Wall Street was set for a flat open on Tuesday as investors returned after a long weekend, with focus on U.S. manufacturing data and an upcoming meeting of European Central Bank policymakers.
Moody’s Investors Service has changed its outlook on the Aaa rating of the European Union to negative, warning it might downgrade the bloc if it decides to cut the ratings on Germany, France, UK and Netherlands.
The Institute for Supply Management releases its August manufacturing index at 10:00 a.m. EDT (1400 GMT). Economists expect a reading of 50.0, versus 49.8 in July.
The Commerce Department releases July construction spending numbers at 10:00 a.m. EDT (1400 GMT). Economists forecast a rise of 0.4 percent, a repeat of the June increase.
Activity in the U.S. manufacturing sector rose less than initially estimated in August, the Markit purchasing managers’ index, or PMI, for the sector showed Tuesday. The final PMI came in at 51.5, up only slightly from 51.4 in July, but below an earlier “flash” estimate of 51.9. Readings above 50 indicate expansion, and the PMI signals only modest improvement in conditions, Markit said. The Institute for Supply Management’s manufacturing index, due at 10 a.m., is expected to show a reading of 50.2%.
Eurozone manufacturing contracted for the 13th consecutive month in August, as exports in Germany, the bloc’s main engine of growth, fell at the steepest rate in three years, according to a purchasing managers’ index.
The Markit manufacturing PMI for the 17-country euro bloc was revised to 45.1 from the initially estimated 45.3. Although above July’s 37-month low of 44.0, it still remained significantly below the 50 mark, which indicates a contraction.
The figures contrasted with more encouraging manufacturing numbers from the UK, also released on Monday, which showed a bounce to 49.5 from 45.2 in July. But Markit, which compiles the data, emphasised a grim underlying picture for the country’s manufacturing sector, while disappointing PMI data from China at the weekend pointed to a more serious downturn than Beijing had been anticipating, economists said.
Analysts said although the eurozone’s PMI rate of decline was easing, eurozone gross domestic product was likely to contract in the third quarter, which would mark the euro region’s second recession in three years. GDP for the single-currency area shrank 0.2 per cent in the second quarter.
Economists polled by Thomson Reuters expect an annual selling rate for new cars and trucks in August of 14.2 million vehicles, which would mark the third straight month above 14 million. Analysts expect sales to rise in the range of 16 to 20 percent from a year ago.
However, U.S. sales in July came in weaker than expected, so analysts will be watching when automakers report results on Tuesday to see whether high unemployment and weak consumer confidence will dent demand.
European Union President Herman Van Rompuy traveled to Berlin for talks with German Chancellor Angela Merkel today as Italian Prime Minister Mario Monti hosts French President Francois Hollande in Rome. They were given a hint about what may be in store when European Central Bank President Mario Draghi said yesterday he would be comfortable buying three-year government bonds to aid nations struggling to fund themselves.
The stewards of the single currency, who have sparred as borrowing costs diverged in the 17 nation-euro area, have a chance to fall in line behind Draghi. Merkel, whose country shoulders the largest cost of bailing out weaker governments, has indicated she would back a more active crisis-fighting role at the ECB and yesterday told a crowd of beer drinkers in Bavaria that Germany must show solidarity with Europe.
Campbell Soup Co. (CPB) reported a better-than-expected profit for its fiscal fourth-quarter, helped by a 14% jump in U.S. sales for condensed soups, as well as gains for broths, ready-to-serve soups and sauces. Shares rose 5% to $36.89 premarket.
Montreal-based drug maker Valeant Pharmaceuticals International Inc. (VRX) agreed to acquire Medicis Pharmaceutical Corp. (MRX) for $2.6 billion, the latest in a string of acquisitions. Valeant will pay $44 a share for Medicis, a 39% premium to the stock’s Friday closing price. Medicis shares surged 38% to $43.47 premarket; Valeant shares were also higher, trading up 9.8% to $56.29.
Questcor Pharmaceuticals Inc. (QCOR) said it has been informed by the U.S. government that it is eligible for a lower Medicaid rebate amount of its blockbuster drug Acthar. Currently, the company pays a mandatory rebate to state Medicaid programs that is roughly 100% of the amount it charges its distributors for the drug; the new amount is estimated at roughly 23.1%. Shares surged 8.8% to $47.20 premarket after the company said in a securities filing that the the change could have a “materially positive impact” on its financial results.
StemCells Inc. (STEM) reported positive results for the first patient trial of its spinal cord injury treatment using neutral stem cells. The trial showed the treatment “continues to demonstrate a favorable safety profile, and shows considerable gains in sensory function in two of the three patients compared to pre-transplant baselines,” according to a statement released by the biotechnology company. Shares jumped 17% to $2.53 premarket.
A handful of companies filed plans Friday to offer common stock and other securities, pressuring shares after hours. Specialty-pharmaceutical and medical-device maker Delcath Systems Inc. (DCTH), which said it may offer securities and selling stockholders may offer shares of common stock for up to $100 million, saw shares fall 4.6% to $1.89 premarket. Biopharmaceutical company MannKind Corp. (MNKD) filed plans to offer up to $500 million of mixed securities, sending shares down 8.5% to $2.47 premarket.
Collective Brands Inc. (PSS) swung to a fiscal second-quarter profit as the shoe company reported stronger margins and continued sales gains at its performance and lifestyle division.
NTS Realty Holdings L.P. (NLP) said it received an offer from its chairman and chief executive to take the company private in a deal valuing the real-estate company at about $58.3 million. Founder and Chairman J.D. Nichols and Chief
Executive Brian F. Lavin offered to take the company private for $5.25 a share, a 71% premium over Friday’s closing price of $3.07.