Late-Night Headlines
Bloomberg: The U.S. Securities and Exchange Commission will extend a ban on short-sales of financial stocks, leaving in place the prohibition on bets companies' shares will fall until Congress approves a $700 billion economic bailout. The restriction will expire three days after lawmakers give Treasury Secretary Henry Paulson authority to buy illiquid assets that are burdening banks and other financial firms, the SEC said today in a statement. The short-sale prohibition will end no later than Oct. 17 if Congress rejects the legislation. ``There are circumstances in which short selling can be used as a tool to mislead the market,'' the SEC said in its statement announcing the extension. It can be used as a ``downward manipulation'' in which traders spread ``lies about a company's negative prospects.'' The SEC handed hedge funds a victory by dropping a separate rule requiring investors who manage more than $100 million to publicly disclose their short positions. The SEC is now requiring funds to only reveal short positions to the agency. That requirement may be in place indefinitely, the agency said. In addition, the regulator continued its crackdown on so- called naked shorting by adopting two regulations that pressure traders and brokers to actually deliver borrowed shares to buyers. A third rule extension makes it a securities fraud when sellers deceive brokers about delivering borrowed shares.
- Asian money market rates declined as the U.S. Senate passed a $700 billion banking rescue bill, easing concern that more financial companies will fail. Overnight dollar borrowing rates for banks outside the U.S. fell 1.35 percentage points to 2.25 percent as of 10:20 a.m. in Tokyo. The rate dropped 2.82 percentage points yesterday, when it touched as high as 7.3 percent.
- The US dollar rose against the euro, approaching a one-year high, as the U.S. Senate began voting on a $700 billion bill that would allow the government to buy troubled assets from banks. The euro may fall for a fourth day against the dollar before today's meeting of the European Central Bank at which policy makers led by Jean-Claude Trichet are forecast to keep the main refinancing rate at 4.25 percent. ``I don't think the euro can get a lot of traction out of Trichet,'' said Jeremy Stretch, a strategist in London at Rabobank International, the third-largest Dutch bank. ``If he is seen to be hawkish, the euro will fall, and if he is seen to open the gates, I think the euro will slide on that basis.''
- New Zealand's commodity export price index fell by the most in 21 years in September, led by dairy, aluminum and beef, ANZ National Bank Ltd. said.
- The U.S. approved the release of as much as 900,000 barrels of oil from the Strategic Petroleum Reserve to two unidentified refiners, after a request for more supplies to ease fuel shortages in the Southeast.
Wall Street Journal: The Senate handily passed a controversial financial rescue package Wednesday, giving the bill its first legislative victory but adding provisions that could complicate efforts to push the $700 billion plan through the House of Representatives.
- Lilly(LLY) Emerges as ImClone’s(IMCL) Secret Admirer.
- For all the speculation over how Sarah Palin will fare in the vice-presidential debate Thursday night, her Democratic opponent, Joe Biden, faces a challenge of his own: taking on the Alaska governor without coming across as sexist or a bully.
- Having come face-to-face with their own mortality, Wall Street rivals Goldman Sachs Group Inc.(GS) and Morgan Stanley(MS) are doing things they wouldn't have imagined just months ago. They have diluted existing shareholders, pushed for rules that are an anathema to many free-market champions and rewritten their corporate charters to become commercial banks -- a business they had regarded as beneath their pedigrees. Morgan Stanley is even considering adding automated teller machines inside its brokerage locations, say people close to the firm.
MarketWatch.com: It's unlikely the European Central Bank will cut interest rates when the Governing Council meets Thursday, but a rapidly deteriorating economic outlook and intense financial turmoil might be enough to convince ECB President Jean-Claude Trichet to lay the groundwork to move sooner rather than later, economists said.
NY Times: Iraq U.S.
