Bull Radar

Style Outperformer:

• Small-Cap Growth (+.62%)

Sector Outperformers:

• 1) Gaming +2.19% 2) Hospitals +1.43% 3) Networking +1.16%

Stocks Rising on Unusual Volume:

• ERIC, MOTR, MLHR, NDAQ, CCME, CIEN, WYNN, WGO and KND
  

Stocks With Unusual Call Option Activity:

• 1) CBG 2) NVS 3) IVN 4) FIG 5) XRX
  

Stocks With Most Positive News Mentions:

• 1) HRS 2) WM 3) ENSG 4) ALV 5) MNBT
  

Thursday Watch

Evening Headlines
Bloomberg:

• Merkel Channeling Antony Comes to Praise Euro While Burying It. Every time German Chancellor Angela Merkel talks about how investors will have to swallow losses in future debt crises, financial markets shudder. Irish 10-year bond yields climbed to a record on Nov. 2 after Merkel said the European Union was drafting plans to force investors to cover losses in a repeat of the sovereign debt slump that started earlier this year in Greece. Her comment in a Nov. 23 speech that the euro’s condition is “exceptionally serious” helped drive the currency down 1.6 percent that day. With EU leaders meeting in Brussels today as the region’s debt woes threaten Portugal and Spain, Merkel’s statements may raise financing costs for the euro area that she says she’s defending, said Henrik Enderlein, a political economist at the Hertie School of Governance in Berlin. Her outbursts may also derail efforts by other EU states and the European Central Bank to fend off bondholders who are betting on a default. At stake are European efforts to contain weakness in the bond markets that threatens to blow the euro region apart. The single currency dropped 6.7 percent against the dollar this year and the extra yield investors demand to hold 10-year bonds of Italy, Spain and Portugal over German equivalents rose last month to euro-era records. “The shape of the euro zone is going be driven by Germany’s political attitude and willingness to underwrite the debt of the peripheral countries,” Marshall said. “That’s why the market is reacting so much to what she said.” Merkel, who faces seven regional elections next year, has said her aim is to put Germany’s stamp on the euro area by getting all countries to reduce budget deficits, thus shielding German taxpayers from the cost of any future bailouts.
  
• Spain Goes Into Last Bond Sale With Sovereign Rating at Risk: Euro Credit. Spain goes into its final bond sale of the year with the threat of a credit rating downgrade, undermining the government’s efforts to convince investors the nation and its lenders can meet their refinancing needs in 2011. Today’s auction of 10-year and 15-year bonds aims to raise as much as 3 billion euros ($4 billion), after a surge in borrowing costs led the Treasury to reduce the habitual goal of as much as 4 billion euros, Finance Minister Elena Salgado said. The yield on 10-year bonds approached a decade-high yesterday, rising to 5.56 percent, before closing at 5.50 percent. Moody’s Investors Service said yesterday it may lower the country’s Aa1 rating less than three months after the previous cut. Spain’s central government, regional administrations and banks collectively require 290 billion euros of financing next year, leaving the country “susceptible to further episodes of funding stress,” the company said.
• China May Lift Rates 6 Times Next Year on Inflation, Mizuho's Suzuki Says. China may raise interest rates up to six times by the end of next year as inflation becomes more entrenched in the economy, according to Mizuho Research Institute Ltd. China’s central bank has relied on reserve-requirement ratios to help control liquidity, and with levels near 20 percent there’s little room for increases, said Takamoto Suzuki, a senior economist at the unit of Japan’s third-largest bank. “A rate hike will be inevitable,” Tokyo-based Suzuki said. “It wouldn’t be surprising if the central bank lifts interest rates by about 1.5 percentage points by the end of next year.” Consumer prices climbed 5.1 percent in November from a year earlier, the fastest since July 2008, the statistics bureau said on Dec. 11. The People’s Bank of China this month announced its sixth increase in reserve-requirement ratios, making major banks to set aside 18.5 percent of deposits. The PBOC raised borrowing costs in October for the first time since December 2007, increasing the one-year deposit rate to 2.5 percent and the lending rate to 5.56 percent.
• Commodity Assets Expand to Record $345 Billion in November, Barclays Says. Commodity assets under management rose $11 billion last month to a record $354 billion, led by demand for index-linked investments, Barclays Capital said. Investment flows into products linked to commodity indexes reached $3 billion in November, Suki Cooper, Roxana Mohammadian Molina, Kevin Norrish and Amrita Sen, Barclays analysts based in London, said today in a report. Total inflows into indexes, medium-term notes and exchange-traded products were $6.1 billion. New investments in 2010 are poised to reach $60 billion, trailing only $76 billion in 2009, Barclays said. The Federal Reserve has kept its benchmark interest rate close to zero percent since December 2008, and the U.S. central bank plans to pump an additional $600 billion into the economy through June by buying government bonds. The Fed purchased $1.7 trillion of securities in a phase that ended in March.
  
