Today's Headlines

Bloomberg:

• Oil prices may rise above $100 a barrel within the next year in the event of a second round of quantitative easing, or QE-2, Nomura International said.
• Manufacturing Growth in New York Area Tops Forecasts. Manufacturing in the New York region expanded in October at a faster pace than anticipated, signaling factories will keep driving the recovery in the world’s largest economy. The Federal Reserve Bank of New York’s general economic index rose to 15.7, the highest level in four months and more than twice the median forecast of economists surveyed by Bloomberg News. The Empire State gauge of new factory orders jumped to 12.9 this month from 4.3 in the prior month. A measure of shipments rose to 19.4 from minus 0.3. The index of inventories fell to minus 11.7, the lowest level since January, from 1.5. The employment measure increased to 21.7, from 14.9. Today’s report showed an index of prices paid climbed to 30 from 22.4, while prices received increased to 8.3 from 1.5. Factory executives in the New York Fed’s district were more optimistic about the future. The gauge measuring the outlook six months from now gained to 40 from 31.3.
• U.S. Michigan Consumer Sentiment Index Unexpectedly Declined in October. Confidence among U.S. consumers unexpectedly declined in October, with Americans more pessimistic about current economic conditions. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment decreased to 67.9, the lowest since July, from 68.2 in September. Economists estimated an October reading of 68.9, according to the median forecast in a Bloomberg News survey. “What we’re seeing in the current conditions reading is concern over the stubbornly high unemployment rate and in the expectations reading, the hope that maybe the situation will improve after the election,” said Christopher Low, chief economist at FTN Financial in New York. Consumer expectations for six months from now, which more closely projects the direction of consumer spending, rose to 64.6 from 60.9, which was the lowest since March 2009, today’s report showed. The survey’s measure of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, dropped to 73, the lowest since November, from 79.6 in the previous month. Consumers in today’s survey said they expect an inflation rate of 2.6 percent over the next 12 months, compared with 2.2 percent projected in September.
• Retail Sales in U.S. Climbed More Than Forecast. Retail sales in the U.S. climbed more than forecast in September, easing concern that unemployment stuck near a 26-year high will bring the recovery to a halt. Purchases rose 0.6 percent following a 0.7 percent gain in August that was larger than previously estimated, according to Commerce Department data issued today in Washington.
• GE(GE) Falls as Sales Miss Estimate on Equipment, Finance. General Electric Co. posted its second straight quarter of profit growth, driven by a rebound at its finance unit and improvement in health care, while sales declined on lower equipment shipments.
• ECB's Stark Says Purchases of Government Bonds Will Continue. European Central Bank Chief Economist Juergen Stark said that the bank will keep buying government bonds “as long as it’s necessary,” according to Germany’s Handelsblatt newspaper. He also warned that “individual banks or group of banks” shouldn’t rely too much on the ECB in refinancing their funding needs, Stark told the newspaper in an interview, according to a faxed release today.
• Ackman Makes Long Bet on Property Reversal With Howard Hughes. William Ackman is about to take a bet on two of the hardest-hit sectors of the economy: housing and commercial real estate development. Ackman, who runs hedge fund Pershing Square Capital Management LP, is one of the lead investors in a new company that Chicago-based General Growth Properties Inc. is spinning off as part of its bankruptcy reorganization. He also will be chairman of the new firm, a money-losing collection of partially built malls and housing developments.
• Chart of the Day: Fed, Japan Treasury Holdings Set to Surpass China. The Federal Reserve and Japanese investors are poised to pass China and become America’s largest creditors following efforts from U.S. policy makers and the Bank of Japan to stimulate growth.
• Kohn Sees Better Growth in 2011, Headwinds 'Abating'. Former Federal Reserve Vice Chairman Donald Kohn said impediments to economic growth are fading and the recovery should quicken next year. “A number of those headwinds are abating,” Kohn said today at a meeting of the Urban Land Institute in Washington. “We should see households spending” an increasing part of “their income instead of a decreasing part.”
• U.S. Posts Second-Largest Annual Budget Deficit on Record. The U.S. government posted its second straight annual budget deficit in excess of $1 trillion as lingering unemployment constrained tax revenue. The shortfall totaled $1.294 trillion in the fiscal year ended Sept. 30, second only to the $1.416 trillion deficit in 2009, the Treasury Department said today in Washington.

