Can The Recovery Survive This Dive?

By the official reckoning, the recession may have come to an end in the second quarter. But the decline in corporate profits was so sharp that some economists say it could pose a threat to the recovery. Although the anemic 0.4% gain in second-quarter gross national product reported by the Commerce Dept. was below expectations, it wasn't such a surprise as the drop in earnings. According to Standard & Poor's Compustat Services Inc., profits for the 900 companies in BUSINESS WEEK's Corporate Scoreboard fell 23% compared with last year's second quarter. That's much worse than the 10% decline that some analysts had been projecting as recently as two weeks ago.

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