Today's Headlines

Bloomberg:
- The Federal Reserve cut its benchmark interest rate by half a percentage point to 1 percent, matching a half-century low, in an effort to avert the worst U.S. economic downturn in the postwar era. ``Downside risks to growth remain,'' the Federal Open Market Committee said today in a statement in Washington. ``Recent policy actions, including today's rate reduction, coordinated interest-rate cuts by central banks, extraordinary liquidity measures, and official steps to strengthen financial systems, should help over time to improve credit conditions and promote a return to moderate economic growth.''

- The U.S. Treasury and the Federal Deposit Insurance Corp. are developing a program to provide at least $500 billion in government guarantees for troubled mortgages, according to people familiar with the matter.

- The cost of protecting against a default by GMAC LLC fell to the lowest in more than a month as the auto finance and mortgage lender sought a new bank status that may give it access to cash from the U.S. Treasury's $700 billion rescue plan.

- Middle East banks may face losses from hedge-fund investments as the industry is squeezed by the global credit crunch, said Citigroup Inc. “Most of the banks in the Middle East have been the target of hedge fund managers,” said Kaveh Samie, managing director of Citigroup in the Middle East and North America. “That exposure has not been felt yet.”

- Crude oil climbed more than $4 a barrel, the biggest gain in a month, amid signs that central bank interest-rate cuts may help revive fuel demand. Oil advanced as much as 9.9 percent on forecasts that the U.S. Federal Reserve rate cut will help spur a recovery in the world's biggest fuel-consuming country. China also lowered rates today and the European Central Bank may reduce them next week. Prices also rose because the dollar fell the most against the currencies of six major U.S. trading partners since 1985.

- Las Vegas Sands Corp.(LVS) doubled in New York trading after the Singapore government said it was in talks with the casino company to help finish a $4 billion casino project.

- Apple Inc.(AAPL), the maker of Macintosh computers and the iPhone, rose to the highest in two weeks in New York trading after Sanford C. Bernstein & Co. said a ``significant'' share repurchase may boost earnings. A depressed price-to-earnings ratio, low interest rates and a growing cash balance ``make a strong case for Apple to initiate a substantial share repurchase program,'' analyst Toni Sacconaghi, based in New York, said in a note to clients today. Sacconaghi estimates that a $20 billion stock buyback would boost earnings by 9 percent above his estimate of $5.50 a share next year.

- Money-market rates in London dropped as cash injections by central banks and the prospect of deeper reductions in borrowing costs worldwide showed signs of revitalizing confidence in lending. The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars fell 5 basis points today to 3.42 percent, its 13th straight decline, according to the British Bankers' Association.

- Legg Mason Inc.(LM), burdened for a year with subpar returns and the cost of bailing out money funds, rose the most since it went public 25 years ago after reporting quarterly profit that exceeded analysts' estimates.

Wall Street Journal:

- Greenlight Capital, SAC Said Caught in Volkswagen Short Squeeze.

Washington Post:
- Sen. Barack Obama's presidential campaign is allowing donors to use largely untraceable prepaid credit cards that could potentially be used to evade limits on how much an individual is legally allowed to give or to mask a contributor's identity, campaign officials confirmed. Faced with a huge influx of donations over the Internet, the campaign has also chosen not to use basic security measures to prevent potentially illegal or anonymous contributions from flowing into its accounts, aides acknowledged. The Obama campaign has shattered presidential fundraising records, in part by capitalizing on the ease of online giving. Of the $150 million the senator from Illinois raised in September, nearly $100 million came in over the Internet.

Charlotte Observer:

- Some factories stable amid downturn.

Interfax:

- Russia’s inflation rate in the year through Oct. 27 reached 11.5% as poultry and beef prices rose, citing a government official.

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Globe and Mail:

- A great many Canadian hedge funds were leveraged commodity plays. Many of these funds don't have a second act to roll out when the resource story is no longer a crowd pleaser.

Bear Radar

Style Underperformer:
Large-cap Growth (+.18%)

Sector Underperformers:
HMOs (-3.23%), Airlines (-2.23%) and REITs (-2.07%)

Stocks Falling on Unusual Volume:
APL, BXP, CI, AET, VPRT, ULTI, VOCS, ADVS, DRIV, APL, WXS and NYM

Stocks With Unusual Put Option Activity:
1) RYL 2) FDRY 3) KGC 4) WSM 5) LAMR

Bull Radar

Style Outperformer:
Small-cap Growth (+.93%)

Sector Outperformers:
Gaming (+7.2%), Oil Service (+6.3%) and Energy (+3.3%)