Wall Street Journal:

• Countrywide Co-Founder Settles With SEC. Former Countrywide Financial Corp. Chief Executive Angelo Mozilo agreed to pay $67.5 million in financial penalties to settle the Securities and Exchange Commission's high-profile civil fraud suit against him.

Bloomberg Businessweek:

• Citigroup(C), JPMorgan(JPM) 'Well Positioned' in Mortgages, Goldman(GS) Says. Citigroup Inc. and JPMorgan Chase & Co. are “well positioned” to manage through mortgage-related problems such as so-called put-backs from Fannie Mae, Freddie Mac and private investors, Goldman Sachs Group Inc. said. The total cost to the banking industry of having to buy back faulty mortgages from Fannie Mae, Freddie Mac and other government-sponsored entities could be between $29 billion and $44 billion, analysts led by Richard Ramsden in New York wrote in a note to investors today. The cost from private-label mortgage-backed securities put-backs could reach $34 billion, the analysts estimated.
• Bank of America(BAC) Says Added Foreclosure Costs 'Grossly Distorted'. Bank of America Corp.’s head of home lending said the added costs caused by delays in foreclosures have been “grossly distorted.” Reviews of foreclosures will delay fewer than 30,000 sales, said Barbara Desoer, president of Bank of America’s home lending and insurance unit. The Charlotte, North Carolina-based lender will rework 102,000 pending foreclosures in 23 states and stands by the accuracy of its procedures, she said.

Barron's:

• Apple(AAPL): Hudson Square Boosts Price Target to Street High $500. “With the launch of the iPhone, the App Store, the iPad, and the relaunch of Apple TV, we estimate Apple’s total addressable market for hardware, content, and services expanded from roughly $400 billion to $1.5 trillion,” he writes in a research note this morning. “Apple’s Mac share has doubled over the last five years and we believe could double again. In a little over 3 years Apple has captured less than 3% of the mobile phone market by units, but by revenue Apple holds a ~14% share. The iPad is off to a strong start, and the product greatly expands Apple’s addressable market for content distribution. While the new Apple TV and iAd are still in the very early stages, we believe the opportunity is very strong.

CNBC:

• US Ad Growth is Like 'Emerging Market': Sorrell. “The surprise to us in the first nine months of the year in our industry has been the strength of the US market, the US and Canada, but the US particularly so, and traditional media,” said Sorrell.
• Sorry Folks, The Put-Back Apocalypse Ain't Gonna Happen. You should probably be a buyer of Bank of America(BAC) right now.

New York Post:

• Investor Titans in St. Joe(STJ) Clash. Call it the clash of the financial titans. A tug-of-war has emerged between two high-profile investors: hedge-fund titan David Einhorn and famed mutual fund manager Bruce Berkowitz of Fairholme Capital Management.

CNNMoney:

• The Fed's Commodity Bubble. One major landmine is in Washington, DC: the Federal Reserve Board. The market has already begun to bake in expectations from a second round of quantitative easing, and an unlimited supply of money can dwarf the supply of some commodities. As a result, the Fed's policies are inciting increased speculative risk, thereby creating a commodity bubble. Just how much of a bubble? Consider the following:

Institutional Investor:

• Hedge Funds Short Obama. When he ran for president in 2008, Barack Obama enjoyed especially enthusiastic support from liberals, college kids and, surprisingly, many hedge fund managers. But as the country gears up for one of the most crucial — and cantankerous — midterm elections ever, several of the smart-money set who say they’re not beholden to any party have pledged allegiance to the GOP.

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-six percent (46%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -19 (see trends).

