Thursday Watch

Late-Night Headlines
Bloomberg:

- Elpida Memory Inc., Japan’s biggest computer-memory chipmaker, posted its first operating profit in eight quarters because of rising prices for the semiconductors.

- Xilinx Inc.(XLNX), the world’s largest maker of programmable semiconductors, gained the most in five months in Nasdaq trading after raising its revenue forecast for the fiscal second quarter. Sales in the period ending this month will rise 10 percent from the first quarter after demand picked up in “nearly all end markets and geographies,” the San Jose, California-based company said today in a statement.

- U.S. policy on Afghanistan is “in a state of drift and lacking direction” as President Barack Obama conducts his review of strategy for the war, the top Republican on the House Armed Services Committee said. “It is unfair to our forces in theater to fight a war while the strategy remains in limbo,” California Representative Howard “Buck” McKeon told a hearing on the war in Washington today. “I’m concerned about the continued drift of our Afghanistan strategy.” McKeon said he is particularly concerned the administration might twist intelligence information to fit a narrower approach based on the idea that the resurgent Taliban militants in Afghanistan are no longer as closely aligned with al-Qaeda. “I’m worried that we’re going to see ‘new’ analysis that justifies a more limited war strategy on the basis that we can now tolerate” the Taliban, McKeon said. “We all know the perils of driving intelligence analysis to fit preferred policy outcomes.”

- Venezuela will take control of the Hilton Margarita and Suites hotel within 15 business days, Tourism Minister Pedro Morejon said. The government will respect all existing contracts at the hotel, the second Hilton brand hotel seized by President Hugo Chavez, Morejon said today in comments broadcast by Venezuelan state television. Venezuela’s government first announced the takeover yesterday, without giving a timeline. “We’re going to start an open-door takeover of all that’s in the hotel complex, respecting all of the contracts that exist for operations inside the hotel,” Morejon said. “Hilton Worldwide is evaluating how the Venezuelan government’s action affects its interest in this hotel, which remains a member of the Hilton system of hotels,” Karla Visconti, Hilton spokeswoman for the Caribbean, Mexico and Latin America, said yesterday in an e-mailed response to questions. Chavez began a spree of government nationalizations in 2007 to advance his socialist agenda. He’s taken control of companies in the oil, steel, cement, banking and telecommunications industries.

- The top Republican on the Senate Banking Committee is pushing to strip the power of banks to nominate Federal Reserve district-bank presidents as part of an overhaul of financial regulation. “We should knock out the obvious conflicts,” Alabama Senator Richard Shelby said today in an interview in Washington. “Any institution that is going to be involved in any way picking their regulator is not good policy.” Shelby is one of the central bank’s most vocal critics in Congress, blaming the Fed for failing to avert the financial crisis while saying Fed-backed bailouts expose taxpayers to losses.

Wall Street Journal:

- The head of the Congressional Budget Office on Wednesday countered Obama administration claims that a landmark climate bill would be a boost to the economy. President Barack Obama and Senate Democrats championing the bill have said mandating greenhouse-gas caps, renewable energy and efficiency standards would be a boon to an ailing economy, creating new low-carbon industries. Millions of so-called green jobs would be created under the cap-and-trade legislation being considered in the Senate, Democrats say. CBO Director Douglas Elmendorf warned a Senate energy panel that there would be "significant shifts" from emissions-intense sectors such as oil and refining firms to low-carbon businesses such as wind and solar power. "The net effect of that we think would likely be some decline in employment during the transition because labor markets don't move that fluidly," Mr. Elmendorf said, testifying before the Senate Energy and Natural Resources Committee. "The fact that jobs turn up somewhere else for some people does not mean there aren't substantial costs borne by people, communities, firms and affected industries," he said. Sen. Sam Brownback (R., Kan.) expressed the fears of many lawmakers, both Democrat and Republican. "You're talking about a massive market manipulation here on a grand scale that has significant impacts on the Midwest and the South … [including] the likelihood of us to lose a lot of jobs, a lot of businesses," he said.

