Friday Watch

Late-Night Headlines
Bloomberg:

- The dollar rose against the yen for the first time in five days after Federal Reserve Chairman Ben S. Bernanke said the U.S. central bank is ready to “tighten” monetary policy, increasing the appeal of U.S. assets. “Bernanke is shifting to a hawkish tone in terms of the timing of exit strategy following moves by other central banks, especially the Reserve Bank of Australia,” said Takeshi Tokita, vice president of foreign exchange sales at Mizuho Corporate Bank Ltd. in Tokyo. “That’s benefiting the dollar.”

- Following is a comparison of the top political donors from the 1989-2010 election cycle to political party as compiled by the Center for Responsive Politics. The last column is the difference in a firm’s average percentage of donations to Democrats from the 1989 to 2010 cycles compared to its 2010 cycle only donation. For example, Goldman Sachs(GS) has increased its percentage of donations from 64 percent to democrats to 75 percent in the latest cycle only.

- White House economic adviser Lawrence Summers repeated the administration’s commitment to a strong dollar, citing recent comments by U.S. Treasury Secretary Timothy Geithner. “He made it very clear that our commitment is to a strong dollar based on strong fundamentals,” Summers said today at a forum in New York organized by Bloomberg LP, the parent of Bloomberg News.

- Billionaire James Simons, founder of hedge-fund firm Renaissance Technologies Corp., plans to retire as chief executive officer by the end of the year. Bob Mercer and Peter Brown, the current co-presidents of the East Setauket, New York-based firm, will take over as co- CEOs on Jan. 1, 2010, according to a letter sent to investors today. Simons, 71, will stay on as non-executive chairman. Simons’s Renaissance Institutional Equities Fund, known as RIEF, fell 9.5 percent this year through September, while his Renaissance Institutional Futures Fund, or RIFF, gained 1.6 percent, the person said.

- Crude oil dropped in New York, paring a 3 percent gain yesterday as the dollar climbed against the euro, fueling skepticism about the pace of recovery in the biggest energy consuming nation. Oil fell as the U.S. currency rose against the yen and euro after Federal Reserve Chairman Ben S. Bernanke said the central bank will be prepared to tighten monetary policy once the economic outlook has improved “sufficiently.”

- General Motors Co., Toyota Motor Corp. and other automakers want to sell consumers electric cars powered by hydrogen within six years. Their plans clash with the U.S. government’s infrastructure priorities.

- BP Plc, Europe’s second-largest oil company, may invest as much as $20 billion with partners in Iraq as it seeks to boost crude output at the Rumaila deposit. BP may spend between $10 billion and $20 billion on the southern Iraqi field after signing a preliminary contract today with Iraq and China National Petroleum Corp., Chief Executive Officer Tony Hayward told reporters today in Buenos Aires. Iraqi Oil Minister Hussain al-Shahristani wants output from Rumaila to triple in the next six years as the country seeks partners to develop its crude deposits. BP and CNPC, the only winners in an auction of oilfield service contracts in June, will have to boost production to 2.85 million barrels a day from the current 950,000 barrels, the Iraqi government said July 22. “The number I have talked about is between 15 and 20 percent,” Hayward said of potential returns on the project.

- Rising industrial production and a rebound in U.S. employment will push stocks higher around the world, according to Absolute Strategy Research Ltd., the London- based firm that told clients to buy shares in March.

- The U.S. House gave final approval to legislation adding gays to the list of groups covered by federal hate-crime laws in the biggest expansion of such protection in decades. The expansion was part of a defense policy measure that passed the chamber 281 to 146. The bill would give the Justice Department authority to prosecute crimes based on prejudice against a victim’s sexual orientation, gender or gender identity when local law enforcement authorities don’t act.

- The 27-nation European Union is trying to replace the Kyoto Protocol global warming agreement at United Nations global warming negotiations in Bangkok, Saudi Arabian and Sudanese delegates said.Saudi Arabia’s lead negotiator, said in an interview today in Bangkok. Envoys from the EU, a party to the 1997 climate-protection agreement, are giving up on renewing it during the climate talks.

Wall Street Journal:

- Treasury Secretary Timothy Geithner has kept frequent contact with an exclusive group of Wall Street executives since taking the helm at Treasury, speaking most often with top officials from Goldman Sachs Group, Inc., JPMorgan Chase & Co., Citigroup Inc. and Blackrock Inc. Calendars released by the Treasury Department in response to a Wall Street Journal Freedom of Information Act request show more than 80 contacts between Mr. Geithner and financial titans such as Lloyd Blankfein of Goldman Sachs, James Dimon of JPMorgan, Citigroup Chairman Richard Parsons and Laurence Fink of Blackrock from January through July. Although it's to be expected that a Treasury secretary would talk to bankers frequently amid a financial crisis, the disclosure of Mr. Geithner's contact with top bankers could prove tricky for an administration that has tried to distance itself from the industry. Mr. Geithner has a reputation among some as Wall Street's man in Washington. "I don't mind that he's talking to Wall Street. The problem is that he appears to be listening," said Rep. Brad Sherman (D., Calif.), a critic of the administration's proposed overhaul of financial rules. The Wall Street name that pops up most frequently on Mr. Geithner's calendar is that of Goldman's Mr. Blankfein, whose bank repaid $10 billion in bailout funds this summer. (JPMorgan has also repaid its bailout funds.) Mr. Blankfein's name appears 22 times on the calendar, including two in-person meetings and, on May 1, three phone calls. That was around the time the government was preparing to announce results of its so-called stress tests of banks' financial strength. The two men know each other from Mr. Geithner's days as president of the Federal Reserve Bank of New York.