Reuters:

• BAE Systems Could Go On Prowl as Defense Cuts Loom. BAE Systems Plc could be poised for a major buying spree in the U.S. defense sector as Europe's top defense contractor chases new growth in the face of looming spending cuts.
• U.S. Treasury Currency Report Now Expected in November. A U.S. Treasury Department report on the currency practices of China and other trading partners will most likely come out in November after a Group of 20 summit, a Senate aide said on Friday.

AP:

• Feds Oppose California Prop 19 to Legalize Marijuana. Attorney General Eric Holder says the federal government will enforce its marijuana laws in California even if voters next month make the state the first in the nation to legalize the drug. The Justice Department strongly opposes California's Proposition 19 and remains firmly committed to enforcing the federal Controlled Substances Act in all states, Holder wrote in a letter to former chiefs of the U.S. Drug Enforcement Administration.

Telegraph:

• Fed Chief Ben Bernanke Signals More Easing to Counter High Unemployment, Low Inflation.

Handelsblatt:

• European Central Bank Chief Economist Juergen Stark said it would be "fatal" if the world's currency areas were to engage in a "devaluation race," citing an interview. Competitive devaluations can lead to protectionism, one of the main causes of the world economic crisis during the 1930s.

Bear Radar

Style Underperformer:

• Large-Cap Value (-.89%)

Sector Underperformers:

• 1) Education -2.27% 2) Banks -2.22% 3) Alt Energy -1.45%

Stocks Falling on Unusual Volume:

• FHN, COF, GE, WFC, BAC, SPH, MAT, GIII, AMSC, APOL, INFY and ERTS
  

Stocks With Unusual Put Option Activity:

• 1) CIEN 2) ABK 3) SWKS 4) EWT 5) STX
  

Stocks With Most Negative News Mentions:

• 1) BAC 2) SINA 3) TAST 4) LBAI 5) SSP
  

Bull Radar

Style Outperformer:

• Large-Cap Growth (+.92%)

Sector Outperformers:

• 1) Disk Drives +3.61% 2) Internet +3.24% 3) Computer Hardware +3.16%

Stocks Rising on Unusual Volume:

• GOOG, CSC, RAI, PBY, JAS, SIGA, VRTX, AAPL, EFII, PM, BCS, TIN, PVTB, WTFC, STX, QCOR, GPOR, CCME, CSGP, MAKO, DMND, YHOO, RBCN, PTEN, WFMI, ASYS, CLNE, BIDU, CTSH, RADS, CTRP and GPRO
  

Stocks With Unusual Call Option Activity:

• 1) STX 2) HUM 3) STI 4) PMI 5) JCG
  

Stocks With Most Positive News Mentions:

• 1) GOOG 2) AAPL 3) WMT 4) STX 5) BA

Friday Watch

Evening Headlines
Bloomberg:

