Today's Headlines

Bloomberg:
- The cost of borrowing dollars for three months in London fell, capping the first monthly decline since May, after central banks provided cash and cut interest rates to unlock the supply of credit. The London interbank offered rate, or Libor, for such loans slid 16 basis points to 3.03 percent today, the 15th consecutive drop, according to the British Bankers' Association. The overnight rate decreased 32 basis points to an all-time low of 0.41 percent, down from almost 6.88 percent on Sept. 30. ``The situation in the money markets has improved after all the actions by central banks,'' said Patrick Jacq, a senior fixed- income strategist in Paris at BNP Paribas SA. ``Given the point that we were at and where we are now, it seems the worst might be behind us.''

- The European Central Bank has embarked on the fastest round of interest-rate cuts in its history as the financial crisis threatens to cripple the economy, a survey of economists shows. The Frankfurt-based ECB will slash its benchmark rate to 2.5 percent by April, according to the median of 28 forecasts in the Bloomberg News survey. That would see the rate drop 1.75 percentage points from its 4.25 percent peak in six months, outpacing the ECB's last easing cycle between May 2001 and June 2003.

- Interest rates on U.S. commercial paper fell to about the lowest in four years after the Federal Reserve said it absorbed more than 9 percent of the market. Interest rates on the highest-ranked 30-day commercial paper dropped 39 basis points to 2.02 percent, about the lowest in four years, according to yields offered by companies and compiled by Bloomberg. Yields on overnight and seven-day paper fell to the lowest levels in at least 13 years, Bloomberg data show. The U.S. commercial paper market expanded for the first time in seven weeks as the Fed purchased $145.7 billion of 90-day paper from companies including American Express Co. and General Electric Co., part of its efforts to free up lending. Commercial paper sales seized up after Lehman Brothers Holdings Inc. filed for bankruptcy on Sept. 15, prompting investors to seek safety. The program has ``worked extremely well,'' said Randy Harrison, managing director and co-head of short-term products at New York-based Citigroup Inc.

- Investors withdrew a record $70.7 billion from US stock mutual funds in October, according to data compiled by TrimTabs Investment Research, raising questions about how long they will stay out of the market. Redemptions by individual investors and institutions jumped 26% from the previous high of $56 billion in September.

- Mark Fleming, chief economist at First American CoreLogic, says FDIC plan may stem foreclosures. (video)

- JPMorgan Chase & Co.(JPM), the largest U.S. bank by market value, plans to modify terms on $110 billion of mortgages and forgo foreclosure proceedings on all real-estate loans while the changes are implemented in the next 90 days. The offer extends to customers of Washington Mutual Inc., the savings and loan JPMorgan agreed to buy last month, the New York-based bank said today in a statement. Loan modifications may include interest-rate or principal reductions. The bank said it will establish 24 regional counseling centers to provide face-to- face help in areas with high delinquency rates.

- Commodities headed for their worst month since at least 1956 on concern that a slump in global economic growth will sap demand for raw materials. The Reuters/Jefferies CRB Index of 19 raw materials has plunged 24 percent this month, the steepest decline in at least a half-century. Crude oil is set for a record monthly drop, copper its biggest retreat in two decades and gold its worst performance in 25 years.

- Gold futures fell, heading for the biggest monthly plunge in 28 years, as the dollar climbed, reducing the appeal of the precious metal as an alternative investment. This month, the price has dropped 17 percent, the most since March 1980. Gold may fall to $620 should the dollar strengthen to $1.20 against the euro, said Joel Crane, a metals strategist at Deutsche Bank AG in New York. ``Cash is just more predictable than gold now,'' he said.

- Russia's ruble had its biggest monthly decline in 9 1/2 years against the dollar as the global credit crunch reduced demand for emerging-market assets. Investors took $72 billion out of Russia in October, according to BNP Paribas SA, sending the Micex Index 30 percent lower and pushing the yield on the 30-year government bond to a seven-year high. A decline in oil spurred banks such as Citigroup Inc. to predict the ruble will be devalued.

- The Federal Reserve Bank of New York said it's ``hopeful'' that one or more credit-default swap clearinghouses will begin guaranteeing trades in November or December as it pushes dealers to reduce market risks.

Wall Street Journal:

- The NYSE is easing its rules on specialists to allow them to place orders for 30 minutes after the closing bell in a bid to curb violent last-minute price swings, citing a regulatory filing.

- ECB, BoE Must Loosen Monetary Policy to Aid Recovery.

- Firms have been paring down a massive inventory of credit-default swap holdings as regulators continue a push for a central clearinghouse for the often-opaque market. Data released Friday by the International Swaps and Derivatives Association showed that credit default swap contracts tied to around $25 trillion in debt have been torn up in the year to date.

NY Times:
- Walt Disney(DIS) is focusing on its nascent Fairies business to drive growth.

- Google(GOOG) Ads Will Be More Prominent.

