Today's Headlines

Bloomberg:

• Corporate Bond Risk Rises in Europe, Credit-Default Swaps Show. The cost of protecting European corporate bonds from default rose, according to traders of credit-default swaps. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings climbed 17 basis points to 453, according to JPMorgan Chase & Co. at 4:01 p.m. in London. The Markit iTraxx Europe index of 125 companies with investment-grade ratings rose 4.25 basis points to 103. The cost of protecting bank bonds from default also rose, with the Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers up 7 at 144 and the subordinated index 13 higher at 224, the highest since June.
• The Baltic Dry Index, a measure of commodity shipping costs, matched its longest losing streak since July as rents fell for three of the four vessel types tracked by the gauge. The index lost 13 points, or .5%, to 2,454 points. The drop was the 10th in a row.
• LCH Clearnet Increases Irish Government Bond-Margin Payments From Tomorrow. LCH Clearnet Ltd. demanded its clients place a larger deposit when trading Irish government bonds after the yield on the nation’s debt soared, and may impose similar measures on other European securities. The additional margin requirement of 15 percent, which takes effect tomorrow, will be charged on investors’ net position in Irish debt from Nov. 11, and the change will be reflected in a margin call on Nov. 12, LCH said on its website. The London-based company is the world’s second-largest fixed- income clearing house. The move by LCH pushed Irish bonds lower, extending their two-week decline as investors speculate costs to bail out the nation’s banks have made the government debt load unsustainable. “This is LCH recognizing that the markets are quite serious about the potential for Ireland to default or restructure,” said Simon Penn, a market analyst at UBS AG in London. The yield on Irish 10-year debt surged 44 basis points to 8.52 percent as of 1:24 p.m. in London. The spread over the Bloomberg Fair Value Sovereign Benchmark 10-year bond widened 32 basis points to 585 basis points, according to Bloomberg generic data. It was at 370 basis points as recently as Oct. 26. “Irish banks are not LCH members, so this should not directly affect their funding,” Francesco Garzarelli, chief interest-rate strategist at Goldman Sachs Group Inc. in London, said in a research report today. “However, this could amplify the re-assessment of counterparty risk.”
• U.S. Jobless Claims Fell Last Week to Lowest Level Since July. The number of Americans filing initial jobless claims last week fell to the lowest level in four months, reinforcing evidence the U.S. labor market is healing. Applications for jobless benefits declined by 24,000 to 435,000 in the week ended Nov. 6, lower than the median forecast in a Bloomberg News survey, Labor Department figures showed today in Washington. The four-week moving average, a less volatile measure than the weekly figures, dropped to 446,500 last week, the lowest since Sept. 13, 2008, from 456,500, the report showed. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, dropped to 3.4 percent in the week ended Oct. 30, from 3.5 percent in the prior week.
• Mortgage Applications in U.S. Increase on Gain in Purchases. The number of mortgage applications in the U.S. rose as purchases increased for a third straight week and refinancing picked up. The Mortgage Bankers Association’s index increased 5.8 percent in the week ended Nov. 5, the Washington-based group said today. Refinancing rose 6 percent and purchase applications were up 5.5 percent, the most since Oct. 1.
• Copper Imports by China Drop to One-Year Low as Rising Prices Deter Buyers. Copper imports by China, the world’s largest consumer, declined for the second month to the lowest level in a year, as high international prices and ample domestic supplies reduced the appeal of buying from overseas. Shipments of copper and products fell 26 percent to 273,511 metric tons from 368,410 tons in September, the General Administration of Customs said on its website today. China’s copper output increased in September, after dipping in July and August, as high prices and high raw-material supplies encouraged production. Inventories in Shanghai warehouses increased 21 percent last month. Copper inventories at Shanghai Futures Exchange-monitored warehouses expanded to the highest level in two months as of last week, according to the bourse. Imports stored in Shanghai’s bonded warehouses have at least doubled in the past three months, Na Liu, Scotia Capital’s China strategy advisor, said in an e-mail yesterday. China also imported 310,000 tons of scrap copper, down 24 percent from 410,000 tons in September, data from the Beijing- based customs showed.
• Crude Oil Increases to Two-Year High on Unexpected Drop in U.S. Supplies. Crude oil rose to a two-year high after a report showed an unexpected decrease in inventories as imports declined and refineries bolstered fuel production. Oil climbed as much as 1.5 percent as supplies dropped 3.27 million barrels to 364.9 million last week, the Energy Department said. Crude oil for December delivery increased $1.17, or 1.4 percent, to $87.89 a barrel at 12:03 p.m. on the New York Mercantile Exchange. Futures touched $88.02 a barrel, the highest level since Oct. 9, 2008. Crude-oil imports tumbled 5.7 percent to 8.09 million barrels a day, the lowest level since January.
• Wall Street Collects $4 Billion From Taxpayers as Swaps Backfire. The subprime mortgage crisis isn’t the only calamity Wall Street created that’s upending the finances of U.S. states and cities. For more than a decade, banks and insurance companies convinced governments and nonprofits that financial engineering would lower interest rates on bonds sold for public projects such as roads, bridges and schools. That failed promise has cost more than $4 billion, according to data compiled by Bloomberg, as hundreds of borrowers from the Bay Area Toll Authority in Oakland, California, to Cornell University in Ithaca, New York, quietly paid Wall Street to end agreements since 2008.
• Polo Ralph Lauren(RL) Boosts Sales Forecast for the Year. Polo Ralph Lauren Corp., the New York-based seller of the namesake brand clothing, raised its sales projection for the year as customers snapped up footwear and apparel. Sales will increase at “a low double-digit” rate, the company said today in a statement. In August, the company projected a “mid-to-high single-digit” rate. Net income in the quarter ended Oct. 2 climbed 16 percent to $205.2 million, or $2.09 a share, from $177.5 million, or $1.75, a year earlier. Revenue climbed 11 percent to $1.53 billion, fueled by the wholesale business in the U.S. and Europe. Consumers are beginning to spend again as they recover from the worst economic slump in about 70 years. Ralph Lauren, led by its namesake chief executive officer, gets about 70 percent of sales from North America. The shares climbed $5.54, or 5.5 percent, to $106.46 at 9:39 a.m. in composite trading on the New York Stock Exchange.
• Attorneys General Foreclosure Probe on 'Fast Track,' Miller Says. The investigation by attorneys general in 50 U.S. states into banks’ foreclosure practices is on “a fast track” and any resolution might involve multiple settlements, Iowa Attorney General Tom Miller said.
• Palestinian Authority to Get $150 Million Additional U.S. Aid to Pare Debt. Secretary of State Hillary Clinton today said the U.S. gave $150 million in direct aid to help the cash-strapped Palestinian Authority close its budget deficit, after direct peace talks with Israel stalled. The assistance to the government led by President Mahmoud Abbas is an advance on $200 million requested in fiscal 2011 for the Economic Support Fund, the State Department said. Total aid to the Palestinians for fiscal 2010 is almost $600 million. This “underscores the strong determination of the American people and of this administration to stand with our Palestinian friends even during difficult economic times as we have here at home,” Clinton said, during a video conference with Palestinian Prime Minister Salam Fayyad.
• Goldman Sachs(GS) Said to Pull $120 Million From Falcone Hedge Fund. Goldman Sachs Group Inc. plans to pull all of its $120 million from Philip Falcone’s main hedge fund after returns lagged behind peers and Falcone disclosed he borrowed $113 million from a smaller fund that had suspended redemptions, said three people briefed on the matter.
• Permanent Tax-Cut Extensions Needed to Reduce 'Uncertainty,' Boehner Says. A permanent extension of tax cuts is needed “to reduce the uncertainty in America” that’s chilling business investment and hiring, John Boehner, the presumptive U.S. House speaker, said today. Asked whether he’s willing to compromise with President Barack Obama on the tax reductions enacted in 2001 and 2003, the Republican leader said he wants the cuts, which expire at the end of this year, to be made permanent for all taxpayers.