• Fed Wants to Hoodwink Public, Only Fools Itself: Caroline Baum. If I were a central banker, I would be afraid. If I were a central banker getting ready to embark on another round of quantitative easing, I would be very afraid. Here’s why. Central bankers in the U.S. are being bombarded with market-based signals suggesting their fears of deflation, or falling economy-wide prices, may be misplaced. Gold prices continue to set new highs. The U.S. dollar, the global reserve currency, keeps sinking amid expectations the Federal Reserve will dilute the existing stock starting at its Nov. 2 to 3 meeting. Commodity prices, both industrial and agricultural, are on a tear. The CRB Spot Raw Industrial Price Index, which includes scrap metals, cotton and rubber -- but not oil -- hit an all- time high this week. Junk bond issuance already set a record for the year, with demand for high-yield debt narrowing spreads to Treasuries. Investors are pouring money into emerging markets debt issued in local currencies by countries that used to be considered banana republics. Mexico sold $1 billion of 100-year bonds last week, double the announced issue size, at a yield of 6.1 percent. Just ask yourself: Would you lend money to Mexico for 100 years? Exactly. If the Fed’s goal was to make investors move out the risk curve, it succeeded. An alternate interpretation: Zero-percent interest rates are causing a misallocation of capital, a nice way of saying, “asset bubbles.” The markets aren’t validating the Federal Reserve’s preoccupation with a deflationary spiral. In fact, the message is just the opposite. Maybe the Fed can fool some of the people some of the time, but it can’t fool all of the people all of the time. In the process, policy makers may end up fooling themselves that they can create expectations of a little more inflation without delivering a lot of the real thing.
• Bank of America(BAC) Downgraded by Bonds on Loans: Credit Markets. Bondholders are penalizing Bank of America Corp. the most of any of the largest U.S. financial firms as the investigation into the foreclosure crisis expands. Credit-default swaps on the country’s largest bank by assets are above those of its peers by a record margin, according to data provider CMA. The contracts, which imply Bank of America has lost its investment-grade rating, exceed Citigroup Inc.’s by the most ever and surpassed Morgan Stanley’s this week for the first time in a year.
• Seagate(STX) is Said to Be in Talks With TPG, Partner About Buyout. Seagate Technology Plc, the world’s largest maker of disk drives, is in talks to be purchased by former owner TPG Capital and another buyout firm, according to two people familiar with the matter. The stock rose 22 percent.
• Big Banks May Escape Capital Surcharge as Global Talks Founder. Leaders of the world’s largest economies, divided over how to curb risk-taking by their biggest banks, will likely fail to agree on a capital surcharge. Instead, the Financial Stability Board, which is weighing measures to prevent such institutions from causing another economic crisis, will recommend a range of options without setting a level of extra capital to be imposed globally, said members of the group who declined to be identified because the discussions are private. The FSB will meet in Seoul next week.
• Obama Spending Rules for UnitedHealth, WellPoint Draw Exemption Requests. Health insurers may abandon some markets unless the Obama administration waives a rule set to take effect next year on how much companies must spend on patient care, state insurance commissioners said. The rule, part of the new health law, mandates that UnitedHealth Group Inc., WellPoint Inc. and rivals spend at least 80 percent of customer premiums on medical care, or return the difference in rebates. Insurers that sell to the 14 million people who buy their own coverage may be hurt because those policies cost more to administer, the commissioners said in a letter to U.S. health secretary Kathleen Sebelius. The correspondence urges delaying the rule in some markets until as late as 2014, when provisions take effect that may cut insurer costs. The waiver request is the latest adjustment sought in the overhaul as President Barack Obama’s allies in Congress face midterm elections next month. The administration last month waived rules affecting 1 million part-time workers who won’t be eligible for subsidized coverage for four years. The premium rule “could threaten the solvency of insurers or significantly reduce competition in some insurance markets,” an effect that may “limit consumer choices,” according to the letter, from the National Association of Insurance Commissioners.
• Harvard Stem Cell Scientists Retract paper on Aging in Periodical 'Nature'. Scientists at the Harvard Stem Cell Institute retracted a paper published Jan. 28 in the journal Nature after the lead author, Amy Wagers, became aware of information she said “undermined” her confidence in the data. The Nature paper, examining the role of blood stem cells in the aging process, was retracted by Wagers, a researcher at the Harvard-affiliated Joslin Diabetes Center in Boston, and two of her co-authors. The research appeared to uncover an “aging mechanism” that “could be reversed” by rejuvenating the blood stem cell population of old mice, according to a Joslin center press release issued at the time of the paper’s publication.
• UBS Says It's in Talks With Dozens of Prop Traders Considering Hedge Funds. UBS AG, the largest Swiss bank, said it has been in talks with “dozens” of proprietary traders worldwide who are considering setting up hedge funds as banks seek to comply with new U.S. rules aimed at curbing risk. “A lot of it is just talk and chatter, but there are very advanced discussions as well,” Stuart Hendel, UBS’s global head of prime brokerage, said in an interview in Singapore yesterday. “In the next 12 months, there is going to be much more of a startup phase than there has been in the last couple of years.”

