BETWEEN THE HEDGES

Wednesday, October 07, 2009

Thursday Watch

Posted by Gary .....at 6:31 PM

Late-Night Headlines
Bloomberg:

- European banks including Credit Suisse AG and Deutsche Bank AG will probably report third- quarter earnings that exceed market expectations as favorable trading fuels profit, Morgan Stanley analysts said. The analysts, led by London-based Huw van Steenis, raised earnings per-share estimates for the two banks as well as for Tullett Prebon Plc, according to an Oct. 7 note to investors. The team also raised share-price targets for Credit Suisse, Deutsche Bank and Tullett Prebon, the note said. “We believe the market is missing the upside” from low interest rates, steep yield curves and high volume of trading and underwriting, the report said.

- Alcoa Inc.(AA), the largest U.S. aluminum producer, reported an unexpected third-quarter profit as it benefited from improving metal prices and saved money by cutting jobs and raw-material costs. The profit excluding certain items was 4 cents a share, exceeding analysts’ average estimate for a 9-cent loss. Alcoa, the first company in the Dow Jones Industrial Average to announce results for the three months through Sept. 30, rose 78 cents, or 5.5 percent, to $14.98 at 6:10 p.m. in trading after the official close of the New York Stock Exchange.

- Trading of bullish Polycom Inc.(PLCM)options jumped the most since 2001 after Cisco Systems Inc.’s purchase of rival Tandberg ASA fueled speculation that Polycom would also be acquired

- Investors should purchase stocks during declines in the market and “stay bullish” as the Standard & Poor’s 500 Index rallies to 1,200 over the next 12 months, Bank of America Corp. said. The 56 percent advance in the S&P 500 from a 12-year low in March is “quite moderate” compared with past recoveries from bear markets, wrote a team of Bank of America analysts led by chief U.S. equity strategist David Bianco. Over the last seven months, the S&P 500 has recouped about 43 percent of its tumble from a record in October 2007, compared with an average recovery of 65 percent by this point, the analysts wrote. “This rally hardly seems overdone to us,” the analysts wrote. A decline of 5 percent to 10 percent in the S&P 500 “would not be surprising, but we would view such a pullback as a buying opportunity,” they wrote. Investor skepticism shows that there is “further room for sentiment and the market to rise before we would consider investors’ bullishness to be overdone,” the analysts wrote.

- Investor skepticism shows that there is “further room for sentiment and the market to rise before we would consider investors’ bullishness to be overdone,” the analysts wrote.

- More than a decade after former Treasury Secretary Robert Rubin made the “strong dollar” national policy, currency traders say the same words coming from the Obama administration have little meaning. Timothy Geithner, the current Treasury secretary, has tolerated the greenback’s 12 percent slide from its peak this year in March as measured by the Federal Reserve’s trade- weighted Real Major Currencies Dollar Index. While he said as recently as Oct. 3 that “it is very important to the United States that we continue to have a strong dollar,” the last time the U.S. intervened in markets to support its currency was 1995. The weaker dollar may boost America’s exports as the economy recovers from the deepest recession since the 1930s. The risk is that it may also drive away America’s largest creditors just as the Treasury relies more than ever on foreign investors to buy the bonds financing Barack Obama’s stimulus spending. The dollar’s share of global currency reserves fell in the second quarter to 62.8 percent, the lowest level in at least a decade, the International Monetary Fund in Washington said on Sept. 30.

- The Federal Housing Administration, the U.S. agency that insures mortgages with low down payments, faces $54 billion more in losses than it can withstand, a former Fannie Mae executive said.Washington tomorrow. “It appears destined for a taxpayer bailout in the next 24 to 36 months,” said Edward Pinto, a consultant who was chief credit officer from 1987 to 1989 for Fannie Mae, the mortgage- finance company that is now government-run, in testimony prepared for a House committee hearing in

.- Labor unions including the Teamsters and United Auto Workers plan to oppose health-care legislation being considered by a U.S. Senate panel unless changes are made to the “deeply flawed” bill, according to a draft advertisement prepared for Washington newspapers. The advertisement, circulated today among the unions, calls for a so-called public option that would compete with private insurers, elimination of a proposed tax on health plans and requiring almost all employers to provide health care or contribute to a fund that would subsidize coverage. The ad would run if the Senate Finance Committee approves draft legislation introduced by Chairman Max Baucus. The committee’s draft legislation would tax so-called Cadillac insurance plans by imposing a 40 percent excise tax on insurance plans valued at more than $8,000 for individuals and $21,000 for families. Labor unions argue in their advertisement that the taxation discriminates against workers. In addition to the autoworkers and the International Brotherhood of Teamsters, the proposed ad was sent to more than 30 unions. Among them were leaders of the American Federation of State, County and Municipal Employees, the United Steel Workers, the International Brotherhood of Electrical Workers, and the National Football League Players Association.

