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Wednesday Watch

Late-Night Headlines
Bloomberg:

- Traders in the U.S. credit-default swaps market are paying the least in more than 16 months to protect corporate bonds from default as signs of an improving economy and almost-zero interest rates boosts demand for higher- yielding assets. The Markit CDX North America Investment-Grade Index, a benchmark credit swaps index tied to 125 companies in the U.S. and Canada, is trading at the lowest level since May 2008. The cost to protect junk bonds from default using a benchmark index is the lowest since June 2008. “There’s still a lot of money out there, and it makes it very difficult except for the really brave and foolhardy, to short the market,” said Scott MacDonald, head of research at Stamford, Connecticut-based Aladdin Capital Management LLC. “You had a slowdown at the end of August, but not the end of the rally, and people came back in September ready to work.”

- Bove Calls Bank of America’s Stock ‘Incredibly Cheap’ Richard Bove, an analyst at Rochdale Securities LLC, talks with Bloomberg's Matt Miller about his decision to raise his price target for Bank of America Corp. stock to $25 a share from $19. (video)

- Italian Prime Minister Silvio Berlusconi and Australian Prime Minister Kevin Rudd wrote to U.S. President Barack Obama urging him to lead the fight against financial speculation and make it the center of the Group of 20 nations summit in Pittsburgh this week. “We would like to bring financial speculation and market manipulation, particularly for raw materials, to the center of the debate,” Berlusconi and Rudd said in their letter, a copy of which was posted on the Italian leader’s Web site.

- President Barack Obama will have Chinese and Russian support at the United Nations tomorrow for his bid to put the world body on record against the spread of nuclear weapons. That doesn’t mean those nations are ready to get tough with Iran or North Korea. Obama, as the first U.S. president to preside over a UN Security Council meeting, will call for a vote on a draft resolution to curb the proliferation and testing of nuclear arms and to safeguard fissile materials. On those goals, he likely will have the unanimous backing of leaders gathered in New York, according to interviews with Security Council diplomats. The resolution nonetheless avoids mentioning Iran and North Korea by name, reflecting disagreement among the U.S., China and Russia over how to deal with countries that are shirking their nuclear obligations.

- Banks with savings and securities- trading divisions should voluntarily abandon structured products that have little social value even if they are profitable, the head of Britain’s financial regulator said. Investors in banks may get lower returns as a result, Financial Services Authority Chairman Adair Turner said in a speech yesterday, which rebutted criticism he had received for questioning the U.K. financial sector’s size. The FSA will judge on “behalf of society” whether banks are efficient, and those with activities and products “of little value” will have to hold more capital to weigh against added risk, he said. “Top management of banks -- and in particular of any banks which are involved both in complex trading activities and in retail banking activities -- need to operate within limits,” Turner told 300 financial-services executives and lawmakers late yesterday in London. “There are some profitable activities so unlikely to have a social benefit, direct or indirect, that they should voluntarily walk away from them.”

- Assets held by exchange-traded funds backed by gold bullion jumped 55 percent in 2009 as financial turmoil and inflation concerns boosted the metal’s appeal as an alternative investment, the World Gold Council said. The value of the assets climbed to $51.4 billion as of Aug. 31, said Jason Toussaint, the council’s managing director of exchange-traded bullion. That compares with $33.1 billion on Dec. 31. The SPDR Gold Trust, the world’s biggest bullion-backed ETF, jumped 50 percent to $32.6 billion this year through August.

- House Financial Services Committee Chairman Barney Frank will exempt retailers and non-financial companies from oversight by the Consumer Financial Protection Agency, scaling back the Obama administration’s proposal. Financial institutions won’t have to offer “plain vanilla” products and services or assess whether consumers understand the products they offer, according to an outline of Frank’s proposal sent today to committee Democrats and confirmed by a spokesman. The committee is holding hearings on regulatory overhaul legislation starting tomorrow.

- The U.K. is drawing up plans to send additional forces to Afghanistan in the event the U.S., which leads the military effort, decides to proceed with a stepped-up campaign, the nation’s army chief said. The British military may expand beyond the approximately 9,000 troops it has in Afghanistan, said General David Richards, who took over last month as chief of the general staff. The U.K. has the second-biggest contingent in Afghanistan, behind the 68,000 personnel the U.S. will have by the end of the year. The Times of London reported today without attribution that the U.K. is considering adding as many as 1,000 troops in response to U.S. Army General Stanley McChrystal’s assessment that more forces are needed to fight the Taliban insurgency.

