Today's Headlines

Bloomberg:

• Recession Concerns Ease on August Jobs Data. Companies in the U.S. added more jobs than forecast in August, easing concern the world’s largest economy is sliding back into a recession. Private payrolls climbed 67,000 after a revised 107,000 increase in July that was more than initially estimated, Labor Department figures in Washington showed today. The unemployment rate rose to 9.6 percent as more people looked for work. A separate report showed service industries expanded more slowly than estimated. “The double-dip talk was probably misplaced,” said Maury Harris, chief economist at UBS Securities LLC in New York. “From a historical perspective, things are still soft. The economy ought to be doing better.” President Barack Obama said there is “no quick fix” for the economy and promised to lay out new ideas next week to boost growth and hiring. The White House is considering payroll tax relief to encourage new hiring, a permanent extension of the research and development tax credit and other business tax breaks as well as more infrastructure spending, according to people familiar with the discussions. Obama’s approval ratings have slipped and support for the Republican Party has grown during the summer months amid signs the economy was cooling. A USA Today/Gallup Poll completed Aug. 30 found Americans believe Republicans in Congress would do a better job on the economy than Democrats, by 49 percent versus 38 percent plurality. Unemployment, which reached a 26-year high of 10.1 percent in October, will average more than 9 percent through 2011, according to a Bloomberg survey. “The painfully slow recovery in the labor market has restrained growth in labor income, raised uncertainty about job security and prospects, and damped confidence,” Bernanke said in a speech in Jackson Hole, Wyoming, on Aug. 27. The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- increased to 16.7 percent from 16.5 percent. The report also showed long-term unemployment dropped. The number of people unemployed for 27 weeks or more fell as a percentage of all jobless to 42 percent from 44.9 percent.
• Debt Risk Heads for Biggest Drop in 11 Weeks in Europe After Jobs Report. The cost of insuring against losses on European corporate bonds headed for the biggest weekly decline in almost three months after a report showed U.S. companies added more jobs than forecast. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings dropped 47 basis points this week to 478, the lowest level since Aug. 9, according to JPMorgan Chase & Co. The contracts were 13 basis points lower at 2 p.m. in London. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings dropped 2.75 basis points today and 11.75 basis points this week to 105.75, JPMorgan prices show. The cost of protecting bank bonds from default is headed for the first decline in five weeks, with the Markit iTraxx Financial Index of 25 banks and insurers falling 20 basis points to 126.5. The index is 6.5 basis points lower today.
• MGIC(MTG) Leads Mortgage Insurers' Rally on Jobs Reports. MGIC Investment Corp. led a rally by U.S. mortgage insurers in New York trading after a report showed companies added more jobs than forecast in August. MGIC, the biggest mortgage guarantor, rose 7.1 percent to $8.55 at 10:54 a.m. in New York Stock Exchange composite trading, after jumping as much as 12 percent. Radian Group Inc. of Philadelphia, the second-largest mortgage insurer, advanced as much as 7 percent to $7.62. No. 3 PMI Group Inc. gained 5.3 percent to $3.48, after climbing as much as 12 percent.
• Coinstar(CSTR) Builds Apple(AAPL) Relationship as It Seeks Online Partner for Movies. Coinstar Inc., owner of the Redbox DVD rental kiosks, is expanding ties with Apple Inc. as it searches for a partner to build an online viewing service. The company added 1.8 million Internet users in the second quarter, including social-media sites and an iPhone application that lets customers reserve DVDs at kiosks, Chief Executive Officer Paul Davis said today in an interview. Coinstar also offers an iTunes coupon through its coin-counting machines. The company says it needs a partner to deliver movies to homes and portable devices to compete with Netflix Inc.’s online service.
• Corn Extends Rally to 14-Month High as Hot, Dry Spell Parches U.S. Crop. Corn rose, extending a rally to a 14-month high, after hot, dry weather last month in the Midwest increased the chances of lower yields in the U.S., the world’s biggest producer and exporter. Harvest results and hundreds of test plots planted by seed companies “all seem to be pointing at yields significantly below a year ago,” said Jim Gerlach, the president of A/C Trading Inc. in Fowler, Indiana. “I’ve seen nothing that would make me believe that corn yields aren’t headed lower.”
• Crude Oil Falls After U.S. Service-Industries Report Dims Economic Outlook. Crude oil fell after service industries grew in August at the weakest pace in seven months, bolstering concern that the U.S. economic rebound will slow. “Prices are still pretty lofty, given supply and the economic backdrop,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The economic outlook is at best mixed.” Crude oil for October delivery declined $1.32, or 1.8 percent, to $73.70 a barrel at 1:33 p.m. on the New York Mercantile Exchange. Futures are down 2 percent this week. An Energy Department report on Sept. 1 showed that U.S. petroleum stockpiles, a combination of oil and fuel supplies, climbed 4.04 million barrels, or 0.4 percent, to 1.14 billion, the highest level since at least 1990. Refineries operated at 87 percent of capacity, down 0.7 percentage point from the prior week and the lowest level since April, according to the report. “There’s plenty of crude around and plenty of refining capacity,” said Adam Sieminski, chief energy economist at Deutsche Bank AG in Washington. “These are fundamental reasons to not be too bullish.
• Goldman Sachs(GS) Said to Be Disbanding Principal Strategies Unit. Goldman Sachs Group Inc. is shutting its principal-strategies business, a group that makes bets with the firm’s own capital, to comply with new U.S. rules aimed at curbing risk, two people with knowledge of the decision said.