- Dave’s Office Sex Gives Reasons CBS(CBS) Should Worry.

- Record gold prices will “ruin” festive-season demand in India, the world’s biggest consumer, the nation’s largest jewelry producer and exporter said. “There’s going to be a big drop in jewelry demand if the current price sustains,” said Rajesh Mehta, chairman of Rajesh Exports Ltd. from Bangalore. “The entire festive season demand will be ruined.”

Wall Street Journal:

- The U.S. budget deficit for fiscal year 2009 was $1.4 trillion, the highest deficit as a share of the nation's economy in over a half-century, according to an estimate from the nonpartisan Congressional Budget Office (CBO). The CBO in its monthly budget report states that the fiscal 2009 deficit was estimated to equal 9.9% of gross domestic product in the U.S. - the largest deficit relative to the nation's gross domestic product since 1945. The deficit was estimated for the fiscal year ending on Sept. 30. The fiscal year 2009 deficit dwarfs the $459 billion deficit recorded for the U.S. in the previous fiscal year. The federal government spent an extraordinarily large amount of money in fiscal year 2009, with the government's outlays increasing by $532 billion over the previous year. The fiscal 2009 spending is equal to 25% of the nation's gross domestic product, which the CBO states is "the highest level in over 50 years." The increased spending was due in large part to the Treasury Department's Troubled Asset Relief Program, the $787 billion economic stimulus and the rescue of mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE).

- In a big win for Google Inc.(GOOG), Dell Inc.(DELL) plans to introduce a smart phone using Google software on the AT&T Inc.(T) cellular network, according to people briefed on the plans. Dell is expected to launch the phone in the U.S. as soon as early as next year, these people said. With an AT&T deal, all four major U.S. cellular networks would carry phones using Google's Android operating system, a key step in the Internet giant's attempt to extend its dominance of the personal-computer world to mobile phones.

- The Weak-Dollar Threat to Prosperity by David Malpass. Measured in euros, US per capita GDP is down 25% since 2000. If you want to know why the dollar has been falling this week and gold hit a new high, look no further than the weak jobs numbers last Friday and the weak communique issued over the weekend at the G-7 meeting in Istanbul. Deploring "excess volatility and disorderly movements in exchange rates" isn't exactly a ringing defense of the greenback. And 9.8% unemployment convinced markets that monetary policy will remain loose regardless of dollar weakness. Bond buyer Bill Gross of the Pimco fund summed up the situation nicely in a recent CNBC interview. Asked whether low interest rates will weaken the dollar, the influential allocator of global capital said: "I think that's part of the administration's plan. It's obviously not announced—the 'strong dollar' is always the policy, so to speak. One of the ways a country gets out from under its debt burden is to devalue."

- President Barack Obama will step up his push for a financial regulatory overhaul Friday, with a call for the public to rally behind his proposed Consumer Financial Protection Agency. The agency, a key plank in Obama's proposed regulatory revamp, has come under fire from Republicans and the banking sector, which says it would crimp the flow of credit to consumers and limit the creation of new products.

- As any TV star knows, it takes work to look good for the camera. That is one reason why NYSE Euronext has committed to an 18-month, $5 million face-lift for the 100-year-old trading floor that serves as a central backdrop for business-television programs. The redesign, already under way along the west wall of the Big Board's main trading room, is part of a broader strategic shift at the exchange. The exchange wants to lure more electronic traders directly to the floor, creating a hybrid world where they can take in the person-to-person "buzz" of live traders while still executing trades.

- Obesity is a complex issue, and addressing it is important for all Americans. We at the Coca-Cola(KO) company are committed to working with government and health organizations to implement effective solutions to address this problem. But a number of public-health advocates have already come up with what they think is the solution: heavy taxes on some routine foods and beverages that they have decided are high in calories. The taxes, the advocates acknowledge, are intended to limit consumption of targeted foods and help you to accept the diet that they have determined is best. In cities and states across America—and even at the federal level—this idea is getting increased attention despite its regressive nature and inherent illogic. While it is true that since the 1970s Americans have increased their average caloric intake by 12%, they also have become more sedentary. According to the National Center for Health Statistics 2008 Chartbook, 39% of adults in the U.S. are not engaging in leisure physical activity. The Centers for Disease Control and Prevention has found that 60% of Americans are not regularly active and 25% of Americans are not active at all. The average American spends the equivalent of 60 days a year in front of a television, according to a 2008 A.C. Nielsen study. This same research data show that the average time spent playing video games in the U.S. went up by 25% during the last four years. If we're genuinely interested in curbing obesity, we need to take a hard look in the mirror and acknowledge that it's not just about calories in. It's also about calories out.