Wall Street Journal:

- Luxury builder Toll Brothers Inc.(TOL) is planning a nationwide housing sale, the company said Tuesday. The move shows that, while buyers might be tiptoeing back into the market, even strong builders with ample cash still have to work for deals as the housing market looks towards recovery from the worst downturn in decades.

- American International Group Inc.(AIG), a symbol of the financial crisis, has morphed into a playground for speculators. At a traders meeting before the market opened on Monday, Scott Redler, chief strategist at hedge fund T3 Capital Management, noted that AIG's stock hadn't moved much for days and was ripe for a breakout. Whether it headed up or down, he said, the traders should be ready.

- Senior Republicans challenged Democratic plans to require nearly all people to carry health insurance, sharpening attacks on the first day of Senate Finance Committee debate over legislation to overhaul the nation's health-care system. The criticism underscored Republican concerns that the legislation represents unwarranted government intrusion into private matters, and highlighted the partisan divide over the White House's top domestic priority. Put on the defensive, the committee's chairman, Sen. Max Baucus (D., Mont.), cut in half the maximum penalty for families that don't have health coverage to $1,900 from $3,800 per year.

- Bed makers are manning up. After years of catering to women, manufacturers are setting their sights on men. The new macho mattresses they're introducing have "muscle-recovery properties" and cooling technology, on the theory that men are more likely to feel too hot in bed. The bed frames feature built-in TVs, iPod docking stations, wine coolers, safes and other guy-friendly gadgetry.

- The Pentagon is rebuffing congressional calls for the top U.S. commander in Afghanistan to personally make the case for the war, amid the growing political tumult over the Obama administration's handling of the conflict. An array of powerful lawmakers from both parties, including the Democratic chairman of the House Armed Services Committee, want Gen. Stanley McChrystal to testify about the challenges confronting the U.S. and its allies in Afghanistan and his plan for beating back the resurgent Taliban. The calls to testify come as the Pentagon has asked Gen. McChrystal to delay his request for more troops while the administration rethinks strategy in the wake of last month's Afghan elections.

- Iran and Russia put Obama to the test last week, and he blinked twice.

MarketWatch.com:
- Seagate Technology(STX) said late Tuesday that its sales for its current fiscal quarter should be better than expected due to anticipated increases in the worldwide demand for hard-disk drives around the world. After the market closed, Seagate(STX) said it expects its fiscal first-quarter sales to be at the high end of its previously forecast range of $2.4 billion to $2.6 billion. Seagate said sales could be even higher if demand continues to grow over the remaining 11 days in the quarter, which ends Oct. 3. Seagate said that it expects the total addressable market [TAM] for disk drives during the current quarter to be greater than the 135 million to 140 million units as previously forecast. The company also expects the worldwide TAM for the December quarter to be between 145 million and 155 million.

- The World Bank said Tuesday it has approved more than $4.3 billion worth of projects designed to boost India's infrastructure and economic stimulus program. "This is a crucial time to support India," World Bank Country Director for India Roberto Zagha said in a statement.

NY Times:

- With a Receptive White House, Labor Begins to Line Up Battles. When China’s president, Hu Jintao, attends the G-20 summit meeting this week in Pittsburgh, he will no doubt complain about the punitive tariffs that the Obama administration recently slapped on Chinese tires and steel. While Mr. Hu is certain to make his displeasure known to President Obama, the man responsible for pressuring the administration to act on those disputes will be elsewhere, sitting in his office a few hundred yards from where the meeting is taking place. That man is Leo W. Gerard, the president of the United Steelworkers, often viewed as the No. 1 scourge of free traders. And the leaders of the G-20 should take note: Mr. Gerard and his fellow labor leaders are just getting started.

- In a provocative new study, a pair of Nobel prize-winning economists, Joseph E. Stiglitz and Amartya Sen, urge the adoption of new assessment tools that incorporate a broader concern for human welfare than just economic growth.