Wall Street Journal:

• Quant Veteran to Retire From Goldman(GS). Senior Goldman Sachs Group Inc. quantitative-investing director Robert C. Jones is retiring at year end, according to a memo sent to Goldman asset-management executives Wednesday morning.
• Ultra-Rich Pour Back Into Hedge Funds. Memories sure are short among the rich. Just a year after getting burned by the steep losses, high fees and lock-up windows of hedge funds, the wealthy are piling back into these investment vehicles. A survey from Spectrem Group shows that half of all households surveyed with $25 million or more in net worth had investments in hedge funds in 2010. That is a big jump from 2007, before the depths of the financial crisis, when just 35% of such households had hedge-fund investments. They also are putting in sizable amounts of cash. The mean hedge-fund holding for this group is $4.6 million in 2010.
• Panel Chairman Recommend Cutting Federal Spending by $200 Billion. The co-chairs of a deficit commission established by the White House would seek to limit federal spending on health care, gradually raise the retirement age and lower the corporate tax rate to 26%, according to a draft set of proposals released Wednesday.

CNBC:

• State of the Hedge Fund Industry. (video)
• After Three Long Years, Families Dining Out Again. Grab the crayons and the kids' menus, families are dining out again. Restaurant visits from families or parties with children in tow this past summer rose after three years of declining traffic, according to market researcher NPD Group.
• US Posts $140 Billion Budget Deficit in October.
• Morgan Stanley Says Equities are 'Crazy Cheap.' Global stocks are in the middle of a multi-year bull market that began in March 2009 and will last for at least two more years, Morgan Stanley Smith Barney's investment strategists said on Wednesday.
• Fed to Buy $105 Billion of Securities Through December. The Federal Reserve will buy about $105 billion of Treasurys and Treasury inflation-protected securities in 18 operations from Nov. 12 through Dec. 9, the New York Fed said on Wednesday.

Business Insider:

• The Fed's QE2 Misadventure Will Cost U.S. Households $4.6 Trillion. The Fed's Quantitative Easing Part 2 has destroyed $4.6 trillion in household wealth, all to boost the stock portfolios of the top 10%. The Federal Reserve's stated goals in launching QE2 were to trigger a "wealth effect" and boost inflation. The net result of their program is a massive destruction of household wealth.

New York Post:

• Stop Overtaxing the Rich: Andrew Cuomo. After repeatedly bashing the ineptitude of Albany on the campaign trail, Gov.-elect Andrew Cuomo yesterday finally admitted there was one thing state government has a talent for -- taxing the wealthy. "We have no problem telling rich people they have to pay taxes. We do it extraordinarily well. We do it better than almost any state in the nation," Cuomo said at Gov. Paterson's East Side offices after their first face-to-face meeting since the election. "At what point do the rich people say, 'I'm moving'? That's the question." Cuomo predicted the state's prospects will be bleak if Albany continued slapping taxes on residents to pay the bills.

