Wednesday Watch

Late-Night Headlines
Bloomberg:
- OPEC, founded five decades ago to unify oil producers, risks dividing members as the group plans to cut output and raise prices just as developed nations face their worst recession since 1983. Iran's energy minister, Gholamhossein Nozari, said yesterday OPEC may slash output quotas by 2.5 million barrels a day, or 8.7 percent, an amount about equal to what's pumped from Kuwait. The debate in the Organization of Petroleum Exporting Countries pits Saudi Arabia, the group's biggest producer and a U.S. ally, against Venezuela and Iran, two nations that oppose U.S. foreign policy and advocate higher oil costs. Saudi Arabia needs oil prices of less than $30 a barrel to balance its government budget, according to Merrill Lynch & Co. estimates. Oil options trading shows the probability that crude will fall below $50 a barrel by June has more than doubled in 10 days, Deutsche Bank AG said in an Oct. 17 report. Oil demand may fall for the first time in 15 years this year as the worst financial crisis in decades tips economies into recession, according to the Centre for Global Energy Studies, a London-based consulting company. U.K. Prime Minister Gordon Brown said last week that it was ``absolutely scandalous'' that OPEC is considering cuts as the global economy risks falling into a recession.

- Apple Inc.AAPL) posted a 26 percent rise in profit as iPhone sales topped estimates and Chief Executive Officer Steve Jobs reassured investors the computer maker will pull through an economic slump. The shares jumped 15 percent in after-hours trading.

- VMware Inc.(VMW), the biggest maker of programs that let computers run multiple operating systems, posted profit and sales that topped analysts' estimates as orders overseas surged. The stock climbed as much as 26 percent after VMware said third-quarter profit, excluding costs such as stock-based compensation, amounted to 24 cents a share.

- Broadcom Corp.(BRCM), the maker of chips for Apple Inc.'s iPhone and Nintendo Co.'s Wii game console, said third-quarter profit increased almost sixfold on sales of wireless products and a technology royalty payment. The stock jumped 8.7% in extended trading.

- Yahoo! Inc.(YHOO), the Internet company that rejected a takeover offer from Microsoft Corp., reported a 64 percent drop in profit and announced plans to cut at least 10 percent of its staff after advertising spending slowed. The stock rose 5.2% in extended trading.

- Financing costs in Asia may extend the past week's declines as money market rates fell yesterday in Europe and the U.S. Federal Reserve agreed to provide as much as $540 billion in loans to relieve pressure on money-market funds.

- Samsung Electronics Co., the world's second-largest chipmaker, scrapped its $5.85 billion unsolicited bid to buy SanDisk Corp. after negotiations stalled and the value of the U.S. company declined.

- Passport Management LLC, the $4.5 billion hedge-fund firm run by John Burbank III, lost as much as 27% before fees this month as investments in commodity stocks slumped. The decline through Oct. 15 left the $2.9 billion Global Strategy fund, which invests in global stock markets, with an annual loss of about 34% before fees, according to an investor letter.

- BHP Billiton Ltd., Australia’s biggest oil and gas producer, said crude-oil and condensates output surged 43%, buoyed by the start-up of new projects in the Gulf of Mexico and Australia. Output of oil and condensates, a type of light oil produced in association with natural gas, jumped to 16.18 million barrels in the three months ended Sept. 30, up from 11.3 million a year earlier, BHP said.

- Crude oil fell for a second day after the U.S. dollar climbed to 20-month high against the euro, reducing the appeal of commodities as a hedge.

- Copper tumbled below $2 a pound for the first time since December 2005 amid speculation that the world economy is headed for a recession that will reduce demand for metals. Copper is heading for its biggest annual slide on record.

BusinessWeek:

- Pressures are building for Boeing (BA) and the International Association of Machinists & Aerospace Workers (IAM) to end a 45-day-old work stoppage. The aerospace giant is expected to release its weakest quarterly earnings report in years on Oct. 22, and there are hints that Washington is getting nervous about the economic impact of the machinists' strike.

