Bear Radar

Style Underperformer:
Mid-Cap Growth (+.07%)

Sector Underperformers:
Retail (-.27%), Utilities (-.25%) and Education (-.23%)

Stocks Falling on Unusual Volume:
WATG, SIGM, PCLN, ADBE, LOGI, FLO and WTW

Stocks With Unusual Put Option Activity:
1) PCS 2) TOL 3) M 4) RRI 5) OSK

Bull Radar

Style Outperformer:
Small-Cap Value (+.94%)

Sector Outperformers:
Homebuilders (+3.93%), Banks (+1.76%) and Semis (+1.57%)

Stocks Rising on Unusual Volume:
OFG, PVTB, SUPX, OXPS, CLF, WFC, BAC, PGR, FPL, CMS, CBEY, REGN, ZOLL, CAAS, CAVM, AIXG, COLM, ASBC, NTRI, MRCY, LMIA, GMCR, ALNY, PLCM, TTES, VRTX, BUCY, SHOO, ODFL and JRCC

Stocks With Unusual Call Option Activity:
1) SAP 2) PWRD 3) TOL 4) DRYS 5) CMG

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Wednesday Watch

Late-Night Headlines
Bloomberg:

- Toll Brothers Inc.(TOLL), the nation’s largest luxury homebuilder, announced fourth quarter revenue that beat analysts’ estimates. The shares gained. “We have definitely progressed from one year ago,” Chairman and Chief Executive Officer Robert Toll said in today’s statement. The average price of a Toll Brothers home climbed to $535,000 from $495,000 a year earlier. Net contracts totaled 765 and the company reported a 6.9 percent cancellation rate, which it said was in line with pre- recession rates. Results were announced after the close of regular U.S. trading. The shares gained $1.35, or 7.3 percent, to $19.74 at 5:45 p.m.

- Federal Reserve Bank of Dallas President Richard Fisher said U.S. economic growth and inflation may persist below ideal levels into 2011, making the central bank’s current interest-rate stance “appropriate.” “Looking into 2010 and perhaps to 2011, the most likely outcome is for growth to be suboptimal, unemployment to remain a vexing problem and inflation to remain subdued,” Fisher said in a speech today in Austin, Texas. “Our current policy is appropriate.” Responding to audience questions, he said the dollar is undergoing a “rather orderly depreciation.”

- Former Bear Stearns Cos. hedge-fund managers Ralph Cioffi and Matthew Tannin were found not guilty of misleading investors who lost $1.6 billion, the first major test of a U.S. effort to obtain convictions tied to the subprime mortgage crisis and subsequent recession. A jury of eight women and four men deliberated less than a day before reaching a verdict today. Cioffi, 53, the portfolio manager for the hedge funds, and Tannin, 48, their chief operating officer, went on trial Oct. 13 in federal court in Brooklyn, New York, on charges of conspiracy, securities and wire fraud. Each faced as many as 20 years in prison if convicted. When the verdicts were read, the two men didn’t visibly react. Their wives burst into tears.

- Western society “is facing an impasse” because of its tradition of Christianity, said Ichiro Ozawa, a lawmaker with the ruling Democratic Party of Japan, according to Kyodo news service. Christianity is an “exclusive and self-righteous religion,” Ozawa, Secretary General of the DPJ, told reporters after meeting a Buddhist leader in western Wakayama prefecture, Kyodo said last night. Ozawa added that while Islam was better, it too was exclusive. Ozawa, 67, his party’s second-ranked official, engineered the DPJ’s landslide victory in August’s lower-house election in which the DPJ ended five decades of almost uninterrupted rule by the Liberal Democratic Party.

- U.S. Senate Banking Committee Chairman Christopher Dodd’s plan to revamp financial regulation may do little to rein in Wall Street compensation as Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co.’s investment bank prepare to pay record bonuses. A bill introduced today by the Connecticut Democrat would rewrite financial-industry rules. It includes a non-binding shareholder vote on executive pay, gives investors more power to elect directors and requires that publicly traded companies allow pay to be clawed back, or recouped, if it was based on inaccurate financial statements. “For the most part it’s pretty hollow, a toothless tiger,” said Paul Dorf, managing director of Compensation Resources Inc., a pay consultant based in Upper Saddle River, New Jersey.