Wall Street Journal:

• Foreclosure Crisis Slams Into Banks. After Days of Shrugging Off the Debacle, Financial Markets Start to Penalize U.S. Banks. The mortgage-foreclosure crisis spilled into the financial markets on Thursday, driving down bank stocks and weighing on mortgage bonds as investors took a grim view of the potential costs.
• In Cities That Battle Wal-Mart(WMT), Target(TGT) Gets a Welcome.
• Mozilo, SEC Talk Settlement in Countrywide Case.
• Public Unions Step Up Spending. Public-sector unions have remained a bulwark for Democrats this fall while other left-leaning donors have kept their wallets shut, according to a Wall Street Journal analysis of Federal Election Commission data. Unions have long bankrolled Democratic campaigns, but some of the biggest public unions are spending more this fall than they did during the prior midterm-campaign cycle in 2006.
• U-Turn in the U.K.: Big Spending Cuts.
• Stop Bashing Business, Mr. President by Ken Langone. If we tried to start The Home Depot today, it's a stone cold certainty that it would never have gotten off the ground.

Bloomberg Businessweek:

• OPEC Members Seek $100 a Barrel Oil to Counter US Dollar Weakness. The 13 percent decline in the dollar index since June has led some OPEC members to call for oil to rise to $100 a barrel. The U.S. currency’s weakness means the “real price” of oil is about $20 less than current levels, Venezuelan Energy and Oil Minister Rafael Ramirez said after yesterday’s meeting of the Organization of Petroleum Exporting Countries in Vienna.
• China September Property Prices Rise, Sales Jump, Defying Curbs. China’s property prices rose and transactions jumped in September from the previous month, underscoring the need for further government curbs to discourage speculation and prevent asset bubbles in the fastest-growing major economy.

CNBC:

• Google(GOOG) Earnings Handily Beat Wall Street Expectations. Google shares leaped in extended trading Thursday as the company reported an adjusted profit that blew past what analysts expected, despite rising expenses. The online search and advertising giant said it earned $7.64 a share excluding one-time items in the third quarter, against $5.89 a share last year. Net revenue excluding traffic-acquisition costs for the most recent period rose to $5.5 billion, from $4.385 billion a year ago. Traffic-acquisition costs (TAC) include money that Web sites pay to advertisers and that they spend to draw traffic. Google's TAC for the quarter totaled $1.81 billion. Equity analysts who follow Google expected the company to turn in a profit of $6.69 a share on sales of $5.27 billion, according to Thomson Reuters.Google stock jumped almost 5 percent in late trading.
• 'Muted' Effect if Fed Buys More Bonds: Kocherlakota. The U.S. Federal Reserve Bank may get little bang for its buck if it tries to help boost the modest economic recovery with a renewed round of Treasury debt purchases, Minneapolis Fed President Narayana Kocherlakota said on Thursday.

Business Insider:

• How the Actions of the Fed are Creating Tranche Warfare in Commercial Real Estate.
• The Real Story Behind the U.S. - Mexico Border Murder of David Hartley by Stratfor.
  
  The Sept. 30 shooting death of an American tourist on Falcon Lake, which straddles the U.S.-Mexico border in southern Texas, has grabbed international headlines in the past two weeks.
• Government Approval Hits Lowest Point Since Watergate. Almost three-quarters of Americans — 72 percent — have a negative view of the federal government, according to a USA Today/Gallup poll released Wednesday. It is the highest level of dissatisfaction since the Watergate scandal that led to President Richard Nixon’s resignation in 1974.
• Warren Buffett Has Not Generated Any Alpha in 10 Years.
  

Seeking Alpha:

• Sovereign Debt Default Risk. Below we highlight the 5-year credit default swap prices for the debt of 39 countries and four high-risk US states. We also highlight how default risk has changed since equity markets bottomed at the start of July. As shown in the left column below, default risk has fallen the most for Japan, China, Australia, Chile, and South Korea since July 2nd. It has risen for just four countries -- Egypt, Portugal, Ireland, and the US. Yep, the US has seen default risk rise 15.7% since the start of July, even as the equity market has performed well. Germany has the lowest default risk of all the countries shown. Of the four high-risk states highlighted, Illinois currently has the highest default risk at 275 bps, followed closely by California at 269 bps. New York and New Jersey are both just above 200 bps.

