Today's Headlines

Bloomberg:
- Energy stocks are headed for their biggest weekly losses in more than three years as falling demand sent crude-oil prices tumbling.
- Warren Buffett’s Berkshire Hathaway said Ronald Ferguson, former CEO of its General Re reinsurance unit, may be sued by the Securities and Exchange Commission.
- The International Atomic Energy Agency and its director general, Egyptian Mohamed ElBaradei, won this year’s Nobel Peace prize for their work to prevent the military use of nuclear energy even as Iran and North Korea threaten to destabilize the world with recent advances in their nuclear capabilities.
- US 10-year Treasuries are rising after yields exceeded 4.4%, the highest since April and a level some traders said represented a buying opportunity.
- Delphi stock and bonds plunged to record lows on speculation that the biggest US maker of auto parts will file for bankruptcy as soon as today and as prospects dimmed for concessions from the United Auto Workers union.
- A US appeals court rejected a bid by Research in Motion for another chance to challenge a patent infringement ruling that may block the Canadian company from selling its BlackBerry e-mail device in the US.
- The US dollar is rising for the first day in three after the US economy’s job losses last month were less than a quarter of the number forecast by economists.

Wall Street Journal:
- Time Warner and Microsoft restarted talks from earlier this year about a partnership between Internet units AOL and MSN.
- New Orleans may have to destroy as many as 50,000 homes as a result of damage caused by Hurricane Katrina.

Washington Post:
- Former FBI Director Louis Freeh said he didn’t trust President Clinton when he was in office and stayed in his post as long as he did so Clinton couldn’t name his successor, citing a forthcoming book and appearance on CBS’ “60 minutes” by Freeh.

NY Times:
- Al-Qaeda deputy leader Ayman al-Zawahiri has warned Abu Musab al-Zarqawi, the group’s self-described leader in Iraq, that videotaped beheadings posted on the Internet and attacks on Iraqi civilians may undermine their cause.

Chicago Tribune:
- Real estate prices for retailers on Chicago’s State Street, a major downtown shopping area, have risen in the past year as construction approaches for two new projects.

San Francisco Chronicle:
- San Francisco’s vacancy rate for commercial real estate fell to 13.1% in the third quarter, the eighth straight quarterly decline since the beginning of 2003.

Handelsblatt:
- Hewlett-Packard plans acquisitions in areas including enterprise storage systems, printers and services.

Hurricanes' Effects on Job Creation Less-than-expected, Inventories Rise

- The Change in Non-farm Payrolls for September was -35K versus estimates of -150K and an upwardly revised 211K in August.
- The Change in Manufacturing Payrolls for September was -27K versus estimates of -33K and an upwardly revised -9K in August.
- The Unemployment Rate for September rose to 5.1% versus estimates of 5.0% and 4.9% in August.
- Average Hourly Earnings for September rose .2% versus estimates of a .2% increase and a .1% gain in August.
- Wholesale Inventories for August rose .5% versus estimates of a .4% increase and a .1% rise in July.

BOTTOM LINE: Hurricane Katrina pushed the US unemployment rate up to 5.1% in September as the economy lost 35,000 jobs, fewer than expected and evidence that the storm wasn’t strong enough to derail the expansion, Bloomberg reported. The hurricanes Katrina and Rita may have eliminated up to 480,000 jobs temporarily, according to the latest estimates from the Congressional Budget Office. I expect job growth to rebound sharply over the coming months, but not back to recent highs.

Stockpiles at US wholesalers rose in August by the most in four months as companies rebuilt inventories to meet growing demand before the two hurricanes ripped into the Gulf Coast, Bloomberg reported. The inventory-to-sales ratio fell to 1.17 months. I expect inventory rebuilding to add to GDP growth through year-end.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Friday Watch

Late-Night Headlines
Bloomberg:
- Japan’s 10-year government bonds headed for a fifth week of declines on concern the Bank of Japan will tighten its monetary policy next year.
- Crude oil may decline as US fuel imports increase and demand falls because of near-record prices, a Bloomberg survey showed.

China Daily:
- China’s Ministry of Commerce forecast that the nation’s trade surplus will rise to as much as $100 billion this year, from $32 billion in 2004, adding pressure for a yuan revaluation.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on CVS, GE, FD, MSFT and SYMC.
- Reiterated Underperform on DRI.

Business Week:
- Cheniere Energy(LNG), which develops liquefied natural gas terminals, may benefit as natural gas becomes a bigger component of the US energy market.
- Shares of Encysive Pharmaceuticals(ENCY), whose Thelin drug treats pulmonary arterial hypertension may rise 64% on regulatory approval and interest from potential buyers of the company.

