Bull Radar

Style Outperformer:
Large-cap Growth (-4.32%)

Sector Outperformers:
Airlines (-.38%), Biotech (-1.09%) and Computer Services (-1.97%)

Stocks Rising on Unusual Volume:
WFC, ASML, ALTR, OZRK, AAPL, HCBK and DLTR

Stocks With Unusual Call Option Activity:
1) NRG 2) DHR 3) ADI 4) DOX 5) FLEX

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Wednesday Watch

Late-Night Headlines
Bloomberg:
- Intel Corp.(INTC) posted higher-than- anticipated third-quarter profit and said sales may rise in this period on demand for laptops, easing concern that the credit meltdown will curb orders and sending the shares higher. ``The results were excellent,'' said Michael Shinnick, a portfolio manager at 1st Source Bank in South Bend, Indiana, which owns Intel shares. ``It should reassure people that PC demand did not fall off a cliff during the third quarter.'' Intel rose 71 cents, or 4.5 percent, to $16.64 in late trading after closing at $15.93 on the Nasdaq Stock Market.

- Lehman’s Hedge Fund Clients Face Margin Calls on Frozen Assets. Lehman Brothers Holdings Inc.’s(LEH) hedge-fund clients may have to pay more collateral on $65 billion of assets frozen when the investment bank went bankrupt a month ago. Lehman's London-based prime brokerage has about 3,500 active clients including hedge funds that own about $45 billion in securities, Steven Pearson, the partner at PricewaterhouseCoopers responsible for unraveling the unit, said in an interview. They hold an additional $20 billion in short positions, or bets that prices will fall. While investors are largely unable to access their Lehman accounts, the value of the securities continues to fluctuate along with the markets. The clients may be required to put up more collateral if the value of those securities drops, a process known as a margin call. ``Every second that they waste hurts,'' said Edward Chin, who runs Pride Revelation Fund, one of dozens of hedge funds in Hong Kong that used Lehman as their sole prime broker. ``We're looking at many hedge funds that will have to shut down, but they can't even shut down because they don't know what they have left. The thing is I cannot now even liquidate the fund.''

- Genentech Inc.(DNA), the U.S. cancer-drug maker being pursued by its majority owner Roche Holding AG, said third-quarter profit rose 6.7 percent as sales of its tumor- fighting medicines beat analysts' estimates. Shares of Genentech rose $2.63, or 3.3 percent, to $81.75, at 6:02 p.m. in extended trading on the New York Stock Exchange.

- Posco(PKX), Asia's third-biggest steelmaker, fell in Seoul trading after warning that demand will decline this quarter and three brokerages including JPMorgan Chase & Co. said profits and prices may deteriorate.

Wall Street Journal:
- Sen. John McCain expanded his response to the financial crisis by proposing new tax cuts for investors, including a sharp, temporary reduction of the capital-gains tax and breaks aimed at older Americans who may need to cash in assets while the market is down.

- Barack Obama and John McCain each said Tuesday that he would put his own stamp on the massive financial-rescue plan, going beyond buying up bank stocks and distressed assets to exert influence on how the firms are structured and managed.

- Thousands of suspicious voter registrations turned in by a group called Acorn have become a rallying cry for Republicans, who claim left-leaning activists may be trying to rig votes in the 2008 elections. Faulty registrations in recent months include those in the names of Mickey Mouse in Florida, Batman in New Mexico and Dallas Cowboys football players in Nevada. State and federal authorities have opened investigations in about a dozen states; as many as 16,000 registrations in Pennsylvania are under suspicion.

- When the real-estate market was booming, General Electric Co.'s(GE) commercial-property business earned the nickname "the honey pot" among insiders because the company could increase earnings simply by selling a building or two. But now, the opposite is true: GE's difficulty selling its office buildings, shopping centers and other commercial property is dragging down its financial results.

MarketWatch.com:
- Cisco Systems Inc.(CSCO) Chief Executive John Chambers told a huge crowd Tuesday at the Gartner ITxpo that there won't be any cutbacks at his company, despite industry concerns of lower tech spending.

CNNMoney.com:
- Overnight lending rate falls. Bank-to-bank rates decline, indicating that the global efforts to ease pressure in the credit markets may be working.

Business Week:

- Bloomberg Hires TV Vet Andy Lack. Expect Them To Go Bigger Online And On TV.

hedgeweek:

- Up to 1,000 hedge funds could close in aftermath of market turmoil, says Tabb report. In the future, investment banking will be more tightly regulated and dominated by risk-averse commercial banks, while new firms that are structured as partnerships but are much smaller will take on many of the industry's more risky (but well remunerated) activities, according to industry analyst Larry Tabb.