- The United States is asking that Iran immediately release two jailed foreign nationals even as it pursues talks over Tehran's nuclear program, according to people familiar with the negotiations. Families, colleagues and friends of the detainees have collected petitions signed by prominent figures and written letters to public officials as part of their far-reaching efforts to win the release of American-Iranian scholar Kian Tajbakhsh and Canadian-Iranian Newsweek journalist Maziar Bahari, who have been held captive by Iran for roughly three months. The State Department says it pressed Iran on its human-rights record when representatives of the two countries sat at the negotiating table to discuss Iran's nuclear program in Geneva last week. So far, Iran hasn't taken any action.

- The U.S. Commerce Department launched an investigation Wednesday into whether to impose antidumping and countervailing duties on imports of certain seamless steel pipes from China. The move comes at a time of rising trade tensions between the two nations. The U.S. last month imposed preliminary duties on $2.7 billion worth of tubular and steel pipe from China used in oil drilling. That case, filed in April, was one of the biggest to date filed by the U.S. against China. Also last month, President Barack Obama agreed to slap hefty duties on imports of Chinese tires. Such trade disputes are increasing as the global economy faces a deep recession and producers search for markets to sell excess goods. The latest case involves carbon and alloy steel pipes used for industrial operations such as moving natural gas, water, steam and other liquids. A petition was filed last month by U.S. Steel Corp., V&M Star LP, TMK IPSCO and the United Steelworkers.

- In just two weeks, on Oct. 22, Microsoft's long operating-system nightmare will be over. The company will release Windows 7, a faster and much better operating system than the little-loved Windows Vista, which did a lot to harm both the company's reputation, and the productivity and blood pressure of its users. PC makers will rush to flood physical and online stores with new computers pre-loaded with Windows 7, and to offer the software to Vista owners who wish to upgrade.

- With friends like Michael Moore, Barack Obama doesn't need imaginary enemies. Michael Moore's "Capitalism: A Love Story" has opened and is doing poorly at the box office. Feeling sorry for the old Catholic socialist, I spent 12 after-tax dollars to see it. Don't expect "Capitalism" to make the White House theater. The movie is largely a paean to plaintiffs lawyers and unions, who alas depend on evil capitalism for their incomes.

- Passing health-care reform could be harmful to the health of congressional Democrats. Just look at how President Barack Obama's standing has fallen as he has pushed for reform. According to Fox News surveys, the number of independents who oppose health-care reform hit 57% at the end of September, up from 33% in July. Independents are generally a quarter of the vote in off-year congressional elections.Gallup's Sept. 24 poll. College graduates are slightly more than a quarter of the off-year electorate. Among seniors, opposition to ObamaCare hit 63% in last month's Economist/YouGov Poll. But the number from that poll that should spook Democrats is this: 47% of seniors said they "strongly" oppose health-care reform, just 27% "strongly" support it. Seniors are the biggest consumers of health care, and their family members will probably take their concerns seriously. Seniors will likely cast about 20% of the votes next year. Among college graduates, opposition to health-care reform is now 50%, while only 33% support it, according to

MarketWatch.com:
- Hedge funds had another good month in September as some managers got a boost from the impending launch of a government-backed program to mop up toxic assets in the wake of the financial crisis, Chicago-based Hedge Fund Research said Wednesday. The HFR Hedge Fund Index rose 3.02% last month, leaving it up 17.21% so far this year.

- William Blair & Co. upgraded Cisco Systems on Wednesday, saying "pent-up demand" for the tech giant's products "has started to loosen up over the past few months."

- The U.S. Justice Department has opened an antitrust inquiry into IBM Corp.'s(IBM) mainframe business, according to a technology-industry coalition and a small rival of Big Blue backed by Microsoft Corp.

IBD:

- Metromedia Fiber Network was in trouble. It had $5.35 billion in debt after the dot-com bust. It filed for Chapter 11 in May 2002, selling off assets, including most of its European operations and a number of its data centers. The company emerged from bankruptcy in September 2003 leaner and meaner, with $80 million in cash and little debt. It also renamed itself: AboveNet (ABVT).

LA Times:

- Home prices in California will increase slightly next year as buyers snap up foreclosures and other properties at the market’s low end, the California Assn. of Realtors said today. At the same time, the number of purchases will decline slightly because there will be fewer of these foreclosures available. In its annual forecast, the association predicted that the median home price in California would rise 3.3% to $280,000 next year. Sales of houses and condominiums, it said, would decrease 2.3% to about 527,500.

zerohedge:

- Securities Industries News discloses that the SEC has requested it be granted authority to have "direct access to real-time data" on CDS and other derivatives. One wonders how the SEC was operating up until this point without this information. Yet of course, this is merely just another pretext for the SEC to deflect allegations about its utter uselessness, with claims that "lack of such information hampered its efforts to investigate potential fraud and market manipulation in the over-the-counter (OTC) derivatives markets during last fall’s financial crisis." Well, duh. The SEC is finally realizing that the credit market is, oh, about 10 times bigger than equities, and that virtually everyone trades CDS now over cash products. CDS is, incidentally, also where all the insider trading occurs these days, a fact abused all too well by CDS traders, who have known about the SEC's inability to closely track the action in the credit market. This is also why if the SEC were to look at CDS buying action of LBOs names in 2006/2007 it may actually find some amusing results. In the meantime, the SEC should spend $10,000 a year and get a MarkIt subscription.