Wall Street Journal:

• Billboards That Can See You. Inside the bustling Shinagawa train station here, a futuristic-looking vending machine has replaced rows of drink bottles and cans with a 47-inch touch-screen monitor. When a person stands in front of the screen, a camera captures his image and a sensor determines the person's gender and approximate age. Based on that reading, the machine "recommends" drinks that fit the customer's profile.
• U.S. Official Warns of Backlash Against China. China risks a backlash from the U.S. Congress unless it becomes more responsive to international concerns about its currency value and trade practices, a top U.S. State Department official warned. Difficult economic conditions, inflated unemployment levels, and election-year politics create a politically combustible environment, said Robert Hormats, under secretary of State for economic, energy and agricultural affairs, told The Wall Street Journal. A lack of action by the Chinese to address U.S. concerns about currency issues and intellectual-property protections could encourage a more protectionist agenda on Capitol Hill. "We're likely to see some legislation offered that would be adverse to Chinese interests" if more steps aren't taken, Mr. Hormats warned.
• Attack Kills Over 40 at Shiite Rally in Pakistan.
  

CNBC:

• Apple(AAPL) Declares War on Nintendo, Sony Over Video Games.
• There's a 'Bull Market in Pessimism': Credit Suisse Exec.
  

Business Insider:

• The 11 Hedge Fund Managers Most Likely to Retire Next.

Zero Hedge:

• Goldman(GS) Exposes The "Lend to Play" Conflict Scheme Involved in IPO Underwriter Allocation.

NASDAQ:

• Brokers See Continued Blockade By Big Banks. Senior brokerage firm executives warned Friday that new rules for over-the-counter derivatives trading only maintain the status quo for major banks and don't resolve issues that played into the 2008 financial crisis. Officials with Knight Capital Group Inc. (KCG) and Newedge said clearinghouses set up to handle trades in credit-derivatives and interest-rate swaps, and thereby reduce risk to the market, also are being used by derivatives dealer banks as barriers to new competition. "If the dealer banks are allowed to control clearing, they could set arbitrary thresholds for joining clearing organizations," said Marcus Katz, senior vice president with Newedge, speaking at an event hosted by the Chicago Federal Reserve.

gurufocus.com:

• Hedge Fund Tiger Management Top Holdings: (WMT), (AAPL), (GOOG), (BBY), (MA), (EBAY).

Charlotte Observer:

• Wachovia, Bank of America Add Fees That 'certainly won't be popular'. No more waived fees for using another bank's ATM. Higher monthly account charges. Fees for paper statements with images of canceled checks. These are some of the changes coming to customers of Bank of America and Wachovia, Charlotte's dominant banks. Bank of America will start telling customers next week that it's adjusting fees as part of an effort to standardize its practices nationwide. Wachovia has been making its own changes, the latest wrinkle from the Wells Fargo merger. The new pricing comes as banks nationwide are revamping their accounts and fee lineups as they adjust to new regulations and look to recoup lost revenue.

AppleInsider:

• Apple(AAPL) Now Building 2 Million iPads Per Month to Meet Demand. Apple has doubled its monthly output capacity of the iPad and is now manufacturing 2 million per month to meet strong consumer demand, but the company reportedly would like to go even further and produce 3 million every month very soon.

