Today's Headlines

Bloomberg:
- Russia weakened its defense of the ruble for a fourth time in a month, pushing the currency near a three-year low against the dollar, as the price of the nation’s crude oil fell by a record this week to less than $40 a barrel. The currency slid as much as 1.4 percent to 28.1768 per dollar.

- Yields on bonds backed by commercial mortgages fell relative to benchmark interest rates as prices rebounded after a plunge sparked by concern that borrowers will default. The gap, or spread, on AAA commercial mortgage-backed securities has dropped 5.12 percentage points to 10.17 percentage points more than swap rates since hitting a record 15.2 percentage points over swaps on Nov. 20, according to Bank of America Corp. data. The swap rate is currently 2.88 percent. “We’ve had several days of pretty good momentum,” said Kent Born, a senior managing director in the commercial lending group at PPM America Inc.

- Gold Futures Head for Biggest Weekly Decline Since 1983 on Dollar’s Rally. Gold fell to the lowest in two weeks as the dollar climbed, eroding the appeal of the precious metal as an alternative investment. Silver also declined. The US dollar gained as much as 1.2 percent against a weighted basket of six major currencies. “The dollar has once again become king, and until that changes, gold is going to have a hard time,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “Gold is caught in this deflationary cycle,” said Tom Hartmann, a commodity analyst at Altavista Worldwide Trading in Mission Viejo, California. “Demand for gold is just not there.”

- Crude oil fell for a sixth day, heading for the biggest weekly drop since the Persian Gulf War in 1991, on concern demand will decline after a report showed U.S. employers cut jobs in November at the fastest pace since 1974. Oil is down 24 percent since Nov. 28. “The $40 level will act as a magnet that we should break through in the next day or two,” said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. “Prices may consolidate there for a week before going down further. It looks like we will continue to fall to levels that looked impossible five months ago.” U.S. equity markets declined yesterday as oil stocks dropped on forecasts of $25-a-barrel crude from analysts at Merrill Lynch & Co. U.S. fuel demand during the four weeks ended Nov. 28 was down 6.2 percent from a year earlier, an Energy Department report showed Dec. 3.

- Hartford Financial Services Group Inc.(HIG) soared as much as 65 percent in New York trading after the insurer lifted its 2008 forecast for operating profit and said the capital outlook at its insurance units was “strong.” Hartford rose $4.15 to $11.36 at 11:47 a.m. in New York Stock Exchange composite trading and sold today for as much as $11.87, the biggest rise in almost 13 years.

- O.J. Simpson, the former Buffalo Bills football player found not guilty 13 years ago of murdering his ex-wife and her friend, was sentenced to 16 years in prison for robbing two sports memorabilia dealers at gunpoint.

Wall Street Journal:

- Former Sen. Tom Daschle, who is slated to oversee health-care policy in the Obama administration, is kicking off the effort to pass a comprehensive health-care plan. In a speech to be delivered Friday in Denver, Mr. Daschle will say, "The president-elect made health-care reform one of his top priorities of his campaign, and I am here to tell you that his commitment to changing the health-care system remains strong and focused."

NY Times:
- U.S. charitable foundations gave money to international causes at record levels in 2007 and their contributions are likely to increase again this year, says a report by an organization that monitors philanthropy. International giving by U.S. foundations totaled about $5.4 billion last year, according to the report released Thursday by the New York-based Foundation Center.

AP:

- CBS News and BusinessWeek plan to collaborate on stories and segments to be broadcast on CBS Evening News with Katie Couric and appear in the magazine as well as on the companies' Web sites.

TVNewser:

- After layoffs at the Dallas and Burbank bureaus, NBC News employees in Washington, DC are beginning to feel the effects of cuts that will trim the global NBCU workforce by 3% or about 500 jobs.

Financial Times:
- Funds dedicated to emerging markets remain in the doghouse as far as investors are concerned, the latest data from EPFR show. Investors withdrew the equivalent of 0.27 per cent of total assets under management from EM equity funds during the week ending Dec 03, bringing year to date outflows to $41.7bn, the equivalent of 9.6 per cent of average assets over the period. This has essentially reversed the record $40.8bn inflows of 2007. But Citi’’s Andrew Howell noted the outflows have actually been equivalent to nearly two years of inflows, given how far markets have fallen in 2008. Moreover, by Citi’s estimate, “about half of the EM fund purchases that have occurred since 2003 have now been withdrawn.” Still, Howell says there are no signs of panic - yet:

Yomiuri:
- North Korean leader Kim Jong Il’s health is worse than initially thought, citing a US source. Kim’s left side is paralyzed from a stroke he suffered on Aug. 14 for 15. The source said that while it’s unclear whether Kim is currently fit to rule, “it’s highly unlikely that he will fully return to power.” The US government has started to map out its strategy in the event Kim dies or is ousted from power.

