Friday Watch

Evening Headlines 
Bloomberg: 

• EU Should Reach Agreement on Greek Aid Next Week, Grilli Says. Italian Finance Minister Vittorio Grilli is confident that euro-region finance chiefs will reach an agreement on aiding Greece when they meet next week. Greece was granted an additional two years to reach budget- deficit goals in its bailout program. European finance ministers will be discussing ways of plugging the funding gap resulting from that extension at a Nov. 20 meeting in Brussels. “We know that there are several options for helping Greece get through this very important challenge,” Grilli said in an interview with Bloomberg Television in London. “I am clearly optimistic that we can come to a decision.” 
• Emerging Market Stocks Slump in Longest Streak Since July. Emerging-market stocks fell for a sixth day, the longest losing streak since July, on prospects China’s new leadership will put off policy changes needed to reform the economy. Volcan Cia. (VOLCABC1) Minera SAA led declines after MSCI Inc. removed the mining company from its Peru index. Tencent Holdings Ltd. (700), China’s biggest Internet company, dropped the most in 13 months in Hong Kong as profit missed analysts’ estimates. Gedeon Richter Nyrt., Hungary’s biggest drugmaker, and Taiwan’s Inotera Memories Inc. (3474) slid after MSCI said they will be removed from benchmark indexes. Embotelladora Andina SA (ANDINAB), a Chilean soft-drink bottler, rose after shares were added to the MSCI Chile Index. The MSCI Emerging Markets Index (MXEF) fell 0.6 percent to 974.33 in New York. The gauge’s losing streak is the longest since a seven-day drop through July 12.
• Singapore Sees 2012 Growth at Low End of Forecast on Exports. Singapore said growth this year will be at the lower end of its previous forecast and the expansion in 2013 may hold near a three-year low, as faltering demand for its goods weighs on the Southeast Asian nation’s economy. The economy will grow 1 percent to 3 percent in 2013 after expanding about 1.5 percent this year, the Trade Ministry said in a statement today. It had previously forecast growth of as much as 2.5 percent in 2012. Gross domestic product contracted 5.9 percent last quarter from the previous three months, worse than the 1.5 percent decline estimated earlier. 
• Oil Heads for Weekly Decline as Weak Economy Counters Mideast Tension. Oil headed for the fourth weekly decline in five in New York as signs of a slowing economy in the U.S., the world’s biggest crude user, countered concern that rising tension in the Middle East threatens to disrupt supplies. West Texas Intermediate futures were little changed after falling 1 percent yesterday as reports showed U.S. unemployment claims at the highest level since April 2011 and manufacturing shrinking in the northeast of the country. Crude stockpiles climbed to 375.9 million barrels, the most since July, as output rose to an 18-year high, according to the Energy Department. Oil pared losses after Israel said it’s ready to escalate military operations against Gaza.
• Gap(GPS) Sales Uptick Boosts Outlook. Gap Inc., the largest U.S. specialty-apparel retailer, raised its full-year earnings forecast as sales in North America advanced.

Wall Street Journal: 

• Israel Mobilizes Troops as Hostilities Escalate. Israel pounded the Gaza Strip with planes and artillery for a second straight day and began mobilizing tens of thousands of troops, while Palestinian militants mounted their deepest-ever missile strikes into the heart of Israel. 
• New J.P. Morgan(JPM) Jam. Bank Faces U.S. Action on Antimoney-Laundering Practices. Regulators are expected to serve J.P. Morgan Chase & Co. with a formal action alleging weaknesses in the bank's antimoney-laundering systems, said people close to the situation. The cease-and-desist order from the Office of the Comptroller of the Currency is part of a broader crackdown on the nation's largest banks, the people said. The OCC is expected to require J.P. Morgan to beef up its procedures and examine past transactions, these people said.
• Funds Bet Against Japan Inc. Some U.S. hedge funds have set their sights on Japan's corporate titans, buying credit-default swaps tied to debt of electronics makers, including Sony and Panasonic, and of commodity exporters, such as Nippon Paper and Kobe Steel. In their search for the next big trade, some U.S. hedge funds have set their sights on Japan's corporate titans. Betting against Japan, either in its government bond or currency market, mostly hasn't paid off. But in recent months, a growing number of U.S. fund managers have placed wagers that Japan's long economic descent is set to worsen, targeting companies instead. The funds are buying credit-default swaps tied to debt of Japan's once-mighty electronics makers, including Sony Corp. and Panasonic Corp., and of commodity exporters, such as Nippon Paper Group Inc. and Kobe Steel Ltd.
• Behind Mark Pincus's Bid to Save Zynga(ZNGA). Tears nearly welled up in Zynga Inc. chief executive Mark Pincus's eyes at a meeting in September with Apple Inc. director Bill Campbell.
• Pain-Pill Probe Targets FedEx(FDX), UPS(UPS).
• Greek Protesters Assail Germans. Protesters in northern Greece raided a conference center and pelted a German diplomat with cups of coffee and water bottles in an expression of continuing rancor between the two countries. Greek police were forced to form a shield around Consul Wolfgang Hoelscher-Obermaier as he entered an annual meeting of German and Greek officials on the grounds of the trade-fair complex in Thessaloniki on Thursday. The consul's glasses were broken in the scuffle. "These people haven't come here to help us, but to announce our death sentence," said Themis Balasopoulos, leader of Greece's municipal workers union, who was at the demonstration.
• Stephen Moore: Why Lower Tax Rates Are Good for Everyone. If we want millionaires to pay more taxes, then we need an economy where there are more millionaires.