FINalternatives:

• Hedge Funds Burned By July Outflows. Hedge funds continued to hemorrhage assets despite strong performance in July, according to a new report. Investors yanked $2.9 billion from hedge funds in July, TrimTabs Investment Research and BarclayHedge said. The outflow—the industry’s second-straight monthly setback—of 0.2% of total hedge fund assets left industry assets at their lowest level since November at $1.53 trillion. “Hedge funds posted a positive return in July, but they did not regain the ground they lost in May and June,” BarclayHedge’s Sol Waksman said. Things look even grimmer for funds of hedge funds, despite a proportionally smaller outflow, according to TrimTabs’ Vincent Deluard. “Funds of funds are in a bad way,” he said. “They posted only five inflows in the past 25 months.” One of those months was not July, when investors pulled $670 million from funds of funds, or 0.1% of total assets.

Politics Daily:

• Campaign 2010: Hill Dems Getting Steamed at Obama?

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 27% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-three percent (43%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -16 (see trends).

Reuters:

• China Orders State Groups to Explore Potash(POT) Bid: Source. One option being discussed is the possibility of Sinochem linking up with China's $300 billion sovereign wealth fund, CIC, according to a second banking source familiar with the matter. Chinese officials have ordered state-owned companies to meet with investment bankers to explore potential options to block BHP Billiton's $39 billion bid for Potash Corp, according to a source with direct knowledge of the matter. In response to the directive, Sinochem is holding meetings with multiple banks, the source said, including Citigroup, HSBC and Morgan Stanley. The order from Beijing underscores the seriousness in which China is taking the potential BHP-Potash tie up and its implications to its fertilizer pricing and supply, despite the obstacles of launching a successful counter-bid.
• FACTBOX - US Tax and Spending Policies Floating in Washington.
• Fewer U.S. Sellers Cut Home Prices in August - Zillow.
  

Herald Sun:

• Israel 'can be removed from the world', says Mahmoud Ahmadinejad. THE people of the Middle East are "capable of removing the Zionist regime from the world scene", Iranian President Mahmoud Ahmadinejad said in an annual Palestinian solidarity day address in Tehran. "If the leaders of the region do not have the guts, then the people of the region are capable of removing the Zionist regime from the world scene," he said as the crowd chanted "Death to America! Death to Israel!" Mr Ahmadinejad said that direct peace talks, which Western-backed Palestinian president Mahmud Abbas relaunched with Israel in Washington on Thursday after a 20-month hiatus, were "doomed" to fail. "What do they want to negotiate about? Who are they representing? What are they going to talk about?" the Iranian President asked of the Palestinian leadership. "Who gave them the right to sell piece of Palestinian land? The people of Palestine and the people of the region will not allow them to sell even an inch of Palestinian soil to the enemy. The negotiations are stillborn and doomed."

Xinhua:

• North Korea will continue attempts to strengthen its friendship with China, citing comments made by North Korean Foreign Minister Pak Ui Chun in a speech at the Chinese Embassy in Pyongyang at a reception held to mark the end of World War II 65 years ago.

Bear Radar

Style Underperformer:

• Large-Cap Value (+.95%)

Sector Underperformers:

• 1) Telecom +.09% 2) Restaurants +.13% 3) Foods +.27%

Stocks Falling on Unusual Volume:

• CPB, EGO and BTH
  

Stocks With Unusual Put Option Activity:

• 1) S 2) DLTR 3) NVS 4) RTN 5) UPL
  

Stocks With Most Negative News Mentions:

• 1) ME 2) BHI 3) BA 4) HRB 5) XEL
  

Bull Radar

Style Outperformer:

• Small-Cap Growth (+1.01%)

Sector Outperformers:

• 1) I-Banks +1.83% 2) Disk Drives +1.61% 3) HMOs +1.60%

Stocks Rising on Unusual Volume:

• BCS, STT, JDAS, EWBC, PBR, BK, TKC, E, BWLD, RT, PAAS, UNFI, IPSU, KGC, ULTA, FNSR, OCLR, NTCT, AIRM, TRLG, NFLX, SFSF, AMZN, MEOH, WYNN, SNDK, LAYN, OTEX, COLM, CREE, PLCE, INFY, EMV, ESL, COO, RZG, PSS, TCB and HRB
  

Stocks With Unusual Call Option Activity:

• 1) BX 2) URBN 3) TCB 4) FNSR 5) NETL
  

Stocks With Most Positive News Mentions:

• 1) CPB 2) AAPL 3) WAG 4) BKC 5) ABT

Friday Watch

Evening Headlines
Bloomberg:

• Wheat Rises on Signs Russia May Extend Grain-Export Ban by Up to 11 Months. Wheat futures rose after Prime Minister Vladimir Putin indicated that Russia, a leading global exporter, may extend a ban on grain exports by as long as 11 months. “We can only review lifting the ban on grain exports after the next year’s crop is harvested and we have clarity on the balances,” Putin said today. The export ban, originally set from Aug. 15 to Dec. 31, may last until November 2011, the time that the country normally completes its harvest.
• Shipments are rising again at U.S. trucking companies, such as San Mateo, California-based Con-Way Inc., a signal the economic recovery remains in tact. The Cass Shipments Index rose 8.3% from the prior month. At 1.0950 the August measure is the second-highest reading in two years.
  
• How AnchorFree Scales China's Great Firewall. Its Hotspot Shield censor avoidance service gives users Web access they'd otherwise be denied.
• Cotton Closes at Highest Since 1995 on Demand Outlook; Orange Juice Drops. Cotton futures rose, closing at the highest price since 1995, on concern that supplies will fall short amid rising demand from Asia. Orange-juice fell for the first time in a week. Global cotton consumption will rise 2 percent in the year ending July 31 to 25.1 million metric tons, the International Cotton Advisory Committee said yesterday.
• Cameron's Austerity Turns Company Bonds Into World Beaters: Credit Markets. British companies are beating the world in the bond market as investors bet Prime Minister David Cameron’s efforts to tame the budget deficit will preserve the U.K.’s top credit rating. U.K. corporate debt denominated in all currencies returned 3.25 percent last month, the most in a year and the best among the 10 countries making up almost 90 percent of the $6.2 trillion Bank of America Merrill Lynch Global Broad Market Corporate Index. “Investors are happy with the measures taken by Cameron,” said Christian Weber, a senior credit strategist at UniCredit SpA in Munich. “The perception has spread that it’s better to actually tackle budget deficits than just keep spending and spending and spending, because that limits your ability in the future to help your economy stabilize.”
• BlackRock(BLK) to Evaluate Commercial Mortgage Holdings for Insurance Industry. BlackRock Inc., the world’s biggest money manager, was hired by state insurance regulators to assess the industry’s potential losses from holding commercial mortgage-backed securities. BlackRock will review more than 7,000 CMBS securities by year-end, the National Association of Insurance Commissioners said today in a statement released on its website. The New York- based firm will calculate loss expectations for the holdings, which in turn determines how much capital insurers must hold to cushion potential declines, the NAIC said.
• Home Prices in China to Decline Starting From September, BNP Paribas Says. China’s home prices will decline from this month as the government maintains its lending curbs and increases the supply of public housing, forcing property developers to cut prices to boost sales, BNP Paribas said. “Although the government has not quantified its target, it has indicated that it wants to see a housing-price correction take place in order to meet or partly meet public expectations,” Chen Xingdong and Isaac Meng, Beijing-based analysts at BNP Paribas, said in a report today, without giving a forecast for how much prices may drop. “We expect a housing price correction to take place from September onwards.” China’s property developers, the worst-performing group on the benchmark Shanghai Composite Index this year, will “continue to be affected” as the government maintains its curbs on the industry, the BNP analysts said. The property market is in a “very big bubble” that may last until the government increases interest rates and introduces a real-estate tax to curb prices, StarRock Investment Management’s investment director Jiang Hui said yesterday in Shanghai. China may strengthen the existing measures targeting the property market and speculation that the government will relax such policies has “vanished,” according to Deutsche Bank AG in a report yesterday.

Wall Street Journal:

• The Small Business The 97% Fallacy by Kevin Hassett and Alan Viard. The president's plan to raise top marginal rates is holding back the very people who should be leading the economic recovery.
• Mexican Soldiers Kill 25 in Gunbattle Near Border. A shootout between soldiers and suspected drug cartel members in northeastern Mexico left 25 purported gunmen dead Thursday, the military said. A reconnaissance flight over Ciudad Mier in Tamaulipas state spotted several gunmen in front of a property, according to a statement from Mexico's Defense Department. When troops on the ground moved in, gunmen opened fire, starting a gunbattle that killed 25 suspected cartel members, according to the military. The statement said two soldiers were injured but none were killed.
• Lobbying Picks Up as Finance Rules Are Written. U.S. firms eager to shape new financial regulations have wasted no time in lobbying the Federal Reserve and other agencies, according to new details the central bank released Thursday. Summaries of 11 meetings involving Fed staff and outside corporations and advocacy groups highlight the high-stakes effort to write rules that carry out the new financial-overhaul legislation.
• U.S. Frets Over Foreign Investors in GM. Treasury Officials Want to Minimize Political Fallout From Car Maker's Stock Sale as It Selects 'Cornerstone' Buyers. The U.S. Treasury is concerned about how many overseas investors it should to allow to buy big stakes in General Motors Co. through the car maker's initial public offering this fall, according to people familiar with the matter.
• East Coast Braces for Earl.
• Bruised Quant Funds Seek a Human Touch. Computer-driven mutual funds, chastened by a string of poor results and a wave of redemptions, are striving to bring more of a human touch to their investment decisions. These so-called quantitative funds, which rely largely on computer models to select investments, have been on the fritz for several years. A group of 65 such funds tracked by investment-research firm Morningstar Inc. lagged behind 72% of their category rivals, on average, in the three years ended Aug. 27.
• A Hot Fund Design Turns Cold. So-called 130/30 funds aim to boost performance with borrowed money and bets against overpriced securities.
• 3PAR(PAR) Insiders Reap Windfall. Hewlett-Packard Co.'s(HPQ) bidding war with rival Dell Inc. over 3PAR Inc. has created a $2.1 billion windfall for insiders and investors at the small data-storage company, but the proceeds won't be evenly split. Nearly $800 million will go to three venture-capital firms—Mayfield Fund, Menlo Ventures and Worldview Technology Partners—that remain among the Fremont, Calif., company's biggest shareholders. Collectively the three still own 38% of 3PAR. Almost $100 million will go to 3PAR's chief executive, David Scott. His payout eclipses the combined proceeds for the company's three founders.

Bloomberg Businessweek:

• Intel(INTC) Wants to Be Inside Everything. Intel is counting on its embedded Atom Processor chips to help break its dependence on the slowing PC market.
• Alberta Fund Got Chinese Approach on Potash Corp.(POT) Bid, CEO Says. Chinese investors approached Alberta Investment Management Corp. to consider a joint counterbid for Potash Corp. of Saskatchewan Inc., the Canadian pension fund’s chief executive officer said.
• Novartis Malaria Drug May Yield First New Treatment in 30 Years.
• Lisa Jackson's High-Wire Act on Carbon Controls. The EPA chief is using her authority under the Clean Air Act to control carbon emission. Early in his Presidency, Barack Obama made it clear that if Congress failed to limit carbon emissions, he would use his authority under the Clean Air Act to control greenhouse gases. Now that Congress has pulled the plug on legislation, that task has fallen to Lisa Jackson, Obama's Environmental Protection Agency chief.

CNBC:

• Is Copper Trying to Tell You Something?
• Gulf Rig Fire Out; Coast Guard Backpedals on Oil Sheen.
• Friday's Jobs Report Will Be Key for Markets - And Fed.
  

MarketWatch:

• BHP Billiton(BHP) May Bid for Anadarko(APC), Report Says.
• Chinese Funds Post Huge Losses in First Half of 2010. Performance marks second-largest loss for industry, after first half of 2008.
• Why Apple's(AAPL) Headed to $350 By Year End by Cody Willard.
  

NY Times:

• YouTube Ads Turn Videos Into Revenue.
• Employers Push Costs for Health on Workers. As health care costs continue their relentless climb, companies are increasingly passing on higher premium costs to workers. The shift is occurring, policy analysts and others say, as employers feel more pressure from the weak economy and the threat of even more expensive coverage under the new health care law. In contrast to past practices of absorbing higher prices, some companies chose this year to keep their costs the same by passing the entire increase in premiums for family coverage onto their workers, according to a new survey released on Thursday by the Kaiser Family Foundation, a nonprofit research group. Workers’ share of the cost of a family policy jumped an average of 14 percent, an increase of about $500 a year. The cost of a policy rose just 3 percent, to an average of $13,770.

Business Insider:

• On The Eve of the Big Jobs Report, Gallup Says Underemployment Jumped in August.

Zero Hedge:

• TrimTabs Reports Percentage of Hedge Funds Expecting to Raise Leverage in September Surges. With just one month left in the quarter, most hedge funds continue to underperform the market, not to mention that the vast majority continues to be under their high water mark (most notably Citadel). And with fickle LPs, unbound by lock ups courtesy of the 2008 crash, knowing all too well they can now move their money with the facility of a HFT frontrunner churning AMZN one thousand times a second, threatening redemptions unless something changes in the last month of the quarter, hedge funds are, for lack of a better word, panicking. Yet as we have long been demonstrating, the vicious loop of high correlations and mutual fund withdrawals means that alpha generation is gone the way of the dodo. Which means that HFs will now seek to actively lever up into the market to chase the beta wave over September like never before.