- Ten-year Treasury Inflation Protected Securities may be “overbought” and poised to drop, according to a technical indicator used by traders to predict changes in securities prices. The relative-strength index on the 10-year TIPS breakeven rate, the yield gap between the securities and conventional Treasuries of the same maturity, is near the highest level since May, indicating TIPS prices may fall. The 14-day RSI was 73 today, after touching a five-month high of 77 yesterday. Readings above 70 indicate a drop is likely. The RSI is measured on a scale of 0 to 100. “Right now it’s overbought, and it’s been overbought and rising for four days,” said John Spinello, chief technical strategist in New York at Jefferies Group Inc., one of 18 primary dealers that trade with the Federal Reserve. “It’s telling you it’s vulnerable to a piece of information that could reverse it.” Bollinger bands, another technical indicator, show that the 10-year TIPS breakeven is more than two standard deviations from the norm, another signal showing TIPS prices may be poised to fall, Spinello said.

- Prudential Financial Inc.(PRU), the second-largest U.S. life insurer, increased its annual dividend 21 percent after posting its third straight quarterly profit. “Businesses that are more sensitive to market conditions, annuities and asset management, are fundamentally sound and are positioned to benefit from improving market conditions,” Chief Executive Officer John Strangfeld said in a conference call last week.

- In Washington, the conversation between Israeli Premier Benjamin Netanyahu and President Barack Obama was about reviving peace talks. Back home, Netanyahu’s Palestinian partner for the negotiations may soon be gone. Palestinian Authority President Mahmoud Abbas said on Nov. 5 that he may not run for re-election in January, a step his advisers said could lead to the collapse of his administration. Aides warned of possible violence as a result of the stalemate with Israel. “The Palestinian Authority was established to achieve a goal, and that was the two-state solution, an independent Palestinian state,” chief negotiator Saeb Erakat said in an interview yesterday. “If the Israelis have not reached the defining moment of wanting a two-state solution, who needs the Palestinian Authority?” Netanyahu’s trip to Washington follows remarks by Secretary of State Hillary Clinton praising his proposal to limit West BankIsrael must end all settlement building in the West Bank as a precondition to talks. The announcement by Abbas, who has staked his career on negotiating peace, may be a tactic aimed at pressing Obama to exert more pressure on Netanyahu to freeze West Bank building, said Moshe Maoz, a professor of Islamic and Middle Eastern studies at Hebrew University in Jerusalem. settlement expansion. The comments angered Palestinian officials, who have repeatedly said that

- Canadian Health Minister Leona Aglukkaq said the decision to vaccinate Taliban detainees in Afghanistan against the swine flu before most Canadians have been inoculated is “outrageous” and she will review it. The Canadian Press reported today that detainees held by Canadian troops will start receiving the swine-flu vaccine tomorrow because the Geneva Convention says prisoners and captors must receive the same medical care.

- China’s lending growth slowed in October as officials considered more steps to tighten credit standards and avert asset-price bubbles. The slowdown in credit follows a warning by the World Bank this month that China faces the danger of a surge in asset prices that could destabilize the economy. Policy makers may “soon” issue measures to limit the use of debt in real-estate purchases as a way to rein in price gains, Fang Xinghai, head of Shanghai’s financial services office, said this week. “To prevent a boom-bust episode in asset prices, China will need to tighten monetary conditions next year,” said Lu Ting, an economist with Bank of America-Merrill Lynch in Hong Kong. “We expect China to adopt a tighter policy bias toward the spring of 2010 as the recovery matures.”

- Orders for Japanese machinery rose more than twice the pace economists estimated in September, signaling that a recovery in the world’s second-largest economy may be sustained. Orders, an indicator of business investment in three to six months, climbed 10.5 percent from a month earlier, the Cabinet Office said today in Tokyo. The median estimate of 25 economists surveyed by Bloomberg was for a 4.1 percent gain.

Wall Street Journal:

- Banks are moving quickly to restructure commercial mortgages under new U.S. guidelines that are more forgiving of battered property values and can help banks avoid bigger losses. Citigroup Inc., regional bank Whitney Holding Corp. and other lenders around the country are planning to review loans now considered nonperforming to determine if they can be reclassified under the guidelines announced Oct. 30 by bank, thrift and credit-union regulators, according to bank executives and people familiar with the matter. The moves could help the banks absorb fewer losses on troubled real-estate loans and preserve capital. "It's a positive all the way around," said James Smith, chief credit officer for National Bank of South Carolina, a unit of Synovus Financial Corp.
- The venture-capital industry is undergoing some tough times, with returns scarce and new money hard to raise in the recession. But a new survey by law firm Fenwick & West shows some optimism is emerging as venture capitalists mark up the valuations of their start-up investments. According to the Fenwick & West survey, which covers the third quarter, 41% of new venture financings in that period were for up rounds, which means a company was given a higher valuation when it received venture money. That compares to 36% down rounds and 23% flat rounds. It was the first quarter this year where up rounds exceeded down rounds, said the survey.