Politico:

- House Speaker Nancy Pelosi were meeting late Wednesday night to iron out possible details of the public option negotiated from the three bills that have passed various committees. Earlier, Greg Sargent at Plum Line detected some serious turbulence between Pelosi and progressives over one of the more devilish details of the public option -- reimbursement rates.

Rasmussen:

- Only 31% of likely voters say the United States is heading in the right direction, according to the latest Rasmussen Reports national telephone survey. That’s down two points from last week and is the lowest level measured since mid-July.

Denverpost.com:

- Boasting its earliest opening day in 40 years, Loveland officials opened for skiing today. Arapahoe Basin announced it would open Friday. Loveland is the first ski area in North America to open its season, with $44 lift tickets. Loveland trail crews were able to begin snowmaking operations on Sept. 21. "We took advantage of the cold temperatures and got an early start making snow this year," said Eric Johnstone, snowmaking and trail maintenance manager. "Now we can move some equipment to other trails and try to open more terrain as quickly as possible."

The Business Insider:

- You Won’t Believe How the Baucus Healthcare Bill Got Such A Good CBO Score. Going by the fairly sketchy description, virtually all of the extra benefit appears to come from estimating that employers will see their health care costs fall, mostly because they put those workers into federally subsidized programs, pass the resulting savings along to their workers in the form of higher wages and salaries, and that the Treasury will thereby gain, at a rough guess, about $12-15 billion a year in tax revenues.

USA Today.com:

- Used vehicle prices shot to an all-time high last month, spurred by falling inventories, according to a closely watched barometer of the second-hand car business. The Manheim Used Vehicle Value Index rose 6.9% in September to a record high of 118.5. The index is adjusted for vehicle mix and seasonality. A value of 100 represents used vehicle prices in January 1995. The main driver behind higher used car prices is falling wholesale vehicle supply, Webb said. This summer's wildly popular cash for clunkers program sent new vehicle sales soaring, taking dealers by surprise and clearing out inventories.

Forbes:

-.The 100 Best Mid-Cap Stocks in America.

examiner:

- Recently the United Nations Environment Programme released its Climate Change Science Compendium. a 68 page report the agency says, is “a presentation of some exciting scientific findings, interpretations, ideas, and conclusions that have emerged among scientists.” The document however has quickly come under fire from skeptics of anthropogenic global warming as errors are exposed and the United Nations quickly tries to remove them after the document has been published.

South China Morning Post:

- A leading al-Qaeda figure has urged Uygurs in Xinjiang to launch a holy war against "oppressive" China - the most serious threat yet against Beijing from the terrorist movement. Abu Yahya al-Libi appeared in a video posted on an Islamist website yesterday to warn that China would collapse, just like the former Soviet Union did two decades ago. "The state of atheism is heading to its fall. It will face what befell the Russian bear," he said, accusing China of massacring Uygurs and seeking to dissolve their identity. "There is no way to remove injustice and oppression without a true return to their [the Uygur's] religion and ... serious preparation for jihad in the path of God the Almighty and to carry weapons in the face of those [Chinese] invaders. "It is a duty for Muslims today to stand by their wounded and oppressed brothers in East Turkestan ... and support them with all they can." He also accused China of using "satanic ways" to oppress Muslims in the autonomous region and replacing them with other ethnicities while "looting their wealth and undermining their culture and religion". Libi, like many other al-Qaeda leaders, is a veteran of the Islamic insurgency that battled Soviet forces following the invasion of Afghanistan in 1979, helping to force its withdrawal 10 years later. He is now considered the third most powerful figure in the movement, with key operational and inspirational roles. His comments mark the first time core al-Qaeda leaders have shown a willingness to take their fight to China.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (NVDA), target $19.

Deutsche Bank:

- Rated (GS) Buy, target $220.

- Raised (ANSS) to Buy, boosted target to $45.

- Rated (MS) Buy, target $36.

UBS:

- Shares of large-cap regional banks “have run too fast,” initiating coverage of the industry with a “cautious” outlook.

Night Trading
Asian Indices are -.25% to +.75% on average.

Asia Ex-Japan Inv Grade CDS Index 107.5 -2.5 basis points.
S&P 500 futures +.88%.
NASDAQ 100 futures +.79%.

