Bear Radar

Style Underperformer:
Small-Cap Value (-2.25%)

Sector Underperformers:
Road & Rail (-4.80%), Oil Tankers (-3.09%) and I-Banks (-2.84%)

Stocks Falling on Unusual Volume:
CA, BKS, KNOL, CETV, GMXR, IBKR, WOOF, MPWR, CYBS, SPWRB, COLM, RVBD, BRCM, SCSC, BIIB, CHBT, OMCL and NTCT

Stocks With Unusual Put Option Activity:
1) BIIB 2) ESV 3) TXT 4) FNM 5) RDN

Bull Radar

Style Outperformer:
Large-Cap Growth (-.31%)

Sector Outperformers:
Software (+2.54%), Retail (+.76%) and Internet (+.62%)

Stocks Rising on Unusual Volume:
AMZN, EPAY, MSFT, NILE, WHR, TNE, KNOL, SNP, ALGN, NFLX, HWAY, BUCY, POWI, DECK, RNOW, CISG, SYNA, TROW, CAKE, ITRI, RBCN, HITT, GIFI, GSIC and CSGP

Stocks With Unusual Call Option Activity:
1) LO 2) TER 3) TIVO 4) NFLX 5) AMZN

Trading Links

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HFR Global Hedge Fund Indices

Friday Watch

Late-Night Headlines
Bloomberg:

- Amazon.com Inc.(AMZN), the world’s largest Internet retailer, reported profit that topped analysts’ estimates after discounts and the Kindle fueled sales. The shares jumped 15 percent in late trading.

- Mikhail Khodorkovsky, the jailed former owner of OAO Yukos Oil Co. and once Russia’s richest man, said Prime Minister Vladimir Putin’s handling of the Russian economy can be compared with a horse-cart on a superhighway. “We’re passengers in this cart, and the manure from under the horse’s tail is the unavoidable option,” Khodorkovsky, 46, said in written answers to more than 100 readers’ questions published by online newspaper Gazeta.ru yesterday.

- American Express Co.(AXP), the biggest U.S. credit-card issuer by purchases, posted profit that exceeded most analysts’ estimates and said the recession may be nearing an end.

- California’s push to lead U.S. sales of electric cars may result in higher power rates for consumers in the state, as a growing number of rechargeable vehicles forces utilities to pay for grid upgrades. The impact of the vehicles on electricity fees is being reviewed this month by California’s Public Utilities Commission as the most populous U.S. state will require Toyota Motor Corp., General Motors Co., Honda Motor Co., Ford Motor Co. and Nissan Motor Co. to sell more vehicles that can be powered at electric outlets from late 2011.

- Federal Reserve Bank of Philadelphia President Charles Plosser said he will be more aggressive in pressing for higher interest rates than other central bank policy makers. “It’s always been a challenge for the Fed to know when to raise rates,” Plosser said in an interview today on Bloomberg Radio. “My instinct is the time for raising rates will be before many of my colleagues” think it is.

- American International Group Inc.’s(AIG) highest paid executives in the unit blamed for pushing the insurer to the brink of collapse haven’t returned bonuses as they’d promised, according to the Obama administration. Four of five managers in AIG’s Financial Products unit that are under the jurisdiction of pay master Kenneth Feinberg didn’t make good on pledges to return the bonuses as of August, Feinberg said in documents released today. The fifth employee hadn’t made any promise, Feinberg said. “The performance of AIG Financial Products has contributed significantly to the deterioration in AIG’s financial health,” Feinberg said. Compensation proposed by AIG for the staff doesn’t “adequately reflect the role of AIG Financial Products” in the decline of the insurer, he said. AIG, which received a $182.3 billion U.S. government bailout, ignited a backlash after giving about $165 million in March to its derivatives staff.

- Congress gave final approval to legislation adding gays to the list of groups covered by U.S. hate-crime laws in what would be the biggest expansion of such protections in at least a generation.

- Capital One Financial Corp.(COF), reporting net income for the first time in a year, said third- quarter profit rose 14 percent, more than analysts expected, as the bank made more on lending. Capital One rose 7.6 percent to $41.24 at 6:32 p.m. in extended trading after the earnings statement.

- Hynix Semiconductor Inc., the world’s second-largest computer-memory chipmaker, reported its first quarterly profit in two years on higher prices after an industrywide production cut helped ease a glut.

