Stocks Finish at Session Lows, Weighed Down by REIT, Financial and Commodity Shares

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Stocks Sharply Lower into Final Hour, Weighed Down by Global Growth Concerns, Financial Sector Pessimism and Profit-Taking

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Internet longs and Medical longs. I added (IWM)/(QQQQ) hedges and added to my (EEM) short this morning, thus leaving the Portfolio 75% net long. The tone of the market is very bearish as the advance/decline line is substantially lower, every sector is declining and volume is below average. Investor anxiety is extraordinarily high. Today’s overall market action is very bearish. The VIX is rising 18.83% and is very elevated at 67.68. The ISE Sentiment Index is below average at 118.0 and the total put/call is above average at .94. Finally, the NYSE Arms has been running extremely high most of the day, hitting 7.32 at its intraday peak, and is currently 6.28. The Euro Financial Sector Credit Default Swap Index is rising 8.14% today to 117.66 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 9.16% to 260.67 basis points. The TED spread is rising .14% to 218 basis points. The TED spread is now down 246 basis points in about seven weeks. The 2-year swap spread is down 1.83% to 107.50 basis points. The Libor-OIS spread is rising 1.97% to 182 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is dropping 2 basis points to .33%, which is down 229 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. The 3-month T-Bill is now yielding .04%. A below average volume day, combined with an extremely high NYSE Arms reading, usually indicates the bears are running short on firepower. I wouldn’t expect to see too much further downside from here before the year-end rally resumes. Nikkei futures indicate a -575 open in Japan and DAX futures indicate a -40 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on financial sector pessimism, more shorting, profit-taking and global growth worries.

Today's Headlines

Bloomberg:
- The plunge in U.S. stocks that pushed the Standard & Poor’s 500 Index down 49 percent to an 11-year low last month is over, according to Laszlo Birinyi, who predicted the rout in financial shares. “The market will not again visit 750 on the S&P,” Birinyi, president of Birinyi Associates Inc. in Westport, Connecticut, wrote in a report today.

- Russian manufacturing shrank more in November than during the 1998 financial collapse as the global economic crisis drove output and new orders to record lows and companies cut jobs, VTB Bank Europe said. VTB’s Purchasing Managers’ Index fell for a fourth month to 39.8, its lowest level, from 46.4 in October, the bank said in an e-mailed statement today. The previous low was 43.2 in September 1998, a month after the government’s ruble devaluation and default on $40 billion of debt.

- Tudor Investment Corp., the firm run by Paul Tudor Jones, temporarily suspended redemptions from the $10 billion BVI Global Fund Ltd. as it plans to split the hedge fund into two, according to a person familiar with the matter. Tudor is proposing to put hard-to-sell investments, mostly corporate bonds and loans from emerging markets, into a new fund called Legacy, said the person, who asked not to be identified because the information is private. BVI Global, which started in 1986, would focus on easier-to-trade stocks, bonds, commodities and currencies.

- Birmingham, Alabama’s mayor is charged with bribery and money laundering in connection with municipal bond and derivative deals while he was president of the Jefferson County Commission, according to an indictment unsealed today. Larry Langford, a Democrat, was charged with soliciting $235,000 from William Blount, chairman of Montgomery, Alabama- based bond underwriter Blount Parrish & Co. and lobbyist Albert LaPierre. Blount helped Langford get a $50,000 loan, and paid for jewelry, a Rolex watch and a jacket from Salvatore Ferragamo, according to the indictment. Blount Parrish received about $7.1 million in fees in connection with the deals, which refinanced debt issued for the county’s sewer system.

- Crude oil fell below $50 a barrel after the Organization of Petroleum Exporting Countries deferred a decision to reduce output until its next meeting on Dec. 17. OPEC said it will use the time to gauge the impact of a 1.5 million-barrel a day reduction agreed to in October.

- Gold tumbled the most in eight months on speculation that a slumping global economy will damp demand for commodities. Silver plunged almost 9 percent. Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was at 758.1 metric tons on Nov. 28. The fund reached a record 770.6 tons on Oct. 10. Gold should be trading around $650 based on the value of the dollar, Deutsche Bank said.

- Citigroup(C), Rubin’s Good Names Belie Sorry Record.

- Obama’s Army of E-Mail Backers Gives Him Clout to Sway Congress.

- Just two weeks after a study showed routine HIV testing recommended by the U.S. government isn’t done at most hospitals, a doctor’s group lent added support to universal screening for those over age 13. The recommendations from the American College of Physicians, whose 126,000 members are internists, are similar to guidelines issued in 2006 by the U.S. Centers for Disease and Prevention. The study, led by Richard Rothman of Johns Hopkins University in Baltimore, found that only about 100 of 5,000 U.S. emergency rooms have implemented CDC test guidelines.

