Tuesday Watch

Late-Night Headlines
Bloomberg:

- China Unicom (Hong Kong) Ltd. Chairman Chang Xiaobing said he expects Apple Inc.’s(AAPL) iPhone to become China’s best-selling smart phone, countering skepticism by analysts who say the handset is too expensive. “We’re very confident about the market position of the iPhone,” Chang said in an interview in Hong Kong yesterday. Unicom, China’s second-biggest wireless carrier, started an advertising program for the device this week, he said.

- Google Inc.(GOOG) and Microsoft Corp.(MSFT) took a bigger chunk of U.S. searches in October, while Yahoo! Inc. lost market share for the second month in a row, according to ComScore Inc. Google’s share climbed to 65.4 percent last month, from 64.9 percent in September, said ComScore, a Reston, Virginia- based research firm. Microsoft rose to 9.9 percent from 9.4 percent, and Yahoo fell to 18 percent from 18.8 percent.

- The United Nations atomic agency said it has lost confidence in Iran’s truthfulness and can’t be sure the country isn’t hiding more nuclear facilities. Iran’s concealment of its Fordo plant, built into the side of a mountain and revealed in a Sept. 21 letter, “gives rise to questions about whether there were any other nuclear facilities in Iran which had not been declared,” the International Atomic Energy Agency said today in a seven-page report.

- Loehmann’s Inc., a U.S. seller of discounted designer goods, will get a $35 million revolving line of credit from GE Capital to replace one from CIT Group Inc., according to two people familiar with the situation.

- Federal Reserve Chairman Ben S. Bernanke said regulators should have the power to shrink banks that pose risks to markets, signaling support for proposals in Congress that let the U.S. cut the size of financial companies. “The supervisors should be allowed by law to insist that the company divest itself or shrink its activities,” Bernanke said today in response to a question after a speech to the Economic Club of New York.

- The U.S. Postal Service said its deficit widened by $1 billion to $3.8 billion in fiscal 2009 and is likely to balloon to $7.8 billion next year if it’s not permitted to reduce delivery days or other expenses. The agency got congressional permission to fill a budget hole by deferring $4 billion in payments that had been due by Sept. 30 for a retiree benefits trust fund. The Postal Service will push Congress for another deferral of the $7.7 billion due to the retiree account this year and for permission to cut delivery from six to five days a week, Corbett said. “The business model, quite frankly, is broken,” he said. “It doesn’t work in a declining volume scenario. It’s becoming much more difficult to manage the organization in the old ways.”

- China’s military is close to fielding the world’s first anti-ship ballistic missile, according to U.S. Navy intelligence. The missile, with a range of almost 900 miles (1,500 kilometers), would be fired from mobile, land-based launchers and is “specifically designed to defeat U.S. carrier strike groups,” the Office of Naval Intelligence reported. Five of the U.S. Navy’s 11 carriers are based in the Pacific and operate freely in international waters near China. Their mission includes defending Taiwan should China seek to exercise by force its claim to the island democracy, which it considers a breakaway province. The missile could turn this region into a “no-go zone” for U.S. carriers, said Andrew Krepinevich, president of the Center for Strategic and Budget Assessments in Washington.

- Soros Fund Management LLC took a new 7.34 million stake in Ford Motor Co. as of Sept. 30, it said today in a regulatory filing.

- GMAC Inc., the auto and home lender bailed out twice by the U.S., said Alvaro de Molina resigned as chief executive officer, and the firm asked the Treasury Department to postpone a third infusion of taxpayer money.

Wall Street Journal:

- Verizon(VZ) ‘Very Pleased’ With Droid Sales.

- Samsung Electronics Co. (SSNHY, 005930.SE) regained the top spot in the U.S. LCD-television market from chief competitor Vizio Inc. in the third quarter as it aggressively cut prices of its advanced LED-backlit sets, according to iSuppli Corp.