IBD:

- Teen clothier Aeropostale (ARO) is one player that keeps bucking the trend. In terms of same-store sales growth, it has outpaced rivals Abercrombie & Fitch (ANF) and American Eagle (AEO) each month since December 2007, according to Perkins.

Business Week:
- As legislators and officials in the Obama Administration debate and potentially draw closer to passing new rules regarding health care, carbon emissions, and financial services, hedge fund managers are awakening to the need to reexamine the assumptions they have long held about government's role in the private sector. This renewed focus on all things macro—from economic policy to regulatory regimes—is spurring hedge fund managers to seek the counsel of policy experts who can help them better grasp the broader context required to make investment decisions in the years ahead.

CNNMoney.com:

- More than a million people could receive an additional 13 weeks of unemployment benefits under a bill approved by the House on Tuesday. The bill extends benefits for those living in states with jobless rates higher than 8.5%. Some 27 states, plus the District of Columbia and Puerto Rico, fall into this category. The national unemployment rate hit 9.7% in August, the highest in 26 years.

Institutional Investor:

- Sovereign Wealth Funds Embrace Hedge Funds.

The Business Insider:

- Don't cry for ACORN, the left-wing group that stands to lose all federal funding after some investigative pranksters busted volunteers for giving tax and housing advice to a "pimp" The group is set to reap a windfall from real estate developer Bruce Ratner, who bought off the group in order to clear the path for his big stadium/residential/commercial plans in downtown Brooklyn.

Politico:

- The Obama administration sought to distance itself Tuesday from a simmering controversy swirling around a National Endowment for the Arts conference call that appeared to urge artists to endorse White House positions. The administration’s response followed a renewed assault from conservatives on Monday after the right-leaning blog Big Hollywood posted a full transcript and audio recording of the call.

Rasmussen:

- Republican congressional candidates have once again expanded their lead over Democrats in the latest edition of the Generic Congressional Ballot. The new Rasmussen Reports national telephone survey shows that 42% would vote for their district’s Republican congressional candidate while 38% would opt for his or her Democratic opponent.

Washington Post:

- The U.S. securities regulator warned Congress on Tuesday that parts of the $450 trillion private swaps market could still fall through regulatory cracks under the Obama administration's financial reform plan. Securities and Exchange Commission Chairman Mary Schapiro said stricter rules were needed to prevent market participants from shopping for the weakest rules, and said regulators needed more tools to enforce anti-fraud authority. The administration's proposal "unfortunately does not currently provide the tools needed to adequately police all these swaps," Schapiro told the House Agriculture Committee hearing.

- To Bob Woodward, it was the modern-day equivalent of the Pentagon Papers. But to Obama administration officials, the classified assessment of the deteriorating situation in Afghanistan, if disclosed by The Washington Post, represented a potential threat to the safety of U.S. troops. The result was that The Post agreed to a one-day delay in publicizing the report by Gen. Stanley A. McChrystal, the top U.S. and NATO commander in Afghanistan, and that the paper's top editor engaged in a lengthy discussion Sunday with three top Defense Department officials in a meeting at the Pentagon. The Post published the report, which Woodward had obtained, on Monday.

Philly.com:

- One of Gov. Corzine's personal investments has become the latest fodder for attacks in an increasingly bitter race between the Democratic incumbent and Republican candidate Christopher J. Christie. Accusing Corzine of a "colossal error in judgment," Christie says the governor is invested in a hedge fund related to funds that have interests in four Atlantic City casinos and do business with the state pension system.

Philly Business Journal:

- The College Football Hall of Fame, long sought after as a crown jewel tourist attraction for the capital of the South, will touchdown in downtown Atlanta, multiple sources have told Atlanta Business Chronicle.

Reuters:

- Some investors believe Goldman Sachs Group Inc (GS) may try to shed its commercial banking charter to sidestep U.S. government efforts to rein in exorbitant Wall Street pay.

- Treasury Secretary Timothy Geithner said in testimony prepared for delivery on Wednesday that the United States would not identify in advance financial firms that it views as systemically important.

- The near collapse of the global financial system, which wiped out trillions in corporate value and personal savings, may be giving way to a new "golden age" for private equity investment, Silver Lake Co-CEO Glenn Hutchins said in an interview on Tuesday.