Reuters:

- The average U.S. retail gasoline price fell 33.3 cents over the last week to $3.15 a gallon, the biggest price decline ever recorded by the government, the Energy Department said on Tuesday. Gasoline demand is off 5.3 percent from a year ago, and crude oil costs have fallen to $79 a barrel from a peak of more than $147 in July. "Right now, I don't know any of us that have seen reductions in price or reductions in demand at the almost warp speed that we're seeing at the present time," Red Cavaney, president of the American Petroleum Institute, said. Cavaney would not speculate how low pump prices could go, but he said the drop in petroleum demand will "put incredible downward pressure" on fuel costs.

- An unprecedented cash crunch is choking the ability of banks to lend and creating an opportunity for hedge funds to launch, or ramp up corporate lending facilities. Companies that have relied on bank borrowing to grow, or even maintain their business, are turning to hedge funds in a move that some say may signal a broad shift of lending from banks to asset managers.

- General Motors Corp's (GM) Brazilian market will grow by much less in 2009 and exports at its Brazilian unit will be hit by the financial crisis, the automaker's chief executive in Brazil said on Tuesday. Jaime Ardila said GM's Brazilian market would grow up to 5 percent in 2009 compared with an expected growth of more than 20 percent in 2008, when it was forecast to sell around 600,000 units.

Financial Times:
- The rescue plan unveiled by the US authorities to protect the nation's banks represents "a major step towards stabilizing the system", Hank Paulson told the Financial Times. In an interview, the US Treasury secretary said "for the first time you have seen an action that is systematic, that is getting at the root causes" of the financial crisis.

The Standard:

- Consumer confidence has plummeted in Hong Kong to the 2003 SARS levels, according to a Chinese Univ. of Hong Kong survey.

South China Morning Post:

- Hong Kong’s office sales fell to a five-year low as investors cancelled purchases or reopened negotiations on concern that occupancy rates will decline as the economy weakens. Third-quarter sales slumped 41% to 476 deals, the least since the final quarter of 2003, citing Centaline Property Agency Ltd.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (AAPL), target $170.

Night Trading
Asian Indices are -2.50% to -.50% on average.
S&P 500 futures -1.67%.
NASDAQ 100 futures -.44%.

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Earnings of Note
Company/EPS Estimate
- (KO)/.77

- (ABT)/.78

- (STT)/1.20

- (DAL)/.02

- (SCHW)/.24

- (JPM)/-.18

- (STJ)/.57

- (WFC)/.40

- (EBAY)/.41

- (NVLS)/.04

- (XLNX)/.37

- (STLD)/1.10

- (PJC)/-.40

- (AMR)/-1.41

Economic Releases
8:30 am EST

- The Producer Price Index for September is estimated to fall .4% versus a .9% decline in August.

- The PPI Ex Food & Energy for September is estimated to rise .2% versus a .2% gain in August.

- Advance Retail Sales for September are estimated to fall .7% versus a .3% decline in August.

- Retail Sales Less Autos for September are estimated to fall .2% versus a .7% decline in August.

- Empire Manufacturing for October is estimated to fall to -10.0 versus -7.4 in September.

10:00 am EST

- Business Inventories for August are estimated to rise .5% versus a 1.1% gain in July.

2:00 pm EST

- Fed’s Beige Book

Upcoming Splits
- None of note

Other Potential Market Movers
- The (GPN) analyst day, (AUY) analyst day, (EW) analyst lunch, (KR) analyst day, (UMH) investor presentation, (CHK) analyst meeting, weekly MBA mortgage applications report, Lazard Alternative Energy Conference and the Wachovia Consumer Conference 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 mixed. The Portfolio is 75% net long heading into the day.

Stocks Finish Lower, Weighed Down by REIT, Semis, Software, Coal and Alternative Energy Shares

