Bear Radar

Style Underperformer:
Small-Cap Value (-1.41%)

Sector Underperformers:
Computer Services (-3.53%), Banks (-2.72%) and Steel (-2.27%)

Stocks Falling on Unusual Volume:
IBM, FORM, WFC, BAC, GE, MRVL, TLVT, ARB, WBD, PMTI, GBCI, UFPI, SGMS, ROVI, SXT, VMI, AOS and TDY

Stocks With Unusual Put Option Activity:
1) VMED 2) AMP 3) EL 4) SO 5) RDN

Bull Radar

Style Outperformer:
Large-Cap Growth (-.68%)

Sector Outperformers:
Gold (+1.24%), Oil Tankers (+1.18%) and Restaurants (-.13%)

Stocks Rising on Unusual Volume:
ADS, EL, MAT, GOOG, GOLD, HAS, TRGT, KNXA, NTRI, BEXP, ICLR, LCAPA, CME, APSG, RINO, CYT and TPX

Stocks With Unusual Call Option Activity:
1) SHAW 2) CMA 3) DRIV 4) RDN 5) TOL

Trading Links

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Morningstar Style Performance
Sector Performance
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
Chart Toppers
CNBC Real-Time Intraday Quote/Chart
HFR Global Hedge Fund Indices

Friday Watch

Late-Night Headlines
Bloomberg:

- Google Inc.(GOOG) reported profit and sales that beat analysts’ estimates after the recovering economy boosted demand for online ads and e-commerce. The shares gained in late trading. Net income rose 27 percent to $1.64 billion, or $5.13 a share, from $1.29 billion, or $4.06, a year earlier, the company said today in a statement. Excluding revenue passed on to partner sites, sales were $4.38 billion, compared with an estimate of $4.25 billion in a Bloomberg survey of analysts. Chief Executive Officer Eric Schmidt said today that the worst of the recession has passed and the company has “the confidence to be optimistic.” Google also is keeping a tighter rein on its expenses and headcount, said Janco Partners Inc.’s Martin Pyykkonen.

- International Business Machines Corp.(IBM) dropped in extended trading after new contract signings declined last quarter, a sign that customers aren’t yet ready to increase spending as the economy begins to recover. Signed services contracts, an indicator of future business, dropped 7 percent to $11.8 billion, the Armonk, New York-based company said today in a statement. That marks the smallest level of services signings in six quarters. Signed consulting and systems integration contracts declined 16 percent.

- Hedge-fund firms went on a hiring binge in late August and September as they sought to rebuild assets under management after the industry’s worst year, according to Heidrick & Struggles International Inc. Much of the demand was for sales and marketing executives who can help funds woo investors, the Chicago-based recruiting firm said in a report today. Fresh cash is important to funds that have yet to generate enough gains to resume earning incentive fees from existing clients, the report said.

- Shariah’s Spread in Asia Appeases Islamists, Threatens Rights.

- A fund associated with buyout firm TPG is exploiting an unintended wrinkle in the $650 billion market for collateralized debt obligations, sparking a revolt among investors that hold the safest portions of the securities.

- The U.S. Treasury Department criticized China for the “lack of flexibility” of the yuan and a buildup of foreign-exchange reserves while stopping short of branding the nation a manipulator of its currency.China’s renewed accumulation of foreign-exchange reserves risk unwinding some of the progress made in reducing imbalances,” the Treasury said in its semiannual report to Congress on the currency policies, using another name for the yuan. “The recent lack of flexibility of the renminbi exchange rate and

- Barton Biggs, managing partner of hedge fund Traxis Partners, says US stocks will rise another 10-15%. (video)

Wall Street Journal:

- U.S. spy agencies are considering whether to rewrite a controversial 2007 intelligence report that asserted Tehran halted its efforts to build nuclear weapons in 2003, current and former U.S. intelligence officials say. The intelligence agencies' rethink comes as pressure is mounting on Capitol Hill, and among U.S. allies, for the Obama administration to redo the 2007 assessment, after a string of recent revelations about Tehran's nuclear program. German, French and British intelligence agencies have all disputed the conclusions of the 2007 National Intelligence Estimate, or NIE, in recent months, according to European officials briefed on the exchanges. Intelligence on the state of Iran's nuclear capabilities has for years been politically fraught within Washington and among U.S. allies and international institutions like the International Atomic Energy Agency. Rewriting an NIE is a major undertaking because it is the most comprehensive of U.S. intelligence reports and reflects the combined judgment of all 16 American intelligence bodies.