• Gregoire Proposes 'Devastating' Cuts in Budget Plan. Governor Christine Gregoire of Washington, one of seven states without an individual income tax, proposed cuts she called “devastating” to bridge a $4.6 billion deficit in a two-year budget that takes effect in July. Gregoire, 63, a Democrat in her second term, is asking the Legislature for about $3 billion in spending cuts and $1.1 billion in savings by suspending pay raises for teachers and a program that provides smaller class sizes, according to a statement from her office. It said fund transfers, pension reforms and use of reserves will also help cover the deficit. The proposal “is not a budget I ever expected to see in the state of Washington, and the choices in it are the most difficult ones I’ve ever faced,” Gregoire said in a message included in the spending plan. “The result is a 2011-13 budget that contains devastating reductions,” she said.
• Taxable Bond Funds Have First Net Withdrawals by Investors in Two Years. U.S. investors pulled $401 million from taxable bond mutual funds in the week ending Dec. 8, the first net withdrawals in two years. Municipal bond funds lost $1.3 billion to redemptions, according to data released today by the Investment Company Institute, a Washington-based trade group for the mutual funds industry. Investors took out $2.7 billion from domestic stock funds, their 32nd straight week of withdrawals, while stock funds that invest outside the U.S. attracted $1.3 billion.
• S&P May Downgrade More Than 1,000 'Incorrectly Analyzed' Mortgage Bonds. Standard & Poor’s said it may downgrade 1,196 securities tied to U.S. residential mortgages after it “incorrectly analyzed” the bonds because of the way interest payments on the debt are structured. The securities were created mostly this year in 129 transactions called re-remics, which are formed by repackaging existing bonds backed by home loans, New York-based S&P said today in a statement. “An admission of guilt by a rating agency: How refreshing, and also what a wonderful Christmas-time present,” said Sylvain Raynes, a principal at R&R Consulting in New York and co-author of “Elements of Structured Finance,” published in May by Oxford University Press. “What I want to know is, is anyone going to get fired over this?”
• Crisis Panel's Split on Blaming Wall Street May Limit Impact of Findings. The partisan split on the federal panel exploring the origins of the financial crisis may undermine the impact of its findings on the banks, bond-rating firms and regulators it investigated, legal scholars and former national commission members said.
• Pakistani Nuclear Weapons Program's Aid From UN Shows Weakness of Watchdog. The United Nations agency tasked with curbing nuclear proliferation may have unwittingly helped Pakistan develop its atomic-weapons program because of weak internal oversight, according to documents and interviews with three former UN scientists. The UN’s International Atomic Energy Agency provided financial and technical aid to develop Pakistan’s uranium mines and improve plutonium-producing reactors even after the country tested a nuclear weapon in 1998 in defiance of a non- proliferation treaty, IAEA documents show.
• Big Oil Sells Assets at Record $49 Billion Pace as China Inflates Prices. The world’s largest oil companies sold assets at a record pace this year, finding buyers at higher prices as China and other emerging economies vie for reserves. BP Plc, Royal Dutch Shell Plc and ConocoPhillips led 95 sales in 2010 valued at $49.5 billion, the most in at least 12 years, data compiled by Bloomberg show. The pace of disposals has picked up through the year -- deals in the fourth quarter topped $20 billion -- signalling momentum may carry into 2011. China’s state-controlled oil companies were the biggest buyers. Cnooc Ltd. and Bridas Corp’s $7.06 billion purchase of BP’s 60 percent interest in Argentina’s Pan American Energy was the largest acquisition of an energy asset from a major. Last week, Occidental Petroleum Corp. agreed to sell its fields in Argentina to Sinopec Group for $2.45 billion.
• U.S. Afghanistan War Study Notes Military Progress, Questions Transition. The Obama administration’s Afghanistan war review concludes that while sending more troops and civilian resources has yielded gains, it’s too soon to say when a full transition to Afghan control will be feasible, according to a U.S. official who worked on the report.
• Goldman Sachs's(GS) Sze Said to Plan Asia-Focused Global Hedge Fund. Morgan Sze, global head of Goldman Sachs Group Inc.’s principal strategies proprietary trading desk, plans to start a global hedge fund that will be 75 percent invested in Asia, said two people with knowledge of the matter.
• Copper Drops For a Third Day as Global Inventories Expand. Copper declined for a third day as stockpiles expanded and renewed concern that Europe’s debt crisis may hamper the global economic recovery hurt the outlook for demand. Futures in Shanghai and New York also fell. Three-month-delivery copper on the London Metal Exchange dropped as much as 0.9 percent to $9,018 a metric ton, and traded at $9,034.75 at 11 a.m. in Singapore. Inventories of copper tallied by the London Metal Exchange rose for a third day yesterday by 7,050 tons, the largest one- day tonnage increase since January, to 357,950 tons. Of that amount, 6,700 tons entered LME warehouses in South Korea, the nearest location to China, the world’s largest metal user. “It’s probably metal being re-routed from China because importers can’t make money bringing it in,” said Zhu Lin, an analyst at Shanghai Metals Market. The metal for March-delivery on the Shanghai Futures Exchange lost as much as 1.1 percent to 67,140 yuan ($10,080) a ton, while futures on the Comex in New York dropped as much as 0.9 percent to $4.0960 a pound. “The potential for further tightening in China” was also weighing on investors, said Li at Sinolink Futures. Policy makers in China have said they may curb lending and raise interest rates to stem accelerating inflation.