CNNMoney:

• Boeing(BA) Cancels Dreamliner Test Flights. Boeing said Wednesday it has canceled test flights of its 787 Dreamliner, after one of the new airplanes made an emergency landing in Texas. "Until we understand the event, we're not going to schedule any new flights," said Boeing spokeswoman Lori Gunter.

McClatchy:

• Obama Officials Moving Away From 2011 Afghan Withdrawal Date. The Obama administration has decided to begin publicly walking away from what it once touted as key deadlines in the war in Afghanistan in an effort to de-emphasize President Barack Obama's pledge that he'd begin withdrawing U.S. forces in July 2011, administration and military officials have told McClatchy. The new policy will be on display next week during a conference of NATO countries in Lisbon, Portugal, where the administration hopes to introduce a timeline that calls for the withdrawal of U.S. and NATO forces from Afghanistan by 2014, the year when Afghan President Hamid Karzai once said Afghan troops could provide their own security, three senior officials told McClatchy, along with others speaking anonymously as a matter of policy.

NJ.com:

• N.J. Small-Business Loans Reached $82M in October, Nearly Triple Last Year's Amount. New Jersey small businesses received $81.7 million in loans last month, nearly triple the amount they secured during the same period last year, the U.S. Small Business Administration said yesterday. Nationwide, loan amounts rose 60 percent to $1.4 billion last month, compared to October 2009.

TechCrunch:

• The 158,221st Best-Selling Kindle Book: The Pedophile's Guide to Love And Pleasure. One thing Amazon loves to tout about their Kindle bookstore is their huge collection of wide-ranging titles. I’ll say. Here’s a great example of something I’m pretty sure you won’t find in rivals e-bookstores: The Pedophile’s Guide to Love and Pleasure. Yep, that’s the actual title.This book can’t actually be about that, can it? Well, here’s the description: This is my attempt to make pedophile situations safer for those juveniles that find themselves involved in them, by establishing certian rules for these adults to follow. I hope to achieve this by appealing to the better nature of pedosexuals, with hope that their doing so will result in less hatred and perhaps liter sentences should they ever be caught. “Liter” aside, yes, this is outrageous. And Amazon customers are letting their feelings be known about such a book. Of the 59 customers reviews of the product, 58 give it the minimum 1 star (while one joker gave it 5 stars). And it looks like just about all of them are from today, and they’re all basically either calling for a boycott of Amazon for carrying such a book, or for Amazon to remove it immediately. A few of them say they’ve called or email Amazon and that the company has said it’s looking into it. But one commenter says that Amazon already got back to them with the following: “Let me assure you that Amazon.com does not support or promote hatred or criminal acts; we do support the right of every individual to make their own purchasing decisions.” “Amazon.com believes it is censorship not to sell certain titles because we believe their message is objectionable.”

USA Today:

• Number of Federal Workers Making More Than $150,000 Soars. The number of federal workers earning $150,000 or more a year has soared tenfold in the past five years and doubled since President Obama took office, a USA TODAY analysis finds. The fast-growing pay of federal employees has captured the attention of fiscally conservative Republicans who won control of the U.S. House of Representatives in last week's elections. Already, some lawmakers are planning to use the lame-duck session that starts Monday to challenge the president's plan to give a 1.4% across-the-board pay raise to 2.1 million federal workers.

Reuters:

• US Democrats Applaud Fed's Bond Buying Program. Two leading U.S. Democratic lawmakers on Wednesday expressed support for the Federal Reserve's controversial $600 billion bond buying program, which has come under sharp criticism at home and abroad. "We applaud the Fed's action and are especially encouraged by its clear signal that it stands ready to do more," Representatives Barney Frank and Sander Levin said in a statement.

Telegraph:

• David Cameron Warns China Over Economic Policies. David Cameron has warned of that “dangerous tidal wave of money” moving from one side of the world to the other could bring globalisation into “reverse.”

Kathimerini:

• Greece's budget shortfall this year will be 9.5% of gross domestic product after a revision of 2009 data. The deficit will be about 22 billion euros, exceeding the 18.5 billion euros, or 8.1% of GDP, originally projected. The revision of last year's shortfall to 15.5% followed the inclusion of debt from state-owned companies and other agencies in the wider public sector, adding 1.8 billion euros to the 2010 budget gap. The higher figure is also due to a 2 billion-euro shortfall in revenue this year.

Caijing:

• China should raise interest rates as inflationary pressure rises, citing the People's Bank of China's adviser Xia Bin.

Bear Radar

Style Underperformer:

• Large-Cap Value (+.30%)

Sector Underperformers:

• 1) Gaming -1.45% 2) Tobacco -.80% 3) Agriculture -.71%

Stocks Falling on Unusual Volume:

• BA, GEOY, ARCC, IDSA, ENOC, CAGC, CVVT, DEER, UEPS, SNIC, EBIX, CCME, LOGI, RINO, MDRX, DPM, EEP, AIZ and MFB
  

Stocks With Unusual Put Option Activity:

• 1) EWH 2) MDY 3) DF 4) ARG 5) FLR
  

Stocks With Most Negative News Mentions:

• 1) CCL 2) TRB 3) SLB 4) AAPL 5) SHLD
  

Bull Radar

Style Outperformer:

• Mid-Cap Growth (-.22%)