- The new chairman of the Consumer Product Safety Commission said she will ask China to help pay for the billions of dollars in damage to U.S. homes blamed on Chinese-made drywall. "I will find out if any discussions are going on in China about the costs, are they prepared to participate in providing funds, and what would it take for that to occur," CPSC Chairman Inez Tenenbaum said in an interview ahead of a trip to China next week for a biennial U.S.-China consumer product safety summit.

- The rise of conservative "tea party" activists around the country has created a dilemma for Republicans. They are breathing life into the party's quest to regain power. But they're also waging war on some candidates hand-picked by GOP leaders as the most likely to win.

- The House voted Thursday to allow detainees held at the American base in Guantanamo Bay, Cuba, to be transferred to the U.S. for trial, boosting President Barack Obama's efforts to close the detention facility. Democratic congressional leaders attached the measure permitting prisoner transfers to a $42.8 billion appropriations bill for the Homeland Security Department. That allowed lawmakers to vote for the broader bill instead of just on the Guantanamo issue. The measure now moves to the Senate. Dozens of Democrats who two weeks ago voted for a nonbinding resolution against prisoner transfers from Guantanamo voted Thursday for the appropriations bill enabling such transfers. The tally was 307-114. Before the vote, House Democrats beat back Republican efforts to remove the language on transfers from the bill. Some GOP lawmakers have opposed the facility's closure, citing security concerns.

- 'When I'm governor, you won't just have a friend in Richmond—you'll have a partner." So said Virginia gubernatorial candidate Creigh Deeds to union supporters on Oct. 3, 2008. The question for Mr. Deeds these days isn't when, but if. And if, as polls suggest, he fails to become governor of Virginia, that loss is shaping up to be as big a judgment on Big Labor as it is on the Democrat. Last year's Democratic victories marked a high in the political fortunes for unions. "Tonight does not simply turn a page but begins a new era for America," bragged SEIU President Andy Stern on election night. Heady on victory and political favors from a new administration, labor turned to replicating their Washington success across the country. Target No. 1: Virginia.

- Almost two-thirds of all bad mortgages in our financial system were bought by government agencies or required by government regulations. Recent reports that the Federal Housing Administration (FHA) will suffer default rates of more than 20% on the 2007 and 2008 loans it guaranteed has raised questions once again about the government's role in the financial crisis and its efforts to achieve social purposes by distorting the financial system.

MarketWatch:

- Rio Tinto Ltd.(RTP) said Friday Australia's proposed carbon pollution reduction scheme, or CPRS, needs to be amended or it will hurt the nation's mining industry and cost jobs. In its strongest statements to date on the scheme, the miner proposed four amendments it said should be made before the legislation is passed through parliament. "Without these changes, the CPRS legislation will affect the international competitiveness of Australian resources companies and will have long-term consequences for Australian jobs and the Australian resources sector's ability to compete in global markets," Rio said in a statement.

- Third-quarter earnings season is proving precarious for short sellers, who are fighting a swell of investor optimism that's driving the broader market to new highs. On Thursday, Harley-Davidson Inc.(HOG) shares gained 5.5% even after the motorcycle maker's profit fell 84% and results excluding special charges missed expectations. Read more on Harley. The rise in Harley shares -- some 17% of which are shorted -- illustrates the precarious nature of betting against an individual stock in the current environment, according to Doug Noland, lead portfolio manager of Federated Investors' $1.3 billion Prudent Bear Fund(BEARX).

CNBC.com:

- Advanced Micro(AMD) lost money in the third quarter, but its stronger-than-expected sales are adding to evidence that consumer spending is fueling a turnaround in the personal computer market.

IBD:

- Patterson Cos. (PDCO) has swung those two poles during the last several months. Patterson's main business is supplying consumables, equipment and technologies to dental practices. They account for 65% of sales, which totaled a shade over $3 billion for the 2009 fiscal year that ended April 30.

