Stocks Higher into Final Hour on Diminishing Economic Fear, Short-Covering, Earnings Optimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Medical longs and Financial longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is about average. Investor anxiety is high. Today’s overall market action is bullish. The VIX is falling 1.34% and is high at 24.39. The ISE Sentiment Index is around average at 144.0 and the total put/call is slightly below average at .68. Finally, the NYSE Arms has been running around average most of the day, hitting 1.23 at its intraday peak, and is currently 1.21. The Euro Financial Sector Credit Default Swap Index is rising +1.54% today to 73.66 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 falling 1.37% to 103.57 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is unch. at 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 +.37% to 33.81 basis points. The Libor-OIS spread is unch. at 13 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up 4 basis points to 1.79%, which is down 88 basis points since July 7th. The 3-month T-Bill is yielding .05%, which is unch. today. Cyclical and small-cap shares are substantially outperforming the broad market today. Coal, Oil Tanker, Oil Service, Steel, Paper, Hospital and Homebuilding shares are especially strong, jumping 3%+ today. The AAII % Bulls fell to 35.0 this week, while the % Bears rose to 41.0, which is a big positive. At this point, the modest rise in the 10-year yield should not be perceived as a negative. On the negative side, (XLF) is trading at session lows and is unch. on the day despite some positive catalysts. As well, breadth in market leading stocks is only mediocre. After the surge over the last four days, stocks are due for a pause before another move higher commences. Nikkei futures indicate an +80 open in Japan and DAX futures indicate an unch. open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking, more shorting, higher long-term rates, rising energy prices and healthcare reform worries.

Today's Headlines

Bloomberg:

- Mortgage rates for 30-year fixed U.S. home loans fell for the second consecutive week, pushing borrowing costs to near record lows. The average U.S. 30-year rate dropped to 4.87 percent from 4.94 percent last week. The 15-year rate was 4.33 percent, mortgage buyer Freddie Mac of McLean, Virginia, said today in a statement. Falling rates helped boost home-loan applications last week to the highest level since May. The Mortgage Bankers Association’s index of applications to purchase a home or refinance rose 16 percent. Rates around 5 percent, slumping home prices and a government tax credit for first-time homebuyers are bolstering demand for housing.

- Essent Guaranty Inc. agreed to buy assets and hire workers from money-losing mortgage insurer Triad Guaranty Inc. as the new firm backed by JPMorgan Chase & Co(JPM) and Goldman Sachs Group Inc.(GS) seeks a foothold in the housing market.

- European Central Bank President Jean- Claude Trichet signaled the bank will keep interest rates at a record low to stimulate growth as the euro’s appreciation threatens to undermine the economic recovery. “The current rates remain appropriate,” Trichet said at a press conference in Venice after ECB policy makers left the benchmark lending rate at 1 percent. “Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability,” he said, repeating the Group of Seven’s mantra on currencies. The euro has surged 18 percent against the greenback since February, eroding export returns just as Europe emerges from its worst recession since World War II. The ECB “continued to signal a cautious stance about recent signs of recovery, implying that it would not be raising interest rates any time soon,” said Nick Kounis, an economist at Fortis Bank Nederland NV in Amsterdam. “At current levels, the situation is becoming very difficult for all industrial companies that have their costs in euros,” Airbus SAS Chief Operating Officer Fabrice Bregier said in Paris today. “We can only appeal to monetary authorities to ensure currency stability.”

- The number of Americans filing first- time claims for unemployment benefits fell last week to the lowest since January, a sign the labor market is deteriorating more slowly as the economy emerges from the recession. Applications fell by 33,000 to 521,000, lower than forecast, in the week ended Oct. 3, from a revised 554,000 the week before, Labor Department data showed today in Washington. The total number of people collecting unemployment insurance dropped in the prior week to the least since March. “Companies are now in a situation where they’ve cut enough jobs, but they’re still not hiring enough,” said Harm Bandholz, a U.S. economist at UniCredit Global Research in New York. The jobless claims report showed the four-week moving average of initial applications, a less volatile measure, fell to 539,750 last week from 548,750. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, decreased to 4.5 percent in the week ended Sept. 26, from 4.6 percent the prior week.

- Inventories at U.S. wholesalers dropped in August for a 12th consecutive month, clearing the way for a pickup in orders as sales improve. The 1.3 percent decrease in stockpiles was larger than anticipated and followed a revised 1.6 percent drop in July, figures from the Commerce Department showed today in Washington. Wholesale inventories have had the longest series of declines since records began in 1992. Sales climbed 1 percent, the biggest gain since June 2008. Distributors will likely increase bookings after companies drew down inventories at a record pace in the first half of the year. The gains may give the world’s largest economy a boost in the early stages of a recovery as American factories rev up assembly lines to prevent stockpiles from dwindling even more. “The degree of decline has been extreme and will likely slow in coming months,” said Guy LeBas, chief economist and fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. At the current sales pace, it would take 1.2 months for wholesalers to deplete the amount of goods on hand, the lowest level since September 2008. The reading was as low as 1.1 months in June 2008.