Sector Outperformers:

• 1) REITs +.79% 2) Gold +.63% 3) Oil Service +.33%

Stocks Rising on Unusual Volume:

• BJ, MIM, AU, GFI, KMX, F, PEGA, CVVT, TSLA, RL and AGM
  

Stocks With Unusual Call Option Activity:

• 1) CAGC 2) DF 3) LXK 4) AONE 5) SSRI
  

Stocks With Most Positive News Mentions:

• 1) KEYW 2) CUZ 3) M 4) MDR 5) AAPL

Wednesday Watch

Evening Headlines
Bloomberg:

• G-20 Unity Born in Crisis Fractures as Leaders Pursue Own Ends. President Barack Obama finds himself on the defensive before a summit of world leaders tomorrow as his European and Asian counterparts disparage U.S. policies they say weaken the dollar and stoke hot-money flows. The fissures over U.S. policy and concern countries may react with competitive currency devaluations underscore how the end of the financial crisis has paved the way for national divisions to overtake the desire for a coordinated response that first brought the G-20 leaders together.
  
• Einhorn's Greenlight Says Fed's Quantitative Easing Won't Benefit Economy. David Einhorn’s Greenlight Capital Inc. said the Federal Reserve’s plan to buy an additional $600 billion of U.S. Treasuries through June won’t stimulate the economy, and helps explain the rally in gold to record levels. The Fed’s so-called quantitative easing announced Nov. 3 will probably result in rising prices of basic goods for consumers and businesses, curtailing economic growth, the New York-based hedge-fund firm said in a Nov. 1 letter to clients, a copy of which was obtained by Bloomberg News. “It is quite likely that QE2 will slow the economy by raising food and energy prices, which would act as a tax on consumers and business,” the firm said in the letter. “Other than satisfying the political need to ‘do something,’ we believe it is doubtful that QE2 will be successful.”
• Fed Monetary Stimulus Prompts Clashing Views From Senate's Shelby, Johnson. Top lawmakers on the U.S. Senate Banking Committee stated opposing views about the Federal Reserve’s expansion of record monetary stimulus, widening the political rift over the effort to spur the U.S. recovery. “I commend the Fed for being willing to try and help improve economic growth in America,” South Dakota’s Tim Johnson, a Democrat who’s in line to begin leading the committee in January, said today in a statement to Bloomberg News. Alabama Senator Richard Shelby, the panel’s top-ranking Republican, said he’s “worried about the risks” of the Fed’s actions.
• China Said to Order Some Banks to Raise Reserve Ratio by 50 Basis Points. China ordered some lenders including Bank of Communications Co. to increase their reserve ratios by 50 basis points, said a person with direct knowledge of the situation. The increases will be effective Nov. 15, said the person, who asked not to be identified as the orders weren’t public. Lu said reserve requirements will now stand at 18 percent for the nation’s four biggest banks. Bank shares fell in Hong Kong and Shanghai, with the Hang Seng Finance Index dropping 1.3 percent as of 12:20 p.m. China may miss the government’s target for 3 percent inflation this year, the nation’s top economic planning agency said yesterday.
• Credit Swaps Rise for Second Day as Rally Runs 'Out of Gas'. The cost of protecting bonds in the U.S. from default rose for the second day, after falling last week to the lowest in six months, on concern that the debt rally is running “out of gas.” The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, rose 2.7 basis points to a mid- price of 90.5 basis points as of 4:56 p.m. in New York, according to index administrator Markit Group Ltd.
• The cost of trading Irish government bonds may jump after LCH Clearnet Ltd., the world's second-largest fixed-income clearing house, told customers it may increase margin requirements, UBS AG said. "LCH has given its clients an early warning, an opportunity to get out," said Penn, a market analyst in London. "The spread has moved to a point where they probably need to be doing something."
• Credit-default swaps on the junior bonds of Allied Irish Banks Plc are signaling that full government ownership of the lender is "all but fully priced in" by traders, according to Credit Agricole SA.
• Surging Rare-Earth Prices Spur Mining in Kazakhstan, Kyrgyzstan, Greenland. Surging rare-earth prices are spurring developments of deposits in Kazakhstan, Kyrgyzstan and Greenland as China cuts exports of the metals used in BlackBerrys, televisions and Toyota Motor Corp.’s hybrid cars.
• Baucus, Levin Say Congress to Keep 'Onerous' Minimum Tax From Increasing. Congress will “do everything possible” to prevent the alternative-minimum tax from forcing 21 million households to pay an additional $66 billion in taxes this year, four lawmakers said in a letter to the Internal Revenue Service. Max Baucus of Montana and Charles Grassley of Iowa, the chairman and top Republican on the Senate Finance Committee, urged IRS Commissioner Douglas Shulman today to prepare for the 2011 tax filing season by assuming the minimum tax will be adjusted for inflation.
• U.S. to Give More Aid to Palestinian Authority, Official Says. Secretary of State Hillary Clinton tomorrow will announce additional assistance to the Palestinian Authority, which is striving to close its budget deficit as the U.S. seeks to revive talks toward peace with Israel. “We are in a new fiscal year and we will have the opportunity to make an additional contribution to the Palestinian Authority,” U.S. State Department spokesman Philip J. Crowley said today in Washington. Clinton will make a statement on the aid in a video conference with Palestinian Prime Minister Salam Fayyad scheduled for 10:15 a.m. Washington time. Fayyad, during a visit to the United Nations General Assembly in September, asked donors for about $500 million to help close his budget deficit. The Palestinian Authority needed $1.2 billion in aid in 2009 and $1.8 billion in 2008.
• Netanyahu Rejects Obama Criticism of East Jerusalem Construction Planning. Prime Minister Benjamin Netanyahu rejected U.S. and Palestinian criticism of Israeli plans to build more homes in east Jerusalem, saying Israel has never accepted “any limitations” on construction in what it regards as its capital city. “Jerusalem is not a settlement,” Netanyahu said, according to a text message sent from his office yesterday. “Jerusalem is the capital of the state of Israel. Israel never took upon itself any limitations on construction in Jerusalem.”