- When it comes to terrorists, you would think that an al Qaeda operative who targets an American mom sitting in her office or a child on a flight back home is many degrees worse than a Taliban soldier picked up after a firefight with U.S. Army troops. Your instinct would be correct, because at the heart of terrorism is the monstrous idea that the former is as legitimate a target as the latter. Unfortunately, by dispatching Khalid Sheikh Mohammed and other al Qaeda leaders to federal criminal court for trial, U.S. Attorney General Eric Holder will be undermining this distinction. And the perverse message that decision will send to terrorists all over this dangerous world is this: If you kill civilians on American soil you will have greater protections than if you attack our military overseas.

- The Permanent TARP. Current financial reform proposals would establish ‘too big to fail’ as national policy.

CNBC.com:

- The Federal Reserve's low interest rate policy is meant to encourage investors to move into riskier assets in order to promote economic recovery, and there are no signs currently the policy is resulting in the build-up of a U.S. asset bubble, the central bank's number-two official said on Monday.

CNNMoney.com:

- Buffett’s Berkshire ups Wal-Mart(WMT) stake.

Forbes:

- An iPhone App That Could Change Medicine. Allscripts Remote lets doctors access real-time patient data and e-mail prescriptions to pharmacies.

CNNPolitics:

- Two-thirds of Americans disagree with the Obama administration's decision to try Khalid Sheik Mohammed in a civilian court rather than a military court, according to a new national poll. But six in 10 people questioned in a CNN/Opinion Research Corporation survey released Monday say that the alleged mastermind of the 9/11 attacks should be tried in the United States, as the administration plans to do, rather than at a U.S. facility in another country. The poll indicates that 64 percent believe Mohammed should be tried in military court, with 34 percent suggesting that he face trial in civilian court. Six in 10 people questioned say Mohammed should be tried stateside, with 37 percent calling for the trial to take place at a U.S. facility in another country. "The decision to bring Khalid Sheikh Mohammed in front of a civilian court is universally unpopular - even a majority of Democrats and liberals say that he should be tried by military authorities," says CNN Polling Director Keating Holland.

Politico:

- As Senate Majority Leader Harry Reid (D-Nev.) aims this week to secure the votes of moderate Democrats on health care reform, a group of liberal senators Monday warned him not to abandon the public insurance option. Sen. Sherrod Brown (D-Ohio), who requested the meeting with Reid, said progressives believe they have compromised enough on the public option – from a Medicare-for-all proposal to Reid’s proposal to create a national government plan with a provision for states to opt-out. “Most of us in the caucus want a strong public option, support the Reid way of doing it,” Brown said. “And we’re confident that over time, as the debate unfolds and we take amendment after amendment after amendment, that we can get 60 votes.” He acknowledged several moderates need convincing, but said there is little willingness among progressives to back down.

- The government’s watchdog over the bank bailout program is criticizing Treasury Secretary Timothy Geithner’s handling of one of the most sensitive moments of last year’s financial meltdown, questioning decisions he made while heading up the New York Federal Reserve Bank. The new report criticizes the New York Fed’s decision in the fall of 2008 to bail out insurance giant AIG by covering its clients’ losses, sending tens of billions in taxpayer dollars to overseas banks. “The decision to acquire a controlling interest in one of the world’s most complex and most troubled corporations was done with almost no independent consideration of the terms of the transaction or the impact that those terms might have on the future of AIG,” reads the report, which is signed by special inspector general Neil Barofsky. The decision to cut the counterparty deal has come under fire because it effectively passed money along to financial companies that had signed intricate contracts with AIG, and sent tens of billions in U.S. taxpayer funds to major Wall Street players such as Goldman Sachs as well as foreign banks including Société Générale and Deutsche Bank. “Questions have been raised as to whether the Federal Reserve intentionally structured the AIG counterparty payments to benefit AIG’s counterparties — in other words that the AIG assistance was in effect a “backdoor bailout” of AIG’s counterparties,” said the report. “Then-FRBNY President Geithner and FRBNY’s general counsel deny that this was a relevant consideration for the AIG transactions. “Irrespective of their stated intent, however, there is no question that the effect of FRBNY’s decisions — indeed, the very design of the federal assistance to AIG — was that tens of billions of dollars of Government money was funneled inexorably and directly to AIG’s counterparties.” Rep. Darrell Issa (R-Calif.), the top Republican on the House Committee on Oversight and Government Reform, reacted angrily to the information in the report. “Behind closed doors and with no approval from Congress, the FRBNY added an additional $13 billion of debt on the backs of taxpayers to give a backdoor bailout to AIG’s creditors, including Goldman Sachs, Merrill Lynch, Société Générale and Deutsche Bank,” said Issa, who concluded taxpayers ultimately lost that amount on the deal. “The lack of transparency and accountability in this transaction is disturbing enough. However, there is evidence that this $13 billion expenditure was entirely unnecessary. All of this begs the question why the FRBNY would not drive a better bargain for the American taxpayer.” The non-profit Project on Government Oversight Director Danielle Brian also reacted critically. “Despite Secretary Geithner's repeated denials, the SIGTARP's latest audit shows how the AIG bailout was actually designed to funnel tens of billions in government funds to counterparties such as Goldman Sachs.”