- A suicide car bombing outside India’s Embassy in the Afghan capital, Kabul, killed 17 people and wounded 73 in the second attack to hit the mission in 15 months. The attackers “came up to the outside perimeter wall of the embassy with a car loaded with explosives, obviously with the aim of targeting the embassy,” Indian Foreign Secretary Nirupama Rao told journalists in India.

- U.S. President Barack Obama faces “more than an embarrassment” should his nation fail to lead international negotiations to complete a new climate-protection treaty by December, a senior European climate negotiator said.

- House Speaker Nancy Pelosi said Congress will consider extending the tax credit for first-time home buyers, currently set to expire Dec. 1.

- U.S. retail sales rose for the first time in 13 months as September results at American Eagle Outfitters Inc. and Kohl’s Corp. topped analysts’ estimates and discounts drew shoppers back to stores. Sales at U.S. chains open at least a year climbed 1.1 percent last month, according to Swampscott, Massachusetts-based Retail Metrics Inc. Seventy percent of retailers reported sales results that exceeded the average of estimates compiled by Retail Metrics, said Ken Perkins, president of the researcher.

- Corporate borrowing in the U.S. commercial paper market expanded the most in almost a year as the economy showed signs of recovering from the longest recession since the 1930s. Unsecured commercial paper outstanding climbed $67.6 billion, or 5.5 percent, to a seasonally adjusted $1.3 trillion in the week ended Oct. 7, the highest since May 6, the Federal Reserve said today on its Web site. That’s the biggest percentage increase since the Fed began buying commercial paper directly from companies at the end of October 2008. “As the pace of inventory liquidation continues to recede, economic recovery continues to broaden and employment levels are reduced at a slower pace, the need for CP should continue to increase validating, for now, the turn in economic output,” Dan Greenhaus, chief economic strategist at Miller Tabak & Co. in New York, wrote today in a note to clients.

Wall Street Journal:

- German semiconductor maker Infineon Technologies AG (IFX.XE) is raising production capacity at its Dresden plant in response to growing demand, a company spokesman said Thursday.

- Iraq hopes to award the licenses for its West Qurna-1 and Zubair oil fields in the south of the country by the end of October or early November, a senior Iraqi Oil Ministry official said Thursday. Abdul Mahdy al-Ameedi said several of the international oil companies that bid for the two fields during the country's first bidding round in June had recently accepted the ministry's payment offers.

- French telecoms and media company Vivendi SA would like to sell its 20% stake in NBC Universal this year, according to people familiar with the matter. But a final decision won't be made until at least mid-November and will depend on whether Vivendi can get a good price, the people say, leaving the fate of the movie and television company in limbo.

- The Senate Finance Committee will vote next Tuesday on an $829 billion health-care bill, after months of efforts to gain consensus on the broad-ranging overhaul measure. The bill has been shepherded by Finance Chairman Max Baucus through lengthy negotiations since early spring, and the Montana Democrat himself has been working intensively on the issue for more than a year. Senate Majority Leader Harry Reid said the vote on the bill would take place Tuesday, which Senate aides confirmed.

- Richard Fisher is the outspoken president of the Federal Reserve Bank of Dallas, and part of the hawkish wing of the central bank’s Federal Open Market Committee. We caught up with him recently and asked him to size up the global economy and the atmosphere at the Fed.

Washington Post:

- In the coming year's military spending bill, members of a House panel continue to steer lucrative defense contracts to companies represented by their former staffers, who in turn steer generous campaign donations to those lawmakers, a new analysis has found. The Center for Public Integrity found that 10 of the 16 members of the House subcommittee on defense appropriations obtained 30 earmarks in the bill worth $103 million for contractors currently or recently employing former staffers who have become lobbyists. The analysis by the Washington watchdog group found that earmarks still often hinge on a web of connections, despite at least three criminal investigations of the practice that became public in the past year. Those probes focus on a handful of defense contractors and a powerful lobbying firm that together won hundreds of millions of dollars in work from the House panel and are closely tied to its chairman, Rep. John P. Murtha (D-Pa.).

- After three years of major increases in federal Pell grants for needy college students, President Obama aims to boost the aid further with $40 billion in funding over the next decade.

AP:

- A federal grand jury has indicted a Jordanian teen accused of trying to blow up a Dallas skyscraper with what he thought was a car bomb, federal prosecutors said Thursday. Hosam Maher Smadi, 19, was indicted Wednesday on one count of attempting to use of a weapon of mass destruction and one count of bombing a public place, but the charges were not made public until Thursday. Each count carries a maximum sentence of life in prison, the U.S. Attorney's Office said. Smadi was arrested on Sept. 24 after he allegedly parked a truck in a garage beneath the 60-story Fountain Place office building in downtown Dallas, authorities said. Once he was at a safe distance, Smadi dialed a cell phone he thought would ignite a bomb in the vehicle — but the device was actually a decoy provided by FBI agents posing as al-Qaida operatives, according to the FBI.

Rassmussen:

- 72% Expect Tax Hikes For Those Who Make Less Than $250,000. (video)

- House Speaker Nancy Pelosi floated the idea of a national sales tax in a recent television interview, but a new Rasmussen Reports national telephone survey shows that 67% oppose a national sales tax on all goods and services. Twenty percent (20%) favor such a tax.