Wall Street Journal:

- A group of victims of terror attacks by Sri Lanka's Tamil Tigers rebels filed suit against Raj Rajaratnam, the Galleon Group hedge-fund founder charged in an insider-trading case, accusing him of funding the Tigers' "crimes against humanity." The suit was filed Thursday in U.S. District Court in New Jersey by 30 people who say they are survivors of attacks carried out by the Liberation Tigers of Tamil Eelam during decades of civil war against the Sri Lankan government.

- In a one-two punch at the pay culture of banks and Wall Street firms blamed for the financial crisis, the U.S.Compensation experts said it would be hard for companies to escape the new oversight, though individuals could do so by jumping to hedge funds, private-equity funds and other financial firms beyond the reach of the new curbs. government announced plans to aggressively regulate compensation at thousands of lenders and impose steep pay cuts at seven companies that received billions in federal aid. While the moves had been anticipated for weeks, Thursday's separate announcements by the Federal Reserve and Treasury Department represent unprecedented federal intervention in pay decisions traditionally left to boards and shareholders. The crackdown is likely to influence how financial firms pay top executives, traders, loan officers and others whose actions could threaten the soundness of the institutions.

- When Barack Obama promised to deliver "a new kind of politics" to Washington, most folk didn't picture Rahm Emanuel with a baseball bat. These days, the capital would make David Mamet, who wrote Malone's memorable movie dialogue, proud. A White House set on kneecapping its opponents isn't, of course, entirely new. (See: Nixon) What is a little novel is the public and bare-knuckle way in which the Obama team is waging these campaigns against the other side.

- The Obama administration is setting aside 200,000 square miles in Alaska and off its coast as "critical habitat" for polar bears, an action that could increase restrictions on future offshore drilling for oil and gas.

IBD:

- One on-the-rise ADN player, Blue Coat Systems (BCSI), says its "application intelligence" optimizes and secures the flow of information "to any user, on any network, anywhere."

Business Week:
- Financial firms under pay restrictions in the U.S. and Europe find their top executives and traders are targeted by headhunters.

Rasmussen:

- The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 26% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. That’s the lowest level of Strong Approval yet measured for this President. Thirty-nine percent (39%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -13 (see trends).

Traders Magazine:

- Nasdaq OMX, at a time of intense suspicion surrounding high-frequency trading practices, has consented to allow the Securities and Exchange Commission to regulate its co-location services.

The Business Insider:

- Earlier this week, investors got a rude shock from Brazil, which decided to impose a tax on foreign investment in a bid to cool its currency and reduce stock market froth. American investors who thought it might be fun to play Brazil through, say, the iShares MSCI Brazil ETF (EWZ), after seeing Rio win the Olympics, quickly took a 3% haircut. Word to the wise. Brazil won't be the last country to do this, as liquidity floods the world, and more emerging markets seek to slow down the excess.

- BlackRock(BLK) head Larry Fink is enraged that Andrew Ross Sorkin's book Too Big to Fail claims that his firm's balance sheet was badly hurt by subprime during the financial crisis, according to a person familiar with the matter.

Reuters:

- CIT Group Inc (CIT), a large finance company trying to avoid bankruptcy, reached a tentative agreement with Goldman Sachs Group Inc (GS) over a disputed payment on a $3 billion loan, Dow Jones Newswires reported on Thursday, citing people familiar with the matter. An agreement over the $1 billion "make whole" payment could be made final within 24 hours, the news service said, citing one of the sources. Goldman would be entitled to the $1 billion payment under the $3 billion rescue package it provided in June 2008, six months before the U.S. government invested $2.33 billion in CIT through the Troubled Asset Relief Program. CIT lends close to 1 million small- and mid-sized companies. If it went bankrupt, the case would be one of the five largest U.S. bankruptcies, based on reported assets.

Financial Times:

- The multi-billion dollar travails of two Saudi companies have caused international banks to demand greater financial disclosure from family businesses in the Gulf and curb lending until standards improve, according to executives. The tightening of lending criteria is a ramification of the problems faced by Saad Group, owned by Saudi billionaire Maan al Sanea, and Ahmad Hamad Algosaibi and Brothers (AHAB). These have put the practice of “name lending,” whereby banks have lent to families and private companies on reputation alone, under renewed scrutiny. “Now everybody is asking for more information, more transparency – it’s no more like it was before,” said Henry Azzam, chief executive of Deutsche Bank, Middle East and North Africa.