China National Radio:

- China plans to raised the retail tax on gasoline to 1 yuan from .2 yuan, citing the government. The tax on diesel will be increased to .8 yuan form .1 yuan, the report said.

Bear Radar

Style Underperformer:
Large-Cap Growth (-1.37%)

Sector Underperformers:
Papers (-4.16%), Energy (-2.50%) and Gold (-2.40%)

Stocks Falling on Unusual Volume:
GMXR, CHK, PCU, CVC, FCX, STO, SU, LAYN, CBST, LSTR, CPRT, STL, SFL, SON, MTR and TPP

Stocks With Unusual Put Option Activity:
1) CL 2) HIG 3) UPL 4) AUY 5) MEE

Bull Radar

Style Outperformer:
Mid-cap Value (-1.49%)

Sector Outperformers:
Insurance (+2.22%), REITs (+.25%) and Banks (+.05%)

Stocks Rising on Unusual Volume:
AHL, FPL, BT, GSK, RTP, MSCC, THOR, CMTL, SAFM, CASY, LEAP, CYBX, ATHN, DMND, HIG and ASF

Stocks With Unusual Call Option Activity:
1) SWY 2) HIG 3) D 4) EMR 5) CRM

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Friday Watch

Late-Night Headlines
Bloomberg:

- Investors should avoid industrial commodities through 2010 because the global recession will sap demand for copper and energy, said Tiberius Asset Management. “You don’t want to be invested in anything that has a high correlation with the economy,” Christoph Eibl, who helps manage more than $1 billion of commodity investments at Tiberius Asset Management AG, said today in New York. “I don’t like industrial commodities.” Commodity prices will continue to decline as investors exit the market, Eibl said. As of Dec. 3, open interest in commodity futures tracked by the CRB, excluding aluminum and nickel traded in London, tumbled 25 percent this year, data compiled by Bloomberg show. Open interest, the total number of contracts yet to be closed, liquidated or delivered, is a measure of what direction money is flowing in commodity markets.

- Investors fled from stock and bond mutual funds for the third straight month in November, removing $86.4 billion. Stock and bond mutual funds have lost $270 billion to investor withdrawals since September.

- Codelco, the world’s largest copper miner, will move ahead with “aggressive” expansion plans, even as rivals curb spending, to halt a four-year production decline. The Chilean state-owned company expects to increase output of the metal next year, Jorge Candia, a member of the company’s board, said today in an interview in Santiago. Copper may fall another 25% by June, Juan Carlos Guajardo, executive director of the Chilean Copper and Mining Studies Center, said in an interview.

- Crude oil is set for its biggest weekly decline since March 2003, trading near an almost four- year low. Oil is set for a 19 percent drop this week after the U.S. was declared in a recession on Dec. 1. Oil prices have fallen 70 percent since reaching a record $147.27 on July 11. Crude’s 19 percent weekly drop is the largest since a 24 percent decline during the week ending March 21, 2003.

- The U.S. welcomed Iraq's approval of a security accord that gives American forces three years to leave the country, saying it puts relations between the two countries on a ``strong footing.'' The agreement calls for U.S. troops to pull back from Iraq's towns and cities by the middle of next year and to leave the country by the end of 2011. It also curbs U.S. powers to detain Iraqi citizens and conduct military operations.

- Hong Kong home prices, down almost a quarter from their five-year high in March, may drop further as banks tighten mortgage lending on concern rising unemployment may hurt buyers' ability to repay. Mortgage rates in Hong Kong have climbed even as the de facto central bank has cut benchmark borrowing costs in line with the U.S. Federal Reserve. That's revived memories of the 1997-98 Asian financial crisis, when Hong Kong home prices slumped two- thirds from their peak. HSBC Holdings Plc, the city's biggest bank by branches, lifted mortgage rates as much as 75 basis points this week.

Wall Street Journal:

- Boeing Co.(BA) may further delay first deliveries of its flagship 787 Dreamliner by at least six months to account for the recent strike by union machinists and other snags.