Politico:

• Judge Disses Dems' 'Alice in Wonderland' Health Defense. A federal judge in Florida on Thursday said he will allow some of the lawsuit challenging the constitutionality of the health care law to proceed — and criticized Democrats for making an “Alice in Wonderland” argument to defend the law. U.S. District Judge Roger Vinson allowed two major counts to proceed: the states’ challenge to the controversial requirement that nearly all Americans buy insurance and a required expansion of the Medicaid program.
• Barack Obama: Economy Stokes 'Tribal Attitude'. President Barack Obama thinks that the recession has caused a temporary increase in racial tension by stoking “tribal attitude” among people in economic distress. During an hour-long town hall with young people simulcast on MTV, BET and CMT Thursday afternoon, Kishor Nagula, a graduate student at Johns Hopkins University, asked Obama about race relations, saying he was disappointed the president hadn’t ushered in a post-racial era, as some of his supporters had once suggested he would.

Reuters:

• China Tells U.S. Not to Make Yuan a Scapegoat.
• BOJ's Shirakawa: to take appropriate policy action. Bank of Japan Governor Masaaki Shirakawa reiterated on Friday that the central bank will take appropriate policy action as it carefully examines economic and price moves.
• Japan's Noda: Will Act on FX to Curb Excess Moves. Japanese Finance Minister Yoshihiko Noda said on Friday that Japan will continue to take decisive steps on currencies if necessary to curb excessive moves in the foreign exchange market.
• AMD(AMD) Eyes Stronger PC Demand, Holds Off on Tablets. Consumers will likely buy more PCs in the fourth quarter but manufacturers will continue to use up components they had over-accumulated in recent months, chipmaker Advanced Micro Devices Inc (AMD) said on Thursday.
• U.S. Video Game Sales Fall 8% in September - NPD.
  

Financial Times:

• Dollar Fall Sparks Stability Warnings. The dollar tumbled against most major currencies on Thursday, prompting warnings that the weakness of the world’s reserve currency could destabilise the global economy and push other countries into retaliatory devaluations to underwrite their exports. Increasing expectations the Federal Reserve will pump more money into the US economy next month under a policy known as quantitative easing sent the dollar to new lows against the Chinese renminbi, Swiss franc and Australian dollar. It dropped to a 15-year low against the yen and an eight-month low against the euro. A senior European policy-maker, who asked not to be named, said a further aggressive round of monetary easing by the US Federal Reserve would be “irresponsible” as it made US exports more competitive at the expense of its rivals.

Yomiuri:

• Japan will downgrade its economic assessment this month for the first time since February 2009 as the yen continues to strengthen.

South China Morning Post:

• American International Group(AIG) is likely to gain "tens of millions of dollars" from the initial public offering of a Chinese automaker that does business with Iran. AIG, through a unit, owns 13.5% in Chongqing-based Lifan Industry Group Co., which exports motorcycles to Iran and where a local factory has a licensing agreement to assemble Lifan's cars from imported kits, citing Mark Herr, AIG's NY-based vp of media relations.
• Container Volumes Suffer as Trade Slows. Lower trade growth caused by high unemployment in the United States and difficult economic conditions in Europe has hit container shipping lines, which have seen a steady fall in average container shipping rates over the past two months.

People's Daily:

• The global currency war maybecome a trade war as countries may limit imports though more direct measures other than letting their currencies depreciate, Zhang Ming, a researcher with the Chinese Academy of Social Sciences, wrote in a commentary.

Evening Recommendations
Citigroup:

• Reiterated Buy on (GOOG), raised estimates, boosted target to $725.
• Reiterated Buy on (INFN), boosted estimates, added to Top Picks Live list, target raised to $16.50.
• Reiterated Buy on (CIEN), target $24.
  

Wells Fargo:

• Rated (ICE) Outperform.

BMO Capital Markets:

• Rated (VIT) Outperform, target $40.
• Rated (LFT) Outperform, target $50.
• Rated (CRM) Outperform, target $130.
• Rated (SFSF) Outperform, target $30.
  

Night Trading

• Asian equity indices are -.50% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 103.0 +5.5 basis points.
  
• Asia Pacific Sovereign CDS Index 94.0 +.5 basis point.
  
