Morning Money Memo…

The headquarters of Reynolds American is seen next to the old R.J. Reynolds Tobacco smoke stacks from a previous manufacturing plant in downtown Winston-Salem, N.C., May 23, 2014. Chris Keane/Reuters

Where there's smoke there's a merger. Reynolds American says it will buy its smaller rival Lorillard for $27.4 billion. The complicated cash and debt deal will reshape the U.S. tobacco industry with more significant competition for Altria Group, which makes Marlboro, by far the best-selling cigarette brand. The merger will also give Reynolds a stake in the e-cigarettes and menthol, the fastest growing parts of the tobacco industry. But the companies say they will sell the Kool, Salem, Winston, Maverick and blu eCigs brands to Imperial Tobacco Group for $7.1 billion to ease regulatory concerns about competition.

Two of Wall Street's biggest financial firms, Goldman Sachs and JP Morgan Chase have just reported stronger than expected second quarter earnings. Profits actually dropped compared to last year. But with a sharp decline in mortgage originations caused by the end of the re-financing boom, analysts had expected worse results. The numbers from JP Morgan and Goldman could spark another stock rally today. The market closed up Monday with a 112 point gain for the Dow Jones Index. The S&P 500 rose nearly 10 points.

Good news for motorists. The Energy Department confirms what other reports have been saying for days. The average price of regular gas fell 4 cents last week. The nationwide average is $3.64. The biggest price drop recently has been in the Midwest.

The Consumer Financial Protection Bureau is suing a major debt collection law firm, alleging it is a "mill" that produces shoddy, mass-produced credit-card collection lawsuits. The bureau's claim was filed in federal court in Atlanta on Monday and states that Frederick J. Hanna & Associates failed to do basic due diligence on the accuracy of suits over defaults. The firm denies the accusations.

Apple may have a hit on its hands when it launches the iWatch. Analyst Katy Huberty of Morgan Stanley says Apple is expected to price the watch at $300 and may sell as many as 60 million units in the first year the smart watch is on store shelves. Reports and rumors claim Apple will launch iWatch later this year. But the firm has made no comment.

Richard Davies Business Correspondent ABC News Radio abcnews.com Twitter: daviesnow