- Iraq may have draft legislation for oil production and exports in the first half next year as the holder of the world’s third-largest reserves seeks to boost output, a former oil minister and government adviser said. Better relations with Kurdish groups in the country’s north and a new security framework with the US are “positive indicators we’ll see a hydrocarbon law in place, hopefully by spring 2009,” Thamir Ghadhban, an adviser on oil and gas policies to the Iraqi prime minister and a former oil minister, said today. The Middle Eastern country, seeking to raise production to 4.5 million barrels a day by 2012, may sign development deals by June, Oil Minister Hussain al-Shahristani said.

- Intel Corp.(INTC), the world's biggest semiconductor maker, will focus on investing in new products to shield itself from the recession, Chairman Craig Barrett said. "We will invest our way out of this recession," Barrett said in an interview in Cairo, where Intel announced a plan to make motherboards with Egyptian partners. "We will not save our way out of it."

- Treasuries rose, pushing yields to record lows, as Federal Reserve Chairman Ben S. Bernanke said the central bank may purchase Treasuries and target long-term interest rates to combat the deepening recession. Bonds rallied for a fourth day, sending yields on two-, 10- and 30-year debt to the lowest since the Treasury began regular sales of the securities.

Wall Street Journal:

- The Krugman Recipe for Depression. Paul Krugman of the New York Times has been on the attack lately in regard to the New Deal. His new book "The Return of Depression Economics," emphasizes the importance of New Deal-style spending. He has said the trouble with the New Deal was that it didn't spend enough.

- When Federal Reserve officials meet in two weeks to choose a course for short-term interest rates, Timothy Geithner -- who is president of the Federal Reserve Bank of New York and has been tapped to become Treasury secretary -- won't be there. Mr. Geithner has handed over his responsibility as a member of the Federal Open Market Committee to Christine Cumming, the New York Fed's chief operating officer and alternate to the FOMC, according to a New York Fed spokesman.

- US carmakers are in talks with the United Auto Workers labor union over halting the program that pays idled workers.

- President-elect Barack Obama’s transition office has released a list of private donors who have contributed $1.2 million to supplement public funding for the office. The list, which covers through Nov. 15 and will be updated monthly, includes many of the top fund-raisers to his presidential campaign.

- India has formally demanded that Pakistan take "strong action" against the people behind the Mumbai attacks. Foreign Ministry spokesman Vishnu Prakash has told reporters Pakistan's high commissioner to India was summoned and told that "elements from Pakistan" had carried out the attacks. India "expects that strong action would be taken against those elements," he says the high commissioner was told.

- Outgoing Federal Communications Commission Chairman Kevin Martin is pushing for action in December on a plan to offer free, pornography-free wireless Internet service to all Americans, despite objections from the wireless industry and some consumer groups.

Atlanta Journal Constitution:
- Alaska Gov. Sarah Palin roared back onto the campaign trail Monday, calling on Georgians to re-elect incumbent Republican U.S. Sen. Saxby Chambliss in his hotly contested runoff with Democrat Jim Martin. “The eyes of the nation are on you,” Palin told several thousand people at the James Brown Arena for her 8:55 a.m. speech, the first of four appearances in the state. “We all have Georgia on our mind.”

StarTribune.com:

- While a tiny margin separates the candidates in the Minnesota U.S. Senate race, it is wide enough that Democrat Al Franken faces a daunting task in challenging votes to erase Sen. Norm Coleman's lead.

Washington Post:

- Talk to the chief executives of America's preeminent health-care institutions, and you might be surprised by what you hear: When it comes to medical care, the United States isn't getting its money's worth. Not even close. "Our health-care system is fraught with waste," says Gary Kaplan, chairman of Seattle's cutting-edge Virginia Mason Medical Center. As much as half of the $2.3 trillion spent today does nothing to improve health, he says. A high-performance 21st-century health system, they say, must revolve around the central goal of paying for results. That will entail managing chronic illnesses better, adopting electronic medical records, coordinating care, researching what treatments work best, realigning financial incentives to reward success, encouraging prevention strategies and, most daunting but perhaps most important, saying no to expensive, unproven therapies. "There is more than enough money in the system," said former House speaker Newt Gingrich, who runs the District-based Center for Health Transformation. "We just are not spending it well."