Wall Street Journal:

• Ireland's Fate Tied to Doomed Banks. With doubts swirling about the solvency of the Irish state in early September, Finance Minister Brian Lenihan summoned a dozen senior government and bank officials to a conference room nicknamed the "torture chamber," a nod to its history as a venue for painful meetings.
• The Next Credit Crisis? Munis. Debtholders Are Left Steamed as Some Cities Forgo Repayment Promises. The housing crisis was fueled by cash-strapped homeowners who walked away from their mortgages. Some analysts and investors now are worried about the same problem happening with debts of cities and towns.
• Extending Tax Cuts, But With a Catch. Top Democrats Link Keeping Bush-Era Breaks to an Overhaul of Tax Code; Republican Aides Say They Are Open to the Idea. Two top Senate Democrats floated the idea Tuesday of extending the Bush-era income-tax rates for a limited time only, and tying that move to an overhaul of the U.S. tax code or passage of policies to address the budget deficit.
• Don't Look Now, But Here Comes the New, New Bank Fees. Less than a year after the passage of new laws limiting banks' ability to impose certain fees on credit and debit cards, Bank of America Corp., Discover Financial Services, J.P. Morgan Chase & Co. and other lenders are using different tactics to boost their fee income. Some are raising minimum payments on certain customers' accounts in order to increase late penalties. Others are ramping up credit-protection insurance programs and charging customers for coverage without permission. Still others are pushing aggressively into high-fee prepaid cards, which are exempt from most of the new rules.

CNBC:

• CME Taps the Brakes on Silver. Tapping the brakes on the silver rally, the CME sent a letter to its clearing member firms and others Tuesday raising the amount of margin needed to trade silver futures contracts.
• Lawsuits Pile Up Against US Banks in Mortgage Mess. Lawsuits against banks over their mortgage lending and foreclosure practices continue to pile up, with JPMorgan Chase, PNC Financial and Ally Financial disclosing suits on Tuesday.

Business Insider:

• Google(GOOG) Gives All Employees Surprise $1,000 Cash Bonus and 10% Raise.

Zero Hedge:

• Debt Bubble Chronicles: Does Bernanke REALLY Think QE Will Boost Home Prices... Or is He Simply Trying to Hide and Even Bigger Problem?
• Exclusive: Presenting the Flash Crashes of 2010 - Part I. In an exclusive collaboration between Nanex and Zero Hedge, we are pleased to present to our readers the first part of a multi-series project that will demonstrate the flash crashes of 2010, and subsequently, of 2009 and 2008.

DiscoverTheNetworks.org:

• George Soros: The Most Powerful Man in the World?

Politico:

• Report: White House Edited to Favor Drilling Ban. The White House rewrote crucial sections of an Interior Department report to suggest an independent group of scientists and engineers supported a six-month ban on offshore oil drilling, the Interior inspector general says in a new report. In the wee hours of the morning of May 27, a staff member to White House energy adviser Carol Browner sent two edited versions of the department report’s executive summary back to Interior. The language had been changed to insinuate the seven-member panel of outside experts – who reviewed a draft of various safety recommendations – endorsed the moratorium, according to the IG report obtained by POLITICO.
  “The White House edit of the original DOI draft executive summary led to the implication that the moratorium recommendation had been peer-reviewed by the experts,” the IG report states, without judgment on whether the change was an intentional attempt to mislead the public.
• President Obama in Jakarta: 'Indonesia is a part of me'. President Barack Obama believes Indonesia and the United States have two things in common that could bridge the east-west divide: democracy and himself. “Let me begin with a simple statement,” Obama said Wednesday in a speech to the Muslim world at the University of Indonesia. He then spoke in Indonesian: “Indonesia is a part of me,” a statement which drew cheers and applause.
  

Reuters:

• ACLU Sues to Stop Defense of Marriage Act. The American Civil Liberties Union filed suit on Tuesday challenging the constitutionality of a federal law defining marriage as between a man and a woman, contending it denies equal protection for gays and lesbians. The suit targets the Defense of Marriage Act, passed by the U.S. Congress in 1996, which allows states to deny recognition of same-sex marriages performed in other states.
• Qualcomm(QCOM) CEO: May Exit India Broadband Mid-2011. U.S. chipmaker Qualcomm could exit its wireless broadband business in India by the second half of next year, the Business Line newspaper reported on Wednesday citing the company's chief executive.
• Short Bets in U.S. Stocks Fall in Late October. Bearish bets fell further in late October, U.S. stock exchanges said on Tuesday, suggesting investors abandoned their positions as the market rallied. Short interest on the NYSE and Nasdaq declined about 2 percent through the second half of October.

