US economic optimism may trump GM bankruptcy

• Source: Sina
• [15:42 June 01 2009]
• Comments

Investors are worried that if bond yields rise to make the huge amounts of government debt attractive, it will make it harder for companies and consumers to recover.

Market-watchers will be looking for more reasons to be optimistic in this week's economic data, which includes unemployment and the closely-watched nonfarm payrolls report. Readings on the manufacturing and services sectors are also on tap.

Next Friday's data is expected to show unemployment rose to 9.2 percent from 8.9 percent the month before, according to Reuters data. Analysts say unemployment is expected to increase even as the economy starts to turn around as companies remain reluctant to hire.

"There still seems to me to be a second shoe to fall on the effect of unemployment," said Carl Birkelbach, chairman and CEO of Birkelbach Investment Securities in Chicago.

But economic hopes could be dampened by the double-edged sword of higher commodity prices and worries over the impact of higher interest rates.

"We start to put additional pressure on the consumer by virtue of higher gasoline prices and higher borrowing costs. I think it threatens at least the timing of the recovery," said Craig Peckham, equity trading strategist at Jefferies & Co in New York.