Bull Radar

Style Outperformer:
Large-cap Growth (-1.10%)

Sector Outperformers:
Restaurants (+.28%), Software (-.50%) and Biotech (-1.24%)

Stocks Rising on Unusual Volume:
BT, COGT, NCIT, OSIP, DECK, SAFM, CEPH, CA, WCRX, TEVA, RIMM, XPH, NOK, PVH, AWH and SCL

Stocks With Unusual Call Option Activity:
1) MAT 2) BBY 3) WYE 4) ACE 5) CREE

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Wednesday Watch

Late-Night Headlines
Bloomberg:
- Byron Wien, the chief investment strategist at Pequot Capital Management Inc., said the S&P 500 Index will advance to 1,200 during the first half of next year after the government’s rescue stabilizes the economy. The benchmark index for US stocks must surge 41% from yesterday’s close of 850.75 to reach that level.

- President-elect Barack Obama has selected Washington lawyer Eric Holder to be the next U.S. attorney general, Newsweek magazine reported. Holder overcame initial reluctance to accept the nomination because of the possibility that Senate confirmation hearings would revive questions about why he didn't protest plans by President Bill Clinton to pardon fugitive financier Marc Rich before Clinton left office, Newsweek said. In 2001, Holder was questioned by a House committee that investigated the pardon.

- Automakers in China are seeking government aid and lower sales taxes to help revive waning demand in the world's second-largest vehicle market. ``The situation is really severe,'' said Zeng Qinghong, general manager of Guangzhou Automobile Group Co., a partner of Toyota Motor Corp. and Honda Motor Co., in an interview at the Guangzhou auto show yesterday.

- Senator Edward Kennedy named fellow Democrat Hillary Clinton to lead a working group on insurance coverage in the effort to write health-care legislation.

Wall Street Journal:
- President-elect Barack Obama's incoming White House chief of staff challenged chief executives and other business leaders Tuesday night to join the new administration in a push for universal health care, saying incremental increases in coverage won't be acceptable. "When it gets rough out there, a lot of business leaders get out of the car and say, 'We're OK with minor reform.' I'm challenging you today, we're going to have to do big, serious things," Mr. Emanuel said, speaking to The Wall Street Journal's CEO Council, a conference convened to elicit corporate opinion on the challenges facing the new president.

- Big Three Plead for Aid. GM, Ford, Chrysler Warn of Failure; Congress Wary of Rescue.

NY Times:
- Bankers in Asia had been largely immune to the fallout from the global financial crisis. But as the economic malaise consumes country after country, those jobs are no longer viewed as safe.

CNNMoney.com:
- A collapsed hedge fund’s overlooked wind wager. Tontine Associates, the once gilt-edged hedge fund that collapsed rapidly over the past two months in the wake of the market's carnage, was renowned for its massive and highly contrarian bets in industries like home-building and steel manufacturing.

- Some 76 percent of consumers watch video on their PC, says a new international study from IBM (IBM). That’s up 27 percent from last year, according to IBM’s second-annual survey of consumers in Australia, Germany, India, Japan, the UK and the U.S.

- Gasoline prices declined to their lowest level in more than 21 months Tuesday, falling for the 62nd straight day in a national survey.

Reuters:

- Mexican retail and media tycoon Ricardo Salinas Pliego owns 28 percent of Circuit City and could buy more of the troubled U.S. electronics chain, a Salinas spokesman said on Tuesday.

- As many hedge funds suffer big losses and anxious investors yank out their money, the town synonymous with the riches of their recent glory is now hurting. In Greenwich, Connecticut, the luxury car dealers are quiet, the prices of mansions are declining and the retailers who have made a good living serving its wealthy residents are complaining about a sudden drop in business.

Financial Times:
- Citigroup (C) is liquidating its Corporate Special Opportunities hedge fund after it lost 53 per cent of its value last month, marking the ninth time in recent months that the bank has had to close or rescue a fund in its alternative investment unit. CSO, which managed almost $4.2bn at its peak, has a net asset value of about $58m and debt of about $880m, investors say. People familiar with the matter say investors in the fund are likely to receive no more than 10 cents on the dollar.