Stocks Rising on Unusual Volume:
NXY, TSRA, APOL, ICLR, STRA, WYNN, BBOX, XRAY, AVAV, KNDL, VPHM, CPSI, CETV, CMED, BMRN, PLXS, WBSN, CRDN, RCII, CEPH, GRMN, IEO, PEZ, IBA, PCP, PTE, LUX, LM, SXL and KDN

Stocks With Unusual Call Option Activity:
1) DHI 2) TLM 3) HBC 4) LM 5) WYNN

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Wednesday Watch

Late-Night Headlines
Bloomberg:
- US stocks offer “good value” even though the economy is in a recession, Goldman Sachs Group Inc.’s(GS) Abby Joseph Cohen said. Companies in the S&P 500 trade for about 13 times next year’s estimated earnings, compared with a historical average of 18 times. The fourth quarter of this year will be the worst during the contraction, according to Cohen. “We do not think that there is a massive global recession out there,” she said. “We will start to see economic activity, particularly in the US, looking better in the second half of 2009” because of government stimulus.

- The cost of protecting Japanese and Australian corporate bonds from default declined, according to traders of credit default swaps. The Markit iTraxx Australia index was quoted 40 basis points lower at 290 as of 11:52 am in Sydney, Westpac Banking data show. The Markit iTraxx Japan index declined 20 basis points to 275, according to prices from Morgan Stanley.

- Boeing Co.(BA) machinists will vote Nov. 1 on a contract proposal to end an eight-week strike that's shuttered the second-largest planemaker's factories and pushed the 787 Dreamliner further behind schedule.

- Google Inc.(GOOG) will pay $125 million to settle two copyright lawsuits by publishers and authors over its book-scanning project, a ``historic'' deal that the company said will make millions of books searchable and printable online. The owner of the most popular Internet search engine said the agreement will expand the Google Book program to let online readers search for and buy copyrighted and out-of-print books in whole or page-by-page, and provide U.S. libraries with free access to the database. ``The tremendous wealth of knowledge that lies within the books of the world will now be at their fingertips,'' Google co- founder Sergey Brin said today in a statement, calling the accord ``historic.''

- Stephen Schwarzman, chairman of Blackstone Group LP, said private-equity firms that buy companies during the credit crisis may see ``phenomenal'' profits once global economic growth resumes. ``In periods like this, people get scared out of their minds,'' Schwarzman said in a speech at the North American Venture Capital Summit in Quebec City today. ``This kind of environment is tailor-made for making absolute fortunes in the private-equity business.''

- Money-market rates may decline in Asia for the first time this week after financing costs fell in Europe and the U.S. as cash injections by central banks showed signs of easing the paralysis among lenders. The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars, dropped 4 basis points to 3.47 percent yesterday, its 12th straight decline, according to the British Bankers' Association.

- Sales of longer-term commercial paper soared 10-fold after the Federal Reserve began buying the corporate IOUs, a sign that the central bank's efforts toward unlocking the market may be working. Companies yesterday sold 1,511 issues totaling a record $67.1 billion of the debt due in more than 80 days, compared with a daily average of 340 issues valued at $6.7 billion last week, according to Fed data. The central bank probably absorbed about $60 billion of the total, said Adolfo Laurenti, a senior economist at Mesirow Financial Inc. ``That's the very first really good news in quite some time,'' said Laurenti, who is based in Chicago.

- China and Hong Kong regulators may review short selling of stocks in the two markets to stem a slump in equities, newspapers said.

- Brazil's central bank may halt six months of interest-rate increases as drying credit slows the economy, trumping concern that inflation will quicken after a two-month, 25 percent slide in the local currency.

Wall Street Journal:
- Motorola Inc.'s(MOT) new cellphone chief is moving quickly to overhaul the struggling division, simplifying the way it makes devices and slashing additional jobs. Sanjay Jha, who became Motorola's co-chief executive in August, has decided to focus on Google Inc.'s(GOOG) Android software as the operating system for many of Motorola's new phones, according to people familiar with the matter.

- Treasury Department officials and the banking industry are mulling ways to expand the government's financial rescue plan to include non-publicly-traded banks, potentially opening up the program to thousands of new institutions.

- Rising gas prices have dramatically increased Americans' interest in tailoring their driving styles to save fuel. Now auto makers are rushing to help out. On Wednesday Ford Motor Co. will unveil a new dashboard system that is supposed to help people modify the way they drive to get every last mile out of a gallon of gas.

- Game Makers Push ‘Family’ Fare.

CNNMoney.com:
- Gasoline prices fell overnight, settling Tuesday to approach the lowest level in roughly three years, according to the American Automobile Association. The national average price for a gallon of regular gas fell to $2.629, down 3.9 cents from the day before, according to AAA's Daily Fuel Gauge Report. The last time gas was this low was Oct. 24, 2005 at $2.6237 a gallon.