- Total, the French oil group, has warned politicians that they risk accelerating an oil supply crunch if they enact environmental policies that deter investment in oil and gas before enough viable alternatives are available. “Governments need to assess the needs of this planet in terms of energy and stop saying we will develop solar and then not have enough,” Christophe de Margerie, Total’s chief executive, said in an interview with the Financial Times. “Carbon is not the enemy; carbon is life.” Mr de Margerie has a relatively moderate position on climate change among his peers. He wants governments to enact clear, far-reaching policies to reduce carbon emissions so the oil industry can make investment decisions. “We as companies cannot take the risk. We are investing without knowing what the contractual framework on carbon will be,” he said. Mr de Margerie is the most vocal of his peers in terms of insisting environmental policy needs to go hand in hand with energy security policy. He warned policymakers heading to December’s climate change conference in Denmark: “Don’t go to Copenhagen only with your concern about the environment. We also have a concern over energy access. If you take only one [concern with you], we are dead and we don’t want to die.”

Late Buy/Sell Recommendations
Citigroup:

- Rated (PPL) Buy, target $35.

- Reiterated Buy on (AMZN), raised estimates, boosted target to $140.

- Reiterated Buy on (HOT), target $40.

- Reiterated Buy on (COF), boosted target to $44.

Kaufman:

- Rated (VPRT) Buy, target $60.

Night Trading
Asian Indices are +.75% to +1.50% on average.

Asia Ex-Japan Inv Grade CDS Index 99.0 -8.50 basis points.
S&P 500 futures +.28%.
NASDAQ 100 futures +.24%.

Morning Preview

BNO Breaking Global News of Note

Google Top Stories

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Asian Financial News

European Financial News

Latin American Financial News

MarketWatch Pre-market Commentary

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TradeTheNews Morning Report

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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
- (ACI)/.04

- (B)/.21

- (CVX)/1.45

- (CMC)/.03

- (CMI)/.37

- (D)/.91

- (DUK)/.38

- (EL)/.34

- (IT)/.14

- (WY)/-.45

- (UTHR)/.30

- (SNE)/-.37

- (NYX)/.46

- (ITT)/.90

- (HMSY)/.28

Economic Releases

10:00 am EST

-.Existing Home Sales for September are estimated to rise to 5.35M versus 5.1M in August.

Upcoming Splits
- None of Note

Other Potential Market Movers
- The Fed’s Bernanke speaking and the Fed’s Kohn speaking could also impact trading today.

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

Stocks Finish at Session Highs, Boosted by Semi, Financial, Gaming, Restaurant, REIT, Homebuilding, Insurance and HMO Shares

Evening Review
BNO Breaking Global News of Note

Google Top Stories

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After-hours Movers
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After-hours Stock Chart

Stocks Surging into Final Hour on Earnings Optimism, Short-Covering, Technical Buying, Less Financial Sector Pessimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Biotech longs, Medical longs, Retail longs and Financial longs. I covered all my (IWM)/(QQQQ) hedges this morning, 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 above average. Investor anxiety is high. Today’s overall market action is very bullish. The VIX is falling -7.74% and is high at 20.53. The ISE Sentiment Index is around average at 143.0 and the total put/call is around average at .82. Finally, the NYSE Arms has been running around average most of the day, hitting 1.36 at its intraday peak, and is currently .68. The Euro Financial Sector Credit Default Swap Index is falling -.12% today to 63.67 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising +3.0% to 100.55 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is rising +2 basis points to 24 basis points. The TED spread is now down 440 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling -.35% to 35.81 basis points. The Libor-OIS spread is up +1 basis point to 13 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down -3 basis points to 1.97%, which is down 68 basis points since July 7th. The 3-month T-Bill is yielding .04%, which is down -2 basis points today. Small-cap and Cyclical shares are substantially outperforming today. Semi, Financial, HMO, Insurance, Homebuilding, REIT, Gaming and Restaurant shares are especially strong, rising 2%+. (XLF) and (IYR) have traded very well throughout the day, which is always a big positive. The AAII % Bulls fell to 40.5% this week, while the % Bears rose to 35.7%, which is also a positive. Given the news today, which could have been construed as mostly negative, today’s advance is even more impressive. On the negative side, Nasdaq leaders are substantially underperforming and the Transports are slightly lower on the day. The whippy action over the last 2 days has likely left many aggressive funds poorly positioned again, which could lead to further near-term stock market gains. Nikkei futures indicate an +83 open in Japan and DAX futures indicate an +59 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less financial sector pessimism, investment manager performance anxiety, technical buying and earnings optimism.