- A recent meeting of the national oil companies in Beijing predicted oil prices would fall to about $40 a barrel, Fu Chengyu, chief executive of China National Offshore Oil Corporation, told a conference in Barcelona. "The consensus at the time was that everybody realized the oil price would be even lower," Mr Fu told the Global China Business meeting. "Nobody knew where it would go but most of them said around $40."

- US regulators are moving to approve centralized clearing houses for credit derivatives in a matter of weeks as the debate about the oversight of the vast unregulated sector gathers pace. Groups competing to set up a central counterparty for credit default swaps, the most popular type of credit ­derivatives, are awaiting approval from the Federal Reserve, the Securities and Exchange Commission or the Commodity Futures Trading Commission, which are currently conducting detailed risk reviews of candidates on site.

Latin American Herald Tribune:

- General Motors(GM) to Invest $1 Billion in Brazil Operations – Money to Come from US Rescue Program.

Xinhua News:

- China's police departments should further standardize the procedure of law enforcement and build harmonious relations with the people, China's top police official said on Tuesday. State Councilor Meng Jianzhu, also Minister of Public Security, said at a tele-conference with local public security heads that the police should "be fully aware of the challenge brought by the global financial crisis and try their best to maintain social stability." "In handling mass incidents, we must be clear that the chief tasks of the public security authorities are to maintain order on the scene, ease conflicts, avoid excessive steps and prevent the situation getting out of control," he wrote.

- Beijing Capital International Airport’s combined passenger and cargo traffic fell about 5% in the first half of the month from a year earlier, citing Dong Zhiyi, president of airport operator Beijing Capital International Airport Co.

South China Morning Post:

- Hong Kong office rents may slump as much as 60% in the next two years as the global financial crisis continues to hurt the city’s economy, citing property analysts. CLSA Ltd. revised its forecast to a 60% decline in rents in the city’s Central business district in the next two years from 38% previously. UBS AG forecast a 25% drop by September next year compared with an earlier estimate of 5%, which Credit Suisse Group AG revised its forecast to a 35% decline in 2009 from 15% before. Separately, retail rents in Macau may drop around 30% in the next year on the global slowdown and falling tourist numbers, citing property agents and retailers.

China Securities Journal:

- China’s economy may grow by less than 9% in the fourth quarter of this year as overseas demand weakens, citing People’s Bank of China adviser Fan Gang. The Asian nation’s economic expansion may slip to below 8% next year before rebounding in 2010, citing Fan’s interview.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -1.75% to +.25% on average.
S&P 500 futures -.93%.
NASDAQ 100 futures -1.17%.

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Earnings of Note
Company/EPS Estimate
- (BJ)/.47

- (ROST)/.43

- (DBRN)/.27

- (PETM)/.26

- (GYMB)/1.03

- (INTU)/-.12

- (LDG)/.63

- (LTD)/.00

Economic Releases
8:30 am EST

- The Consumer Price Index for October is estimated to fall .8% versus unch. in September.

- The CPI Ex Food & Energy for October is estimated to rise .1% versus a .1% gain in September.

- Housing Starts for October are estimated to fall to 780K versus 817K in September.

- Building Permits for October are estimated to fall to 774K versus 805K in September.

10:35 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,000,000 barrels versus a +22K increase the prior week. Gasoline supplies are expected unch. versus a 1,982,000 barrel increase the prior week. Distillate inventories are estimated to rise by +700,000 barrels versus a +516,000 barrel increase the prior week. Finally, Refinery Utilization is estimated unch. versus a -.69% decline the prior week.