- Health insurers accused the U.S. Medicare agency on Tuesday of political interference in a battle over whether the industry can lobby its customers directly over healthcare legislation. The Centers for Medicare & Medicaid Services (CMS), which oversees the Medicare program for the elderly and disabled as well as privately run Medicare alternatives, said on Monday it was investigating a letter Humana Inc (HUM) sent enrollees about efforts to overhaul the nation's healthcare system. Humana's letter, sent in an envelope citing important plan information, told customers the Democrats' bills could hurt "millions of seniors and disabled individuals could lose many of the important benefits and services that make Medicare Advantage health plans so valuable," according to CMS. America's Health Insurance Plans, the industry lobby group, called the CMS action a "gag order." The group argued that any cuts, including those in various Democratic proposals, would raise costs and reduce benefits for those who want private plans. "Seniors have a right to know how the current reform proposals will affect the coverage they currently like and rely on," said AHIP spokesman Robert Zirkelbach. Republicans seized on the spat. "It looks likes CMS is engaged in government intimidation, pure and simple," said Representative Dave Camp, the ranking Republican on the U.S. House of Representatives Ways and Means Committee. Senate Republican Leader Mitch McConnell of Kentucky, where Humana is based, also blasted the CMS "effort to squelch free speech." Medicare Advantage plans are already under scrutiny because they cost more than traditional Medicare. An advisory group has urged Congress to curb payments to help lower the overall costs of Medicare, which could run out of money as early as 2017. Representative Camp said AARP, the nation's largest lobby group for older Americans which offers its own Medicare plan with UnitedHealth Group Inc (UNH), touts Democratic healthcare reform efforts on its website. "CMS may be selectively and inappropriately using its regulatory powers," he wrote in a letter to CMS.

- Brocade Communications Systems Inc (BRCD) forecast revenue for fiscal 2010 that would exceed Wall Street's expectations as more customers resume spending on network equipment as the economy stabilizes. Brocade also said on Tuesday that its integration of Foundry Networks, acquired last year, was going as planned and its sales partnership with International Business Machines Corp (IBM) was beginning to yield more benefit.

Financial Times:

- Chinese state companies this month began supplying petrol to Iran and now provide up to one-third of its imports in a development that threatens to undermine US-led efforts to shut off the supply of fuel on which its economy depends. The sales come in spite of moves over the past year by international companies, including BP and Reliance of India, to stop selling petrol to Iran, and highlight the difficulties of implementing sanctions aimed at curbing Iran’s nuclear ambitions. Traders and bankers familiar with Iran’s purchasing said the gap left by the withdrawal of such long-standing suppliers had been filled by Chinese petrol this month. Lawrence Eagles, head of commodities research at JPMorgan, said: “We estimate, based on what we are hearing in the market, that 30,000-40,000 barrels a day of Chinese petrol is making its way from the Asian spot market to Iran via third parties.” His comments reflect the view of several leading traders supplying Iran with petrol. The US and some of its allies want to shut off Tehran’s petrol imports, which have long been depicted as the Iranian economy’s most vulnerable point.

- German officials warned on Tuesday of a “widening of differences” ahead of the G20 summit, as US proposals attracted criticism in Europe for concentrating too heavily on global imbalances instead of reforming financial regulation. The US has expressed the hope that there is “a narrowing of differences” between the positions of the delegations. A German official said: “Actually, this shows a widening of differences.” “The language on the financial regulatory system, on capital requirements, on preventing banks from becoming too big to fail is very disappointing and not nearly compact enough,” one German official said.

O Estado de S. Paulo:
- Gerdau SA will keep steel prices unchanged this year, citing the company’s chief executive officer.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (RCL), boosted estimates, raised target to $34.

- Reiterated Buy on (CCL), raised estimates, boosted target to $41.

- Reiterated Buy on (OMX), target $18.

- Reiterated Buy on (YHOO), target $21.

- Reiterated Buy on (BAC), target $20.

Night Trading
Asian Indices are -.50% to +.75% on average.

Asia Ex-Japan Inv Grade CDS Index 109.0 -5.0 basis points.
S&P 500 futures -.10%.
NASDAQ 100 futures -.01%.