MarketWatch.com:
- Some of the top hedge-fund firms have taken steps to limit investor withdrawals in recent days, demonstrating how the financial crisis is affecting even the oldest and most respected players. Farallon Capital Management, ranked earlier this year as the second-biggest hedge-fund manager by Alpha Magazine, put up a so-called gate after investors requested redemptions, according to two people familiar with the situation. Gates are imposed if investors ask to withdraw more than a certain quantity of assets from a hedge fund, usually about 20% of assets under management. When these levels are breached, funds can limit total redemptions and investors only get back a portion of the money they've asked for.

CNBC.com:
- Robert Rubin, the Citigroup Inc.(C) board member and senior counselor, may resign from his positions at the company, CNBC on-air editor Charles Gasparino reported. Rubin is facing pressure to quit from those critical of his oversight of Citigroup while he was chairman of the company. (video)

- Attention Santa Claus: The financial bailout has a new address—It's Main Street, not Wall Street.

BusinessWeek:

- Obama Drops Big Oil Tax as Prices Pluunge. The plan was for a windfall-profits tax on oil over $80 a barrel. But even though oil is under $50 now, some are upset that the issue is being dropped.

- Special Report: Tech Pioneers of 2009.

CNNMoney.com:
- Programs quietly easing credit crunch. The government has initiated two corporate debt-purchasing programs that have gotten little attention, but are making a sizable impact in the credit market.

PatriotLedger.com:

- Gulf Oil CEO Joe Petrowski said on Wednesday that the price of oil could sink to $20 per barrel, and there is a chance gasoline prices could drop as low as $1 per gallon by early next year. Speaking at a South Shore Chamber of Commerce breakfast at Lombardo’s in Randolph, the Brockton native said that after speculators drove oil prices up, there is a chance that the market will overshoot on the way back down, resulting in much lower prices at the pump. Petrowski said that policymakers should make low-cost energy a goal by investing in alternative energy sources, increasing domestic oil reserves, and diversifying the foreign origins of oil so as to be less dependent on unfriendly countries. He said that cellulosic ethanol will eventually replace corn-based ethanol, and that he thinks the U.S. should eventually get rid of the import tax on ethanol from places like Brazil.

Reuters:

- There is broad understanding of distress but no consensus yet in Congress to rescue U.S. automakers as industry chiefs hope on Friday to advance their case in a second appearance before lawmakers in two days.

- The year-long U.S. recession has taken a turn for the worse recently, two top Federal Reserve policy-makers said on Thursday, raising expectations for aggressive policy action by the central bank as soon as next week. Separately, Federal Reserve Chairman Ben Bernanke urged more aggressive steps to halt home foreclosures, one of the most visible outcomes of the severe U.S. downturn.

- December is likely to be a bit more cheerful for U.S. retailers and their stocks as lower gasoline prices, a shorter holiday shopping season and pent-up demand help sales, despite the recession.

- Some of the biggest names in hedge funds lost money in November, including Dan Loeb and Kenneth Griffin, but John Paulson was among the few who made money for their investors. Hedge fund investors around the world lost money for the sixth straight month as many in the industry reported steepening declines, investors said on Thursday.

Bild Zeitung:

- Deutsche Bank AG expects Germany’s economy to shrink in 2009 more than currently expected by the government. Deutsche Bank chief economist Norbert Walter said that Germany’s gross domestic product could contract by as much as 4% next year. Walter forecast the slump because of a deteriorating economic situation in Russia and in the Middle East. Walter is urging Germany’s government to drop its value-added tax to 16% for one year to strengthen domestic consumption.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -.75% to +1.25% on average.
S&P 500 futures -.08%.
NASDAQ 100 futures -.24%.

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Earnings of Note
Company/EPS Estimate
- (BIG)/.16

- (BF/B)/.93

Economic Releases
8:30 am EST

- The Change in Non-farm Payrolls for November is estimated at -333K versus -240K in October.

- The Unemployment Rate for November is estimated at 6.8% versus 6.5% in October.

- Average Hourly Earnings for November are estimated to rise .2% versus a .2% increase in October.

3:00 pm EST

- Consumer Credit for October is estimated to fall to $2.0 billion versus $6.9 billion in September.

Upcoming Splits
- None of note

Other Potential Market Movers
- The 3Q mortgage delinquencies report and JPMorgan Small-Mid Cap Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and real estate 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 Sharply Lower, Weighed Down by Technology, Commodity, Gaming and Utility Shares

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