- Nearly two years after she became one of the highest-profile early casualties of the credit crisis, Zoe Cruz is working on plans to launch a hedge-fund firm, according to people familiar with the situation. The 54-year-old former Morgan Stanley co-president has begun recruiting employees to join a firm she plans to call Voras Capital Management, these people said.

- Washington spent the week waiting for the Congressional Budget Office to roll in with its new cost estimates of the Senate health-care bill, and what a carnival. Behold: a new $829 billion entitlement that will subsidize insurance for tens of millions of people—and reduce deficits by $81 billion at the same time. In the next tent, see the mermaid and a two-headed cow.

- Chevron Corp.(CVX) is employing new technologies in hopes of extending the life of one of the world's oldest and most prolific oil fields, a process that is being replicated elsewhere to help the energy industry squeeze more out of aging oil basins. The Kern River field has produced more than 2 billion barrels of oil in its 110-year history, but Chevron estimates it still holds another 1.5 billion barrels. Chevron is using the Kern River field as a real-world laboratory, testing enhanced recovery techniques and bringing in engineers from around the world to learn them.

- U.S. airlines and their unions have joined forces to push the Federal Aviation Administration to let pilots do what was once unthinkable: sleep on the job. Though the practice of nodding off midflight in the cockpit is now strictly forbidden by the FAA, U.S. airlines and pilot unions say there is reputable research supporting the notion that so-called controlled napping can enhance safety by making crews more alert during critical, often hectic descents and landings.

- A Senate panel backed a new version of counterterrorism measures, but the closer-than-expected 11-8 vote highlighted troubles that the Obama administration faces in trying to notch a rare bipartisan win in Congress. The Senate Judiciary Committee voted Thursday to extend to 2013 three provisions of the USA Patriot Act, but with modifications that supporters said would improve privacy protections for Americans.

- The request for troops sent to President Barack Obama by the top U.S. commander in Afghanistan includes three different options, with the largest alternative including a request for more than 60,000 troops, according to a U.S. official familiar with the document. Although the top option is more than the 40,000 soldiers previously understood to be the top troop total sought by Gen. Stanley McChrystal, the top U.S. officer in Kabul, 40,000 remains the primary choice of senior military brass, including Gen. McChrystal, the official said.

CNBC.com:
- The Obama Posse is hellbent-for-leather on a misguided crusade to rein in the one clear growth engine of the American manufacturing economy: high-tech. There's no other way to explain the news today that IBM is in the cross-hairs of Justice Department anti-trust cops, who are suspicious of the grip it holds over a dinosaur business: mainframe computers.

NY Times:

- Fissures are developing among policy makers at the Federal Reserve as they debate how and when to start raising the benchmark interest rate from its current level just above zero. With Fed officials forecasting that unemployment will average 9.8 percent in 2010, nobody appears to be arguing that monetary policy should be tightened anytime soon. The central bank’s official mantra continues to be that the overnight federal funds rate will remain “exceptionally low” for “an extended period.” But Fed officials have hinted at new disagreement in recent weeks. The arguments go beyond the traditional split between hawks, who worry that easy money will stoke inflation, and doves, who contend that unemployment is the top problem.

- The Department of the Interior has frozen oil and gas development on 60 of 77 contested drilling sites in Utah, saying the process of leasing the land was rushed and badly flawed. The 77 government-owned parcels, covering some 100,000 acres in eastern and southern Utah, were leased in the last weeks of the Bush administration. But the leases were immediately challenged by conservation groups, and in January a federal judge blocked drilling on the ground that the Interior Department had failed to follow its own procedures for reviewing the appropriateness of lands designated for oil and gas extraction.

IBD:

- As electronics products get smaller, business for Tessera Technologies (TSRA) gets bigger. San Jose, Calif.-based Tessera plays a key role in the miniaturization of electronics.

Washington Post:

- The latest Washington Post poll of the Virginia gubernatorial race represents more than bad news for Democratic nominee R. Creigh Deeds. The findings paint a portrait of the electorate that, if replicated elsewhere, stands as a warning sign for President Obama and Democrats who will be running in next year's midterm elections. The poll shows a lack of enthusiasm among many of the voters who propelled Obama and his party to victory last November, raising troubling questions for the Democrats: Were many of Obama's 2008 energetic supporters one-time participants in the political process who care little about other races? Is Obama's current agenda turning off some voters who backed him last year but now might be looking elsewhere?