Forbes:

• Apple's(AAPL) Stealthy Attack on Your Living Room.

Washington Post:

• White House Considering Major Tax Breaks for Businesses, Sources Say. With the recovery faltering less than two months before the November congressional elections, President Obama's economic team is considering another big dose of stimulus in the form of tax breaks for businesses - potentially worth hundreds of billions of dollars, according to two people familiar with the talks. Among the options are a temporary payroll tax holiday and a permanent extension of the research and development tax credit, say people familiar with the talks who spoke on the condition of anonymity in order to describe private deliberations. Permanently extending the research credit would cost roughly $100 billion over the next decade, tax experts said. And depending on its form and duration, a payroll tax holiday could let businesses keep more than $300 billion they would otherwise owe the Treasury. While significantly less than last year's $814 billion stimulus package, both ideas would be far more dramatic than anything the White House had been expected to propose. The staff-level discussions are in preliminary stages. But with the unemployment rate expected to rise again in new jobs numbers due out Friday, such a move could serve both to spur hiring and to combat Republican charges that Obama's tax policies would hurt small businesses. More spending on infrastructure - particularly transportation projects - is also under discussion, sources said. But a person familiar with the talks said it would be easier for a package consisting purely of tax cuts to "avoid the stain of a 'bailout' or 'stimulus' label."

GuruFocus.com:

• Hedge Fund Glenview Capital Q2: Buys (CLWR), (DFS), (GILD), (GOOG); Larry Robbins Added. Hedge fund manager Larry Robbins, founder of Glenview Capital, has been added into our list of premium gurus. These are the buys and sells of the fund during the second quarter.

Politico:

• Few Options for Barack Obama on 9/11. Every year it’s a challenge for the White House: how to commemorate the Sept. 11, 2001, terrorist attacks. This year is especially awkward, given the controversy around President Barack Obama’s remarks in support of an Islamic cultural center and mosque planned for a neighborhood near ground zero in lower Manhattan. The White House has not yet announced the president’s plans for next week, though a source familiar with the matter was doubtful Obama would travel to New York.

Reuters:

• China FX Reserves About 65% in Dollars - Report. China's foreign exchange reserves are allocated roughly in line with the global average of 65 percent in dollars, 26 percent in euros, 5 percent in pounds and 3 percent in yen, an official newspaper reported on Friday, citing unidentified reserve managers.
• Petrobras(PBR) Capital Plan to Boost Reserves by 35%. Brazil's state-run oil company Petrobras's proven oil reserves could rise 35 percent as a result of access to new fields through an oil-for-shares swap, the company chief executive said on Thursday. "We are going to have a 35 percent increase in proven reserves, strengthening production growth in a sustainable pace," Chief Executive Jose Sergio Gabrielli said during a conference call. He said the company by 2014 or 2015 could incorporate those reserves, which are distributed in at least six fields. He added that the company's reserves are currently 14 billion barrels. Gabrielli added that oil production would also increase as a result of the new fields, but declined to provide a time frame or changes to existing output forecasts.
• Ulta Salon(ULTA) Q2 Beats Estimates, Sees Q3 Above Street. Ulta Salon, Cosmetics & Fragrance Inc posted a higher-than-expected quarterly profit, helped by higher merchandise margins, and forecast a strong third quarter, sending its shares up 11 percent.
• Cooper Cos(COO) Q3 Profit Tops Estimates, Raises FY View. Eye-care company Cooper Cos Inc posted a better-than-expected quarterly profit as it gained market share in its contact lens and surgical businesses, and the company raised its full-year forecast, sending its shares up 4 percent after market.
• Esterline(ESL) Q3 Profit Beats Street, Raises FY10 EPS View. Aerospace and defense parts supplier Esterline Technologies posted a quarterly profit that beat market estimates, helped by growth in its avionics and controls segment, and raised its 2010 earnings outlook above estimates, sending its shares up 4 percent.
• Apple(AAPL) TV Could Help Netflix(NFLX) Growth. Shares in Netflix Inc neared their all-time high on Thursday, after Apple Inc said that the company's streaming video service would be added to a new version of Apple TV. The tie-in with Apple TV, a smaller, cheaper version of Apple's earlier web-to-TV product, could cement Netflix's dominance in the online movie rental business.
• ArcSight(ARST) Q1 Tops Street, Sees Strong Q2. Cybersecurity firm ArcSight Inc posted better-than-expected first-quarter results, helped by strong demand from its core customers, and forecast second quarter ahead of market estimates.