2:00 pm EST

- Minutes of Oct. 28-29 FOMC Meeting

Upcoming Splits
- None of note

Other Potential Market Movers
- The weekly MBA mortgage applications report, (ALGT) Investor Day, (SMOD) Analyst Meeting, (CKP) Investor Day, (HAL) Analyst Meeting, (TKLC) Investor Day, (BBX) Investor Meeting, (GWW) Analyst Meeting, (ROK) Investor Meeting, Cowen Healthcare Conference, Bank of America Credit Conference, CSFB Aerospace & Defense Conference, Lazard Healthcare Conference and Morgan Stanley Retail Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and financial 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 Mostly Higher, Boosted by Drug, Tech and Energy Shares

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In Play

Stocks Lower into Final Hour on Global Growth Worries, Financial Sector Pessimism, More Shorting

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Internet longs and Medical longs. I covered some of my (IWM)/(QQQQ) hedges today, thus leaving the Portfolio 75% net long. The tone of the market is bearish as the advance/decline line is lower, almost every sector is declining and volume is about average. Investor anxiety is above average. Today’s overall market action is bearish. The VIX is rising 5.5% and is historically elevated at 72.84. The ISE Sentiment Index is very low at 88.0 and the total put/call is above average at 1.0. Finally, the NYSE Arms has been running above average most of the day, hitting 1.65 at its intraday peak, and is currently .1.20. The Euro Financial Sector Credit Default Swap Index is up 3.38% today to 115.50 basis points. This index is up from a low of 52.66 on May 5^th, but down from 157.81 on Sept. 16^th. The North American Investment Grade Credit Default Swap Index is up 4.41% to 217.94 basis points. The TED spread is falling 1.93% to 210 basis points. The TED spread is now down 254 basis points in about five weeks. The 2-year swap spread is rising 1.62% to 109.50 basis points. The Libor-OIS spread is rising .67% to 176 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is plunging 21 basis points to .55%, which is down 207 basis points in under five months and at the lowest level since Bloomberg record-keeping began in August 1998. The 10-year TIPS spread bottomed at .65% in October 1998 during the Asian financial crisis and at 1.24% in October 2001 during the technology bubble-bursting meltdown. Today’s action is worse than the major averages would suggest. Breadth is poor and many market leaders are down 4-5%. A number of sectors are down 4%+, as well. The (XLF) continues to trade heavy. On the positive side, volume is only average, some widely followed tech stocks(IBM, HPQ, AAPL, RIMM) trade well and the bears are unable to gain meaningful traction despite several potential downside catalysts. Nikkei futures indicate a -75 open in Japan and DAX futures indicate a -35 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering and bargain-hunting.

Today's Headlines

Bloomberg:
- Hewlett-Packard Co.(HPQ), the world’s biggest personal-computer maker, posted a fourth-quarter profit that topped analysts’ estimates, sending the shares up the most in six years in New York trading.

- Prices paid to U.S. producers plunged in October by the most on record as the faltering global economy caused demand for commodities to dry up. The larger-than-forecast 2.8 percent drop followed a 0.4 percent decline in September, the Labor Department said today in Washington.

- China surpassed Japan in September to become the biggest foreign holder of U.S. Treasuries, as foreign investors sought the relative safety of government debt as stocks plunged 9.1 percent that month. Total net purchases of long-term equities, notes and bonds increased a net $66.2 billion in September from $21 billion the previous month, the Treasury said today in Washington. Including short-term securities such as stock swaps, foreigners bought a net $143.4 billion, compared with net buying of $21.4 billion the month before.

- Treasury Secretary Henry Paulson rejected using the government's financial-rescue program as a ``panacea'' for economic difficulties, clashing with lawmakers who want the funds to help beleaguered homeowners. ``The rescue package was not intended to be an economic stimulus or an economic recovery package,'' Paulson said in testimony to the House Financial Services Committee in Washington. The Troubled Asset Relief Program was designed to stabilize financial markets and the flow of credit and ``is not a panacea for all our economic difficulties.''