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- (GIS)/1.03

- (AZO)/4.43

- (PAYX)/.34

- (CTAS)/.39

- (BBBY)/.47

- (CPRT)/.43

- (RHT)/.15

- (CMTL)/.17

Economic Releases

10:30 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory drawdown of -1,400,000 barrels versus a -4,729,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +500,000 barrels versus a +547,000 barrel increase the prior week. Distillate supplies are estimated to rise by +1,450,000 barrels versus a +2,237,000 barrel gain the prior week. Finally, Refinery Utilization is expected to fall by -1.0% versus a -.26% decline the prior week.

2:15 pm EST

- The FOMC is expected to keep the benchmark fed funds rate at .25%.

Upcoming Splits
- (UTHR) 2-for-1

Other Potential Market Movers
- The Treasury’s 5-year note auction, weekly MBA mortgage applications report, BOE minutes, CSFB Steel & Mining Conference, (ABT) investor briefing, Canaccord Adams Healthy Living Conference, UBS Global Life Sciences Conference, RBC Financial Institutions Conference, (UFS) analyst meeting, (XCO) analyst meeting, (KNOT) investor day, (VQ) analyst day and the (SYMC) Annual Meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Higher, Boosted by REIT, Financial and Commodity Shares

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Stocks Slightly Higher into Final Hour on Less Financial Sector Pessimism, Declining Economic Fear, Short-Covering, Technical Buying

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Technology longs and Financial longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is heavy. Investor anxiety is high. Today’s overall market action is mildly bullish. The VIX is falling 3.66% and is high at 23.16. The ISE Sentiment Index is around average at 162.0 and the total put/call is slightly below average at .75. Finally, the NYSE Arms has been running below average most of the day, hitting .47 at its intraday trough, and is currently .73. The Euro Financial Sector Credit Default Swap Index is falling 5.16% today to 68.67 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is falling 4.96% to 90.75 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is down 1 basis point to 19 basis points. The TED spread is now down 444 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling .85% to 36.50 basis points. The Libor-OIS spread is down 1 basis point to 10 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 1 basis point to 1.82%, which is down 85 basis points since July 7th. The 3-month T-Bill is yielding .10%, which is up 1 basis point today. The most economically sensitive shares are outperforming substantially today, with the MS Cyclical Index rising 1.6%. REIT, I-Banking, Bank, Steel, Gold, Oil Service, Coal and Oil Tanker shares are especially strong, rising 2%+. Healthcare-related, education and airline stocks are under pressure today. Another meangingful decline in credit default swap indices is a large positive. The Euro Financial Sector CDS Index is dropping to the lowest level since June 18^th of last year. The 2GB U-DIMM DDR2 667 MHz DRAM price has risen 7.27% over the last five days and is at the highest level since Oct. of last year. The US dollar is dropping again today, however I suspect we are nearing another tradable low in the currency over the next few days as shorts cover and some bargain-hunters materialize. The Shanghai Composite fell another 2.3% last night, finishing at session lows, and looks poised for further losses over the coming weeks. Nikkei futures indicate an +80 open in Japan and DAX futures indicate an +7 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on diminishing economic fear, short-covering, less financial sector pessimism, lower long-term rates, technical buying and investment manager performance anxiety.

Today's Headlines

Bloomberg:

- Crude oil rose in New York for the first time in four days as the dollar weakened, bolstering the investment appeal of commodities, while China confirmed its August net imports were the second highest on record.

- Goldman Sachs Group Inc.’s(GS) third- quarter earnings per share estimate was raised 28 percent by FBR Capital Markets analysts, who said they expect the New York- based bank to continue achieving high returns on assets.

- U.S. home prices rose 0.3 percent in July from the previous month, less than analysts’ estimates, in a sign that the housing recovery is tenuous. The house price index fell 4.2 percent for the 12 months ended in July, the smallest decline this year, the Federal Housing Finance Agency in Washington said today.