Barron's: 

• Sears(SHLD) Falls Despite Q3 Beat. Shares of Sears Holdings were recently falling more than 6% in after hours trading, despite a better-than-expected third-quarter earnings report, as sales trends worried investors.

Fox News:

• Intel officials struggle to explain Libya talking points, pressure on Petraeus to clear the air.

CNBC: 

• Obamacare, Host of Others Need Slashing: Simpson-Bowles. Americans interested in getting the national debt crisis under control likely will have to endure cuts to popular programs like defense, Social Security — and the nationalized health insurance program known as Obamacare. That's the conclusion of Alan Simpson and Erskine Bowles, authors of the widely disseminated report commissioned to devise ways to unwind the $16 trillion national debt and $1 trillion-plus government budget deficits. Speaking in stark terms and folksy language, the duo laid out the dire reality of the situation to 4,000 investors at the Charles Schwab Impact conference Thursday.
• What Traders Hope For—and Fear— in DC 'Fiscal Cliff' Talks. “The dividend taxation issue is my greatest fear because I don’t really know how you react to dividend taxes going to 45 percent and capital gains going close to 25,” Adams said, adding investors have not had to consider those factors for years.

Zero Hedge: 

• Guess What They Are Not Cutting In The Fiscal Cliff...
• The 'Broken' Fed Model In 3 Simple Charts.
• The Bernanke-Obama-Keynes Toxic Triangle Dead End.
• How Fiscally FUBAR Will Your State Be?

Business Insider:

• Israel And Gaza On Brink Of War As Tanks Amass At Border. (video)
• The State Of Corporate Profit Margins.

NY Times:

• Senate ‘Gang of 8’ Says This Isn’t Its Moment in Deficit Talks. After years of wrangling, members of the bipartisan group of senators known as the Gang of Eight are ratcheting back expectations for a deficit reduction breakthrough and now say the best they can probably do is offer ideas for the one fiscal negotiation that will truly matter: talks between President Obama and Speaker John A. Boehner that begin in earnest on Friday.

Forbes: 

• Sina(SINA) Q3 Tops Guidance, But Q4 Outlook Misses; Shrs Fall. Shares of China-based Internet content and communications company Sina are trading lower after hours Thursday after the company provided disappointing guidance for the fourth quarter.

The Blaze: 

• The Pictures Coming Out of Israel Are Chilling — See Our Collection Showing the Aftermath.

USA Today:

• America must avoid Europe's toxic tax remedy. The looming fiscal cliff, with four times more tax increases than spending cuts, would reduce growth, not debt. Tax-heavy European austerity plans have failed. We must cut public spending to prosper.

Reuters: 