Wall Street Journal:

• Bank of America(BAC) in Settlement Talks Over Mortgages. Bank of America Corp., after vowing to fight requests that it repurchase certain loans, has begun potential settlement discussions with some of its largest mortgage investors. The 17-member group now in talks with the nation's largest bank as measured by assets includes the Federal Reserve Bank of New York, government-owned mortgage company Freddie Mac, BlackRock Inc., and Allianz SE's Pacific Investment Management Co., or Pimco. The bank's approach with this group appears to signal a change in tone for Chief Executive Brian Moynihan, who in November pledged to engage in "day-to-day, hand-to-hand combat" on investor requests to repurchase flawed mortgages made before the U.S. housing collapse.
• Unions Take Fight With Pulte(PHM) to Congress. Unions are pressing Congress to assess how home builder Pulte Group Inc. spent about $900 million in government tax breaks meant to help spur job creation and avoid layoffs. Unions say Pulte has laid off workers and question whether the Michigan-based giant has created new jobs. The unions’ real beef: Pulte’s use of contractors that don’t hire unionized workers, a practice that hurts union members and makes it harder for union organizers to justify why other workers need to join their ranks.
• Officials Warn U.S., Europe of Terror Plot. Iraqi authorities have obtained confessions from captured insurgents who claim al Qaeda is planning suicide attacks in the U.S. and Europe during the Christmas season, two senior Iraqi officials said Wednesday. A U.S. official familiar with the matter confirmed the threat as credible. "People are looking at this very closely," the U.S. official said. "We take it very seriously."
• The 111th Congress's Final Insult. The 111th Congress began with an $814 billion stimulus that blew out the federal balance sheet, so we suppose it's only fitting that the Members want to exit by passing a 1,924-page, $1.2 trillion omnibus spending bill.

MarketWatch:

• Insiders Betting That Rally Will Soon Reverse Course. Corporate insiders evidently believe that the stock market’s rally will soon run out of steam. That’s because they recently have been selling the shares of their companies’ stock at a pace last seen since early 2007.
• U.S. Stock Watchers Optimistic on 2011. The U.S. stock market -- at its loftiest perch since before Lehman Brothers collapsed two years ago -- can rise further in 2011 as long as there are signs the economic recovery is strengthening. That’s the view of many stock strategists.
• Housing is The Forgotten Crisis. Falling prices once again threaten economy.

Business Insider:

• 15 Examples of Government Pork That Are Driving John McCain Crazy.
• Here Are the 10 'Dumbest' U.S. News Websites According to Google(GOOG). Google has launched a new search filter to its "advanced search page" that allows people to sort content based on...reading level - basic, intermediate, or advanced. It also allows you to chart how 'smart' or 'dumb' any website is by using the search function.
  