- The Baltic Dry Index, a measure of shipping costs for commodities, fell to the lowest in more than four months after data showed Chinese demand for coal and iron ore to make steel is tumbling. The index tracking transport costs on international trade routes slid 72 points, or 3.1 percent, to 2,246 points, according to the Baltic Exchange. That’s the lowest since May 11. “China’s in what we call ‘off-peak mode’ and not going hell for leather importing iron ore,” Hendrik Leusink, division executive for capesize and panamax vessels at Island View Shipping in Cape Town, said by phone today. Also, “there are so many more ships coming free” for rental while new vessels are being delivered. Chinese iron-ore imports fell 14 percent in August from July and coal imports slid 15 percent, a second consecutive monthly decline, according to customs data today. The drops were due to rising global costs and domestic supplies.

- Total SA Chief Executive Officer Christophe de Margerie said recent gains in oil prices reflect market anticipation of a supply shortfall within five years rather than current demand. “If it was purely offer and demand, prices would be lower than the $60 we are seeing,” de Margerie said today in a Bloomberg Television interview in New York. “The market is anticipating in the long term there won’t be enough oil, some people would say speculating.”

- Yale University, whose endowment strategy became a model for schools across the country, said its investments lost 24.6 percent in the past year because of declines in private equity, energy and real estate.

- Palm Inc.(PALM), maker of the Pre mobile phone, gained as much as 9.7 percent in Nasdaq trading, a jump that some analysts attributed to speculation Nokia Oyj may bid for Palm. Palm, based in Sunnyvale, California, rose $1.10 to $17.05 at 1:26 p.m. on the Nasdaq Stock Market, after climbing to $17.50 earlier.

- American International Group Inc.(AIG), the insurer bailed out by the U.S., extended its rally for a second day, exceeding the company’s highest closing share price this year. The insurer gained $3.71, or 7.7 percent, to $52.11 at 11:39 a.m. in New York Stock Exchange composite trading.

- U.S. securities and commodities regulators urged Congress to tighten rules for derivatives beyond the Treasury Department’s proposal, to close loopholes and prevent traders from exploiting gaps in oversight. All dealers and markets should be subject to the rules, Commodity Futures Trading Commission Chairman Gary Gensler said today at a House Agriculture Committee hearing. Securities and Exchange Commission Chairman Mary Schapiro said the Treasury Department proposal lets traders investing in swap indexes engage in “regulatory arbitrage.”

- Georgia Governor Sonny Perdue issued a state of emergency for 17 counties after as much as 20 inches of rain in the past week turned creeks into torrents and killed at least seven people. It’s the worst flooding in the Atlanta area since the state began keeping detailed climate records after World War II, said David Stooksbury, Georgia’s climatologist.

Wall Street Journal:

- New Pentagon Priorities Reshape Defense Business. Smaller Contractors Benefit Amid Shift From High-Tech Weapons to More-Basic Arms Meant for Quick Deployment.

- Wind-turbine makers say growth in their industry could dramatically slow unless the federal government requires more electricity come from renewable energy. New federal stimulus grants helped restart a stalled wind-power industry, but Vic Abate, a General Electric Co.(GE) vice president in charge of its wind-turbine business, said orders for wind turbines to be built in 2012 and thereafter have been "extremely light." He is worried that wind-power installation by 2012 could fall back to one-third of last year's construction levels without additional government support, taking the wind industry from "a boom to a bust cycle."

- New York City students who win a lottery to enroll in charter schools outperform those who don't win spots and go on to attend traditional schools, according to new research to be released Tuesday. The study, led by Stanford University economics Prof. Caroline Hoxby, is likely to fire up the movement to push states and school districts to expand charter schools -- one of the centerpieces of President Barack Obama's education strategy.

- The Federal Deposit Insurance Corp. is leaning toward asking banks to prepay future fees as a way to quickly rebuild the agency's deposit insurance fund, people familiar with the matter said. Such a move is within the agency's power and would have banks push forward some of their payments in order to recapitalize the FDIC's fund, which is supported by fees levied on the banking industry. The agency is expected to propose a new policy at a board meeting next week. A final decision on how to recapitalize the fund hasn't been made, the people said.

MarketWatch.com:
- Congress could strengthen a White House proposal to reform the derivatives market through a variety of means, the head of the Securities and Exchange Commission said Tuesday, such as by approving a measure to have over-the-counter derivatives be regulated and disclosed in the same way as their underlying commodities or securities.