Night Trading
Asian Indices are -.25% to +.50% on average.
S&P 500 indicated +.15%.
NASDAQ 100 indicated +.13%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
SFNT/.39
GY/-.16

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for September is estimated to be -150K versus 169K in August.
- The Unemployment Rate for September is estimated to rise to 5.0% versus 4.9% in August.
- The Change in Manufacturing Payrolls for September is estimated to be -33K versus -14K in August.
- Average Hourly Earnings for September are estimated to rise .2% versus a .1% gain in August.

BOTTOM LINE: Asian indices are mostly higher, boosted by financial companies in the region after several strong earnings reports. I expect US equities to open mixed and to rise later in the day. The Portfolio is 50% net long heading into the day.

Stocks Finish Lower Despite Tumbling Energy Prices on Fed Worries

Indices
S&P 500 1,191.49 -.41%
DJIA 10,287.10 -.29%
NASDAQ 2,084.08 -.90%
Russell 2000 639.45 -.86%
DJ Wilshire 5000 11,891.88 -.54%
S&P Barra Growth 570.61 -.29%
S&P Barra Value 616.74 -.52%
Morgan Stanley Consumer 580.14 -.13%
Morgan Stanley Cyclical 698.38 -1.0%
Morgan Stanley Technology 492.44 -.96%
Transports 3,650.21 +.74%
Utilities 408.68 -1.56%
Put/Call 1.07 +5.94%
NYSE Arms 1.14 -47.91%
Volatility(VIX) 14.96 +2.82%
ISE Sentiment 165.00 +6.45%
US Dollar 88.68 -1.44%
CRB 323.93 -1.30%

Futures Spot Prices
Crude Oil 61.77 +.64%
Unleaded Gasoline 185.70 +.90%
Natural Gas 13.30 -.56%
Heating Oil 196.84 +.91%
Gold 476.20 +.25%
Base Metals 132.76 +.70%
Copper 178.30 unch.
10-year US Treasury Yield 4.38% +1.09%

Leading Sectors
Airlines +4.43%
Gold & Silver +2.79%
Restaurants +1.03%

Lagging Sectors
Energy -2.45%
Biotech -2.69%
Alternative Energy -3.37%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on IMCL, AMGN and RE.

Afternoon/Evening Headlines
Bloomberg:
- Federal Reserve Bank of Dallas President Richard Fisher said policy makers must prevent an “inflation virus” from disrupting the US economy and financial system.
- JPMorgan Chase and Morgan Stanley, forced to spit by lawmakers more than 70 years ago, may reunite, Prudential’s Mayo said.
- Sales at US retailers jumped 4% in September, beating analysts’ estimates, even as two hurricanes disrupted business.
- Merck said an experimental vaccine prevented cervical cancer caused by two common forms of a sexually transmitted virus, which infects more than 5.5 million Americans each year.
- UTStarcom, the biggest supplier of wireless-telephone systems in China, said third-quarter sales missed its forecast and US regulators began a probe of the company’s financials.
- NY police stepped up counter-terrorism patrols on the city’s subways after receiving a “specific threat,” Mayor Bloomberg said.
- Crude oil tumbled to a two-month low and gasoline slid for a sixth session as US fuel imports surged and demand stagnated.

Financial Times:
- The US has dismissed EU hopes that the decision by Airbus SAS shareholders to build a new aircraft without state aid could restart trans-Atlantic negotiations over aircraft subsidies.

BOTTOM LINE: The Portfolio finished substantially higher today on gains in my Energy-related shorts, Steel shorts, Internet longs and Retail longs. I added SCHN short and took some profits in other shorts in the afternoon, thus leaving the Portfolio 50% net long. The tone of the market was negative today as the advance/decline line finished lower, most sectors declined and volume was heavy. Measures of investor anxiety were lower into the close. Overall, today’s market action was negative. Take a look at the charts of ENER (-10.1%), CPST (-7.06%), NGS (-23.6%), ABP (-19.9%), SGY (-14.14%), SYNM (-3.44%) and BCON(-12.1%). There are many, many others. These formally loved speculative energy stocks are collapsing. This reminds me very much of what happened to the Internet stocks in March of 2000. There were many vigorous rallies thereafter and they were all sells.

***Alert***

Due to market volatility I am unable to post the Mid-day Scoreboard. I am currently 50% net long. I expect stocks to rise modestly into the close.