Wednesday morning headlines

Welcome to Q3: Wall Street starting off the July-September quarter on the plus side. Dow is up about 65 points in early trading.

Sizing up Q2: It's a little like watching the Dodgers this season: The numbers look good, but you're just not sure how long it can last. The Dow closed the second quarter at 8447, up 838 points or 3.8 percent from the previous three months but still down 40 percent from its all-time high. From the NYT:

Despite signs that this downturn is easing, many Americans are more downbeat about the economy now than they were when the stock rally began. Unemployment is rising. Home prices are falling. Many corporate earnings are still weak. "Less-worse isn't the same as better," said Barry Ritholtz, chief executive of FusionIQ, a research firm. "We want to see 'good.' In order to grow profits, in order for earnings to increase, in order for corporate America to start hiring and spending, we need to see greener shoots. So far that hasn't really happened."

Job cuts being trimmed: Private employers only reduced their rolls by 473,000 jobs in June, which is the lowest level in eight months. Still, it was a bigger loss than expected, and another reminder that the jobs recovery is a long way off. The U.S. jobs report is due out on Thursday. (Reuters)

No deal on budget: Actually, the deficit widened further overnight because lawmakers failed to cut education spending and shift redevelopment funds (something about the formula used in calculating school funding). From the Sacto Bee:

Schwarzenegger plans to declare a new state of fiscal emergency today, launch another special session and propose additional program cuts to solve the larger deficit problem, spokesman Aaron McLear said. The new deficit number will be roughly $26.3 billion, about $2 billion higher than the governor's May budget, according to Schwarzenegger's Department of Finance. Senate President Pro Tem Darrell Steinberg said Schwarzenegger's veto threat against a stopgap package to cut the 2008-09 education budget and delay IOUs "may be the most irresponsible act I have seen in my 15 years of public service. And for what? It's a monumental blunder."

About those IOUs: It would be only the second time since the Great Depression that the state has issued warrants instead of checks. Still unclear is whether banks will be willing to cash them before they mature in October. From Bloomberg:

The controller will begin issuing the IOUs tomorrow after a meeting of the State Pooled Money Investment Board, which will set the interest-rate that the state will pay on the promissory notes until they mature in October. More than $1 billion of the so-called warrants will be issued to the elderly, disabled and to welfare recipients that are due checks, according to the controller. Another $565 million will be sent to businesses that hold contracts with the state, while $159 million will be given to students.

Sales tax going up: Starting today, it's 9.75 percent for L.A. County (and over 10 percent in a few municipalities within the county). The tax will be used to finance transportation projects. (LAT)

American Apparel probe: A federal investigation finds that about 1,800 of the company's factory workers in the L.A. area had supplied suspect or invalid records and were not authorized to work in the U.S. All told, American Apparel employs about 4,500 workers. (Reuters)

Wal-Mart pushes mandate: The retail giant supports President Obama's plan that requires employers to provide health insurance to workers. Wal-Mart's move appears aimed at beating back a measure that would result in a more burdensome requirement for companies that have lower-wage workers. From the WSJ:

The National Retail Federation, the industry's main lobby, said it was "flabbergasted" by Wal-Mart's move. "We have been one of the foremost opponents to employer mandate," said Neil Trautwein, vice president with the Washington-based trade group. "We are surprised and disappointed by Wal-Mart's choice to embrace an employer mandate in exchange for a promise of cost savings." Mr. Trautwein said an employer mandate is "the single most destructive thing you could do to the health-care system shy of a single-payer system," under which the government handles health-care administration. The mandate "would quite possibly cut off the economic recovery we all desperately need," he said. The group believes forcing companies to provide insurance will raise costs for its members.