Financial Times:

• China can "stand firm" against pressure to appreciate the yuan at the upcoming G20 summit, Yao Yang, director of the China Center for Economic Research and Peking University professor, wrote. A stronger currency would benefit the U.S. a little while depressing China's gross domestic product and employment by 3%, Yao wrote.
• Goldman(GS) Executive Fired Over Violations.
  

Telegraph:

• EU Threatens to Block Chinese Bids for Public Contracts. The European Union will block access for Chinese companies bidding for publicly funded contracts unless businesses from Europe get the same access in China, under new proposals tabled in Brussels as David Cameron held trade talks in Beijing.

Irish Independent:

• One-Third of Nationwide Home Loans in Arrears. MORE than a third of residential mortgages issued by Irish Nationwide Building Society are in arrears, the Irish Independent has learned. Around half of the buy-to-let mortgages issued by the society in the past few years are also in arrears.

People's Daily:

• The U.S.'s second round of quantitative easing, or QE2, is financial protectionism, Su Jingxiang, a researcher with the China Institutes of Contemporary International Relations, wrote.

Xiaoxiang Morning Post:

• Liu Mingkang, head of China's banking regulator, said the nation's economic growth this quarter may be less than 9%. The Chinese currency's appreciation since June has put great pressure on exports, Liu was cited as saying.

Evening Recommendations
Citigroup:

• Reiterated Buy on (ALL), boosted estimates, target $37.
• Reiterated Buy on (MDR), boosted target to $23.

Night Trading

• Asian equity indices are -1.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 103.0 +1.0 basis point.
  
• Asia Pacific Sovereign CDS Index 96.0 +2.25 basis points.
  
• S&P 500 futures -.06%
  
• NASDAQ 100 futures -.06%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (RL)/1.69
• (M)/.04
• (KLIC)/.87
• (CSC)/1.17
• (AAP)/.92
• (CSCO)/.40

Economic Releases
8:30 am EST

• The Trade Deficit for September is estimated at -$45.0 Billion versus -$46.3 Billion in August.
• The Import Price Index for October is estimated to rise +1.2% versus a -.3% decline in September.
• Initial Jobless Claims for last week are estimated to fall to 450K versus 4457K the prior week.
• Continuing Claims are estimated to fall to 4305K versus 4340K prior.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,500,000 barrels versus a +1,950,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,000,000 barrels versus a -2,689,000 barrel decline the prior week. Distillate inventories are expected to fall by -2,000,000 barrels versus a -3,568,000 barrel decline the prior week. Finally, Refinery Utilization is expected unch. versus a -1.9% decline the prior week.

2:00 pm EST

• The Monthly Budget Deficit for October is estimated at -$140.0 Billion versus -$176.4 Billion in September.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The $16 Billion 30-Year Treasury Bond Auction, weekly MBA Mortgage Applications report, Piper Jaffray Tech/Media/Telecom Conference, Wells Fargo Tech/Media/Telecom Conference, (CSFB) Healthcare Conference, (BBD) investor day and the (HA) analyst meeting could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.

Stocks Falling into Final Hour on Eurozone Debt Worries, Rising Global Economic Fear, Profit-Taking, Real Estate Sector Worries

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Almost Every Sector Declining
  
• Volume: About Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 18.39 +.55%
  
• ISE Sentiment Index 104.0 -32.90%
  
• Total Put/Call .80 +14.29%
  
• NYSE Arms 1.27 +30.51%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 86.49 bps -.87%
  
• European Financial Sector CDS Index 107.0 bps -.69%
  
• Western Europe Sovereign Debt CDS Index 171.50 bps +.29%
  
• Emerging Market CDS Index 200.90 bps +3.30%
  
• 2-Year Swap Spread 20.0 +2 bps
  
• TED Spread 17.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .11% unch.
  
• Yield Curve 222.0 +7 bps
  
• China Import Iron Ore Spot $158.30/Metric Tonne +.70%
  
• Citi US Economic Surprise Index +32.60 unch.
  
• 10-Year TIPS Spread 2.13% +2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +90 open in Japan
• DAX Futures: Indicating -8 open in Germany

Portfolio:

• Slightly Lower: On losses in my Retail and Biotech long positions
  
• Disclosed Trades: Added (IWM), (QQQQ) hedges and added to my (EEM) short
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades near session lows despite gains in overseas equities and a decline in the Ireland sovereign cds. On the positive side, Ag, Medical Equipment and Education shares are higher on the day. The Ireland sovereign cds is dropping -4.40% to 571.08 bps and the US sovereign cds is declining -4.69% to 42.28 bps. The 10-year yield is rising +12 bps to 2.67%. Copper is rising +.9% and Lumber is gaining +.73%. Weekly retail sales rose +2.6% this week versus a +2.6% gain the prior week. On the negative side, Airline, REIT, Homebuilding, Gold, Oil Tanker and Coal shares are under meaningful pressure, falling more than 2.0%. Cyclical and small-cap shares are underperforming. (XLF)/(IYR) are trading heavy again today. Shanghai copper inventories are now at the highest level since early June. As well, LME Copper Canceled Warrants have been trending lower since early Sept., which is a negative. Key global cds indices are maintaining recent gains, which is a large negative. The divergence between the US/Eurozone Economic Surprise Indices, rising eurzone sovereign debt worries and overly bullish trader expectations regarding the euro currency are providing the catalysts for more euro weakness. The -4.08% decline in (IYR) is troubling and should be monitored closely. I suspect the major averages have made another short-term top. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking, eurozone sovereign debt worries, rising global economic fear, more shorting and real estate sector worries.