All Things Digital:

- The Huffington Post will announce this morning that it has raised $25 million, in a single investment from Oak Investment Partners. The large round by Oak, which was led by Palo Alto, Calif.-based venture capitalist Fred Harman, will give the popular online news and blog site a valuation of just “south of $100 million,” a source said. The new funding, the Huffington Post’s third, will be used for expansion of its offerings and the hiring of editorial and business talent.

PC World:

- 20 Hot Cyber Monday Deals.

FINAlternatives:

- BlueBay Asset Management is closing a fixed-income hedge fund after accusing its manager of breaking valuation rules. The London-based firm will close its US$1.2 billion Emerging Market Total Return Fund, which was “dramatically” burned by bets on bonds and credit default swaps. The fund is down 53% this year, according to a statement from BlueBay, leaving it not “viable as a standalone strategy.”

Broadcasting & Cable:

- While the gallows humor continues, CNBC isn't exactly laughing all the way to the bank. Despite the yuks and the huge numbers, the network is now in the process of slashing as much as 10% from its budget. People at the network, says one staffer, “are scared s---less.”

Reuters:
- Democrats in the House of Representatives likely will seek passage next month of an economic stimulus bill costing about $500 billion, a House Democratic aide said on Monday. The aide said the package would include the cost of a middle-class tax cut that President-elect Barack Obama wants, billions of dollars for road, bridge and mass transit construction, aid to states and investments in renewable energy development.

- Retail sales online are expected to surge on Monday as shoppers look for more discounts than they found during the holiday weekend, but overall holiday web sales will remain weak due to the economy, analysts said. According to a Shop.org survey, conducted this weekend by BIGresearch, 84.6 million consumers plan to shop online from home or at work on Monday, up from 72 million in 2007. So far, top-selling items online include the Apple iPod and iPhone and the Nintendo Wii game console, according to data from eBay and Amazon.com. "It was a very soft November, but it should be a much better December," Forrester analyst Sucharita Mulpuru said, noting there is typically a spike in online sales on what some call Cyber Monday, the Monday after Thanksgiving.

- J.P. Morgan Securities added seven stocks to its small- and mid-cap money list, saying it estimated a mid-2009 trough date for the recession and the stocks will likely bottom between now and early 2009. The brokerage said it added casino operator Las Vegas Sands Corp (LVS), online travel agency Priceline.Com Inc (PCLN), casual dining restaurant chain Red Robin Gourmet Burgers Inc (RRGB) and United Airlines parent UAL Corp (UAUA) to the SMid Money List under its Captain PEG theme. The brokerage said it also added drugstore chain Rite Aid Corp (RAD), life and mortgage insurer Genworth Financial Inc (GNW) and Fluor Corp (FLR) to the SMid Money List.

Guardian:

- The European Union's top financial regulator said on Monday he would start a wide-ranging public consultation on oversight and risks attached to hedge funds.

The consultation will study adequacy of transparency measures, oversight responsibility, risk management practices, assessment of systemic risks, need for capital requirements and supervisory responsibility, EU Internal Market Commissioner Charlie McCreevy said.

AFP:
- President George W. Bush will mark World AIDS Day Monday by announcing that his administration has already met its goal of treating two million people living with HIV/AIDS by the end of the year, the White House said. "PEPFAR is the largest commitment by any nation to combat a single disease in human history," White House spokeswoman Dana Perino said in a statement. "When the President launched this initiative in 2003, approximately 50,000 people in all of sub-Saharan Africa were receiving anti-retroviral treatment." The President's Emergency Plan for AIDS Relief (PEPFAR) provides funding for HIV/AIDS, malaria and tuberculosis treatment in 15 focus countries among the world's poorest, mainly in Africa. As of September 30, PEPFAR supported life-saving antiretroviral treatment for over 2.1 million men, women and children living with HIV/AIDS around the world, including more than two million people in Sub Saharan Africa, Perino said.

Bear Radar

Style Underperformer:
Small-cap Value (-7.2%)

Sector Underperformers:
Oil Tankers (-12.71%), I-Banks (-12.46%) and Oil Service (-12.04%)

Stocks Falling on Unusual Volume:
EMR, THOR, COGT, TRMB, KYN, BBL, ISH and ESL

Stocks With Unusual Put Option Activity:
1) DTV 2) AOB 3) DOW 4) MMM 5) VIA/B

Bull Radar

Style Outperformer:
Small-cap Growth (-4.50%)

Sector Outperformers:
Restaurants (-3.04%), HMOs (-3.34%) and Drugs (-3.57%)

Stocks Rising on Unusual Volume:
HOMB, MANT, ITMN, CFFN, ENSG and MNT

Stocks With Unusual Call Option Activity:
1) HA 2) FNM 3) ALTR 4) FRE 5) F

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