Politico:

- The forces in favor of a public health insurance option roared back Thursday on Capitol Hill after weeks when their cause looked bleak. House Speaker Nancy Pelosi (D-Calif.) looked closer than ever to including a robust U.S. government-run insurance program in the House bill — saying recent attempts by the health insurance industry to undercut reform prove insurers can’t be trusted. And in the Senate, a weekly policy lunch turned into a heated debate when liberals went after the Senate Finance Committee bill and made clear they won’t roll over for legislation that doesn’t include a public option. Reflecting deep divides within the caucus, the Senate luncheon turned tense, with voices elevated and senators venting. “In today’s lunch, it even involved a little performance theater,” Sen. Evan Bayh (D-Ind.) said, describing it as an “emotional catharsis.”

- Illinois Republican Rep. Judy Biggert introduced legislation Thursday to strip the community-organizing group of its certification to qualify for federal housing dollars. “It’s abundantly clear that ACORN and its affiliates cannot be trusted as a federally-certified entity,” Biggert said in a statement. “Given the group’s clear links to illegal and inappropriate activities, how can we knowingly give them federal certification to divert precious resources from legitimate housing counselors working overtime to help struggling homeowners?” Republicans have been after ACORN for more than a year – they were suspicious of the group’s voter registration efforts on behalf of then-candidate Barack Obama last year. And Republicans have successfully offered amendments to strip money from the ACORN after two conservative filmmakers caught ACORN employees offering tax evasion advice to a fake pimp and prostitute.

The legislation would suspend ACORN’s Housing and Urban Development Department certification as an approved housing counseling agency, a status that allows ACORN to qualify for federal housing grants and helps them raise money from other sources.

The Business Insider:

- Goldman Sachs(GS) is Robbing Us Blind by Dilan Ratigan. They called it credit derivatives -- where banks and insurers offer to effectively "insure" financial assets. For instance, they were used to insure much of the real estate and pension liabilities in America the past 10 years. To make money, the banks exploit two loopholes. The first -- overcharge customers by depriving them of the type of competitive pricing only possible on an exchange like the New York Stock Exchange or Chicago Mercantile Exchange. And the second, exploit the lack of transparency to hide the fact that you are keeping little or no money to pay claims while selling insurance and collecting fees on every house and pension payment in America. The key to success here is that when there is a default or claim against that so-called credit insurance -- the banks keep all the past payment -- and the taxpayer under threat of collapse pays off the claims while getting nothing in return. This quite simply, is a brilliant way to steal our money. Now this method of "business" is only possible if the government continues to allow these crooked insurance contracts to be written in secret, allows them to hold little or no money in reserve for payment and allows them to sell enough coverage on enough vital national assets that if there is a default -- the taxpayer has no choice but to pay. Needless to say, J.P. Morgan & Co. has never had more revenue and the Goldman Sachs bonus pool has never been bigger. Considering the $23.7 trillion of taxpayer money being used to support these Corporate Communists one would hope they could at least make a few billion in profits with it. In context, making a few billion risking a few trillion is a rather pathetic return after all. As we talked about last week - allowing these outdated banks to take control of our government and change the rules so they are protected from the natural competition and reward systems that have created so many innovations in our country, you not only steal from the citizens on behalf of the least worthy but you also doom them by trapping the capital that would have been used to generate new innovation and, most tangibly in our current situation, jobs. We don't want a government commandeered by those in our banking system who have failed and been passed over by technological advancements, innovation and flat out smarts. The government's job is to restore the rules of investment, not indulge those who want to unfairly sustain their wealth and power at our nation's expense. What we want, is a Wall Street that would attract men and women who would seek to be the next Warren Buffett, or great venture capitalist. Men and women competing to analyze the countless ideas of our best and brightest - investing in those who will best be able to bring their innovations to America and the world.

- Chart Of The Day: iPhone Has 30% Of Smartphone Market.