Financial Times:

• ABB Chief Plugs Into the Developing World. As debate rages on the direction of the world economy, few should be better placed to make a call than Joe Hogan, chief executive of ABB, the Swiss-Swedish electrical engineering group that is as prominent in emerging markets as mature ones. With 117,000 employees in 100 countries, the group is an industrial bellwether, vying with the likes of Siemens, General Electric and Hitachi to secure large contracts for electricity transmission systems, factory automation and heavy mine equipment. “I’m cautiously optimistic,” says Mr Hogan in a rare interview, almost two years to the day since he took over at ABB after stepping down as chief executive of GE’s healthcare division. “Anyone who’s overly optimistic right now would not be reading the economic statistics as they’re coming through.” But Mr Hogan, freshly returned from holiday in his native US, is equally wary of predicting disaster. He acknowledges that Europe – outside Germany – and the US “are still slow”. But he is adamant ABB has detected no signs of a double-dip US slowdown as yet. “So far, I can’t say we’ve seen any kind of deviation from the first and second quarters.”
• Banks Are Cutting Use of Bonuses to Recruit. Investment banks are using far fewer lucrative “guaranteed” bonus packages to attract recruits in response to the global regulatory crackdown on bank pay, according to a closely watched industry report. Guaranteed bonuses, where employees are promised a fixed incentive payment regardless of their performance or their business’s profitability, accounted for about 5 per cent of the bonuses paid out for 2009 at 37 leading financial companies surveyed by the Institute of International Finance, the industry lobby group. That is down from an average of nearly 10 per cent of bonuses for 2008 and 8 per cent for 2007.
• Lenders Shunned on Stress Tests Doubts. Leading UK and continental European companies are increasingly shunning banks from Spain, Italy and even Germany because they do not believe the Europe-wide stress testing of banks gave a true picture of their financial health. Corporate treasurers from groups with revenues of more than $240bn told the Financial Times they were conducting their own tests to gauge for themselves banks’ robustness. “What we are increasingly concerned about is credit risk,” said the treasurer of one of Germany’s largest industrial companies. “Even after the stress tests, we have to ask ourselves: are the banks healthy? The tests have opened up more questions than they have answered, especially here in Germany.” Stuart Siddall, chief executive of the Association of Corporate Treasurers, said companies were taking a more proactive approach to assessing how financially strong banks are: “Everybody is spending a lot more time today on counterparty risk than they did before.” “There is an element of whether the emperor has any clothes on and what to do if he doesn’t. The stress tests were a joke,” said the treasurer of a large European media company. The companies said that they were taking measures such as talking to banks’ own proprietary trading desks to determine the health of other banks. “We are paranoid about it and monitor market rumours very closely,” said the treasurer of another media company. Treasurers are now also paying close attention to credit default swaps – the price of protection against a bank defaulting on its debt – as well as to share prices. “Credit rating agencies acted too slowly,” said the treasurer of a German industrial group. “We look at banks’ health daily and adjust our limits with them accordingly.”
• Fears Grow Over Global Food Supply. Russia announced a 12-month extension of its grain export ban on Thursday, raising fears about a return to the food shortages and riots of 2007-08 which spread through developing countries dependent on imports. The announcement by Vladimir Putin came as the UN’s Food and Agriculture Organisation called an emergency meeting to discuss the wheat shortage, and riots in Mozambique left seven dead. The unrest in Maputo, in which 280 people were also injured, followed the government’s decision to raise bread prices by 30 per cent. Police opened fire on demonstrators after thousands turned out to protest against the price hikes, burning tyres and looting food warehouses.

Der Spiegel:

• American Has Become Too European. The Obama administration and the Federal Reserve want to fix the United States economy by spending more money. But while that approach might work for Europe, it is risky for the US. The nation would be better off embracing traditional American values like self-reliance and small government. There's no question about it: The 20th century was America's era. The United States rose rapidly from virtually nothing to become the most politically powerful and economically strongest country in the world. But the financial crisis and subsequent recession have now raised doubts about its future. Are we currently witnessing the beginning of the end of the American era?

