Thursday Watch

Late-Night Headlines
Bloomberg:
- The U.S. Securities and Exchange Commission will extend a ban on short-sales of financial stocks, leaving in place the prohibition on bets companies' shares will fall until Congress approves a $700 billion economic bailout. The restriction will expire three days after lawmakers give Treasury Secretary Henry Paulson authority to buy illiquid assets that are burdening banks and other financial firms, the SEC said today in a statement. The short-sale prohibition will end no later than Oct. 17 if Congress rejects the legislation. ``There are circumstances in which short selling can be used as a tool to mislead the market,'' the SEC said in its statement announcing the extension. It can be used as a ``downward manipulation'' in which traders spread ``lies about a company's negative prospects.'' The SEC handed hedge funds a victory by dropping a separate rule requiring investors who manage more than $100 million to publicly disclose their short positions. The SEC is now requiring funds to only reveal short positions to the agency. That requirement may be in place indefinitely, the agency said. In addition, the regulator continued its crackdown on so- called naked shorting by adopting two regulations that pressure traders and brokers to actually deliver borrowed shares to buyers. A third rule extension makes it a securities fraud when sellers deceive brokers about delivering borrowed shares.

- Asian money market rates declined as the U.S. Senate passed a $700 billion banking rescue bill, easing concern that more financial companies will fail. Overnight dollar borrowing rates for banks outside the U.S. fell 1.35 percentage points to 2.25 percent as of 10:20 a.m. in Tokyo. The rate dropped 2.82 percentage points yesterday, when it touched as high as 7.3 percent.

- The US dollar rose against the euro, approaching a one-year high, as the U.S. Senate began voting on a $700 billion bill that would allow the government to buy troubled assets from banks. The euro may fall for a fourth day against the dollar before today's meeting of the European Central Bank at which policy makers led by Jean-Claude Trichet are forecast to keep the main refinancing rate at 4.25 percent. ``I don't think the euro can get a lot of traction out of Trichet,'' said Jeremy Stretch, a strategist in London at Rabobank International, the third-largest Dutch bank. ``If he is seen to be hawkish, the euro will fall, and if he is seen to open the gates, I think the euro will slide on that basis.''

- New Zealand's commodity export price index fell by the most in 21 years in September, led by dairy, aluminum and beef, ANZ National Bank Ltd. said.

- The U.S. approved the release of as much as 900,000 barrels of oil from the Strategic Petroleum Reserve to two unidentified refiners, after a request for more supplies to ease fuel shortages in the Southeast.

Wall Street Journal:
- The Senate handily passed a controversial financial rescue package Wednesday, giving the bill its first legislative victory but adding provisions that could complicate efforts to push the $700 billion plan through the House of Representatives.

- Lilly(LLY) Emerges as ImClone’s(IMCL) Secret Admirer.

- For all the speculation over how Sarah Palin will fare in the vice-presidential debate Thursday night, her Democratic opponent, Joe Biden, faces a challenge of his own: taking on the Alaska governor without coming across as sexist or a bully.

- Having come face-to-face with their own mortality, Wall Street rivals Goldman Sachs Group Inc.(GS) and Morgan Stanley(MS) are doing things they wouldn't have imagined just months ago. They have diluted existing shareholders, pushed for rules that are an anathema to many free-market champions and rewritten their corporate charters to become commercial banks -- a business they had regarded as beneath their pedigrees. Morgan Stanley is even considering adding automated teller machines inside its brokerage locations, say people close to the firm.

MarketWatch.com:
- It's unlikely the European Central Bank will cut interest rates when the Governing Council meets Thursday, but a rapidly deteriorating economic outlook and intense financial turmoil might be enough to convince ECB President Jean-Claude Trichet to lay the groundwork to move sooner rather than later, economists said.