USA Today.com:

- The nation's Catholic bishops have threatened to pull their support for health care reform unless their concerns about abortion and access for immigrants are addressed by lawmakers. The U.S. Conference of Catholic Bishops, which supports universal access to health care as a "basic human right," had been supportive of efforts to reform the health care system, but is concerned about taxpayer-funded abortions. White House has insisted abortion will not be covered in a final bill, but many conservatives worry that attempts to make that promise explicit in legislation have failed. Catholic officials are also concerned about failed attempts to insert language that would protect the consciences of medical providers who object to procedures like abortion, birth control, or fertility treatments. "It is essential that the legislation clearly apply ... longstanding and widely supported federal restrictions on abortion funding and mandates, and protections for rights of conscience," the bishops said in an Oct. 8 letter to Congress. "No current bill meets this test." The bishops maintained that health care reform must provide for low-income Americans who lack access to health insurance, as well as "legal" immigrants.

AP:

- Five men were convicted Friday of plotting a terrorist attack by stockpiling bomb-making instructions and purchasing explosive chemicals in Australia's largest terrorist conspiracy. A jury deliberated for a month before finding the men guilty of conspiring to commit acts in preparation for a terrorist attack. Each face a maximum sentence of life in prison. During the trial, which began in November 2008, prosecutor Richard Maidment told the jury in New South Wales state Supreme Court that the men planned to use explosive devices or firearms to commit "extreme violence" in a bid to force Australia's government to change its policy on Middle East conflicts.

Reuters:

- Goldman Sachs Group Inc(GS) opted to devote a smaller chunk of revenue to compensation in the latest quarter in what may be a sop to critics angry about a bonus bonanza so soon after the bank took billions in government funds. But the move also helped boost quarterly earnings. And Goldman Sachs employees need not lose any sleep, because they are still on track to receive an average of $630,000 each, rivaling their record bonus haul in 2007. Further, that $630,000 amount, which places the bank far ahead of rivals, is based on Goldman's full workforce, including assistants and other support staff. Goldman has been heavily criticized for setting aside so much for its bonus pool so soon after the firm repaid $10 billion in taxpayer bailout funds. So far this year, Goldman has set aside about $16.7 billion for bonuses, and looks well on track to break the $20 billion mark. Lawrence White, a professor at New York University's Stern School of Business, said Goldman wishes everyone would simply leave it alone -- but that will not happen as long as it continues to stash away billions for bonuses. "But ten-digit numbers for the quarter, 11 digit numbers for the year -- that has to attract attention," White said. "There is a certain amount of tone deafness, a certain amount of arrogance, and a certain amount of, 'Hey we are good and we want to make sure we keep our employees happy.'"

- The U.S. economy is recovering but the upturn will be slow and it makes no sense to raise interest rates in this climate since inflation is not a risk, a top Federal Reserve official said on Thursday. "I am worried about unemployment and I see an enormous amount of slack. I hear it everywhere," Federal Reserve Bank of Dallas President Richard Fisher told Reuters in an interview. "I am super-hawkish on inflation. I don't think that is where the risks are right now," Fisher said, speaking from his spacious top-floor office overlooking downtown Dallas. His comments will reinforce the impression that the U.S. central bank is in no hurry to raise interest rates, despite guarded optimism that the U.S. economy is healing. Fisher, who takes pride in a reputation as an anti- inflation policy hawk, said the U.S. central bank would not lose sight of its long-term obligation to keep price pressures at bay. But he stressed that this was not the current issue. "Right now that is not the risk. The risk is a disinflationary/deflationary risk," he said.

- Inflows to emerging market stock funds reached a 2009 record in the past week, while money market and U.S.U.S. equity funds lost $3.49 billion during the same period even as the Dow Jones Industrial Average .DJI moved back to its 10,000 level. equity funds saw redemptions, EPFR Global said on Thursday. Emerging debt funds also benefited from investors' appetite for yield, recording their largest weekly inflows since EPFR started tracking them in 2001. Investors withdrew $28.1 billion from money market funds in the week ending Oct. 14, according to EPFR data.