- Last spring Tennessee Republican Rep. Marsha Blackburn asked Al Gore during a House hearing if his investments in green energy meant he would benefit personally from cap and trade. "If you believe that the reason I have been working on this issue for 30 years is because of greed, you don't know me," Mr. Gore responded (and, yes, according to two reporters present, he sighed). Mr. Gore is quite right that his arguments should be judged on their merits, not on his investments. He's wrong to think his investments are irrelevant, and, even more, that sincerity is dispositive of anything. Sincerity is no substitute for disinterestedness. Here are a couple questions: When so much of his position and prestige are invested in a predicted climate crisis, is Mr. Gore likely to be open to contrary evidence? Is he likely to be particularly fastidious about whether proposed steps will actually have an effect on global warming if they also happen to benefit his investments? Ms. Blackburn's challenge was in a sense late. Mr. Gore long ago jumped over to the side where salesmanship, by whatever means, was the trumping priority. As far back as 1989, he insisted there was "no dispute worthy of recognition" about the danger of manmade climate change. By now, he titularly heads a vast establishment with a stake in one side of the argument. Notice, for instance, after a decade in which the earth appears to have stopped warming and even cooled, that global warming advocates have rushed to embrace a computer simulation that predicts this cooling (in retrospect, of course) and allows for indefinite future cooling, even while assuring that the world is destined to face disastrous warming anyway. Isn't this what forecasters of doom have done since time immemorial when their deadlines for doom haven't been met?

- South Korea's sovereign ratings could be hurt if tensions with North Korea worsen, a Standard & Poor's Ratings Service analyst said, hours after a naval clash between the two neighbors.

- Morgan Stanley(MS) Smith Barney is raising its recruiting deal for top-producing financial advisers, according to people familiar with the situation. The retail brokerage joint venture will offer top-tier advisers from its competitors up to 330% of their annual production to join the firm, an increase from a previous offer of 230% to 250%.

- The Obama administration said Tuesday it will streamline the application process for $7.2 billion in broadband stimulus grants in response to criticism from applicants and lawmakers that the program isn't getting money out quickly enough. Officials at the Commerce and Agriculture Departments outlined plans to consolidate into a single round a grant process originally projected to go for two more rounds. The first round of grants is scheduled to be made in December.

- The U.S. dollar's dominance isn't over--at least not yet, a new report from the Center for Strategic & International Studies argues. While the past year has been marked by calls for a shift away from the dollar as the world's reserve currency by countries including China--the U.S's largest creditor--the CSIS doesn't expect the greenback will lose its clout in the near future. "It would be a mistake to conclude that China is ready to ditch the dollar anytime soon, let alone seek to replace the dollar with the renminbi as a reserve currency," researchers Melissa Murphy and Wen Jin Yuan wrote. They say Chinese talk of shifting from the dollar is simply rhetoric aimed at putting the world on notice that China plans to use its growing economic clout to strengthen its role in the global economy. "Given its vast holdings and limited investment options, Beijing has little choice but to continue to support the U.S. dollar," they wrote. The CSIS estimates China has accumulated about $1.4 trillion in U.S. dollar reserves, underscoring its desire not to see a drop in the value of the dollar and its own dollar-denominated holdings. "Beijing doesn't want to shoot itself in the foot," Murphy said in a panel discussion Tuesday.

- A Financial Crisis Investigation Scorecard.

- Robert Benmosche has told the board of American International Group Inc.(AIG) that he is considering stepping down as chief executive of the government-controlled insurer, just three months after taking the job, according to people familiar with the matter. At a board meeting last week, the strong-willed industry executive told fellow AIG directors that he was "done" but agreed to think it over after other board members reacted with shock, according to the people. The executive is chafing under constraints imposed by AIG's government overseers, particularly a recent compensation review by the Obama administration's pay czar, Kenneth Feinberg.

