’t help but affect a company's health . . . READ MORE

COMMENTARY/AMERICAN SPECTATOR
INFLATION FUELING STOCK RALLY?
ROBERT STACY McCAIN: A few months ago, when I asked a private-sector economist what he thought of the policy now being pursued by the Fed, Treasury and Congress, he answered: "They're trying to re-inflate the bubble." That stock prices could go up as a result -- the deficit-funded flood of currency being partially diverted into securities -- is certainly a possible consequence of this inflationary policy. . . . READ MORE