Thursday Watch

Late-Night Headlines
Bloomberg:
- Elpida Memory Inc., Japan’s largest computer memory-chip maker, will reduce the number of chips it sells on the spot market to match a new strategy by Hynix Semiconductor.
- A new version of the benchmark loan derivatives index, which added the leveraged buyout debt of First Data Corp.(FDC) and Tribune Co.(TRB), rallied on its first day of trading in a sign that demand for the debt is returning.

Wall Street Journal:
- The FDA may establish a “behind the counter” system allowing more drugs that currently require a prescription to be sold without one.

MarketWatch.com:
- Delta(DAL) flying high after bankruptcy.
- Newsletters remain largely in cash, despite Dow’s record high. That’s bullish from a contrarian point of view.

CNNMoney.com:
- Some of the year’s hottest toys could be sold out weeks before Christmas, industry watchers warned.

Financial Times:
- Citigroup(C) is in talks with KKR to provide financing to buy some of the leveraged loans on its balance sheet. It has also talked to other private equity firms about providing such funding.
- A price war aimed at Japan’s 100 million mobile phone users could have a significant impact on the core consumer price index, potentially prolonging the country’s brush with deflation, economists warned on Wednesday.
- Walt Disney(DIS) has acquired a parcel of beachfront land in Hawaii to develop a hotel resort, part of a new strategy to expand its theme-parks business through smaller, mixed used sites.

Reuters:
- United Auto Workers members at several locals have backed a ground-breaking tentative contract with General Motors(GM) that may serve as a pattern for talks with Ford Motor(F) and Chrysler LLC.

Ming Pao Daily:
- Funds in China may invest more than $18 billion in Hong Kong’s stock market in the next two months. Funds to be raised under China’s qualified domestic institutional investor, or QDII, program, in the next two months will be $36 billion. The funds may allocate half of the money for Hong Kong stocks.

Late Buy/Sell Recommendations
Citigroup:
- Rated (MTG) Buy, target $63.
- Reiterated Buy on (EL), target $48.
- Reiterated Buy on (PX), target raised to $93.

Morgan Stanley:
- We are initiating coverage of the North American steel industry with a Cautious view. Steel stocks do not appear to be discounting the one-two punch of a deteriorating supply-demand balance and slowing global growth that we expect next year. Our top short idea is US Steel(X).
- Although we are long-term bulls on oil prices, tactically we think energy stocks will underperform in the coming three to six months. Relative valuations are unattractive – in the last month the sector offered a yield below the market for only the second time in history. Sentiment on the stock is very bullish, which we take as a good contrarian sell signal. Earnings growth in the next few years will be sub-par while free cash flow is falling and the free cash flow yield is the second lowest of the ten big sectors. In the short-term, we think consistently weak seasonality(energy underperformed by 6.7% on average in the last ten 4Qs), falling dollar and high expectations for 4Q represent headwinds.

Wachovia:
- Rated (MU), (NOK), (XLNX), (MSCC), (DELL), (ADI), (INTC), (HPQ), (CAMD) and (BRCM) Outperform.

BMO Capital:
- Rated (AAPL) Outperform, target $182.

Night Trading
Asian Indices are -1.0% to -.75% on average.
S&P 500 futures +.10%.
NASDAQ 100 futures +.11%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Macro Calls
Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (AYI)/1.18
- (STZ)/.33
- (FDO)/.25
- (ISCA)/.56
- (MAR)/.30
- (PLL)/.55
- (CMN)/.16
- (LWSN)/.04
- (SLR)/.05

Upcoming Splits
- (PCAR) 3-for-2
- (RUSHA) 3-for-2

Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to rise to 310K versus 298K the prior week.
- Continuing Claims are estimated to fall to 2550K versus 2551K prior.

10:00 am EST:
- Factory Orders for August are estimated to fall 2.8% versus a 3.7% rise in July.

Other Potential Market Movers
- The Fed’s Mishkin speaking, Fed’s Fisher speaking, ECB policy meeting, weekly EIA natural gas inventory data report, (FLO) analyst meeting, (PRX) analyst meeting, (AEP) analyst meeting, (NSTK) analyst meeting and Deutsche Bank Leveraged Finance Conference could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by commodity stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.