- A critical Senate Finance Committee work session on a sweeping health-care reform bill got off to a contentious start on Tuesday, with the panel's chairman seeking to wrap up debate this week but other members saying the bill needs many improvements before they can support it. "I look forward to a constructive floor debate starting as early as next week," said Finance Committee Chairman Max Baucus, D-Mont. "Let us make this a time for progress," said Baucus, who unveiled changes to the bill on Tuesday in a bid to attract new support.

CNBC:

- The worldwide personal-computer market is pulling out of its slump quickly and could defy predictions by growing this year, Intel(INTC) CEO Paul Otellini said Tuesday. Otellini's comments at a conference Tuesday were more bullish than many analysts have been.

- Car dealership chain CarMax said Tuesday its fiscal second quarter profit surged on higher sales and a one-time gain related to its auto financing business.

NY Times:

- The White House’s intervention in the race for New York governor is the latest evidence of how President Obama and his top advisers are taking an increasingly direct role in contests across the country, but their assertiveness has bruised some Democrats who suggest it could undercut Mr. Obama’s appeal with voters tired of partisan politics. The overt involvement of Mr. Obama’s team in New York, where they have tried to ease Gov. David A. Paterson out of the race, has made clear that this is a White House willing to use its clout to help clear the field for favored Democratic candidates and to direct money and other resources in the way it thinks will most benefit the administration and help preserve the Democrats’ majority in Congress.

- It was not exactly a planned strategy, but the recession, particularly in the United States, has been very good for Hyundai, the South Korean automaker.

Vanity Fair:

- 100 to Blame: Miami and Las Vegas.

paidContent.org:

- The Financial Times Lex commentary team is hoping to raise its profile and revenues thanks to a deal with business news broadcaster Bloomberg TV. Lex columnists will appear on the financial channel every weekday to expand on commentary addressed in the day’s column. In a collaboration that taps into the growing premium being placed on commentary, the clips will also be available on the FT.com website, where the newspaper group will run advertising alongside them. The FT said the deal will help its commentators reach Bloomberg’s 200 million global viewers and those visiting Bloomberg.com.

Rassmussen:

- Fifty-nine percent (59%) of U.S. voters believe that the current level of political anger in the country is higher than it was when George W. Bush was president. A new Rasmussen Reports national telephone survey finds that only 22% think the level of political anger is lower now, while 16% rate it as about the same.

- Sixty-six percent (66%) of voters nationwide say they’re at least somewhat angry about the current policies of the federal government. That figure includes 36% who are Very Angry. The latest Rasmussen Reports national telephone survey finds that only 30% are not angry about the government's policies, including 10% who are Not at All Angry. Adding to the voter frustration is the fact that 60% believe neither Republican nor Democratic political leaders have an understanding of what is needed today. Among those who are Very Angry about government policies, 80% say that neither political party’s leaders have the answers.

Politico:

- Just when President Barack Obama has got Congress focused on health care again, Afghanistan keeps pulling him back in. With a $629.6 billion defense bill heading for the Senate floor, Washington woke up to headlines Monday warning of “mission failure” if more U.S. troops aren’t committed to battle the Taliban.

- President Barack Obama urged world leaders at the United Nations on Tuesday to act swiftly to address climate change, but did not offer a plan, or timetable, to get stalled cap-and-trade climate legislation through the U.S. Senate.

AP:

- Counterterrorism officials have issued security bulletins to police around the nation about terrorist interest in attacking stadiums, entertainment complexes and hotels — the latest in a flurry of such internal warnings as investigators chase a possible bomb plot in Denver and New York. In the two bulletins — sent to police departments Monday and obtained by The Associated Press — officials said they know of no specific plots against such sites, but urged law enforcement and private companies to be vigilant. These two bulletins followed on the heels of a similar warning about the vulnerabilities of mass transit systems. The bulletin on stadiums notes that an al-Qaida training manual specifically lists "blasting and destroying the places of amusement, immorality, and sin... and attacking vital economic centers" as desired targets of the organization. "While DHS and FBI have no information regarding the timing, location or target of any planned attack, we believe it is prudent to remind transit authorities to remain vigilant," Homeland Security spokesman Sean Smith said Monday night. Separately, law enforcement officials said a Colorado man may have been planning with others to detonate backpack bombs on New York City trains in a terrorism plot similar to past attacks on London's and Madrid's mass-transit systems. The investigation and the earlier warning about mass transit system have already prompted officials around the nation to step up patrols. Two law enforcement officials speaking on condition of anonymity because they were not authorized to discuss details of the investigation told The Associated Press late Monday that more than a half-dozen individuals were being scrutinized in the alleged plot.