- So where’s that long-awaited deluge of bank-owned homes that is supposed to flood the U.S. housing market? This “shadow” inventory has been a hot topic in recent months, as housing analysts struggle to guess how much further house prices may fall. But there’s no sign yet that the shadow inventory will swamp the market soon in California, says ForeclosureRadar.com in its monthly report on that state. The research firm estimates that banks and mortgage loan investors owned 90,365 foreclosed homes in the Golden State at the end of September, down from 155,269 a year earlier. Even though the number of people falling behind on their home loans continues to mount, banks in recent months have been selling foreclosed homes faster than they take in new ones.

- One of the biggest hits to General Electric Co.'s(GE) earnings on Friday will likely be its ongoing losses on subprime U.K. mortgages. But unlike its quick exit from U.S. mortgages, GE plans to hold steady in the U.K. in the hope of capitalizing on a projected housing shortage. The looming losses on British mortgages highlight ongoing weakness in GE's finance unit, known as GE Capital, which investors will be watching when GE reports third-quarter financial results.

- The Wall Street Journal said Wednesday that its average weekday circulation rose slightly in the six months through September to 2.02 million print copies and online subscriptions. The increase likely makes the Journal the largest U.S. newspaper by weekday circulation.

- Now that the Senate Finance Committee has voted for the health-care bill drafted by Montana Democratic Sen. Max Baucus, negotiations over the real bill can begin in Senate Majority Leader Harry Reid's cozy Capitol hideaway. It won't be easy. Democrats now face a central problem for any governing party: How to pass a major piece of legislation when there are a lot of sharply different ideas about what should be in it. Trying to reconcile what Democrats in the House prefer with what Democrats in the Senate want is already opening up divisions among the party's supporters. This week, for example, leaders of 30 labor unions called for Democrats to reject Mr. Baucus's bill because it doesn't include the government-run health insurance program better known as the public option. This only makes it more likely that Democrats will have a bloody fight over the public option. Members of Congress have a tendency to take a hard stand on a particular portion of a controversial bill. That allows them to show a little independence and make a plausible claim to have influenced the eventual outcome. The problem for Mr. Obama is that the Baucus bill is being sold on the strength of accounting tricks that make it appear that it won't add to the deficit. (This is true for the other health-reform bills, too). If fiscally conservative Democrats sign on to the bill now after publicly saying they are doing so because it doesn't add to the deficit, they may end up bailing once the tricks are revealed to the public. One trick is easily explained. The bill imposes tax hikes and benefit cuts right away, including $121 billion of Medicare reductions between 2011 and 2015. But new spending really doesn't start until five years out (2015) and isn't fully operational until 2017. The bill uses 10 years worth of tax hikes and benefit cuts to fund a few years worth of benefits. And that's just the start.

- Energy Secretary Steven Chu set out this year to address America's energy future with a network of new research labs. But lawmakers drafted their own blueprint: Instead of fully funding Dr. Chu's request, an energy-spending bill sets aside millions of dollars for such projects as an aviation-research institute, an environmentally friendly locomotive and air conditioning for a New Jersey museum. When President Barack Obama signed a spending bill for the 2009 fiscal year in March, he said he wanted earmark-laden legislation to be an "end to the old way of doing business, and the beginning of a new era of responsibility and accountability." Congress, however, hasn't given up earmarks -- the term for seemingly parochial projects funded at the behest of lawmakers. The Obama administration didn't request these energy projects; it has proposed eliminating many of them. Critics of the proposals -- which total more than $400 million in the legislation nearing Senate approval -- say they threaten to distract the Energy Department at a time when it is trying to disburse roughly $37 billion that Congress approved earlier this year for fuel-efficient vehicles, a modernized electric grid and other projects.