NY Times:
- Iraq's Shiite-led government took command Wednesday of thousands of U.S-backed mostly Sunni fighters who turned against al-Qaida, pledging to integrate them into public life in recognition of their help in quelling violence. About 100,000 fighters, known as Sons of Iraq or Awakening Councils, had been under U.S. military supervision and were paid by the Americans for the last two years. They are now being transferred to Iraqi military control.

- For some hedge funds, Lehman Brothers(LEH) has become the Roach Motel of Wall Street: They checked in, but they can’t check out. Two weeks after Lehman spiraled into bankruptcy, hedge funds that did business with the Wall Street bank are still fighting to get their money out of the firm. For some, it has become a life-or-death struggle. Big funds like GLG, Harbinger, Amber Capital and Elliott Associates have varying degrees of exposure to Lehman Brothers.

Forbes.com:
- What Buffett’s Bet Says About GE(GE).

USA Today.com:

- A Securities and Exchange Commission investigation into whether traders spread misinformation in a bid to drive down shares of financial firms focuses in part on a series of midsummer Wall Street rumors, according to an SEC subpoena.

Reuters:

- The Pfizer Inc.(PFE) AIDS drug maraviroc helps thwart the HIV virus in nearly half of people who have developed resistance to other treatments, according to two related studies published on Wednesday.

- Sony Corp's(SNE) PlayStation 3 video game console and its portable cousin, the PSP, are selling faster than expected and are poised to meet full-year sales targets even if the current economic crisis hurts holiday demand, Sony said on Wednesday.

- Japan's Mitsubishi Motors said on Wednesday it will begin testing its electric cars in Europe next month as it aims to beat rivals to the uncharted market and promote itself as the pioneer of the zero-emission vehicles.
- North American fertilizer company Mosaic Co (MOS) said on Wednesday its fiscal first- quarter profit almost tripled, driven by a boom in the global agricultural sector and the soaring price of potash- and phosphate-based crop nutrients. But the company's shares plummeted more than 17 percent to $55.45 in trading after the closing bell as earnings fell short of Wall Street's expectations. The company warned it plans to sharply reduce phosphate production over the next several months, due to high inventory levels. "Momentum has slowed in the phosphates business near-term due to the combined effects of soft seasonal demand, higher customer inventory levels and falling raw material costs," said Prokopanko.

- Investors poured a record $12.39 billion into U.S. money market funds in the week to Sept. 30, the Money Fund Report said on Wednesday.

Financial Times:
- AIG, the troubled US insurer, is set to kick-start a sale of assets likely to attract interest from potential buyers including sovereign wealth funds, private equity groups and US and European insurers.

- Guy Wyser-Pratte has blocked withdrawals from his hedge fund after the veteran New York arbitrageur and activist warned that the “calamitous” market conditions were the worst since he started trading in the 1960s. Wyser-Pratte Eurovalue, a $500m fund campaigning for change at mid-sized companies across Europe, suspended withdrawals on Tuesday after some clients asked for their money back.

Independent:

- Anthony Bolton, who ran the Fidelity Special Situations fund for many years, believes the UK stock market has reached rock-bottom and he is using his own money to start betting on a recovery. Bolton said that he’d started to feel optimistic “for the first time in a couple of years” and that “the markets of the past two or three days have all the signs of a low.” During the past weeks, we have looked into the abyss and stepped back. Mr Bolton's view, which is shared by other fund managers at Fidelity, is based partly on his contrarian instincts, but also on the current depressed valuations of many companies. Mr Bolton said that investor sentiment indicators were now so depressed that there was no further for confidence to fall and that he had also identified several sectors of the market which offered better value than at any time for a generation. Mr Bolton said sectors such as financials, which began falling before the rest of the market, were likely to lead the recovery, with banking consolidation in the UK, for example, working in favour of many companies. He warned that areas such as commodities that have only begun falling in recent months would take longer to recover. "I wouldn't rush back into natural resources," he said.