Dallas Morning News:

- Hedge fund operator and oil prognosticator T. Boone Pickens liquidated one of his hedge funds last month as the stock markets plunged. The Dallas billionaire converted his energy equity fund to cash and offered investors the opportunity to withdraw their money early. The fund started with $2 billion and could be down to around $400 million to $500 million after withdrawals, according to someone familiar with the fund. The fund was down 60 percent this year after heady gains in previous years. Mr. Pickens' commodity fund has lost 84 percent of its value this year.

AP:

- AP poll: 1 in 7 voters still persuadable.

International Herald Tribune:

- Dozens of hedge funds have told investors that they cannot get their money back right now as managers try to limit a wave of redemptions to safeguard all their clients' investments - as well as their own futures. Only a few months ago, hundreds of the world's estimated 9,000 hedge fund managers made it tough for wealthy investors to put money into their funds by requiring minimum investments of $1 million or more and charging heavy fees. Now managers are making it hard for investors to get out.

Globe and Mail:
- He’s the first call on The Street. He can raise $40 million in two minutes. And now hedge-fund superstar Rohit Sehgal is afraid to open his e-mail.

1 Year Graph: 30-day Asset-Backed Commercial Paper Yield

(click on image to enlarge)

BOTTOM LINE: The 30-day asset-backed commercial paper yield is plunging another 34 basis points today. This is the rate that highly rated companies pay for their short-term funding needs. The yield has plummeted 165 basis points in two weeks. This is a large positive.

Bear Radar

Style Underperformer:
Large-cap Growth (+.58%)

Sector Underperformers:
Gold (-1.79%), Steel (-1.61%) and Oil Service (-.84%)

Stocks Falling on Unusual Volume:
BCS, CTV, BT, OGE, TE, HUM, BCS, CCL, PVD, MORN, ERTS and MCRS

Stocks With Unusual Put Option Activity:
1) PAYX 2) LTD 3) PMCS 4) THC 5) HNZ

Bull Radar

Style Outperformer:
Small-cap Growth (+1.2%)

Sector Outperformers:
Airlines (+8.21%), Semis (+2.7%) and Banks (+2.41%)

Stocks Rising on Unusual Volume:
ESRX, RATE, CEPH, BEAT, THOR, BOOM, AKAM, DPTR, LHCG, CBEY, QSFT, MNST, AFAM, ALOG, WYNN, VSEA, USTR, CBST, CSTR, KAMN, LAZ, IBA, SXE, FDP, CSS, CWT, IRE and SWM

Stocks With Unusual Call Option Activity:
1) STX 2) CCL 3) VSEA 4) LOW 5) SLAB

Links of Interest

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
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Exchange Volume vs. Average
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Dow Jones Hedge Fund Indexes

Friday Watch

Late-Night Headlines
Bloomberg:
- Deephaven Capital Management LLC, the hedge-fund unit of stockbroker Knight Capital Group Inc., froze a $1.6 billion fund after investors asked to get back 30 percent of their money. Withdrawals from the Deephaven Global Multistrategy Fund were suspended so managers wouldn't be forced to sell assets in falling stock and debt markets, the Minnetonka, Minnesota-based firm said today in a letter to investors. Lenders and trading partners also imposed stricter financing requirements, according to the letter. Deephaven Global, which trades a variety of securities including bonds and commodities, follows RAB Capital Plc, Ore Hill Partners LLC and Highland Capital Management LP in limiting withdrawals.

- The cost of protecting investors in Australian corporate bonds from default declined, according to traders of credit-default swaps. The Markit iTraxx Australia index quoted 20 basis points lower at 245 as of 10:34 am in Sydney, Citigroup Inc. data show.

- Crude oil fell in New York and is poised for its biggest monthly drop since trading began in 1983. Oil retreated, taking this month's decline to 36 percent. U.S. fuel demand in August fell 8.9 percent from a year earlier, the Energy Department said yesterday. Prices, which have tumbled 56 percent from a record $147.27 on July 11, are down 32 percent from a year ago. Monthly data for U.S. August fuel consumption, measured in terms of products supplied by refiners, dropped to 17.4 million barrels a day, the Petroleum Supply Month said. That was down from 19.1 million barrels in August 2007. U.S. fuel demand during the past four weeks averaged 18.9 million barrels a day, down 7.8 percent from a year ago, an Energy Department report showed Oct. 29. UBS AG cut its oil- price forecast for next year by 43 percent to $60 a barrel from $105 because the global economic slowdown may reduce demand. OPEC member countries seem to have ignored an agreement reached at a meeting in September to more closely adhere to its production quotas at the time. The Organization of Petroleum Exporting Countries increased oil supplies 0.5 percent this month because of higher exports from Iraq, according to provisional data from Geneva-based consultants PetroLogistics Ltd. Higher Iraqi output countered declines from Saudi Arabia, Kuwait and the United Arab Emirates.

- Law firms could get $5.2 billion in legal fees from the U.S. government's bank bailout bill, according to a survey by BTI Consulting Group.

- Wells Fargo & Co.(WFC), Bank of America Corp.(BAC) and Merrill Lynch & Co.(MER) agreed to sell a combined $50 billion in preferred and common shares to the U.S. Treasury under the government rescue plan.

- Investors pulled $9.2 billion from stock mutual funds in the past week, extending a streak of withdrawals that began in the last week of July, according to data compiles by TrimTabs Investment Research.