Financial Times:
- Oil trading in Singapore almost halved in September as the financial crisis and slowing regional demand combined to keep speculators away from the world's third largest energy trading hub. The sudden drop in September's trading came amid slowing economic growth in Asia, the world's engine of commodities demand, as exported-oriented nations, including China, suffered from a reduction in overseas orders. The credit crisis has hit the private, bilateral over-the-counter derivatives market that is the cornerstone of Asia's oil and commodities trading. The region, in contrast to New York and London, does not have a prominent commodities exchange or clearing house, exacerbating counterparty risk. Market participants fear that the other side of their deals could default on obligations.

La Tribune:

- France will boost arms exports as it seeks to raise its share of the world market to 13%, citing an interview with Defense Minister Herve Morin. The French arms industry aims to export up to $9.2 billion of arms by 2010 to raise market share to 13% from 6% currently, Morin said.

Stuff.co.nz:

- Canadian oil explorer Trans-Orient Petroleum Ltd says it believes it has found at least 12.6 billion barrels of oil on New Zealand's East Coast. The company said in Vancouver today that AJM Petroleum Consultants had made an assessment of the company's fractured oil-shale in its 100 percent-owned 890,000 hectare prospect in the East Coast Basin. It estimated the oil available from just 10 percent of the area was 12.6 billion barrels.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (COH), target $33

- Reiterated Buy on (BRCM), target $27.

- Reiterated Buy on (WU), target $21.50.

- Reiterated Buy on (MAN), target $50.

Night Trading
Asian Indices are -1.75% to -1.0% on average.
S&P 500 futures +.24%.
NASDAQ 100 futures +1.74%.

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
- (KMB)/1.00

- (MCD)/.98

- (GD)/1.51

- (R)/1.27

- (GENZ)/1.00

- (FCL)/.00

- (APD)/1.26

- (NOC)/1.41

- (MRK)/.79

- (BHI)/1.36

- (WB)/-.02

- (TRV)/.61

- (EMC)/.20

- (WLP)/1.48

- (PFCB)/.25

- (PM)/.89

- (WYE)/.90

- (BA)/1.01

- (T)/.71

- (COP)/3.19

- (RHI)/.42

- (CVD)/.80

- (CMG)/.59

- (ALL)/.71

- (AMZN)/.25

- (PHM)/-.53

- (NUVA)/.01

- (RYL)/-1.11

- (AMGN)/1.08

- (ADS)/1.16

- (TEX)/1.33

- (NE)/1.34

- (ATI)/1.40

- (LRCX)/.24

Economic Releases
10:35 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,650,000 barrels versus a +5,611,000 barrel increase the prior week. Gasoline supplies are expected to rise by +2,700,000 barrels versus a +6,973,000 barrel increase the prior week. Distillate inventories are estimated to rise by +300,000 barrels versus a -453,000 barrel decline the prior week. Finally, Refinery Utilization is expected to rise by +1.0% versus a +1.31% increase the prior week.

Upcoming Splits
- None of note

Other Potential Market Movers
- The weekly MBA mortgage applications report and (UTEK) analyst day could also impact trading today.

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

Stocks Finish Sharply Lower, Weighed Down by Technology, Commodity, Construction and Homebuilding 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