Morning Preview

BNO Breaking Global News of Note

Google Top Stories

Bloomberg Breaking News

Yahoo Most Popular Biz Stories

MarketWatch News Viewer

Asian Financial News

European Financial News

Latin American Financial News

MarketWatch Pre-market Commentary

U.S. Equity Preview

TradeTheNews Morning Report

Briefing.com In Play

SeekingAlpha Market Currents

Briefing.com Bond Ticker

US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Stock Quote/Chart
WSJ Intl Markets Performance
Commodity Futures
IBD New America
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?
Upgrades/Downgrades

Politico Headlines
Rasmussen Reports Polling

Earnings of Note
Company/EPS Estimate
- (MAR)/.13

- (PEP)/1.03

- (ISCA)/.37

Economic Releases

8:30 pm EST

- Initial jobless claims for last week are estimated to fall to 540K versus 551K the prior week.

- Continuing Claims are estimated at 6105K versus 6090K prior.

10:00 am EST

- Wholesale Inventories for August are estimated to fall -1.0% versus a -1.4% decline in July.

11:00 am EST

- ICSC Chain Store Sales for September are estimated to fall -1.5% versus a -2.0% decline in August.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Fed’s Bernanke speaking, Fed’s Hoenig speaking, Fed’s Tarullo speaking, weekly EIA natural gas inventory data, BoE rate decision, ECB rate decision, Treasury’s 30-year bond auction, (LOCM) analyst meeting, (NTAP) analyst meeting, (CLDA) investor day and (BKS) guidance could also impact trading today.

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

Stocks Finish Slightly Higher, Boosted by HMO, Hospital, Education, Bank, Computer Service, Internet and Oil Service Shares

Posted by Gary .....at 4:11 PM

BNO Breaking Global News of Note

Google Top Stories

Bloomberg Breaking News

Yahoo Most Popular Biz Stories

MarketWatch News Viewer

Briefing.com In Play

SeekingAlpha Market Currents

WSJ Today’s Markets
Today’s Movers
StockCharts Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Morningstar Style Performance
Commodity Futures
S&P 500 Gallery View
Timely Economic Charts
Most Recent Guru Stock Picks
CNN PM Market Call
After-hours Stock Commentary
After-hours Movers
After-hours Stock Quote
After-hours Stock Chart

Stocks Mixed into Final Hour as Lower Long-Term Rates, Falling Energy Prices Offset Profit-Taking, Economic Worries

Posted by Gary .....at 3:16 PM

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Biotech longs and Financial longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is neutral as the advance/decline line is slightly lower, sector performance is mixed and volume is about average. Investor anxiety is very high. Today’s overall market action is mildly bullish. The VIX is falling 3.50% and is high at 24.80. The ISE Sentiment Index is around average at 158.0 and the total put/call is around average at .78. Finally, the NYSE Arms has been running above average most of the day, hitting 1.36 at its intraday peak, and is currently 1.21. The Euro Financial Sector Credit Default Swap Index is rising +7.42% today to 74.67 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising 4.46% to 105.01 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is up 1 basis point to 23 basis points. The TED spread is now down 442 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is +2.81% to 34.25 basis points. The Libor-OIS spread is unch. at 13 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down -1 basis point to 1.75%, which is down 92 basis points since July 7th. The 3-month T-Bill is yielding .05%, which is down 2 basis points today. A number of market leading stocks are substantially outperforming the broad market today. Education, HMO, Hospital, Bank, Networking, Internet and Oil Service shares are especially strong, rising .75%+. Considering recent supply, the fall in long-term rates is a big positive and should continue to assist in a housing recovery. (XLF) has been trading well throughout the day, despite numerous scary commercial real estate stories over the last 24 hours. Oil continues to trade poorly, as it has since June, despite numerous potential upside catalysts. One of my longs, (GOOG), is breaking out to a new 52-week high today on volume. I still see significant upside in (GOOG) over both the short and long-run. It is highly unlikely we will see a meaningful broad market decline imminently with several key stocks breaking out. Nikkei futures indicate a -49 open in Japan and DAX futures indicate an +2 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, less financial sector pessimism, technical buying, lower energy prices, falling long-term rates and bargain-hunting.

Today's Headlines

Posted by Gary .....at 3:10 PM

Bloomberg:

- Mortgage applications in the U.S. rose last week to the highest level since May as near record- low borrowing costs boosted refinancing and sent purchases to a 10-month high. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan jumped 16 percent to 756.3 in the week ended Oct. 2 from 649.6 in the prior week. The group’s gauge of refinancing surged 18 percent and its measure of purchases climbed 13 percent.

- Valentino Fashion Group SpA’s sales in the U.S. and western Europe stabilized in September after months of decline, while demand in China and Hong Kong has surged, Chief Executive Officer Stefano Sassi said. The Italian luxury brand, owned by London-based buyout firm Permira Advisers LLP, doesn’t expect demand in developed markets to return to pre-credit crunch levels “for a few months at least,” Sassi said after Valentino’s fashion show in Paris yesterday evening.