• U.S. gives states more time to make Obama health law decision. The federal government on Thursday gave states another month to decide if they will operate insurance exchanges under the new U.S. healthcare law, after some Republican governors stalled in the hope President Barack Obama would lose last week's election. 
• Egypt PM to visit Gaza in support of Hamas against Israel. Egypt's prime minister prepared to visit the Gaza Strip on Friday in an unprecedented display of solidarity with Hamas militants embroiled in a new escalation of conflict with Israel that risks spiralling into all-out war.
• Fed hawks press their minority case against easing. The Federal Reserve's most hawkish policymakers were out in force on Thursday to criticize as misguided and risky the central bank's aggressive attempts to boost the U.S. economic recovery. In speeches around the country, three regional Fed presidents ticked off their reasons for opposing the U.S. central bank's current and possibly massive round of large-scale asset purchases, including the risk of inflation and the prospect of letting politicians off the hook for inaction on the economy. Many of these concerns have been raised in the past. But Thursday's speeches by the so-called hawks - who generally worry about a run-up in inflation - illustrated the resistance that Fed Chairman Ben Bernanke and the other officials who constitute a majority face at their closed-door policy-setting meetings. "The extraordinary policies the Fed has pursued pose substantive longer-term risks: these include moral hazard, future inflation, and loss of institutional credibility," Charles Plosser, president of the Philadelphia Federal Reserve Bank, said in Washington.
• On eve of U.S. 'fiscal cliff' talks, positions harden. As President Barack Obama and congressional leaders prepared for budget and tax talks on Friday aimed at preventing the U.S. economy from falling back into recession, a top Republican vowed to overhaul the U.S. tax code next year. Democrats and Republicans dug in on their long-held opposing positions on the eve of the talks, with Senate Republican leader Mitch McConnell warning, "What we won't do is raise tax rates." 
• Dell(DELL) profit falls 47 percent. Dell Inc's third-quarter profit slid 47 percent, hurt by lower PC sales, weaker demand from large corporations and the shift to mobile computing. 
• Japan cuts economic view for 4th month in row as recession looms. Japan's government cut its view of the economy for a fourth straight month in November, marking the longest such sequence since the 2008-09 financial crisis and underlining the view that the country is slipping back into recession as the global slowdown bites. Weakening corporate capital spending was the chief culprit behind the downgrade, the government said as it warned of persistent weakness in the economy in the face of uncertainty over the euro zone debt crisis and a slowdown in China. The downgrade comes as Prime Minister Yoshihiko Noda is due to dissolve parliament's lower house on Friday for a snap poll on Dec. 16, likely paving the way for a change of government and adding to the murky outlook for the world's third-biggest economy.
• Russia threatens tough response if US backs rights bill. Russia warned the United States on Thursday to expect a tough response if the U.S. Congress passes "unfriendly and provocative" legislation designed to punish Russian officials for human rights violations. 
• Marvell Technology(MRVL) sees another weak quarter. Marvell Technology Group Ltd forecast another weak quarter as the chipmaker finds little respite from falling PC sales and lower demand for its mobile phone chips.

Telegraph: 

• 1930s medicine pushes Europe back into double-dip recession. The eurozone has relapsed into double-dip recession as the austerity shock in the Mediterranean region spreads to the core countries of the north.

N-TV:

• EU's Schulz Says a Breakdown in European Economies is Possible. Martin Schulz, President of the European Parliament, says an Italian breakdown would affect everyone although he believes Italy has a chance to emerge from the crisis, citing an interview. Schulz said Europe faces a double danger since investors have lost faith in the economy and people have lost faith in state institutions, including European institutions.

China Securities Journal:

• Many Chinese Cities Ready for Property Tax Trial. Many Chinese cities are preparing for the introduction of property tax trials, citing people familiar with the situation. China's central government hasn't yet decided the scale and the timing of the property tax trial expansion. China may officially start the tax trial expansion early next year.
• China Economy September Rebound Temorary. China's economy has not bottomed out and the recovery in Sept. is only a "short-term fluctuation in a downward trend," Wang Jian, a National Development and Reform Commission researcher wrote in a commentary. Domestic consumption growth is likely to slow down if the income gap isn't reduced, Wang said. Sept. and Oct. exports rebounded because of a low base last year, Wang said. Fundamentals have not improved and recent signs of recovery are a result of investment growth and monetary expansion, Wang said.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -1.0% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 130.5 +4.25 basis points.
• Asia Pacific Sovereign CDS Index 93.0 +2.25 basis points.
• FTSE-100 futures -.10%.
• S&P 500 futures -.11%.
• NASDAQ 100 futures -.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CMRG)/.00
• (FL)/.54
• (HIBB)/.68
• (SJM)/1.45
• (CYBX)/.39

Economic Releases
9:00 am EST 

• Net Long-Term TIC Flows for September are estimated to fall to $50.0B versus $90.0B.

9:15 am EST

• Industrial Production for October is estimated to rise +.2% versus a +.4% gain in September.
• Capacity Utilization for October is estimated at 78.3% versus 78.3% in September.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Lockhart speaking, Hong Kong GDP report, (FWLT) Investor Day and the (DGX) Investor Day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.