- On Thursday, Goldman Sachs Group Inc.(GS) will announce that life is pretty much back to normal: billions of dollars in quarterly profit and record pay set aside for employees at the firm known for running circles around the rest of Wall Street. Hoping to defuse a politically combustible situation, Goldman officials have been mounting a soft-sell campaign that pushes the usually reticent company into the spotlight. For months, the New York firm has been working to dispel what it sees as misperceptions about itself to make its profit and bonuses go down easier, from a lobbying push in Washington to media interviews in which Goldman Chief Executive Lloyd Blankfein reminisces about his humble roots. In June, a Rolling Stone magazine article -- which was passed up and down Wall Street -- called Goldman a "great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." New York Attorney General Andrew Cuomo's denouncement of banking-industry pay practices in a July report titled "No Rhyme or Reason" noted that 953 employees at Goldman got bonuses of at least $1 million in 2008. Of course, Goldman's critics aren't likely to leave the firm alone anytime soon no matter how hard it tries. Luigi Zingales, a finance professor at the University of Chicago Booth School of Business, said trying to explain to the public billions in bonuses barely a year after Goldman got a $10 billion capital infusion from the government and bolstered its liquidity by converting to a bank-holding company is to many Americans the equivalent of "putting lipstick on a pig." The roughly 29,000 employees at the firm are on track to earn even more than they did in 2007, when the average payout of $661,490 set a new threshold for compensation in the securities industry. Mr. Blankfein, who got roughly $68 million in 2007 in what was a record for any Wall Street CEO, could surpass that number this year. His big payday came largely in restricted stock. Mr. Blankfein also has been spending more time meeting lawmakers in Washington, lobbying for more effective systemic regulation. Employees in the firm's Washington office have been working overtime to fight what Goldman claims are misunderstandings, including that the firm pocketed billions of dollars as insurer American International Group Inc. teetered. During the first six months of 2009, Goldman spent $1.3 million lobbying lawmakers, according to the Center for Responsive Politics.

IBD:

- Mednax (MD) has one basic formula for growth: acquisition. Through its Pediatrix Medical Group unit, the company buys physician group practices in its core areas, newborn medicine and prenatal care. And it's starting to diversify, expanding into a much larger potential market, anesthesiology.

Politico:

- Senate Democrats took their newfound momentum for health reform into closed-door talks with White House aides Wednesday but still faced a months-old problem: centrist Democrats who aren’t sold on Obama-style reform even now. If Democratic leadership hoped Republican Olympia Snowe’s decision to cross party lines Tuesday would inspire her fellow middle-of-the-roaders, they were mistaken. And the moderates’ reluctance to commit showed just how far health reform still has to go, despite getting a boost from Tuesday’s Senate Finance Committee vote.

- Hillary the other day flatly ruled out a run for President. On Nightline tonight, she's more politic: CM: Well, never is a long time. So I want to ask you again. You're never going to run for President again??? Clinton: I have absolutely no interest in running for President again. None. None. I mean, I know that's hard for some people to believe, but, you know, I just don't, I feel like that was a great experience, I gave it all I had, I'm giving this job all I have. I try to live in the present, so it just seems, you know, that that's not in my future.?? Not to parse too much, but "no interest" is what politicians say when they're not ruling something out.

The Business Insider:

- Microsoft's(MSFT) upcoming Windows 7 launch could be very good news for Apple(AAPL), Fortune blog Apple 2.0 reports. Ever since Windows 98 came out in June 1998, every time Microsoft (MSFT) has launched a new version of its operating system, Apple's computer sales spike during the same quarter. Broadpoint AmTech analyst Brian Marshall, who noticed the trend, observed:

- Dissecting today's advance retail sales data shows that trends improved for everything, except auto-related sales due to cash for clunkers. This is strong.

Reuters:

- CIT Group Inc (CIT) is getting closer to finalizing the terms of a new loan that would give the commercial lender, trying to avoid bankruptcy, $3 billion to $6.5 billion, two sources familiar with the matter said on Wednesday. The terms of the loan, being arranged by Bank of America (BAC), could be finalized as soon as this week, the sources said, declining to be identified because talks are private. One of the sources warned that the situation was fluid and the loan could be delayed.

- Bruce Wasserstein, the legendary Wall Street deal maker identified with an era of no-holds-barred takeover battles, has died at the age of 61. His death leaves major questions about the future direction and leadership of Lazard Ltd., the investment bank he headed.