Reuters:
- Room rates at luxury hotels will remain weak through 2010, but group bookings have started to perk up, a sign that economic conditions are turning around, the president of the Ritz Carlton hotel chain said on Monday. Business from conferences, media organizations and sports teams are stacking up, and they're booking rooms at rates slightly higher than today's current prices, said Simon Cooper, who is also chief operating officer of the Ritz Carlton, one of Marriott International's (MAR) luxury brands.

- India's gold imports in 2009 may fall to their lowest level since trade was liberalised 12 years ago as high prices have put off buyers in the world's biggest market for the metal, a top importer said on Tuesday. Total imports may fall to 500 to 550 tonnes, Shilpa Kumar, senior general manager of the global markets group at ICICI Bank, one of India's top three gold importers, told Reuters in an interview. In the first half of the year, Indian demand was 55 percent lower than a year ago, but the gap will be narrowed to 23-30 percent for the full year as higher wages for government employees and an official scheme for rural employment has cushioned the impact of failed monsoons, she said.

- U.S. Treasury Secretary Timothy Geithner on Tuesday said that the U.S. economy appeared to be picking up steam and G20. leaders gathering in Pittsburgh this week would strive to ensure the recovery was balanced. "We are at the very beginnings of this recovery ... We need to make sure that we keep at this, so we have in place a recovery that is going to be self-sustaining, led by private demand, (and) a financial system that can actually provide the credit that is needed," he told a press briefing.

- Carnival Corp & Plc (CCL) lifted its 2009 earnings forecast on Tuesday and said ticket prices for its cruises were stabilizing, boosting shares of the world's largest cruise operator as much as 9 percent.

Les Echos:

- Germany still faces “enormous” systemic risks, especially among its state-owned banks or ‘landesbanken’, finance minister Peer Steinbrueck said in an interview. Restructuring of the banks must be speeded up.

Handelsblatt:

- BMW AG’s Spartanburg South Carolina factory will reach full technical capacity at the middle of next year, citing management board member Frank-Peter Arndt.

heraldscotland:

- US calls a truce in row over Megrahi release. America has vowed to draw a line under the release of the man convicted of the Lockerbie bombing and work to repair shattered transatlantic relations.

Justice Secretary Kenny MacAskill’s decision to free Abdelbaset Ali Mohmed al Megrahi sparked fury among American leaders, but a US State Department official has said the Obama administration recognizes Scotland’s right to decide its own affairs. Fears had been raised over a possible US boycott of Scottish produce, but State Department spokesman Ian Kelly promised that there would be no knee-jerk reaction against the country.

DigiTimes:

- HTC (High Tech Computer) is evaluating the possibility of adding Broadcom(BRCM) to its supplier list of 3.5G chipset solutions to fulfill its goal of introducing more entry-level and mid-range smartphones, according to market sources. The evaluation is also part of HTC's continuing strategy to reduce the risk of relying on a single supply source, said the sources, noting that HTC is dealing mainly with Qualcomm(QCOM) for the supply of 3.5G chipset solutions at present.

Xinhua:

- China’s steel production capacity may rise by at least 50 million metric tons to 710 million tons next year, citing Wu Xichun, a consultant and former chairman of the China Iron and Steel Association. A total of $50 billion has been invested in steel projects in China, citing Wu. The industry will have a “difficult period” from the fourth quarter into next year because of worsening domestic overcapacity and weak global demand, the report said. China’s steel consumption increased by 17% in the first eight months of this year from a year ago, Wu was cited as saying. That pace will be hard to maintain during the rest of the year, the report said.

21^st Century Business Herald:

- Chinese local governments are putting their solvency at risk by guaranteeing bank loans to investment projects, citing Liu Shiyu, a vice governor at the central bank. Local-government liabilities tripled to $770 billion as of May 31 from the start of 2008.