China Business News:

• Chinese local government financing vehicles may have outstanding loans of as much as 10 trillion yuan this year and exceeding 11 trillion yuan in 2011, citing Liu Yuhui, an economist with the Institute of Finance and Banking at the Chinese Academy of Social Sciences. The extent of risk at the vehicles depends on the nation's economic growth and property market, Liu said.

China Securities Journal:

• China's four state-owned banks reported an increase in special-mention loans in the second quarter, citing statistics. Special-mention loans, one level above non-performing debt, rose from the previous quarter by about 42 billion yuan at Industrial and Commercial Bank of China Ltd, 12 billion yuan at Bank of China Ltd., 4.9 billion yuan at Agricultural Bank of China Ltd. and 2.7 billion yuan at Bank of Communications Co.

Evening Recommendations
Citigroup:

• Rated (WMB) Buy, target $31.

Night Trading

• Asian equity indices are -.25% to +1.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 124.0 -3.0 basis points.
  
• Asia Pacific Sovereign CDS Index 118.50 -2.0 basis points.
  
• S&P 500 futures -.24%.
  
• NASDAQ 100 futures -.12%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CPB)/.30

Economic Releases
8:30 am EST

• The Change in Non-Farm Payrolls for August is estimated at -105K versus -131K in July.
• The Change in Private Payrolls for August is estimated at +40K versus +71K in July.
• The Unemployment Rate for August is estimated to rise to 9.6% versus 9.5% in July.
• Average Hourly Earnings for August are estimated to rise +.1% versus a +.2% gain in July.
  

10:00 am EST

• ISM Non-Manufacturing for August is estimated to fall to 53.2 versus a reading of 54.3 in July.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Lockhart speaking could also impact trading today.
  

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

Stocks Rising into Final Hour on Declining Sovereign Debt Angst, Less Economic Fear, Short-Covering, Technical Buying

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Almost Every Sector Rising
  
• Volume: Below Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 23.45 -1.84%
  
• ISE Sentiment Index 111.0 +4.72%
  
• Total Put/Call .94 +14.63%
  
• NYSE Arms .56 +123.63%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 108.24 bps -1.64%
  
• European Financial Sector CDS Index 117.73 bps -4.49%
  
• Western Europe Sovereign Debt CDS Index 145.67 bps -2.42%
  
• Emerging Market CDS Index 248.85 bps -.98%
  
• 2-Year Swap Spread 19.0 +1 bp
  
• TED Spread 17.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .12% -1 bp
  
• Yield Curve 213.0 +6 bps
  
• China Import Iron Ore Spot $144.90/Metric Tonne +2.19%
  
• Citi US Economic Surprise Index -42.30 +.9 point
  
• 10-Year TIPS Spread 1.63% +5 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +2 open in Japan
• DAX Futures: Indicating +10 open in Germany

Portfolio:

• Higher: On gains in my Tech, Biotech, Retail, Ag and Medical long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is bullish as the S&P 500 breaks above its 50-day moving average, building on yesterday's sharp gains, ahead of a likely poor jobs report tomorrow. On the positive side, Semi, Oil Tanker, Disk Drive, Retail and Restaurant shares are especially strong, rising 2.0%+. (IYR) has outperformed throughout the day. Cyclicals are also outperforming. The S&P GSCI Ag Spot Index is rising another .8%. Moreover, the 10-year yield is rising +5 bps to 2.62%, which is also a big positive. The European Investment Grade CDS Index is dropping -5.13% to 100.75 bps and the US sovereign cds is dropping -3.97% to 45.93 bps. As well, the Spain sovereign cds is dropping -2.85% to 223.92 bps, the Portugal sovereign cds is falling -5.19% to 304.78 bps and the UK sovereign cds is dropping -5.08% to 66.58 bps. The AAII % Bulls rose to 30.8% this week, while the % Bears fell to 42.2%. Overall bearish sentiment towards US stocks remains a major market positive. On the negative side, HMO, Drug, Telecom, Computer Service and Utility shares are falling slightly. The Ireland sovereign cds is gaining +1.91% to 334.47 bps. With investor sentiment still so bearish, technicals improving and hedge funds underexposed to stocks, I suspect any kneejerk market weakness on tomorrow's well-telegraphed likely weak jobs report will succumb to bargain-hunting and short-covering by tomorrow afternoon ahead of a three-day weekend. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, bargain-hunting, less economic fear, diminishing sovereign debt angst, less real estate sector pessimism, buyout speculation and technical buying.