- A lawyer for former Bear Stearns hedge fund manager Ralph Cioffi on Wednesday vigorously defended him against prosecution allegations he repeatedly lied to investors early in the financial crisis, describing as "ridiculous" one charge of insider trading.

Financial Times:

- Obama administration officials now working on fixing and regulating the financial system were beneficiaries of several million dollars in pay from Wall Street and private equity companies, it has been revealed. Financial disclosure forms show that prior to joining the government, Gene Sperling, a senior Treasury adviser, was paid $887,727 by Goldman Sachs(GS) and $158,000 for speeches to companies that included Stanford Group, the company run by Sir Allen Stanford, who has since been charged with fraud.

Late Buy/Sell Recommendations
Citigroup:

- Raised (OPEN) to Buy, target $35.

- Reiterated Buy on (CMCSA), Added to Top Picks Live list, target $20.

- Raised (SLB) to Buy, target $80.

- Downgraded (BHI) and (BJS) to Sell.

- IDC issued preliminary 3Q09 PC shipment results this afternoon. Global shipments grew 2% yoy during 3Q, up from -7% and -2% declines in the prior two quarters and modestly above consensus of flattish yoy. We are raising our 2009 global PC unit growth forecast to +3% from -4% and our 2010 forecast to +15% from +10%. Our 2010 outlook assumes generally normal seasonality throughout the year, which could prove conservative if corporate buyers resume a more normal rate of upgrades at some point next year.

Caylon:

- Rated (CREE) Outperform, target $45.

BMO Capital:

- Rated (SLB), (PTEN) and (HAL) Outperform.

- Rated (SII) Underperform.

Night Trading
Asian Indices are +.50% to +1.25% on average.

Asia Ex-Japan Inv Grade CDS Index 95.50 -7.5 basis points.
S&P 500 futures unch.
NASDAQ 100 futures -.06%.

Morning Preview

BNO Breaking Global News of Note

Google Top Stories

Bloomberg Breaking News

Yahoo Most Popular Biz Stories

MarketWatch News Viewer

Asian Financial News

European Financial News

Latin American Financial News

MarketWatch Pre-market Commentary

U.S. Equity Preview

TradeTheNews Morning Report

Briefing.com In Play

SeekingAlpha Market Currents

Briefing.com Bond Ticker

US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Stock Quote/Chart
WSJ Intl Markets Performance
Commodity Futures
IBD New America
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?
Upgrades/Downgrades

Politico Headlines
Rasmussen Reports Polling

Earnings of Note
Company/EPS Estimate
- (PPG)/.89

- (HOG)/.24

- (FCS)/.08

- (BAX)/.96

- (GS)/4.18

- (C)/-.29

- (GOOG)/5.42

- (IBM)/2.38

- (LUV)/.01

- (CY)/.06

- (AMD)/-.44

- (SWY)/.29

- (PII)/.85

Economic Releases

8:30 am EST

- The Consumer Price Index for September is estimated to rise +.2% versus a +.4% gain in August.

- The CPI Ex Food & Energy for September is estimated to rise +.1% versus a +.1% increase in August.

- Empire Manufacturing for October is estimated to fall to 17.25 versus 18.88 in September.

- Initial Jobless Claims for last week are estimated to fall to 520K versus 521K the prior week.

- Continuing Claims are estimated to fall to 6000K versus 6040K prior.

10:00 am EST

- Philly Fed for October is estimated to fall to 12.0 versus 14.1 in September.

10:30 am EST

- Bloomberg consensus estimates call for a weekly EIA natural gas storage increase of 53 bcf versus a 69 bcf injection the prior week.

11:00 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,000,000 barrels versus a -978,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +1,125,000 barrels versus a +2,937,000 barrel build the prior week. Distillate inventories are expected to fall by -100,000 barrels versus a +679,000 barrel gain the prior week. Finally, Refinery Utilization is estimated unch. versus a +.42% gain the prior week.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Fed’s Bullard speaking, credit card master trust data, (GPS) analyst meeting, (ALOG) investor day, (ORCL) analyst meeting, (AEO) analyst day and the (PETM) analyst day could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and financial shares 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.