Stocks Sharply Lower into Final Hour on Global Growth and Earnings Worries

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Computer longs and Internet longs. I added (IWM)/(QQQQ) hedges today, 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 about average. Investor anxiety is high. Today’s overall market action is bearish. The VIX is rising .3% and is still very elevated at 53.23. The ISE Sentiment Index is below average at 134.0 and the total put/call is about average at .88. Finally, the NYSE Arms has been running high most of the day, hitting 1.47 at its intraday peak, and is currently 1.44. The Euro Financial Sector Credit Default Swap Index is falling 2.36% today to 97.0 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 3.0% to 189.24 basis points. The TED spread is plunging another 8.2% to 273 basis points. The TED spread is now down 190 basis points in less than two weeks. The 2-year swap spread is rising 2.18% to 104.25 basis points. The Libor-OIS spread is dropping 5.18% to 277 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 2basis points to 1.11%, which is down 152 basis points in under four months and at the lowest level since April 1999. Another meaningful decline in gauges of credit angst is a large positive for the broad market. However, the action in technology shares is a negative considering how much bad news should already be factored into shares at current levels. I suspect (AAPL) will beat estimates slightly and be very conservative with guidance. I would expect an initial further sell-off in the shares followed by a rebound by tomorrow’s close. I plan to add to my long position on any further meaningful decline in the share price from current levels. Nikkei futures indicate a -280 open in Japan and DAX futures indicate a -40 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, diminishing credit angst and bargain-hunting.

Today's Headlines

Bloomberg:
- KeyCorp, U.S. Bancorp, Regions Financial Corp., and National City Corp. said they may join the government's $250 billion plan to recapitalize banks and are pondering whether to use the money to shore up capital or make acquisitions.

- Argentine bonds soared above 24 percent and stocks sank the most in a decade on speculation the government will seize private pension funds and use the assets to stave off the second default this decade. ``It's horrible,'' said Jaime Valdivia, who manages $1 billion of assets for Emerging Sovereign Group in New York. ``We're going back to the dark ages. Not even in times of the worst financial stress did the government ever think about taking over the private pension system.''

- Crude oil fell more than $2 a barrel as the U.S. dollar rose to its highest in more than a year against the euro, dimming the appeal of commodities as a hedge. Oil climbed earlier on expectations that OPEC, supplier of 40 percent of the world's oil, will reduce output at a meeting in Vienna this week. ``The Saudis will probably go along with a significant cut to maintain cohesion in the group.'' ``The cartel is in a tight corner,'' said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut. ``They don't want to contribute to a further global economic slowdown. The Saudis for sure know that it's not in their interest to see this occur, so they may limit what they do immediately.'' Iran, OPEC's second-largest producer, said it favors a cut of between 2 million and 2.5 million barrels a day.

- Home sales in the San Francisco Bay Area rose 45 percent last month, the biggest increase in more than six years, as buyers took advantage of discounted prices on foreclosed homes, MDA DataQuick said. A total of 7,271 single-family houses and condominium units were sold in the nine-county Bay Area last month, up from 5,014 a year earlier. It was the biggest year-over-year rise since April 2002, when sales increased 49 percent, San Diego-based real estate research company MDA DataQuick said today in a statement.

- The cost of borrowing in euros for three months fell to the lowest level since before Lehman Brothers Holdings Inc. collapsed as governments stepped up efforts to boost bank balance sheets and policy makers offered cash to revive lending. The London interbank offered rate, or Libor, that banks charge each other for such loans dropped 3 basis points to 4.96 percent today, the British Bankers' Association said. That's the lowest level since Sept. 12, the Friday before Lehman failed. The overnight dollar rate slid 23 basis points to 1.28 percent, below the Federal Reserve's target for the first time since Oct. 3.

Wall Street Journal:

- The US government effectively guarantees Fannie Mae(FNM) and Freddie Mac’s(FRE) debt, which should make it more attractive to those who want to buy it, citing remarks by Federal Housing Finance Agency director James Lockhart. Lockhart, who is the regulator for the two biggest mortgage finance companies, told the Journal the government would be “behind them short, medium and long term.”

- Children's products maker Delta Enterprise Corp. will announce a recall Tuesday of 1.59 million cribs linked to two infant deaths, the company said, continuing a string of recent recalls of cribs and bassinets involving other manufacturers. A spokesman for the New York-based company said the recall stems from two different types of problematic hardware used on cribs sold from 1995 through 2005. The hardware, which includes safety pegs for one set of cribs and spring pegs for another, can create a hazard if not properly installed. The drop side of the cribs can fall and disengage, creating a gap that can entrap and suffocate infants.