- President Obama heads for Asia this week to talk about U.S. economic recovery and reform, and one theme that we expect he'll hear from Asian leaders is this: America is leaving itself behind as the rest of the world tries to liberalize trade. The numbers tell the story. At least 266 bilateral or regional trade deals are in force, according to the World Trade Organization, and there are roughly 100 more of which the WTO has not yet been formally informed. The U.S. is a party to only five of the 64 trade pacts that have taken effect since 2005—with Australia, Morocco, Bahrain, Oman and Peru.

CNBC.com:

- Three Things the US Can Do To Stop the Dollar’s Decliine.

NY Times:

- At a time when other categories of advertising dollars are shrinking, video ads are booming. News sites are adding more video inventory to keep pace with the demands of advertisers, and benefiting from the higher cost-per-thousands, or C.P.M.’s, that ads on those videos command.

IBD:

- Japan, the world's second-largest economy, took one step closer this fall to green-lighting the sale of surgical robots, satisfying its craving for medical devices. The news bodes well for Intuitive Surgical (ISRG), which had a disappointing quarter overseas. The company has a lock on the robotic surgery market with its flagship da Vinci system.

CNNMoney.com:

- Tech gadget gifts for $299 or less.

Forbes:

- Grab-Em-While-You-Can Gadgets.

The Hollywood Reporter:

- Comcast and GE have agreed to make NBC Universal CEO Jeff Zucker the head of their proposed joint venture, but the structure of a new board is still being negotiated, sources familiar with the matter said. The two sides have been in talks to reach a deal that would give Comcast a 51% stake in the NBC Universal venture, which would also house the cable networks now belonging to Comcast. They recently agreed to value NBC Universal at about $30 billion, sources previously told Reuters. Under the terms being discussed, Zucker will lead the new entity, with no clauses for him to leave after a specific period, the sources said Tuesday.

Politico:

- Democrats who thought a vote against the sweeping health care package would inoculate them from political attack are facing serious blowback from angry constituents and interest groups on the left—fierce opposition that could prove as consequential as anything Republicans could have thrown at them. For some of 39 House Democrats who opposed the bill, there are protests outside their offices and promises of retribution. For others, there are attempts to shut off their campaign money spigot. Still more are about to get drilled in a television ad campaign paid for by Democratic donors. What they’ve all discovered is that there’s no safe harbor when it comes to the $1.2 trillion measure that the House passed Saturday. Darcy Burner, executive director of the American Progressive Caucus Policy Foundation, said that the anger over the vote was a natural outgrowth of the value liberals have placed on the health care push. “I think, for the most part, the Democrats who voted ‘no’ on the health bill and who are getting heat deserve it,” said Burner.

Rasmussen:

- Republican candidates have stretched their lead over Democrats to six points in the Generic Congressional Ballot. The latest Rasmussen Reports national telephone survey shows that 43% would vote for their district’s Republican congressional candidate while 37% would opt for his or her Democratic opponent. Republicans have held the lead for over four months now. Voters not affiliated with either party continue to heavily favor Republicans, 43% to 20%.

The Business Insider:

- Chart of the Day: The Las Vegas Strip Is Making A Huge Comeback.

- Gold Investors Beware The Hyperdeflationary Black Swan.

Reuters:

- Google(GOOG) eyes China as Baidu(BIDU) fumbles.

Financial Times:

- Goldman Sachs(GS) pays its employees more than other financial groups because its employees are more productive, declared Lloyd Blankfein, Goldman chief executive, at an industry conference on Tuesday. Mr Blankfein offered a wide-ranging defence of his company on Tuesday to an audience of banking analysts at a conference sponsored by Bank of America. His comments came as public debate continues over Goldman’s power and bonuses, prompting the comedy programme Saturday Night Live to ask the bank: “Can you not read how mad people are at you?”.

TimesOnline:

- President Obama is to ask members of Nato to provide up to 4,000 more troops to help to break the deadlock in Afghanistan. Mr Obama is poised to confirm a surge of more than 30,000 US combat troops, according to senior military sources. He will also urge the rest of Nato to provide thousands of soldiers to train new recruits to the Afghan National Army (ANA). His appeal is set to be largely ignored, however. At present only two Nato members have offered more troops — Britain and Turkey — and no other country is expected to come up with any, according to alliance sources. Such a response would threaten the credibility of the alliance in Afghanistan and represent a considerable snub for Mr Obama, who was viewed as a welcome change after the administration of President Bush.