Today's Headlines

Bloomberg:

• Spain Leads Surge in Sovereign Credit Risk to Record in Europe. Spain led a surge in the cost of insuring European government debt to a record on concern the region’s peripheral nations will struggle to cut budget deficits and repay debt. Credit-default swaps on Spanish government bonds jumped 10.5 basis points to 275.5, an all-time high based on closing prices, according to data provider CMA. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments climbed 2.5 basis points to 179.5. Investors are shunning Europe’s most indebted nations, driving borrowing costs and swaps higher for an 11th consecutive day. Confidence in Spain is ebbing after its central bank estimated the economy stagnated from July to September after emerging from recession in the first quarter. Credit-default swaps on Portugal increased 6 basis points to 473.5 and Ireland climbed 3 to 602, both records based on closing prices. Italy was up 5 at 204 and Greece was 3 basis points higher at 871, CMA prices show. Sovereign debt concerns drove swaps on European bank bonds to the highest levels in six weeks. The Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers rose 1.5 basis points to 141, and the subordinated index increased 2 basis points to 216.5, according to JPMorgan Chase & Co. Credit-default swaps on the senior debt of Allied Irish Banks Plc rose 17.5 basis points to a record 927 and Bank of Ireland Plc jumped 16.5 basis points to a record 739, CMA prices show. “These funding costs that you’re seeing right now are clearly not sustainable for countries that are not going to grow that fast for some years,” Erik Nielsen, chief European economist at Goldman Sachs Group Inc. said yesterday on Bloomberg Television’s “Midday Surveillance” with Tom Keene. “There is a big probability the Irish and the Portuguese will end up having to get help from” policy makers, he said.
• China's Dagong Downgrades U.S. to A+ on Quantitative Easing. China’s Dagong Global Credit Rating Co. cut its credit rating for the U.S. to A+ from AA because of a Federal Reserve plan to purchase bonds to spur growth and inflation, according to Xinhua News Agency. The credit outlook for the U.S. is negative amid deteriorating debt repayment capability and a “drastic” drop in the government’s intention to repay debt, Dagong said, as cited by the state-controlled news agency. The Fed’s quantitative easing policy will erode the value of the dollar and is against the interests of creditors, the company said. “Serious defects in the U.S. economy will lead to long- term recession and fundamentally lower national solvency,” Dagong said, as cited by Xinhua. Chinese central bank adviser Xia Bin said Nov. 4 that the Fed’s $600 billion on planned bond purchases is “uncontrolled” money printing, and Vice Finance Minister Zhu Guangyao said yesterday that the program could “shock” emerging markets by flooding them with capital.
• Quant Fund Assets Plunge After Strategies Underperform, Nomura Report Says. Quantitative funds, which choose stocks according to mathematical models, may have lost almost half their assets since 2007 after failing to capture swings in markets, according to a study by Nomura Holdings Inc. Money overseen at a sample of 137 quant funds fell 43 percent over three years to $44 billion, while the quant share of actively managed equity funds is also estimated to have halved since 2007, the Tokyo-based bank said in a Nov. 4 report. The funds lost 24 percent based on price since October 2007, with the rest of the shrinkage coming from withdrawals, the report showed.
• Baltic Index Falls for Ninth Day; Capesizes Extend Losing Streak. The Baltic Dry Index, a measure of commodity-shipping costs, fell for a ninth day as hire rates for capesize vessels extended their longest losing streak in almost four months. The gauge dropped 15 points, or 0.6 percent, to 2,467 points, the lowest level since Oct. 1, according to data from the London-based Baltic Exchange. Rents for capesizes, typical iron-ore haulers and the biggest ships tracked by the index, declined for a 10th day, the longest run since an 11-session drop through July 15. There’s “a slight hole in demand” for capesizes, Jan Bagger, a director at London-based Clarkson Securities Ltd., a unit of Clarkson Plc, the world’s biggest shipbroker, said by phone today.
• Natural Gas Futures Rise to 11-Week High On Below-Normal U.S. Temperatures. Natural gas futures rose to the highest level in more than 11 weeks on speculation that lower- than-normal temperatures in the U.S. will boost demand for the heating fuel. Gas advanced to $4.21 per million British thermal units, the highest level since Aug. 19, as forecasts showed temperatures will be below average across much of the nation from Nov. 14 to Nov. 22, according to the National Weather Service. Natural gas for December delivery rose 5.1 cents, or 1.2 percent, to $4.139 per million Btu at 1:03 p.m. on the New York Mercantile Exchange. There will be “widespread” cold weather in the U.S. East and Midwest beginning Nov. 14, according to Commodity Weather Group LLC in Bethesda, Maryland. Chicago will have a low of 22 degrees Fahrenheit (minus-6 Celsius) on Nov. 19, 10 degrees below normal, according to AccuWeather Inc. in State College, Pennsylvania. New York will have a low of 37 degrees. The Energy Department is expected to report that gas stockpiles increased by 23 billion cubic feet to 3.844 trillion, surpassing the current record of 3.837 trillion set in November 2009, according to the median of nine analyst estimates compiled by Bloomberg. The number of U.S. gas drilling rigs fell 12 to 955 in the week ended Nov. 5, the lowest level since the week ended June 18, according to Baker Hughes Inc. The rig count is 30 percent higher than a year ago. Consumption will average 65 billion cubic feet a day, down from 65.16 billion estimated in October.
• High-Frequency Traders Lobby, Donate to Head Off U.S. Rules. The high-frequency trading industry is stepping out of the shadows in Washington. Closely held companies with undisclosed profits and obscure names like Getco LLC, Hard Eight Futures LLC and Quantlab Financial LLC, are beginning to act more like Wall Street banks, cutting checks to politicians, forming trade groups and hiring lobbyists and ex-regulators. They’re looking to fend off tighter rules and appease lawmakers who say the firms disadvantage small investors and contribute to wild swings in stock prices. They have more than quadrupled their political giving over the last four years, a Bloomberg News analysis shows. The top recipients include Eric Cantor, set to become House majority leader, and several incoming senators who won in last week’s Republican rout.
• BofA(BAC), JPMorgan(JPM) Reprise Perfect Trading Records in Third Quarter. Bank of America Corp. and JPMorgan Chase & Co., the two biggest U.S. banks by assets, racked up perfect trading records for the second time this year, making money every day last quarter after accomplishing the same feat in the first three months of 2010.
• Dollar Seen Strengthening as Price, Momentum Diverge: Technical Analysis. The dollar may rally to a level last reached in September as the greenback’s price against a basket of currencies including the euro and yen diverges from a momentum gauge, according to Citigroup Inc.
• Job Openings in U.S. Decreased 163,000 in September. Job openings in the U.S. dropped in September for a second month, signaling a sustained labor market rebound will take time to develop, a government report showed.
• U.S. Airline Cancellations Rise 62% After Tarmac Rule. U.S. airlines canceled 4,754 flights in September, a 62 percent jump from the same month a year ago, as the government requires carriers to let passengers off stuck flights within three hours. The cancellation rate, rising to 0.9 percent from 0.57 percent in September 2009, has increased in four of five months since the Transportation Department imposed a rule April 29 to discourage airlines from keeping passengers on delayed aircraft.
• Manhattan Salaries Rose 11.9% in First Quarter, Fed by Financial Industry. New York City’s borough of Manhattan experienced an 11.9 percent increase in salaries between January and March, the most for any big county in the nation after federal policies helped stabilize the financial industry, according to the U.S. Labor Department. The jump in Manhattan, where average weekly wages surged to $2,404, the highest rate among the biggest U.S. counties, didn’t extend to the city’s four outer boroughs, where average pay declined in the 2010 first quarter, the department’s Bureau of Labor Statistics said today.