- These are the days that bring out the power shopper in Larry Ellison. With so much chaos in the markets and panic in the boardrooms, the Oracle(ORCL) CEO sees right now as a fine time to stroll through Silicon Valley and buy pretty much whatever he wants.

BusinessWeek:

- The Iberian Giants of US Wind Energy. Backed by their parents’ capital, Iberdrola Renovables, from Spain, and Portugal’s EDP Renovaveis can exploit the downturn and snap up smaller rivals.

- Comcast’s(CMCSA) Revenues May Well Be in Good Shape. Analysts predict decent revenue growth for Comcast despite tighter household budgets, suggesting cable is no longer a discretionary item.

Editor & Publisher:
- CNN Courts Newspapers With New Wire Service. CNN is courting newspapers -- and possibly competing with The Associated Press -- with a new wire service the cable network plans to launch soon, with plans for an all-expenses-paid, three-day summit in December to show off its news gathering capabilities.

Financial Week:

- CME Group’s(CME) planned clearinghouse for credit default swaps will be ready to go at the end of this week—and can begin operating after it gets regulatory approvals and completes testing with trading firms, CME managing director Tim Doar said today. CME, the world’s largest derivatives exchange, has passed a series of internal tests aimed at gauging the system’s technical capability, financial safeguards and ability to conform to rule changes, Mr. Doar said in an interview.

Globe and Mail:

- Since many hedge fund managers like to drive Porsche roadsters, it's somehow appropriate that the German auto maker just ran them down. The European hedge fund community took a pounding Monday covering short positions in Volkswagen. Shares in the auto company doubled Monday on a short squeeze that came after Porsche announced it had used derivatives to build a 74 per cent stake in VW. That move brought a long-running takeover near the finish line, and also meant portfolio managers betting on a drop in Volkswagen shares had to cover positions. In their rush to cover shorts, often at massive losses, hedge funds pushed up the value of Volkswagen by 123 per cent on Monday, briefly making the auto maker the largest company on earth.

AFP:

- China is proposing that developed nations contribute 1% of their gross domestic product to help poor countries combat global warming, citing a Chinese government climate-policy official.

South China Morning Post:

- Rents for prime retail space in Hong Kong may fall 20% from their peak next year, citing property consultants. Colliers Intl. Property Consultants Inc. said the average retail rental in the city’s four main shopping districts – Mong Kok, Tsim Sha Tsui, Central and Causeway Bay – fell 4% quarter-on-quarter in the three months to September.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (HEW), target $50.

- Reiterated Buy on (ALB), target $30.

- Reiterated Buy on (FORM), target $28.

- Reiterated Buy on (FISV), target $56.

Night Trading
Asian Indices are +1.75% to +5.0% on average.
S&P 500 futures -.67%.
NASDAQ 100 futures -.99%.

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Earnings of Note
Company/EPS Estimate
- (GLW)/.43

- (ANR)/.98

- (AGN)/.65

- (CAH)/.70

- (PG)/1.00

- (SEE)/.39

- (NEM)/.43

- (MGM)/.32

- (PX)/1.07

- (SPW)/1.65

- (ODP)/.07

- (HES)/2.45

- (AG)/.78

- (MCO)/.41

- (CMCSA)/.22

- (AET)/1.12

- (KFT)/.43

- (Q)/.10

- (BWA)/.55

- (MXIM)/.27

- (CA)/.38

- (PRU)/.78

- (HIG)/-.91

- (MUR)/2.65

- (OI)/.85

- (V)/.56

- (CME)/3.95

- (FSLR)/1.00

- (ITRI)/.80

- (SYMC)/.35

- (JNY)/.33

- (K)/.81

- (TSO)/1.57

Economic Releases
8:30 am EST

- Durable Goods Orders for September are estimated to fall 1.1% versus a 4.8% decline in August.

- Durables Ex Transports for September are estimated to fall 1.5% versus a 3.3% decline in August.

10:23 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,550,000 barrels versus a +3,182,000 barrel increase the prior week. Gasoline supplies are estimated to rise by +1,500,000 barrels versus a +2,709,000 barrel increase the prior week. Distillate inventories are expected to rise by +1,050,000 barrels versus a +2,156,000 barrel build the prior week. Finally, Refinery Utilization is estimated to rise by +.5% versus a +2.51% increase the prior week.

2:15 pm EST

- The FOMC is expected to cut the benchmark Fed Funds rate to 1.0% from 1.5%.

Upcoming Splits
- (BKE) 3-for-2

Other Potential Market Movers
- The weekly MBA mortgage applications report, (KCI) analyst day, Sidoti Emerging Growth Forum and BIO Investor Forum could also impact trading today.

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

Stocks Finish Sharply Higher, Boosted by Airline, Retail, REIT, Financial, Commodity, Technology, Homebuilding and Telecom Shares

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