Futures Lower; Deal Gives Schering Boost
Stock index futures pointed to a lower open for Wall Street, but were off the day's lows as Dow component Merck announced it will merge with Schering-Plough in a cash and stock deal.
Schering-Plough shareholders will get 0.5767 share in the new company and $10.50 in cash for each Schering-Plough share, the two companies said in a statement.
Merck said the value of the deal will be about $41.1 billion and the new company will keep the Merck name.
Merck shares fell 4.5 percent in premarket trading, but Schering-Plough gained 17.4 percent.
The whole world needs to step in to stop the economic crisis, by pumping more money into the economy in a coordinated effort, White House chief economic adviser Larry Summers said on Monday.
In the financial sector, GE Capital, the finance arm of General Electric , plans to sell more bonds under a government guarantee program, a source involved in the deal told Reuters on Monday. GE the parent company of CNBC.com., saw its shares fall 1.5 percent premarket.
Capital One became the latest financial to announce a dividend cut, saying it was slashing its yield from 37.5 cents to 5 cents beginning in the second quarter and holding into the future. The credit card company said the move will save $500 million annually.
Overall, financial shares continued to feel the heat and were the biggest weight on futures, with Goldman Sachs dropping 1.6 percent premarket.
However, Bank of America shares showed some strength, gaining about 1 percent as Barron's said the firm can avoid the same fate as Citigroup by tightening up its operations, and could post strong earnings again once the financial crisis has passed.
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At least two dozen American and European banks benefited from the bailout of American International Group, with approximately $50 billion paid out to them since the Federal Reserve first gave aid to the insurance giant, the Wall Street Journal reported.
Goldman Sachs and Deutsche Bank received a combined $6 billion between September and December last year, the paper said.
Goldman Sachs' chief executive said he opposed the full nationalization of banks, but thought government stakes could be sensible in extreme situations, in an interview with German weekly Welt am Sonntag.
But the US should let some big troubled banks fail rather than commit more federal funds to prop them up, two key congressional Republicans said Sunday.
Senator Richard Shelby, top Republican on the Senate Banking Committee, said the United States should not mimic Japan, which in the 1990s propped up failing banks and prolonged its economic downturn.
And Senator John McCain, also criticized the new administration's response to the banks.
In other news, General Motors denied a report that its German carmaker Opel is preparing for bankruptcy.
Shares of Halliburton were drawing interest, with the energy exploration firm's stock gaining nearly 4 percent after FBR said gasoline consumption would continue to decline and investors should turn their sights towards larger firms in the industry. FBR upgraded both Hallirburton and Transocean, which also edged higher, to outperform.
Best Buy also was trading higher on an estimate from William Blair that the electronics retailer would see a 7 percentage point sales gain following the demise of Circuit City, which closed the last of its stores over the weekend.
Also in retail, Amazon shares rose 1.2 percent after Piper Jaffray raised the online store to buy from neutral, citing a survey showing a high level of consumer satisfaction with the company.
The newspaper industry continued its difficult year as national chain McClatchy , which owns the Sacramento Bee, Miami Herald and other papers, said it will cut 1,600 positions, or about 15 percent of its workforce.
Asian stocks were lower, while banks dragged down European markets in the morning, after the UK government raised its stake into Lloyds Banking Group to up to 77 percent at the weekend, in exchange for pledges from the bank that it will boost lending.