- Japan's consumer-price inflation slowed in September as oil prices fell, giving the central bank more scope to cut interest rates.

Wall Street Journal:
- John McCain's campaign believes it has been handed two winning arguments in the closing days of the presidential race, both courtesy of Democratic vice-presidential nominee Joe Biden. Unscripted comments by Sen. Biden -- one on taxes, the other on international affairs -- have given the Republican presidential nominee a new way to contend that Sen. Barack Obama, the Democratic presidential candidate, is a risk to voters' wallets and to national security.

- The U.S. government's latest plan to aid struggling homeowners could move as many as three million people into more-affordable mortgages, according to people familiar with the effort.

- The likelihood that Google Inc.(GOOG) and Yahoo Inc.(YHOO) will walk away from their planned search partnership has risen, say people familiar with the matter. The two Internet companies have so far failed to reach an agreement on their partnership with the Justice Department, which has been building a lawsuit to block the deal.

- In a sign that Wall Street is waking up to the political tempest over billions of dollars in year-end bonuses likely to be paid out at securities firms lining up for government infusions, top executives are in discussions to possibly cap their own compensation, according to people familiar with the situation.

- The world's largest investment banks are preparing to commit more capital to support the $55 trillion credit-default-swap market ahead of tighter regulation. Thursday, nine large credit-default-swap dealers expressed support for a central clearinghouse being developed by derivatives-exchange-operator IntercontinentalExchange Inc.(ICE).

CNBC.com:

- Warren Buffett's Berkshire Hathaway has added 825,000 more shares to its Burlington Northern Santa Fe(BNI) stake, bringing its total holdings to 64,610,418 shares.

Fox News.com:
- As the candidates make their closing arguments before the election, the race has tightened with Barack Obama now leading John McCain by 47 percent to 44 percent among likely voters, according to a FOX News poll released Thursday. Last week Obama led by 49-40 percent among likely voters.

USA Today.com:

- The industrial chemical melamine is commonly added to animal feed in China to make it appear higher in protein, state media reported, in what appeared to be a tacit admission by the government that contamination is widespread in the country's food supply.

Reuters:

- Hailed as an American hero for his role in pulling Iraq back from the brink of all-out civil war, U.S. Army Gen. David Petraeus takes on an even more challenging job on Friday as the head of U.S. Central Command. The warrior-scholar with a doctorate in international relations from Princeton University takes responsibility for U.S. military operations in a volatile swathe of the world that includes Afghanistan, Pakistan, Iraq, Iran and the Gulf. As the top commander in Iraq, Petraeus presided over a surge of 30,000 extra U.S. troops into the country and implemented a strategy focused on protecting the Iraqi population, which contributed to a steep decline in violence.

- Fidelity Investments' flagship Magellan fund sharply raised its holdings of Bank of America Corp (BAC) and JPMorgan Chase & Co (JPM) in September, as it moved into bigger U.S. banks amid the worsening credit crisis.

Financial Times:
- Crisis-hit Russia must scale down its ambition.

- Iron ore miners face the prospect of the first price cut in seven years as steel production in China and elsewhere plunges amid the global downturn. After an informal meeting last week at a conference in the Chinese city of Quingdao, traders and bankers said a cut of 10-20 per cent was a likely outcome of the formal negotiations, due to begin in November, for annual contracts.

Securities Times:

- The combined third-quarter profit of 1,601 Chinese publicly traded companies fell 9.6% from a year earlier. Profit fell 19.5% from the second quarter.

The Economic Times:

- The global financial meltdown and the slowdown in Western economies has increased India’s threat perception from China. The government is apprehensive that shrinking markets in major developed countries could lead to China flooding India with a variety of goods.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (CMC), target $20.

- Reiterated Buy on (IRM), target $31.

- Reiterated Buy on (KLAC), target $31.

- Reiterated Sell on (EK), target $9.

- Reiterated Buy on (ONNN), target $9.

Night Trading
Asian Indices are -1.5% to +.5% on average.
S&P 500 futures -.5%.
NASDAQ 100 futures -.52%.

Morning Preview
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Earnings of Note
Company/EPS Estimate
- (B)/.54

- (CVX)/3.25

- (CLX)/.84

- (CMI)/1.19

- (KBR)/.43

- (QSII)/.42

- (WY)/-.06

- (GG)/.15

Economic Releases
8:30 am EST

- Personal Income for September is estimated to rise .1% versus a .5% gain in August.

- Personal Spending for September is estimated to fall .2% versus 0.0% in August.

- The PCE Core for September is estimated to rise .1% versus a .2% gain in August.

- The 3Q Employment Cost Index is estimated to rise .7% versus a .7% increase in 2Q.

9:45 am EST

- The Chicago Purchasing Manager for October is estimated to fall to 48.0 versus 56.7 in September.

10:00 am EST

- The Final Univ. of Mich. Consumer Confidence reading for October is estimated at 57.5 versus a prior estimate of 57.5.

Upcoming Splits
- None of note

Other Potential Market Movers
- The NAPM-Milwaukee and BIO Investor Forum 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 100% net long heading into the day.