- Soros-Funded Democratic Idea Factory Becomes Obama Policy Font. Thanks in part to funding from benefactors such as billionaire George Soros, the Center for American Progress has become in just five years an intellectual wellspring for Democratic policy proposals, including many that are shaping the agenda of the new Obama administration. CAP's president and founder, John Podesta, 59, former chief of staff to President Bill Clinton, is one of three people running the transition team for president-elect Barack Obama, 47. A squadron of CAP experts is working with them. To help promote its ideas, CAP employs 11 full-time bloggers who contribute to two Web sites, ThinkProgress and the Wonk Room; others prepare daily feeds for radio stations. The center's policy briefings are standing-room only, packed with lobbyists, advocacy-group representatives and reporters looking for insights on where the Obama administration is headed. CAP, which has 180 staffers and a $27 million budget, devotes as much as half of its resources to promoting its ideas through blogs, events, publications and media outreach.

- China’s stocks plunged, dragging the benchmark index to its biggest decline since June, as slumping commodity prices heightened concern the global recession will hurt the world’s fastest-growing major economy. Shanghai Pudong Development Bank Co., the Chinese partner of Citigroup Inc., and China Shipping Development Co., the nation’s biggest oil carrier, were among more than 120 shares that slumped by the daily 10 percent limit.

- Harbinger Capital Partners, the New York-based hedge-fund firm run by Philip Falcone, has almost $200 million in potential losses on bets that Navistar International Corp.’s stock price would rise.

- China Substitutes ‘Spin’ for Suppression as Web Weakens Control.

Wall Street Journal:

- Treasury Secretary Henry Paulson said he is unlikely to use what remains of the $700 billion rescue fund to launch any substantial new programs, preferring instead to keep some money in reserve and preserve flexibility for the incoming administration.

- Steelmakers are suspending and renegotiating contracts with raw material suppliers after demand for the metal declined. ArcelorMittal, the world’s largest steelmaker, has told its German scrap-metal suppliers that it will suspend contracts from the end of October.

NY Times:
- A Bridge Loan? US Should Guide GM in a Chapter 11.

- There’s more bad news for Kenneth C. Griffin’s Citadel Investment Group: The counterparty credit ratings for two of its hedge funds were cut Tuesday by Standard & Poor’s because of market losses.

Business Week:

- GM: The Case Against a Bailout. How about this instead: The boards of Chrysler and General Motors (GM) put their companies into bankruptcy with the clear intent of reorganization and merger. As radical as that sounds, it's the best road we can see to a viable future for the industry. And yes, the U.S. car industry does belong in the future.

AP:

- The Iraqi government said it will hold provincial elections Jan. 31, a key step in the effort to promote reconciliation between the country’s warring ethnic and religious groups.

Globe and Mail:

- Canadian banks get go-ahead to issue both Visa(V), MasterCard(MA).

Financial Times Deutschland:
- VMWare Inc.(VMW), the world’s largest maker of software that lets computers run on multiple operating systems, sees growth slowing from an “astronomical” to a “healthy” level, citing an interview with CEO Paul Maritz. Maritz said VMWare predicts “fantastic opportunities” in the next few years because its products cut companies’ capital and energy costs.

Russian Newsweek:

- Russia’s ruble will be allowed to weaken to 35 per dollar by the start of May after the government made a political decision to let it fall.

Ekonomicheskie Izvestia:

- The Ukrainian government expects the economy to shrink and the hryvnia to decline versus the dollar in 2009, citing government economic parameters for the 2009 state budget. The government forecasts gross domestic product will shrink by 7% while the hryvnia falls to 7 per dollar next year.

RIA Novosti:

- Russia’s economy may expand by less than 2% next year as energy prices drop and growth flows. The Economy Ministry has prepared forecasts including growth of 2% and less. The Economy Ministry earlier forecast growth of 6.7% next year.

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Folha de S. Paulo:
- General Motors Corp.’s(GM) Brazilian unit cut its revenue forecast for this year by 14% to $9.5 billion from $11 billion, citing the subsidiary’s president, Jaime Ardila. Car sales in the first two weeks of November fell 18% form the same period in October and 24% from a year earlier.

KUNA:

- OPEC Secretary-General Abdalla el-Badri said it may be too early to cut oil production at the group’s ministerial meeting in Cairo on Nov. 29. World oil markets are oversupplied and crude prices are declining because of the global financial crisis, el-Badri said yesterday.