In the first sign the U.S. economy is coming out of its recent stall, the manufacturing sector expanded at a respectable rate in July, to 62.0 from 61.1 in June, on strong orders and higher production rates. It was the 14th consecutive monthly increase and was in line with the consensus forecast of analysts. An index reading above 50 indicates expansion. Also, the Commerce Department reported that construction spending slipped 0.3 percent in June to a seasonally adjusted $985.2 billion after expanding a revised 0.1 percent in May, another sign the economy hit a rough patch early in the summer.
NYSE Plans More Electronic Trading
The New York Stock Exchange said it wants to allow trades to be executed electronically, no matter the price or number of shares involved, while still providing the option for a floor-based auction run by specialists that the exchange says often results in price improvement. The plan must be approved by the SEC. NYSE chief executive John A. Thain said the specialists in charge of floor auctions would be fully in control of trading at the open and close of the session to keep prices from getting out of hand.
Treasury Secretary John W. Snow said the United States could face the prospect of not being able to pay its bills this fall unless Congress raises government borrowing authority now capped at $7.4 trillion. In a letter to House and Senate members, Snow said the government is expected to reach the statutory ceiling on the national debt by late September or early October. Even if Treasury takes steps to juggle accounts to stay just under the limit to avoid defaulting on the debt, "we can finance government operations no longer than mid-to-late November," Snow wrote. He urged Congress to raise the debt limit as soon as possible. He did not suggest a specific amount.
Franklin Advisers will pay $50 million to settle Securities and Exchange Commission claims that it allowed some clients to engage in improper mutual fund trading. The SEC said Franklin will pay a civil penalty of $20 million and return $30 million gained from the practices to shareholders affected by market timing.
Aetna said it will create a joint venture with Priority Healthcare to provide specialty drugs at lower costs to Aetna policyholders with severe chronic illnesses. Aetna Specialty Pharmacy will open a 45,000-square foot distribution center that will employ 300 people.
Freddie Mac, which ranked first in corporate donations to political groups from 2001 to 2002, created a political action committee to direct contributions by its employees to individual candidates and campaign groups. The government-sponsored mortgage finance company's top executives held off on forming the PAC while they worked on reducing the company's lag in financial reporting, a spokeswoman said.
T-bill rates were mixed. The discount rate on three-month Treasury bills auctioned yesterday rose to 1.465 percent from 1.425 percent. Rates on six-month bills were unchanged at 1.735 percent. The actual return to investors is 1.490 percent for three-month bills, with a $10,000 bill selling for $9,963.00, and 1.774 percent for a six month bill selling for $9,912.30 Separately, the average yield for one-year Treasury bills, a popular index for making changes in adjustable-rate mortgages, rose to 2.16 percent last week from 2.12 percent the previous week.
J.C. Penney raised its profit forecast due to strong sales and said it would buy back nearly one-fourth of its shares and reduce debt with proceeds from the sale of Eckerd drugstores. Penney said it plans to buy back $3 billion in stock and cut debt by $5.7 billion, including $3.4 billion tied to Eckerd leases. Along with rising profit at department stores, the changes would give Penney the flexibility to invest more heavily in the business, such as opening more off-mall stores, and return its debt ratings to investment-grade.
DirecTV will purchase the primary assets of Pegasus Communications' satellite-television unit for $875 million in cash in a deal that DirecTV said reflects full satisfaction and dismissal of all claims between the two companies. The deal includes the rights to all DirecTV subscribers activated through Pegasus, which delivers DirecTV to more than 8.4 million homes in 41 states and serves more than 1 million rural subscribers. The deal is subject to bankruptcy court and antitrust approval.
American Airlines gave up on its proposed fare increases and matched sale prices announced by United Airlines after several competitors did not match the hikes on all their seats. The latest failed fare hike began late last week when American announced it was raising prices on domestic flights by $5 one-way and $10 on round trips to offset higher jet fuel costs.
Microsoft and Thomson will upgrade their MSN TV Internet receiver, a television set-top box that offers simplified e-mail and Web-browsing, to allow connection through a personal computer and high-speed network.
Dow Chemical said Andrew N. Liveris, its president and chief operating officer, will succeed William S. Stavropoulos as chief executive as of Nov. 1. Stavropoulos, who ran the chemical company from 1995 to 2000 and then returned to the position in 2002 after two years of poor financial performance, will continue as Dow's chairman.
Viacom agreed to buy the rest of SportsLine.com, the sports Web site operator whose clients include Viacom's CBS television network, for about $49.2 million. Viacom offered $1.75 a share in cash, a 13 percent premium over Friday's closing price. Viacom owns 38 percent of SportsLine.com.
Saucony said it had retained private investment bank Chestnut Services to help it consider strategic options, including a possible sale of the company. The athletic footwear maker said it "has not determined whether to pursue any particular strategic alternative."
Dominion Resources, NiSource and Nicor subsidiaries will pay a total of $8.1 million in civil penalties and customer refunds to settle federal charges that they passed competitive information on natural gas storage levels to affiliates and favored customers, the Federal Energy Regulatory Commission said. Dominion Transmission and Dominion Energy Clearinghouse, units of Dominion Resources of Richmond, agreed to refund $4.5 million to storage customers and pay a $500,000 civil penalty, the commission said.
Procter & Gamble reported a 44 percent jump in its fiscal fourth-quarter profit, to $1.37 billion from $955 million in the same quarter a year earlier, as sales volumes climbed 41 percent for beauty products and 13 percent in the health care segment. Revenue for the three months ended June 30 climbed 19 percent, to $12.96 billion.
R.J. Reynolds Tobacco Holdings, the No. 2 U.S. cigarette maker, said it more than doubled its second-quarter profit, to $151 million from $70 million in the same quarter a year earlier. Sales fell 5.5 percent, to $1.35 billion, but the company benefited from cost-savings and restructuring plans.
Priceline.com, the name-your-own-price Internet company, said an expanded product line and acquisitions led to a jump in second-quarter profit of 48 percent, to $11.4 million from $7.7 million in the same quarter a year earlier, but said third-quarter results will be below Wall Street expectations. Revenue was $259.4 million, up 8 percent.
Unocal said higher oil and gas prices and lower exploration costs helped its second-quarter profit nearly double, to $341 million from $177 million in the same quarter a year earlier. Gains of $78 million from the sale of assets, $46 million from settlement of a lawsuit and $27 million from tax-related matters also contributed to the gain. Revenue climbed to $1.98 billion from $1.61 billion.
Compiled from reports by the Associated Press, Bloomberg News, Dow Jones News Service and Washington Post staff writers.