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In Play

Stocks Lower into Final Hour on Profit-taking, Global Growth Worries

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Internet longs, Computer longs and Biotech longs. I added (IWM)/(QQQQ) hedges, added to my (EEM) short and added to some commodity shorts this morning, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is above average. Investor anxiety is still very elevated. Today’s overall market action is mildly bearish. The VIX is rising 3.51% and is still historically elevated at 56.82. The ISE Sentiment Index is low at 100.0 and the total put/call is slightly below average at .82. Finally, the NYSE Arms has been running high most of the day, hitting 1.78 at its intraday peak, and is currently 1.37. The Euro Financial Sector Credit Default Swap Index is falling 7.25% today to 88.33 basis points. This index is up from a low of 52.66 on May 5^th, but down significantly from 157.81 on Sept. 16^th. The North American Investment Grade Credit Default Swap Index is falling 5.4% to 176.0 basis points. The TED spread is falling 4.57% to 436 basis points. The 2-year swap spread is falling 12.3% to 130.75 basis points. The Libor-OIS spread is dropping 3.6% to 343 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 1 basis point to 1.03%, which is down 160 basis points in just over three months and at the lowest level since February 1999. Considering market gains from the lows on Friday, today’s sell-off isn’t too bad. As well, the action in the (XLF) is a big broad market positive. Today’s meaningful declines in gauges of credit market angst are the first real signs that recent global initiatives are making a significant impact on the problem. If these gauges continue to improve another strong stock surge is very likely. Intel(INTC) reports after the close. I suspect their guidance will be weak. However, I wouldn’t be surprised to see the stock rebound tomorrow after an initial negative reaction, considering how much bad news is likely already priced into the shares around current levels. Nikkei futures indicate a -12 open in Japan and DAX futures indicate an +24 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less financial sector pessimism, diminished forced selling and declining credit market angst.

Today's Headlines

Bloomberg:
- Bond investors from Tokyo to New York are pushing 30-year Treasury yields to record lows in a bet that the financial market meltdown will turn inflation into deflation. Frankfurt-Trust Investment GmbH's global debt fund is buying so-called long bonds. Mizuho Asset Management Co., part of Japan's second-largest bank, sold shorter-maturity notes and purchased longer-term debt last week. BlackRock Inc.(BLK), which oversees $1.4 trillion, says the trade may be a winner next year.

- Money-market rates in London fell after the U.S. joined the U.K., Germany and France in offering to buy stakes in banks to restore confidence in the global financial system. The London interbank offered rate, or Libor, that banks charge each other for three-month dollar loans slid 12 basis points to 4.64 percent today, the biggest drop since March 17, according to the British Bankers' Association. It was at 4.82 percent on Oct. 10, the highest level since December. The three- month euro rate fell 7 basis points to 5.23 percent, the largest decline since Dec. 28.

- Lord West, a U.K. lawmaker and former head of the Royal Navy, said British authorities are investigating a serious terror plot, Sky News reported. ``There is another great plot building up again and we are monitoring this,'' he said today in a debate on the Counter Terrorism Bill in the House of Lords, the broadcaster reported.

- Hedge fund managers, after enduring the industry's worst month in a decade, are seeking to explain to investors what went wrong and what they are doing about it. ``We clearly underestimated several things, most importantly the tsunami of redemptions that are being delivered to hedge funds as investors line up to get out of these funds as well as record outflows from equity mutual funds,'' Jeffrey Gendell, who runs Greenwich, Connecticut-based Tontine Associates LLC, wrote in an Oct. 1 letter to clients.

- Bank bonds soared and the cost of protecting their debt against default plunged as the U.S. government prepared to invest about $125 billion into financial companies and guarantee their newly issued debt. Credit-default swaps protecting against a Morgan Stanley default plunged to the lowest in four weeks and its bonds rose from distressed levels. Credit-swaps on Goldman Sachs Group Inc. and Citigroup Inc. also declined, indicating an improvement in investor confidence. Credit-default swaps on Morgan Stanley plunged 414 basis points to 403 basis points, and have dropped the equivalent of 898 basis points since Oct. 10, according to CMA Datavision. Contracts on Goldman fell 192 basis points to 195 basis points. Citigroup dropped 85 basis points to 137 basis points, the lowest since July. The Markit CDX North America Investment Grade index, a benchmark gauge of credit risk linked to the bonds of 125 companies in the U.S. and Canada, fell 42 basis points from Oct. 10 to 178, according to broker Phoenix Partners Group, as of 11:46 a.m. in New York.

- Energy companies, banks and hedge funds are turning to exchanges instead of over-the-counter markets to minimize risks in energy trading, speakers at an energy derivatives conference in London said. Traders are opting for exchanges where settlement is guaranteed on concern over completion and payment for trades after Lehman Brothers Holdings Inc. filed for bankruptcy last month and Fortis was rescued by Belgium, the Netherlands and Luxembourg. Some smaller energy and commodity companies will struggle to survive if banks continue to restrict credit, which also affects funds that invest in those companies, he said. ``Some exploration and production companies can't get funding, it's game over,'' he said. ``Some funds in Canada are closing shop. It's the same with junior mining companies.''

- The US government’s plan to inject cash into financial institutions, coupled with similar actions by countries around the world, may jumpstart a stalled global financial system, Blackstone Group LP(BX) CEO Schwarzman said. “We’re looking today at an absolute sea change in the global financial system in terms of liquidity,” Schwarzman said. “This could be the time that breaks the back of the credit crisis.”