Economic Daily News:

- Taipei metropolitan home prices fell about 10% last month from August, citing figures from property agency Yungching Rehouse Ltd. The number of units changing hands declined 20%.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -.75% to +.25% on average.
S&P 500 futures -.97%.
NASDAQ 100 futures -.97%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Upgrades/Downgrades
Rasmussen Business/Economy Polling

Earnings of Note
Company/EPS Estimate
- (MAR)/.32

- (STZ)/.44

- (RECN)/.26

- (GPN)/.60

Economic Releases
8:30 am EST

- Initial Jobless Claims for last week are estimated to fall to 475K versus 493K the prior week.

- Continuing Claims are estimated to rise to 3550K versus 35442K prior.

10:00 am EST

- Factory Orders for August are estimated to fall 3.0% versus a 1.3% gain in July.

Upcoming Splits
- None of note

Other Potential Market Movers
- The weekly EIA natural gas inventory report, Cowen Therapeutics Conference, (SFE) analyst day, (OKS) analyst meeting and (ENER) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by automaker and commodity stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

Stocks Finish Lower, Weighed Down by Construction and Commodity Shares

Evening Review
Market Summary
Top 20 Biz Stories
Today’s Movers
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Real-Time Stock Bid/Ask
After-hours Stock Quote
After-hours Stock Chart
In Play

Today's Headlines

Bloomberg:
- The U.S. Senate is set to vote tonight on a $700 billion financial-rescue plan, tying it to an increase in bank-deposit-insurance limits and tax breaks to win support from Republicans.

- The US dollar advanced against the euro for a third consecutive day as demand for funding in the U.S. currency increased, reflecting banks' reluctance to lend to each other amid a global credit crunch. ``Markets need dollars,'' said Matthew Kassel, director of proprietary trading at ING Financial Markets LLC in New York. ``They need funding, and they buy dollars in the spot market.''

- Polish economic growth may slow more than previously forecast next year as the consequences of the global financial turmoil become known, central bank central bank Governor Slawomir Skrzypek said.

- General Electric Co.(GE)d it has been able to sell corporate paper and fund operations without tapping bank lines, seeking to quash speculation that led to a surge in its credit default swaps and a slump in the stock.

- General Electric Co. plans to offer $12 billion in common shares and billionaire investor Warren Buffett's Berkshire Hathaway Inc. will buy $3 billion in preferred shares.

- The probability that the Federal Reserve will cut interest rates before policy makers are next scheduled to meet increased after manufacturing in the U.S. contracted at the fastest pace since the last recession.

- Oil prices are more volatile than at any time since the first Gulf War in January 1991 as the banking crisis raises concern the six-year rally in commodity prices is over. “Historical volatility has jumped about 30 points over the last 20 sessions,” said Stephen Schork in his daily Schork Report.

- Crude oil fell after a U.S. government report showed a bigger-than-forecast increase in supplies as fuel consumption dropped to the lowest since 2001. Fuel use over the past four weeks averaged 19 million barrels a day, the lowest since October 2001. ``Things are going to get worse as far as the bulls are concerned,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``Imports will remain high and refineries are coming back. Prices are now headed for $90.'' Crude-oil imports increased 26 percent to 8.99 million barrels a day, the biggest one-week percentage gain since November 1997.

- The U.S. Supreme Court reaffirmed its decision barring the death penalty for the crime of child rape, rejecting a bid to reopen the case and instead amending the majority opinion to address an overlooked federal law. Louisiana, backed by the Bush administration, had urged the justices to schedule a new round of arguments, something the court hadn't done in a decided case since 1960. The justices voted 7-2 not to reopen the case.

Wall Street Journal:

- Slide Inc., a startup best known for software tools that help people personalize their profiles and amuse themselves on social-networking sites like Facebook and MySpace, is trying to prove it has staying power. The San Francisco company, begun in 2005 by Silicon Valley wunderkind Max Levchin, on Thursday will kick off distribution partnerships with Time Warner Inc.'s Warner Bros., CBS Corp., and Comcast Corp.'s E! Entertainment channel, among others. Using a new Slide video service, social-networking users will be able to view clips from shows such as NBC's "Nightly News" and "Beverly Hills 90210" for free.