- For some hedge funds, Lehman Brothers(LEH) has become the Roach Motel of Wall Street: They checked in, but they can’t check out. Two weeks after Lehman spiraled into bankruptcy, hedge funds that did business with the Wall Street bank are still fighting to get their money out of the firm. For some, it has become a life-or-death struggle. Big funds like GLG, Harbinger, Amber Capital and Elliott Associates have varying degrees of exposure to Lehman Brothers.
Forbes.com: What Buffett’s Bet Says About GE(GE)
USA Today.com:
- A Securities and Exchange Commission investigation into whether traders spread misinformation in a bid to drive down shares of financial firms focuses in part on a series of midsummer Wall Street rumors, according to an SEC subpoena.
Reuters:
- The Pfizer Inc.(PFE) AIDS drug maraviroc helps thwart the HIV virus in nearly half of people who have developed resistance to other treatments, according to two related studies published on Wednesday.
- Sony Corp's(SNE) PlayStation 3 video game console and its portable cousin, the PSP, are selling faster than expected and are poised to meet full-year sales targets even if the current economic crisis hurts holiday demand, Sony said on Wednesday.
- Japan's Mitsubishi Motors said on Wednesday it will begin testing its electric cars in Europe next month as it aims to beat rivals to the uncharted market and promote itself as the pioneer of the zero-emission vehicles. North American fertilizer company Mosaic Co (MOS) said on Wednesday its fiscal first- quarter profit almost tripled, driven by a boom in the global agricultural sector and the soaring price of potash- and phosphate-based crop nutrients. But the company's shares plummeted more than 17 percent to $55.45 in trading after the closing bell as earnings fell short of Wall Street's expectations. The company warned it plans to sharply reduce phosphate production over the next several months, due to high inventory levels. "Momentum has slowed in the phosphates business near-term due to the combined effects of soft seasonal demand, higher customer inventory levels and falling raw material costs," said Prokopanko.
- Investors poured a record $12.39 billion into U.S. money market funds in the week to Sept. 30, the Money Fund Report said on Wednesday.
Financial Times:
AIG, the troubled US insurer, is set to kick-start a sale of assets likely to attract interest from potential buyers including sovereign wealth funds, private equity groups and US and European insurers.
- Guy Wyser-Pratte has blocked withdrawals from his hedge fund after the veteran New York arbitrageur and activist warned that the “calamitous” market conditions were the worst since he started trading in the 1960s. Wyser-Pratte Eurovalue, a $500m fund campaigning for change at mid-sized companies across Europe, suspended withdrawals on Tuesday after some clients asked for their money back.
Independent:
- Anthony Bolton, who ran the Fidelity Special Situations fund for many years, believes the UK stock market has reached rock-bottom and he is using his own money to start betting on a recovery. Bolton said that he’d started to feel optimistic “for the first time in a couple of years” and that “the markets of the past two or three days have all the signs of a low.” During the past weeks, we have looked into the abyss and stepped back. Mr Bolton's view, which is shared by other fund managers at Fidelity, is based partly on his contrarian instincts, but also on the current depressed valuations of many companies. Mr Bolton said that investor sentiment indicators were now so depressed that there was no further for confidence to fall and that he had also identified several sectors of the market which offered better value than at any time for a generation. Mr Bolton said sectors such as financials, which began falling before the rest of the market, were likely to lead the recovery, with banking consolidation in the UK, for example, working in favour of many companies. He warned that areas such as commodities that have only begun falling in recent months would take longer to recover. "I wouldn't rush back into natural resources," he said.
Economic Daily News:
- Taipei The number of units changing hands declined 20%.
Late Buy/Sell Recommendations
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Earnings of Note
Company/EPS Estimate
- (STZ)/.44
- (RECN)/.26
- (GPN)/.60
Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to fall to 475K versus 493K the prior week.
- Continuing Claims are estimated to rise to 3550K versus 35442K prior.
10:00 am EST
- Factory Orders for August are estimated to fall 3.0% versus a 1.3% gain in July.
Upcoming Splits
Other Potential Market Movers
BOTTOM LINE: Asian indices are mostly lower, weighed down by automaker and commodity stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.
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