• S&P 500 futures +.08%.
  
• NASDAQ 100 futures +.40%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (SCHW)/.09
• (GE)/.27
• (INFY)/.61
• (GPC)/.76
• (GCI)/.50
• (WDFC)/.38
• (MAT)/.76

Economic Releases
8:30 am EST

• The Consumer Price Index for September is estimated to rise +.2% versus a +.3% gain in August.
• The CPI Ex Food & Energy for September is estimated to rise +.1% versus unch. in August.
• Advance Retail Sales for September are estimated to rise +.4% versus a +.4% gain in August.
• Retail Sales Less Autos for September are estimated to rise +.3% versus a +.6% gain in August.
• Retail Sales Ex Auto & Gas for September are estimated to rise +.3% versus a +.5% gain in August.
• Empire Manufacturing for October is estimated to rise to 6.0 versus a reading of 4.1 in September.
  

9:55 am EST

• Preliminary Univ. of Mich. Consumer Confidence for October is estimated to rise to 68.9 versus a reading of 68.2 in September.

10:00 am EST

• Business Inventories for August are estimated to rise +.5% versus a +1.0% gain in July.

2:00 pm EST

• The Monthly Budget deficit for September is estimated at -$32.0 Billion versus -$46.6 Billion in August.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bernanke speaking, Fed's Lockhart speaking and Former Fed Vice Chairman Kohn speaking could also impact trading today.
  

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

Stocks Modestly Lower into Final Hour on Rising Financial Sector Pessimism, Economic Fear, Profit-Taking, More Shorting

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Around Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 20.98 +10.02%
  
• ISE Sentiment Index 108.0 -.92%
  
• Total Put/Call .78 +8.33%
  
• NYSE Arms 1.52 +67.40%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 98.15 bps +4.69%
  
• European Financial Sector CDS Index 97.0 bps +7.07%
  
• Western Europe Sovereign Debt CDS Index 139.33 bps -2.45%
  
• Emerging Market CDS Index 195.20 bps +2.74%
  
• 2-Year Swap Spread 18.0 +2 bps
  
• TED Spread 15.0 -2 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .13% +1 bp
  
• Yield Curve 212.0 +6 bps
  
• China Import Iron Ore Spot $152.70/Metric Tonne +1.26%
  
• Citi US Economic Surprise Index -4.10 -7.0 points
  
• 10-Year TIPS Spread 2.14% +9 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -58 open in Japan
• DAX Futures: Indicating +2 open in Germany

Portfolio:

• Slightly Lower: On losses in my Medical, Retail and Biotech long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades just modestly lower despite meaningful financial sector weakness, rising economic fear and recent sharp equity gains. On the positive side, Alt Energy, Ag, Computer, Computer Service, Telecom and Restaurant shares are higher on the day. The MS Tech Index is slightly higher on the day. The S&P GSCI Ag Spot Index is rising +.6%. The Portugal sovereign cds is falling -1.53% to 374.31 bps, the Greece sovereign cds is declining -1.11% to 682.04 bps and the Ireland sovereign cds is falling -2.49% to 407.93 bps. Moreover, the US sovereign cds is falling -3.49% to 42.19 bps. On the negative side, Education, Bank and Oil Tanker shares are under pressure, falling more than 2.0%. (XLF) is underperforming badly again. Cyclicals are also underperforming. The Hungary sovereign cds is climbing +4.22% to 268.53 bps. The euro financial sector cds index is recouping some recent losses, which is also a negative. Copper is falling -.76% despite more euro strength. Given today's news, the market's resilience is very impressive and the bears remain unable to gain any traction. (AAPL) is trading well around the $300 level and, after a brief pause, should move towards $325 over the coming weeks. One of my longs, (GOOG), reports after the close today. Its put/call open interest ratio is currently 1.20, which is near the highest over the last few years. As well, short interest in the shares has moved back to the high-end of its recent range. I expect US stocks to trade mixed-to-higher into the close from current levels on falling sovereign debt angst, buyout speculation, rising QE2 expectations and tax policy/election optimism.