- U.S. Representative Barney Frank’s proposed overhaul of derivatives regulation may leave gaps in oversight and unnecessary exemptions, the Commodity Futures Trading Commission and Securities and Exchange Commission said. “Certain aspects of the discussion draft could unintentionally preserve existing regulatory gaps,” Henry T.C. Hu, director of the SEC’s new division of risk, strategy and financial innovation, said of legislation proposed Oct. 2 by House Financial Services Committee Chairman Frank. The draft would ease trading and clearing requirements for derivatives dealers such as Morgan Stanley(MS) and Goldman Sachs Group Inc.(GS), compared with the administration’s proposal.

- Crude oil fell for the first time in three days in New York after a U.S. Energy Department report showed that inventories of gasoline and distillate fuel, a category that includes heating oil and diesel, increased. Gasoline supplies rose 2.94 million barrels to 214.4 million last week, almost three times the gain forecast by analysts in a Bloomberg News survey. Distillate stockpiles climbed 679,000 barrels to 171.8 million, the highest since January 1983. Oil also dropped as the rising dollar reduced the appeal of energy to investors looking for an inflation hedge. “This is a very bearish report,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “The product builds are significant and increase the cushion against any disruption. It takes uncertainty about refiners out of the equation.” The gain in gasoline supplies left stockpiles 6.9 percent higher than the five-year average for the period, according to the department. Distillate inventories are 30 percent above the five-year average for the week. Gasoline production climbed 3.5 percent to 9.42 million barrels a day in the week ended Oct. 2, the highest level since August 2008. Refineries operated at 85 percent of capacity last week, up 0.4 percentage point from the previous week. “Fundamentals are still weak,” BNP Paribas SA senior oil analyst Harry Tchilinguirian said in an interview with Bloomberg radio. “This year is going to end with a contraction in global demand. There have been positive supply surprises in places outside OPEC like Russia, and OPEC’s own compliance has slipped.” Nations outside of the Organization of Petroleum Exporting Countries will increase crude oil and other liquids production by 0.7 percent to 50.04 million barrels a day this year, as increased output in Brazil, the U.S., Azerbaijan, Kazakhstan and Canada offsets declines in Mexico and the North Sea, according the Energy Department’s monthly Short-Term Energy Outlook released yesterday.

- U.S. discount, grocery, restaurant and specialty chains hired a larger percentage of applicants in August for the eighth straight month, signaling the economy is stabilizing and may grow next year, Kronos Inc. said. Three of every 100 applications resulted in a hire in August, the highest level since merchants hired four of every 100 in December, according to Kronos’s analysis of 1.4 million job applications to 68 retailers. The increase “makes us confident that our numbers will continue to be stable, slowly increase, and then the general economy will follow that several months later,” Robert Yerex, Kronos’s chief economist, said by telephone yesterday from Beaverton, Oregon.

- At least 47 school-age children in Chicago have been killed in homicides, mostly by guns, since the month President Barack Obama took office. The latest youth homicide in his adopted hometown was different only in that the attackers used splintered railroad ties and were captured on video broadcast globally. The Sept. 24 attack prompted Obama to send his attorney general and education secretary to Chicago today after the killing tarnished the city’s drive to win the 2016 Olympics. Gun issues in Chicago will remain in the national spotlight following the U.S. Supreme Court’s Sept. 30 announcement that it will hear a challenge of the city’s handgun ban, implemented in 1982 to combat urban crime.

- Crude oil remains in a downtrend and will face multiple layers of resistance before any approach toward a September high of more than $73 a barrel, according to Societe Generale. Should prices break below $69.40 a barrel, “the correction will resume” to $67.50 and $66.20, Aymes said.

- 3M Co.(MMM), the maker of 55,000 products from Post-It Notes to face masks, will spend about $1 billion on acquisitions within the next 12 months, Chief Executive Officer George Buckley said. The company plans to make 10 to 20 purchases in different industries, Buckley said in an interview today after the opening of a 3M laboratory in Singapore.

- Retailers on EBay.com Inc.’s(EBAY) site had sales gains in August and September, the first increases since at least July 2008, according to ChannelAdvisor Corp., which helps merchants sell on EBay, Amazon.com and other sites. Same-store sales, or revenue for merchants selling for at least one year on EBay, gained 4.6% in August and 5.1% in September. Sales had declined every month since ChannelAdvisor started tracking its merchants on EBay 14 months ago. Analysts estimate that EBay’s sales rose less than 1% to $2.13 billion in the third quarter from a year earlier.

- Costco Wholesale Corp.(COST), the largest U.S. warehouse club, reported fourth-quarter profit that fell less than analysts estimated, sending the shares up 3.3 percent in Nasdaq trading.