The Business Insider:

- In one week, Activision and Infinity Ward's Call of Duty: Modern Warfare 2 has raked in more cash than any form of entertainment for sale. Any form! Controversy -- stemming from a game mission in which players are supposed to kill civilians in a crowded airport -- hasn't hurt sales, either. Though it did get the game banned in Russia.Here's that scene. Warning: It's extremely violent and disturbing:

Reuters:

- Cantor Fitzgerald, a private investment bank growing by leaps and bounds, for the first time said it is considering going public as it accelerates expansion plans in a world without rivals such as Bear Stearns and Lehman Brothers.

- Hedge funds will soon play a bigger role in portfolios, but investors still worry about getting their money back and understanding what a manager is doing, according to a new survey released on Monday. Nearly 60 percent of all financial advisers who help wealthy people invest their money and institutional investors said they expect hedge funds to be as important to much more important as traditional investments over the next five years. Currently 34 percent of the financial advisers think that these loosely regulated portfolios will be as important as their traditional cousins, up from 27 percent last year, the survey from research firm Morningstar and magazine Barron's found. The results come less than one year after the $1.5 trillion hedge fund industry reported its worst-ever losses and investors pulled billions of dollars out of funds as many lost more than half of their capital during the financial crisis.

- Qualcomm (QCOM), the world's biggest chip designer, said on Tuesday that it expects to be selling its TD-SCDMA chips in mainland China within the next year. The company expected to be able to grab much of the market for such chips, Chief Executive Paul Jacobs told reporters during a media event in Hong Kong.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (UTX), target $76.

Night Trading
Asian Indices are -.50% to +.25% on average.

Asia Ex-Japan Inv Grade CDS Index 110.0 +6.0 basis points.
S&P 500 futures -.30%.
NASDAQ 100 futures -.30%.

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
- (HD)/.35

- (JEC)/.65

- (SKS)/-.11

- (TJX)/.78

- (CNQR)/.18

- (CRM)/.16

- (TGT)/.50

- (ADSK)/.22

- (DDS)/-.50

Economic Releases

8:30 am EST

- The Producer Price Index for October is estimated to rise +.5% versus a -.6% decline in September.

- The PPI Ex Food & Energy for October is estimated to rise +.1% versus a -.1% decline in September.

9:00 am EST

- Net Long-Term TIC Flows for September are estimated at $30.0B versus $28.6B in August.

9:15 am EST

- Industrial Production for October is estimated to rise +.4% versus a +.7% gain in September.

- Capacity Utilization for October is estimated to rise to 70.8% versus 70.5% in September.

1:00 pm EST

- The NAHB Housing Market Index for November is estimated to rise to 19.0 versus a reading of 18.0 in October.

Upcoming Splits
- None of Note

Other Potential Market Movers
- The Fed’s Yellen speaking, Fed’s Lacker speaking, Fed’s Pianalto speaking, Treasury’s Geithner speaking, TAF results, weekly retail sales reports, ABC consumer confidence reading, API Energy Inventories, Citi Credit Conference, Lazard Healthcare Conference, Oppenheimer Industrial Conference, (STEC) analyst day, (SXCI) analyst meeting, (KO) analyst meeting and the (FLEX) mid-year business update could also impact trading today.

BOTTOM LINE: Asian indices are slightly lower, weighed down by financial and automaker 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.