US SMALL/MIDCAPS-Stocks fall after data; Medicis jumps on buyout

NEW YORK, Sept 4 Tue Sep 4, 2012 1:02pm EDT

NEW YORK, Sept 4 (Reuters) - Mid- and smallcap stocks were lower Tuesday after economic data pointed to an economy that remained sluggish and pulled economically sensitive sectors lower.

The Institute for Supply Management said its index of national factory activity fell to 49.6 in August from 49.8 in July and below the 50.0 median estimate in a Reuters poll of economists. A reading below 50 indicates contraction.

Separately, construction spending in July dropped 0.9 percent to an annual rate of $834.4 billion, the lowest level since April. Reuters estimate called for a gain of 0.4 percent.

With a key payrolls report looming on Friday, the data provided little help for investors looking for insight into possible moves by the U.S. central bank to stimulate the economy when it meets on Sept. 12-13.

"The problem as much as anything is just the uncertainty out there," said Edward Hemmelgarn, chief investment officer at Shaker Investments in Cleveland.

"The ISM manufacturing wasn't great, it wasn't disastrous, it's not very far off from what people had forecast - (investors) are just scratching their heads trying to figure out what happens next."

The S&P MidCap 400 index shed 0.3 percent while the S&P SmallCap 600 index lost 0.4 percent. In comparison, the benchmark S&P 500 fell 0.5 percent.

Sectors closely tied to economic fortunes were among the worst performers, with energy and materials falling more than 1 percent for both mid- and smallcap stocks.

Midcap Arch Coal Inc dropped 6.9 percent to $5.69 after Dahlman Rose cuts its price target on the stock to $9 from $12. Smallcap Monolithic Power Systems Inc slumped 7.8 percent to $19.88 after Piper Jaffray cut the stock to a "neutral" rating.

But Medicis Pharmaceuticals Inc surged 38.1 percent to $43.57 after the company agreed to be acquired by Valeant Pharmaceuticals International Inc for $2.6 billion in cash.

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