- A new bond insurer backed by Macquarie Group and Citadel Investment Group received regulatory approval to write guarantees on U.S. municipal bonds, where issuance has dropped and yields have risen amid the past year's credit-market turmoil.

- A review of nearly a dozen investor letters sent by hedge funds around the beginning of October finds a tone that could, at best, be described as somber — and, at worst, dire. Oaktree Capital Management L.P.’s Howard Marks called the last couple of weeks “the greatest panic I’ve ever seen,” while Tontine Associates LLC’s Jeffrey Gendell said he was “embarrassed by this performance.” “Since our specialty is not macro forecasting, let alone guessing how some erratic actors in Washington will behave, we are not in a position to know when these headwinds will reverse,” sniffed David Einhorn’s Greenlight Capital L.P., which posted a negative return of more than 16% on each of its three funds in the third quarter, net of fees and expenses. Mr. Einhorn should have merely followed his own advice — in its second-quarter letter, Greenlight preached cash and little action in stocks, but at the same time traded heavily all quarter long. Others took a quick swipe at the past, generally explaining where positions were lost, with a bias towards blaming the bursting of the commodities bubble - a sector many had touted earlier this year - as their biggest detriment.

WCBSTV.com:
- New York's transit agency is testing digital advertising screens on the sides of buses. The screens can target ads for specific neighborhoods. The ads, which resemble TV commercials, could even advertise coffee in the morning, and beer after work. Titan Worldwide has a 10-year, $800 million contract to sell ads throughout the city's bus and commuter-train systems. The company says GPS technology allows it to change the ads based on the buses' locations. The Metropolitan Transportation Authority is testing the system on a Manhattan route, with an eye toward 200 buses in the first quarter of next year.

Washington Post:

- The government is moving forward with its first significant effort to bring oversight to a vast, unregulated corner of Wall Street that has severely exacerbated the financial crisis. But a turf war is brewing among three leading federal agencies that have contrasting visions for how the $55 trillion market for speculative financial instruments known as credit-default swaps should be regulated.

Deutschlandfunk:

- European Central Bank Executive Board member Juergen Stark said tensions in the money market are abating and the worst of the turbulence may be over.

recast to "

Valor Economico:

- Russia, the biggest importer of Brazilian beef, halted purchases of the Brazilian product because of a lack of financing and a glut in the market.

Folha de S. Paulo:

- Brazilian units of Ford Motor(F), Fiat SpA and Volkswagen AG are cutting interest rates on vehicle loans to boost sales as demand dwindles. Vehicle sales declined 10% in the first half of October from a month earlier.

Emirates Business 24/7:
- Steel prices in Abu Dhabi fell 20% in September as compared with August, citing a study by the Department of Planning and Economy. Cement prices declined by less than 1% and the cost of other building materials fell.

Sudan Tribune:

- Southern Sudan will base its 2009 budget on oil prices at $65 a barrel. Oil revenue makes up 97% of Southern Sudan’s budget.

Bear Radar

Style Underperformer:
Large-cap Value (-3.09%)

Sector Underperformers:
Gold (-7.08%), Computer Hardware (-6.58%) and Steel (-6.31%)

Stocks Falling on Unusual Volume:
MICC, LOGI, CNQR, MASI, NFLX, KNM, ARB, TMB, MTA, LUX, LXK, AXE and CEO

Stocks With Unusual Put Option Activity:
1) JBLU 2) PHM 3) AU 4) TXT 5) HK

Bull Radar

Style Outperformer:
Mid-cap Value (+.01%)

Sector Outperformers:
Biotech (+1.47%), Airlines (+1.32%) and Hospitals (+1.3%)

Stocks Rising on Unusual Volume:
MMM, PNR, JDAS, LPHI, ICLR, ITWO, MYGN, ASTE, AMAG, NDAQ, OXPS, SNDK, ERIE, CAVM, BIDU, RIGL, SY, RZG, EBS and HXL

Stocks With Unusual Call Option Activity:
1) SYNA 2) HOT 3) TXN 4) ATVI 5) LGF