Wall Street Journal:

• GE's(GE) Immelt Stresses Chinese Protectionism Concerns. General Electric Co. Chairman Jeff Immelt said Tuesday the U.S. conglomerate feels welcome in China and is committed to the country, but protectionism in the world's second-largest economy remains a concern.
• Obama, in Indonesia, Criticizes Israeli Settlements.
  

CNBC:

• The Flash Crash, In Miniature.

Business Insider:

• You Should Be Terrified By What We've Learned About The California Missile Launch. This morning we learned that yesterday a missile was launched off of the coast of California, but that the government had no idea who was behind it. Since then the Pentagon has been looking into it, and what have they discovered? NOTHING. They still have no idea.
• The Complete Costs, Side Effects, And Unintended Consequences of ObamaCare.
  

New York Times:

• Mining the Seafloor for Rare-Earth Minerals.
• A Lack of Transparency in S.E.C. Disclosure Rule. Has the Securities and Exchange Commission bungled its disclosure rules? That’s the question being whispered around Wall Street trading floors after a series of company disclosures in recent weeks from the likes of Microsoft and Google that appear to have created an awful lot of confusion, potentially giving some savvy investors an edge while potentially putting the rest of us at a disadvantage.
• The Return of the Risk Arbs. The business of betting on mergers and acquisitions is coming back from the dead. As Wall Street insists that the merger business will rise again, hedge funds are pouring money into betting on the outcomes of those mergers in a strategy known as merger, or risk, arbitrage.

PRNewswire:

• 83% of Companies are Using Financial Derivatives to Hedge Their Risk.

NY Post:

• Prime Rents Seen as Manhattan 'Malling'. The mall-ification of the Big Apple continues. This fall, rents for Manhattan retail space have bounced in tourist hot spots, including Fifth Avenue, Times Square and SoHo, the Real Estate Board of New York said in a report yesterday. Brokers said rents are being pushed higher by demand from big retail chains that already serve many tourists in their hometowns.

Richmond Times-Dispatch:

• Legal Challenge Could Derail Health Care Law. When 21 states and several private groups initiated lawsuits challenging the constitutionality of the Obama health care law earlier this year, critics denounced the suits as frivolous political grandstanding. But it is increasingly clear that the plaintiffs have a serious case with a real chance of victory.

Real Clear Markets:

• The World Revolts Against Bernanke's QE2 by Larry Kudlow.

Reuters:

• Euro Falters for 3rd Straight Day on Debt Fears.

Telegraph:

• China Is Too Busy Trying to Get Rich to Bother With Human Rights.

IrishTimes.com:

• A lawmaker with Fianna Fail, the biggest member of Ireland's ruling coalition, said he may vote against the 2011 budget should the government cut old-age pensions. Noel O'Flynn said he couldn't accept cuts in pensions.

Irish Independent:

• Ireland's government is considering introducing a property tax and flat-rate water charges as part of a plan to cut 6 billion euros from next year's budget.