- Amazon.com Inc.(AMZN) introduced an international version of its Kindle electronic reader that works in more than 100 countries and lowered the price of its U.S. version by $40 to $259. The international Kindle begins shipping Oct. 19 at a price of $279, Seattle-based Amazon.com said today. Until now, the device was only available in the U.S.

- Stocks are worth buying worldwide as a rebound in earnings ends a “Twilight Zone” of rising share prices and falling profits, according to Robert Buckland, a Citigroup Inc. global strategist. Although the MSCI World Index’s P/E ratio has increased to 24 times earnings from 9 times in March, it’s below the peaks in three previous profit slumps since 1989. The gauge reached 28 times to 33 times earnings as those periods ended. At 1.8 times book value, this ratio is lower than the average of 2.1 times since 1975.

Wall Street Journal:

- Demand for Long Term Evolution, or LTE, network equipment is likely to accelerate due to a continually strong need for fast data transfer, said Hakan Eriksson, Chief Technology Officer of L.M. Ericsson Telephone Co. (ERIC). "It's difficult to predict the pace of LTE implementation, but the new technology will become the industry standard," Eriksson told Dow Jones Newswires during an interview on the sidelines of the ITU (International Telecommunication Union) Telecom World conference here. First roll-out of LTE networks will start in 2010, Eriksson said.

- Federal Communications Commission Chairman Julius Genachowski told the wireless industry Wednesday that he intends to proceed with Internet openness rules for cellular carriers, despite some of the "unique congestion issues" posed by mobile Internet, according to his prepared remarks for a convention sponsored by CTIA-The Wireless Association.

- Democrats defeated an effort by Republicans to remove Rep. Charlie Rangel from his chairmanship of the influential Ways and Means Committee amid a congressional ethics investigation. Democrats blocked the anti-Rangel effort on a procedural motion that would have forced the New York Democrat to step down. The House later voted by a wide margin to refer the matter to the House Ethics Committee, a technical move given that the committee is already reviewing allegations of ethical lapses by Mr. Rangel. But in what could be the first signs of the weakening of support for Mr. Rangel among Democrats, two Democratic lawmakers broke with their party and voted with Republicans on the vote. The vote was the third time since July 2008 that the House has voted on a measure by Republicans to remove Mr. Rangel. This was the first time that any Democrat had voted with Republicans.

- The European Commission Wednesday warned nine countries, including Germany and Italy, that their budget deficits are too large, highlighting the broad damage the economic downturn has caused European Union governments. Under EU rules, countries must keep their budget deficits below 3% of gross domestic product.

- Qualcomm Inc.(QCOM), which is known more for cellphone chips than products sold to consumers, is betting that a new pocket-sized device will spur more interest in mobile TV.

CNBC:

- The two top Democrats in Congress will meet with President Barack Obama at the White House on Wednesday to explore ways to stimulate the U.S. economy, including a possible job-creation tax cut.

NY Times:

- YouTube appears to be mastering the art of turning video piracy into revenue for itself and its partners. For years, the clips of television shows, music videos and other copyrighted content that users uploaded to YouTube without permission were a source of tension between Google(GOOG), which owns YouTube, and media companies, which owned the copyrights. But since last year, a growing number of media companies have stopped insisting that YouTube take down those unauthorized clips. Instead, they are choosing to claim the videos as their own, and allowing YouTube to sell advertising when people watch them. The revenue is split between YouTube and the content owners.

Boston Globe:

- Commercial real estate powerhouse CB Richard Ellis/New England is launching a venture with one of the region’s largest players in retail leasing, with the two trying to capitalize on an economic rebound that will probably lead to new property redevelopments and store openings over the next few years. CB Richard Ellis is forming a joint venture with Grossman Commercial Real Estate Group, whose principals have represented Puma, Linens ‘N Things, and CVS drugstores.The new entity, to be called CBRE/Grossman Retail Advisors, should be a formidable player in the region’s retail market. Principals said the current slowdown presented an unusual opportunity to join forces, allowing them to create new business now and expand as retailers emerge from the doldrums to scout new locations.“Our expectation is that we’re hitting the ground running at the right point in the curve,’’ said Kevin M. Doyle, co-managing partner for CBRE/New England. “We see a lot of opportunities for retailers, and that will grow in the future.’’

San Francisco Chronicle:

- As the search wars continue, new numbers are in showing that Microsoft's(MSFT) Bing slipped while Google(GOOG) inched further ahead last month. Google's search accounted for 71.08% of all U.S. searches conducted between September and October, said the Internet monitoring firm Hitwise. That's a 1% market share increase for Google, Hitwise reported late on Tuesday. Google's latest search rival, Bing, didn't have as good a month, though. Unveiled in June, Bing slipped 5%, going from 9.48% in September to 8.96% of the market early in October. Holding in second place, Yahoo Search dropped 3%, going from 16.96% to 16.38%.