Politico:

- In his trademark gravelly New York brogue, Charlie Rangel has been known to say: “I’ll be with you ‘til I can’t be with you.” Now, even some Democrats who have stuck with him through his messy financial problems are beginning to wonder if they can’t stick with him anymore. The House ethics committee expanded a sprawling investigation into Rangel Thursday, digging into allegations stemming from an August restatement of his personal finances, in which he under reported hundreds of thousands of dollars in assets. The ethics committee action – which was unanimous — came a day after House Democrats turned back a Republican attempt to force Rangel from his Ways and Means chairmanship while the investigation, now in its second year, is completed. “There’s growing concern at the piling up here of issues,” said one Democratic lawmaker who asked not to be identified talking about Rangel. “People are willing to give some time to the process, but not an infinite amount of time. There will come a time, if this goes unresolved, when the drip, drip, drip will become a torrent.”

- House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid emerged from the White House Tuesday with broad, bicameral smiles — until Reid put his arm around Pelosi to announce that “everyone” would support “whatever” Afghanistan policy the president produces. Pelosi doesn’t agree with that — not at all — and the TV cameras captured the California Democrat rolling her eyes and slightly recoiling from Reid’s grasp as he spoke. Back at the Capitol, Pelosi made it clear to staff that she was angry about Reid's unilateral offer of unequivocal support, a person familiar with the situation said.

Philly Business Journal:

- Four financial institutions accused of assisting now-defunct payday lender American Business Financial Services in perpetuating a Ponzi scheme agreed to pay $100 million late Wednesday to settle the case. The agreement between ABFS’s bankruptcy trustee, George Miller, and financial service firms J.P. Morgan, Bear Stearns(now part of J.P. Morgan), Credit Suisse and Morgan Stanley in Philadelphia’s Common Pleas Court is the latest in a series of agreements.

Reuters:

- Shares of Wynn Macau (1128.HK), the Asia unit of U.S. casino giant Wynn Resorts (WYNN), rose 13 percent in their trading debut, defying expectations, as Hong Kong feted its first IPO of a top global brand in years.

- The Federal Reserve will keep interest rates very low as the recovery gathers steam, but must raise them once the economy is back on solid ground, a top Fed official said on Thursday.

Financial Times:

- Asian central banks intervened heavily in the currency markets on Thursday to stem the appreciation of their currencies against the US dollar amid fears that their exports could be losing ground against China. The mainly south-east Asian countries have been spurred to defend the competitiveness of their currencies by China’s decision to in effect re-peg the renminbi to the dollar since July last year. Simon Derrick, at Bank of New York Mellon in London, said: “Other Asian central banks outside China are naturally looking to aggressively defend their competitive edge against undesirable currency strength as the dollar weakens.” ean-Claude Trichet, European Central Bank president, issued a warning about the euro’s strength on Thursday and said that authorities on both sides of the Atlantic would “co-operate as appropriate”.Marco Annunziata, chief economist at Unicredit, said: “He clearly tried to signal as convincingly as possible that the eurozone and the US are united in the desire to limit the rise in the euro versus the dollar – but the market is calling his bluff.”

- Leading Democrats made a renewed drive on Thursday for a “public option” as a Senate panel scheduled a key vote on its pivotal $829bn reform plan next Tuesday. Nancy Pelosi, the Democratic speaker of the House of Representatives, also floated the idea of a windfall tax on health insurers on Thursday, sparking a drop in the share prices of companies in the sector. “Let me say that I believe that all of the participants, whether it’s the insurance companies or the pharmaceutical industries, have much more they can put on the table to help reduce cost and take us in a downward direction, in terms of spending on this healthcare bill,” she added. Chuck Schumer, senator for New York and a senior member of the finance committee, which has drafted a key moderate bill, said he would push for a compromise public option – a government-controlled health insurance scheme – to be included when the debate eventually moved to the Senate floor.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (MAR), target $29.

- Reiterated Buy on (COH), target raised to $39.

- Reiterated Buy on (JCP), target $43.

Night Trading
Asian Indices are -.25% to +1.25% on average.

Asia Ex-Japan Inv Grade CDS Index 103.5 -4.0 basis points.
S&P 500 futures -.13%.
NASDAQ 100 futures -.36%.

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
- (INFY)/.50

Economic Releases

8:30 pm EST

- The Trade Deficit for August is estimated to widen to -$33.0B versus -$32.0B in July.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Fed’s Kohn speaking, Fed’s Lockhart speaking, USDA crop report could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and automaker shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Finish Higher, Boosted by Commodity, Homebuilding, Hospital and Gaming Shares

Evening Review
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 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