Financial Times:

- New rules that require banks to do more to protect themselves against trading losses will force them to increase their total capital holdings by an average of 11.5 per cent, according to an impact study by the Basel committee on banking supervision. The rules, adopted in July by the committee’s 27 member nations, force banks to set aside capital against the possibility of credit defaults or downgrades and to test their trading-book risk in deeply stressed markets. All major banks must adhere to the new requirements by the end of 2010, including those in the US, which has not subscribed to some of Basel’s rules in the past. Banks will, on average, have to more than triple the capital they hold to cover trading losses, according to the study, which looked at how the rules will affect 40 banks around the world. One will have to increase its trading book capital more than 12 times. The increases push up the amount of capita that banks have to hold overall, although the effects vary widely around the 11.5 per cent average increase. One of the banks in the study will see no increase in overall capital requirements, while another faces an 85 per cent rise.

Late Buy/Sell Recommendations
Citigroup:

- Upgraded (SNE) to Buy.

- Reiterated Buy on (GS), raised target to $240.

- Reiterated Buy on (AMD), boosted estimates, raised target to $8.50.

- Reiterated Buy on (GOOG), boosted estimates, raised target to $640.

- Reiterated Buy on (FCS), target $18.

- Reiterated Buy on (APH), target $48.

- Reiterated Buy on (PII), boosted estimates, raised target to $56.

Night Trading
Asian Indices are -.25% to +.50% on average.

Asia Ex-Japan Inv Grade CDS Index 95.0 -.5 basis points.
S&P 500 futures +.14%.
NASDAQ 100 futures +.16%.

Morning Preview

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US AM Market Call
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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
- (GE)/.20

- (AOS)/.70

- (MAT)/.63

- (ZLC)/-.78

- (GPC)/.65

- (BAC)/-.12

- (HAL)/.26

Economic Releases

9:00 am EST

- Net Long-Term TIC Flows for August are estimated to rise to $30.0B versus $15.3B in July.

9:15 am EST

- Industrial Production for September is estimated to rise +.2% versus a +.8% gain in August.

- Capacity Utilization for September is estimated to rise to 69.8% versus 69.6% in August.

10:00 am EST

- Preliminary Univ. of Mich. Consumer Confidence for October is estimated to fall to 73.3 from 73.5 in September.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Fed’s Fisher speaking, (LINT/A) investor meeting and the (NWS/A) shareholder meeting could also impact trading today.

BOTTOM LINE: Asian indices are slightly 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 100% net long heading into the day.

Stocks Finish Slightly Higher, Boosted by Energy, Restaurant, Construction, Drug, Hospital, Software and Steel Shares

Evening Review
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After-hours Stock Chart

Stocks Mostly Lower into Final Hour on Profit-Taking, Higher Energy Prices

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Technology longs and Financial longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly negative as the advance/decline line is lower, sector performance is mixed and volume is about average. Investor anxiety is high. Today’s overall market action is neutral. The VIX is falling -4.68% and is high at 21.79. The ISE Sentiment Index is slightly above average at 163.0 and the total put/call is slightly below average at .71. Finally, the NYSE Arms has been running above average most of the day, hitting 1.43 at its intraday peak, and is currently 1.13. The Euro Financial Sector Credit Default Swap Index is rising +.78% today to 65.17 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 +.03% to 96.75 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 441 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising +5.78% to 38.88 basis points. The Libor-OIS spread is down -1 basis point to 13 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up +4 basis points to 1.99%, which is down 66 basis points since July 7th. The 3-month T-Bill is yielding .05%, which is down 2 basis points today. Energy, Steel, Drug, Hospital, Construction and Software shares are especially strong today, rising 1.0%+. The decline in gold is noteworthy, considering more dollar weakness. It appears as though some large speculators are switching into oil. Most tech shares are relatively weak ahead of key reports from (GOOG) and (IBM) after the close. (GOOG)’s short interest ratio is currently 1.46, up from 1.13 in July. Its open interest put/call ratio is .93, up from .80 in August. I suspect (GOOG) will slightly exceed estimates. However, any kneejerk selling in the shares will likely be relatively mild and short-lived ahead of several significant positive catalysts over the next year. Nikkei futures indicate an +102 open in Japan and DAX futures indicate an +27 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on diminishing economic fear, short-covering, takeover speculation, investment manager performance anxiety and earnings optimism.