- The woman who chairs one of the most powerful political committees in the European Parliament will propose next week that caps on hedge fund borrowings should be dumped, The Times has learnt. Sharon Bowles, whose Economic and Monetary Affairs Committee is responsible for handling the proposed legislation governing hedge funds, private equity and other asset managers, plans to suggest in a speech in Frankfurt that central banks should monitor borrowing levels in their own countries, within a range set by Brussels. The Liberal Democrat MEP hopes that her suggestion will trigger a debate among regulators, central banks and fund managers about the feasibility of such a move. It would mark a significant victory for London’s hedge funds, which are anxious that Brussels will cap their leveraging levels and force them to apply to Europe when they want to increase borrowing.

- A looming glut in supplies of natural gas will trigger sliding prices and weaken Russia’s grip over Europe’s energy supplies, the International Energy Agency (IEA) said yesterday. In its 2009 World Energy Outlook, the IEA said that the surplus in global supplies could hit 200 billion cubic metres per year by 2015 — equivalent to more than three years’ annual gas production from Britain’s part of the North Sea.

South China Morning Post:

- Cathay Pacific Airways Ltd. said holiday demand has boosted cargo volumes as US retailers stock up on clothing and electronics, citing the company’s cargo general manager for China and Hong Kong. Business has returned to what the company regards as normal levels and rates have climbed.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (TYC), raised estimates, boosted target to $42.

- Upgraded (FPL) to Buy, target $58.

- Reiterated Buy on (HEW), raised target to $46.

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

Asia Ex-Japan Inv Grade CDS Index 107.50 +3.0 basis points.
S&P 500 futures +.14%.
NASDAQ 100 futures +.07%.

Morning Preview

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Who’s Speaking?
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Earnings of Note
Company/EPS Estimate
- (FLO)/.34

- (M)/-.07

- (CSC)/1.38

- (AAP)/.66

- (GMCR)/.33

- (AMAT)/.03

Economic Releases

- None of note

Upcoming Splits
- None of Note

Other Potential Market Movers
- The Bloomberg Global Confidence Index, (AMD) analyst day, CSFB Healthcare Conference, Goldman Sachs Data Center Conference, (K) analyst day, (SMOD) analyst event, (KEME) analyst meeting, (LOGI) analyst day, (STZ) institutional investor meeting, DA Davidson Housing Conference, (MON) pipeline presentation, (MJN) investor day, Citi Industrial Manufacturing/Transportation Conference, Robert Baird Industrial Conference, Janney Montgomery Software/Services Conference, Piper Internet Summit, (NUVA) investor luncheon, (EGN) investor day and the BofA Merrill Banking/Financial Services conference could also impact trading today.

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

Stocks Finish Mixed as Gains in Healthcare and Medical Stocks Offset Losses in Homebuilding, Construction and Bank Shares

Evening Review
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Stocks Mixed into Final Hour as Profit-Taking, More Shorting Offsets Earnings Optimism, Technical Buying and Stable Long-Term Rates

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Technology longs, Retail longs, Medical longs and Biotech 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 very high. Today’s overall market action is neutral. The VIX is falling -.39% and is high at 23.06. The ISE Sentiment Index is around average at 151.0 and the total put/call is about average at .83. Finally, the NYSE Arms has been running above average most of the day, hitting 1.32 at its intraday peak, and is currently .83. The Euro Financial Sector Credit Default Swap Index is falling -2.19% today to 66.67 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 +.18% to 98.88 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is down -2 basis points to 21 basis points. The TED spread is now down 443 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is up +1.15% to 32.88 basis points. The Libor-OIS spread is unch. at 13 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down -2 basis points to 2.21%, which is down 44 basis points since July 7th. The 3-month T-Bill is yielding .06%, which is up +2 basis points today. Market leading stocks are strongly outperforming today. As well, healthcare-related shares are relatively strong today. Medical, HMO and Hospital stocks are all rising .75%+ for the day. (XLF)/(IYR) have underperformed throughout the day, but have moved to session highs in recent trading. Weekly retail sales rose +1.7% this week versus a +.7% gain the prior week and up from a -4.1% decline the week of Sept. 1. This is the best showing for weekly retail sales since the week of Sept. 9^th, 2008, which is a big positive. I expect overall holiday retail sales to exceed expectations. Today’s broad market action is indicative of another healthy consolidation day. Nikkei futures indicate an +70 open in Japan and DAX futures indicate an +16 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, earnings optimism, investment manager performance anxiety, technical buying and stable long-term rates.