Politico:

- Like most Americans, members of the House are expected to report promptly — no excuses — when summoned by their bosses for the start of another workweek. One difference: For lawmakers, starting time doesn’t come until about 6:30 Tuesday evening. After taking control of the House in 2006 — and again when President Barack Obama was elected president in 2008 — Majority Leader Steny Hoyer (D-Md.) boasted that lawmakers would work four or five days a week to bring change to America. But midway through Obama’s first year in office, Hoyer’s House has settled into a more leisurely routine. Members usually arrive for the first vote of the week as the sun sets on Tuesdays, and they’re usually headed back home before it goes down again on Thursdays. Since the House returned for its fall session on Sept. 8, it has stuck around to vote on a Friday just once: to approve a 5.8 percent increase in Congress’s own budget.

Washington Times:

- Nearly $1 million in Homeland Security funding typically earmarked for fire departments has been awarded to ACORN, despite a clear signal from Congress that it intends to cut off federal funding to the embattled group. The grant to ACORN's Louisiana office became public on Oct. 2, less than three weeks after the House and Senate voted to cut off ACORN funding after employees were caught on video advising a fake prostitute and pimp on scams. It was one of only three such grants issued to the state and made up almost 80 percent of the firefighting money earmarked for Louisiana, prompting one of the U.S. senators from the state to demand that the funds be taken back.

Reuters:

- Google Inc (GOOG) Chief Executive Eric Schmidt said on Wednesday that the worst of the advertising recession was over, and pointed to signs of a recovery in both Europe and the United States. Speaking to a group of reporters in New York, Schmidt said that Google, the largest U.S. Internet search engine, had increased its hiring and investment in anticipation of a recovery. "The worst is behind us," he said. "We're clearly seeing aspects of recovery, not just in the U.S. but also Europe." Google first started to see signs of a recovery in May and June, Schmidt said, following a period in which the slump in advertising spending undercut the company's revenue growth and the price of its search ads.

- The Obama administration's latest effort to boost the beleaguered housing market is likely to help mortgage insurers as lower defaults will boost their liquidity. The new program aims to provide as much as $35 billion to state housing finance agencies, which provide low-cost mortgages to potential homebuyers with low to moderate incomes. As part of the program, government-controlled housing finance giants Fannie Mae and Freddie Mac, together with the U.S. Treasury, will buy as much as $20 billion of bonds issued by the housing finance agencies. The efforts of the U.S. government to reduce defaults and let homeowners keep their homes will help entities like MGIC Investment Corp (MTG), Radian Group Inc (RDN) and PMI Group Inc (PMI) to lower the claims that they pay out on defaults.

- British bank Barclays could acquire a wealth management business at least the size of Julius Baer to meet its target of ranking in the top five private banks globally, Barclays Wealth's vice chairman said on Wednesday. Speaking at the Reuters Global Wealth Management Summit in Geneva, Gerard Aquilina said the group would be prepared to acquire an entity the size of Julius Baer "or bigger," to reach the target set by the unit's Chief Executive Tom Kalaris earier this year. "There could be a major transformational buy for us," he said.

Financial Times:

- The sharp fall in the US dollar is giving ammunition to the critics of the Obama administration and fuelling broader concerns about the erosion of America’s reserve currency status. Republican politicians have highlighted the dollar’s slide as evidence of waning US power. On Wednesday, Sarah Palin, the Republican former vice-presidential candidate, added her voice to those who have expressed concern over the consequences of rising US indebtedness and dependence on foreign oil. “We can see the effect of this in the price of gold, which hit a record high today in response to fears about the weakened dollar,” she wrote on her Facebook site.

DigiTimes:

- Foxconn Electronics (Hon Hai Precision Industry) will be the manufacturing partner for an upcoming tablet PC device from Apple, according to market sources. The device is expected to hit the market in the first quarter of 2010, with initial shipments from Foxconn being in the 300,000-400,000 range, the sources said. The device will have a 10.6-inch display, and the sources speculated that perhaps Foxconn could secure panels from its subsidiary Innolux Display. The sources indicated they believe the tablet PC features will focus more on e-book functionality rather than music, and that based on Apple's marketing strategy, long battery life, quick Internet connectivity and an easy-to-use user interface will be key features of the device.

Bear Radar

Posted by Gary .....at 2:17 PM

Style Underperformer:
Small-Cap Value (-.50%)

Sector Underperformers:
Telecom (-2.97%), Homebuilders (-1.59%) and Gold (-1.26%)

Stocks Falling on Unusual Volume:
VIP, SDXC, ORLY, PPD and O

Stocks With Unusual Put Option Activity:
1) SNV 2) FDO 3) YUM 4) GMCR 5) AMX