CNBC:
- Steel Authority of India Ltd. plans to cut prices of flat products, citing company officials.

MarketWatch.com:

- Hedge fund manager David Einhorn suffered a big loss in September as the credit crisis deepened and regulators banned short selling of more than 900 financial-services stocks. Einhorn is chairman of Greenlight Re (GLRE) a reinsurer that invests almost all its premiums with him. The company said Wednesday that its investment portfolio lost 11.5% in September, leaving it down 12.9% so far this year.

WealthBulletin:
- At least 1000 hedge funds, one in eight of the worldwide total, are trying to unwind investments held by their prime brokers amid moves today by investment firm Olivant to recover its 2.78% holding in UBS, which was held in accounts managed by Lehman Brothers in Europe.

Fox News:

- Questions are being raised about the objectivity of Thursday's vice presidential debate moderator after news surfaced that she is releasing a new book promoting Barack Obama and other black politicians who have benefited from the civil rights struggle. Gwen Ifill, of PBS' "The NewsHour," is expected to remain as moderator, however.

NY Post:
- As Wall Street burns, smoke can now be seen billowing from its neighbor to the north: Greenwich, Conn., the world's hedge-fund capital. With once-highflying funds seeing their performance worsening, investors are pounding on the door to get their money out, sources told The Post.

Market News International:

- Charles Plosser, president of the Federal Reserve Bank of Philadelphia, may be prepared to back further interest rate cuts if the outlook for the economy weakens, citing an interview.

Reuters:
- France plans to propose a $422 billion bank-rescue fund for the European Union at a meeting of government leaders this weekend, citing an European government source. In an interview to be published tomorrow in Germany’s Handelsblatt, French Finance Minister Christine Lagarde said France would propose an EU-wide fund.

- Deutsche Bank AG CEO Josef Ackermann said Europe should be ready if necessary to provide a financial rescue plan for banks similar to the $700 billion bailout in the US.

Financial Times:
- Blackstone(BX) and JPMorgan(JPM) will brave shrinking credit markets by attempting to raise more than $1bn to fund the conversion of up to 20,000 US cinema screens to digital projection systems, in a deal due to be announced on Wednesday. Blackstone and JP Morgan are arranging the financing for a consortium made up of the three largest US cinema chains, which has done a deal with five Hollywood studios, according to a person familiar with the situation.

O Estado de S. Paulo:

- Brazil plans to limit textile imports from China to lower its trade deficit in the sector.

Bear Radar

Style Underperformer:
Mid-cap Growth (-1.73%)

Sector Underperformers:
Coal (-8.51%), Steel (-5.06%) and Oil Service (-4.92%)

Stocks Falling on Unusual Volume:
FSS, CLF, FCX, GLRE, XTXI, PDX, PHO and ATU

Stocks With Unusual Put Option Activity:
1) LVLT 2) GRA 3) BSX 4) MCO 5) JOSB

Bull Radar

Style Outperformer:
Mid-cap Value (-1.13%)

Sector Outperformers:
Airlines (+4.05%), Banks (+1.80%) and Restaurants (+.75%)

Stocks Rising on Unusual Volume:
GOOG, UVV, C, LYG, SFD, MWIV, OTEX, NUAN, DMND, FCFS, GPRO, FSLR, IMCL, NGT and UGP

Stocks With Unusual Call Option Activity:
1) MYL 2) RYL 3) NUAN 4) SNDK 5) JBL

Links of Interest

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
Movers & Shakers
Upgrades/Downgrades
In Play
Exchange Volume vs. Average
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Real-Time Intraday Quote/Chart
Dow Jones Hedge Fund Indexes