The other route that's being talked about is another long-term refinancing operation, a program that worked well at the end of last year and the beginning of this year.
"If they don't do this I think there will be massive disillusionment -- the question is therefore whether the Germans are prepared to go along with something like that," said Morgan.
September crude oil futures settled down 35 cents at $89.78 a barrel. December gold futures settled up $1.30 at $1,624.00 an ounce.
The benchmark 10-year Treasury was up 15/32, lowering the yield to 1.500%. The greenback was trading up 0.24%, according to the dollar index.In U.S. economic news, the Chicago Fed Midwest Manufacturing Index increased 1.1% in June, to a seasonally adjusted level of 94.1. Revised data show the index was down 1.4% in May. Also, the July Texas manufacturing index from the Dallas Fed came in at negative 13.2, declining from 5.8 the prior month. On Friday, the Labor Department is slated to release the July jobs report, which is expected to show a tepid gain of 100,000 in nonfarm payrolls after a rise of just 80,000 new workers in June, according to a survey of economists by Thomson Reuters. The unemployment rate is expected to stay at 8.2%. On the corporate front, Shaw Group (SHAW) agreed to be acquired by Chicago Bridge & Iron (CBI) in a cash-and-stock transaction valued at about $3 billion. Shaw shares rose 55% while CBI's stock fell more than 14%. HSBC (HBC) has put aside about $2 billion to cover the cost of compliance problems related to the selling of payment protection insurance to British customers and to cover "certain law enforcement and regulatory matters" in the United States related to money-laundering controls. The bank, Europe's biggest, reported Monday that underlying profit for the first six months of 2012 fell 3% to $10.6 billion. Shares rose 1.4%. Also, jury selection in federal court began Monday in the patent fight between Apple (AAPL) and Samsung. Apple alleges that Samsung's smartphones and computer tablets are illegal knockoffs of its iPhone and iPad. Apple is seeking $2.5 billion in damages. Meanwhile, Apple and Twitter are currently not in discussions on Apple taking a stake in the social networking site, Reuters reported, citing sources familiar with the matter. Apple gained 1.7%. Progenics Pharmaceuticals ( PGNX) and Salix Pharmaceuticals (SLXP) shares were plunging after they said the U.S. Food and Drug Administration asked for more data following the review of their constipation treatment. Progenics's stock sank 50% while Salix shares tumbled 13%. Of the 280 companies in the S&P 500 that have reported earnings to date for the second quarter, 67% have reported earnings above analyst expectations, according to a Thomson Reuters report. This is higher than the long-term average of 62% but lower than the average over the past four quarters of 68%, the report said. A Deutsche Bank report said that year-over-year sales growth in the S&P 500 in the second quarter of 2.3% has lagged earnings per share growth of nearly 7%. "Thus, some observers think cost cuts underlie 2Q EPS growth," the report said.
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