- Codelco, the world's biggest copper producer, will invest $1.8 billion next year, maintaining record spending even as weaker U.S. and European economies lead to the first global surplus of the metal since 2003.

- China Loss Is Alabama Gain as Sleeping-Bag Firm Adds US Jobs.

- Aisling's $2 billion Merchant Commodity Fund, run by Michael Coleman and Doug King, former Cargill Inc. traders, trounced hedge funds in September. The fund gained 12 percent as energy and agricultural prices slumped, according to two people with knowledge of its performance. ``Is this the end of the commodities bull super-cycle? It doesn't look good: there's no light at the end of the tunnel'' in the next year, O'Malley told an audience of cotton traders and textile producers.

- Iceland's benchmark stock index plunged 77 percent, the biggest decline on record, as trading resumed after a three-day suspension and the nationalization of the country's largest banks. Investors demanded a higher premium to hold Icelandic government bonds, while the price of the country's currency remained ``undetermined,'' according to TD Securities.

- President George W. Bush talked with three European leaders about the importance of ``not letting up'' in the drive to revive global financial markets.

- Apple Inc.(AAPL) plans to offer its first Macintosh notebook priced at less than $1,000 this holiday shopping season in a bid to attract budget-conscious consumers stung by the global economic crisis. Chief Executive Officer Steve Jobs cut the price on the current MacBook models to $999 today at Apple's headquarters in Cupertino, California. He also introduced an aluminum-clad version with a glass display that will sell for $1,299 and updated the MacBook Pro line with thinner models.

- European Central Bank President Jean- Claude Trichet called for a global approach to solve the financial market crisis.

- Treasury Secretary Henry Paulson urged banks getting $250 billion of taxpayer funds to channel the money to customers quickly to halt a credit freeze that's threatening to bankrupt companies and hammer the job market. ``Leaving businesses and consumers without access to financing is totally unacceptable,'' Paulson said in Washington.

- Investors willing to buy stocks at their current depressed prices stand to make a lot of money, according to Tim Bond, Head of global asset allocation at Barclays Capital in London. “Global equity markets are starting to offer a long-term buying opportunity that is typically only seen once in a generation,” Bond wrote. “Returns from equities purchased during this interval may very well be extremely high over the next 12 months and could, if history is any guide, average double-digit long-run returns over the next decade.”

Wall Street Journal:

- US mutual funds are facing a sharp drop in fee income as investors sell stocks and switch to cash and other investments. Stock funds have been hit by investors pulling $92 billion since Sept. 1, with almost $50 billion of the withdrawals taking place in the first 10 days of October, citing data from TrimTabs Investment Research. As of Friday, the market decline had shaved $2 trillion in assets from U.S. and international stock mutual funds since Sept. 1 -- almost 36% of total assets under management, according to TrimTabs Investment Research. The loss is on pace to smash the largest two-month asset decline in percentage terms of 18%, set in June-July 2002, TrimTabs said.

- We’re Laying the Groundwork for Recovery by Fed Chairman Bernanke.

- After being severely constricted for weeks, the commercial paper market showed tentative signs of recovery on Tuesday after global leaders aimed a number of initiatives at stabilizing financial markets.

Financial Times:
- Hedge funds investing in Russia are having trouble valuing their assets, with surprise market closures and a lack of liquidity prompting some to suspend valuations - and withdrawals - altogether.

Valor Economico:

- Brazilian companies may have lost a combined $24 billion in the derivatives market after the local currency tumbled, Banco Itau Holding Financeira SA Executive Director Sergio Werlang said.

Les Echos:
- Shipping companies will go bankrupt because of the global economic slowdown which has led to falling freight transport prices, citing Philippe Louis-Dreyfus, CEO of Louis Dreyfus Group. Overcapacity in the shipping industry will also be a problem in the coming months and will lead to the cancellation of a third of all orders to shipyards, he said.

Tehran Times:

- Iran seeks to complete energy agreements with Russian gas monopoly OAO Gazprom during a visit by National Iranian Oil Co.’s Managing Director Seifollah Jashnsaz to Russia today. Iran expects to reach an agreement to form a joint venture to develop energy projects and build a pipeline to transport oil from the Caspian Sea to the Sea of Oman, citing the Oil Ministry.

Etemaad:

- Iran will face a budget deficit if crude oil prices decline to $70 a barrel, citing a former Iranian oil minister. “Previous governments sought to decrease Iran’s dependence on oil revenue but these efforts were not pursued by the current government,” said Bijan Namdar Zanganeh. Iran “cannot live with oil at $70 a barrel,” said Namdar Zanganeh, who was oil minister for eight years until 2005.