Politico:

- The U.S. Chamber of Commerce fired back at critics on Thursday, after a series of defections by member companies angry over the business lobby’s opposition to climate change legislation. “The only regrets we have is that we maybe have not always used the right language,” Chamber CEO Tom Donohue told reporters. “We don’t have regrets about our position and we don’t intend to change it.” He blamed the resignations on an “orchestrated pressure campaign” by environmental groups, refusing to name specific organizations at fault. Progressive investor groups and others have been encouraging companies that support a cap and trade system to leave the business lobby. The chamber says it supports “federal legislation to control and reduce greenhouse gas emissions” and could support a cap and trade system – just not the one passed by the House earlier this year. And they’ve threatened to sue the Environmental Protection Agency, if the agency doesn’t hold a public debate on a plan to regulate greenhouse gases.

- For American officials, the possibility of the dollar losing its long-term dominance in global commerce is a nightmare scenario, because it would likely mean sharply higher interest rates at home, and a declining ability to finance the U.S. debt. No one believes it could really happen right now, but stories like the British report this week make it seem incrementally more likely.

Washington Times:

- Cities and states are spending near-record amounts to retain their expensive cadres of Washington lobbyists, even as the worst economic recession in a generation prompts layoffs, mounting deficits and falling property-tax revenues. States and localities are on track to spend a combined $83.1 million in taxpayer money this year on Washington lobbyists, the second straight recession year to top the previously unbroached $80 million barrier, according to the nonpartisan Center for Responsive Politics. By comparison, officials spent less than half that much - $38.5 million - lobbying Washington in 2001.

USAToday:

- The Federal Reserve is likely this month to introduce guidelines to curb reckless pay packages in banking. The Fed will look beyond the executive suite and peer deep inside big banks, to the trading floors where individual traders place huge bets and into the cubicles where loan officers are paid for the quantity, not the quality, of mortgages they generate. "Incentive problems may have been more severe a few levels down the management structure than for chief executive officers and other top managers," Scott Alvarez, the Fed's general counsel, told Congress this year. "Poorly designed compensation arrangements for business-line employees, such as mortgage brokers, investment bankers and traders, may create substantial risks." The Fed's guidance to the banks "will apply not only to the top five or 10 executives but way down into the organization — to traders or anybody whose activities can affect the risk profile of the company," Fed Chairman Ben Bernanke told Congress last week.

Reuters:

- U.S. Democrats are looking at the possibility of a windfall profits tax on insurance companies as part of healthcare reform, House of Representatives Speaker Nancy Pelosi said on Thursday. Pelosi said she had asked House Ways and Means Committee chairman Charles Rangel to examine the possibility and report back to her.

- Morgan Stanley (MS) likely broke a string of three straight losses in the third quarter, while chief rival Goldman Sachs Group Inc (GS) extended its dominance. The growing mismatch between the last two big names on Wall Street is illustrated by analysts' forecasts: Goldman earnings are expected to more than double, while Morgan Stanley is seen just eking out a profit, lagging far behind its year-earlier results.

- The U.S. government sold $12 billion worth of 30-year debt on Thursday, the Treasury said, in an auction that attracted soft demand and ended a $78 billion week of coupon securities offerings on a weak note. The auction was a reopening of securities originally issued on August 17. Overall demand was weak based on the bid-to-cover ratio of 2.37 times the amount on offer, below the average of 2.49 at the five reopenings that took place within the past year.

Telegraph:

- YouTube and Channel 4 are on the brink of signing a landmark content deal which will see the majority of the broadcaster’s content hosted in full on the video sharing site.

Bear Radar

Style Underperformer:
Large-Cap Value (+.64%)

Sector Underperformers:
HMOs (-3.79%), Telecom (-.76%) and Wireless (-.22%)

Stocks Falling on Unusual Volume:
WLP, HUM, BRCM, SMSC, FNF, TRGT, GYMB, RINO, FORM, SVNT, TKTM, CIEN, AMAG, STC, NCR, LAD, BKS and LLL

Stocks With Unusual Put Option Activity:
1) CENX 2) WFT 3) USU 4) WMB 5) WLP

Bull Radar

Style Outperformer:
Small-Cap Value (+2.15%)

Sector Outperformers:
Homebuilders (+4.58%), Gaming (+3.64%) and Airlines (+3.22%)

Stocks Rising on Unusual Volume:
CLF, CRZO, NXY, ABB, JDAS, ANSS, TIE, TKS, COP, CKP, CSIQ, VECO, TXIC, TSCO, CYBS, CPKI, GIII, TLVT, CENX, FIRE, LINE, ACIW, GOLD, SCSC, VLCCF, LIHR, ZUMZ, LPNT, GOOG, KALU, AA, ARL, CBD, BDC, WTM, CMN, GDI, PVD and BYI

Stocks With Unusual Call Option Activity:
1) BRCD 2) CAR 3) LIZ 4) ARO 5) STI

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Thursday Watch

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.