• Twitter is Now Worth Almost TWICE as Much as The New York Times(NYT).

Zero Hedge:

• Contrary to Rumors, New York Comptroller Sees an Increase in Banker Bonuses in 2011, as Rick's Cabaret Prepares to Add Locations.
• Nic Lenoir of ICAP On Why the Euro is About to Crash and Burn, And Why His Concern for the "New Normal" is Not Slow Growth But Civil War.
  

NY Times:

• Europe Staggers as Critical Summit Looms. Europe’s smoldering financial crisis flared up on Wednesday, with riots over austerity spending in Greece, new signs of troubles in Spain and little indication that European leaders were moving any closer to agreement on a systemic approach to long-term stability. The day’s events emphasized the complex social, political and economic challenges facing government leaders at a European Union summit meeting on Thursday and Friday in Brussels. The meeting is expected to focus on the financial crisis, but there was no sign of the emergence of the sort of comprehensive plan that financial experts say is needed to beat back the unfolding turmoil.
• Bloomberg to Publish Editorials. The mayor’s company, Bloomberg L.P., said on Wednesday that it would begin publishing editorials across its vast media enterprise in an effort to broaden the company’s influence on national affairs. And though Mr. Bloomberg has an agreement with the city to have no involvement in the “day-to-day operations” of his company, the endeavor, called Bloomberg View, is intended to channel his personal philosophy and worldview. “I think it’s very important that everyone understands that our editorial page is going to be, for sure, consistent with the values and beliefs of the founder — even if he happens to be mayor of New York City,” said Matthew Winkler, the editor in chief of Bloomberg News. “I fully expect us in our Bloomberg View always to reflect those values. In fact, I want people to come away from reading the Bloomberg View infused with those beliefs and values.”
• China's Push Into Wind Worries U.S. Industry. “These are very sophisticated machines,” he said. They are also the only three Chinese-made wind turbines operating in the United States. That could soon change, though, as Goldwind and other Chinese-owned companies plan a big push into the American wind power market in coming months.

Politico:

• House Democrats Resigned to Tax Bill's Passage. For House Democrats, reality finally set in. Just one week ago, Democrats were furious over President Barack Obama’s tax compromise with Republicans, hollering “no, we can’t” in a basement room in the Capitol, and eventually approving a resolution to try to block the bill from coming to the floor. But now, after several late-night gripe sessions and a flurry of calls from the administration, House Democrats are resigned to the fact that one of their final votes of this Congress – and for some, their careers – will be to extend the very tax cuts they railed against for the last decade.
  

Reuters:

• U.S. Says Chavez Subverting Will of Venezuelans. Venezuelan President Hugo Chavez is using autocratic powers to subvert the will of the people, the U.S. State Department said on Wednesday after the socialist leader said he would rule by decree for a year. On Thursday, Venezuela's National Assembly is due to grant Chavez the authority to fast-track laws in a move that undermines a bloc of opposition lawmakers who join parliament next month.
• NYC Faces $17 Billion of Budget Gaps in FY2011-'14- Report. New York City might have to close $17 billion of budget gaps from fiscal 2011 through 2014, the city comptroller said in a report on Wednesday, despite a series of spending reductions and service cuts. Though last month Bloomberg announced 6,000 layoffs over 18 months and $1.5 billion of budget cuts, Comptroller John Liu said the biggest danger with the city's forecasts was its reliance on teachers and school administrators agreeing to no wage increases for the first two years of the next contract. And New York state could, by the actions it takes on taxes and school and health programs, drive the city's budget gaps $1 billion higher each year, Liu said.
• U.S. State Dependence on Federal Funds Grows - NASBO. Despite an historic collapse in revenue, U.S. states were able to modestly increase their spending for two years after the federal government sent them aid through the economic stimulus plan, according to a report released on Wednesday. State leaders have warned that their budgets have become so dependent on federal money that they risk new budget holes or possibly another recession next year as the final stimulus funding dries up. "Looking beyond fiscal 2010, states are very concerned that state revenues will not have recovered to pre-recession levels by the time the additional federal funds begin winding down in fiscal 2011," the report from the National Association of State Budget Officers said, adding states are likely to face increased demands for healthcare and public assistance. State general funds declined 3.3 percent in fiscal 2009 and an additional 5.9 percent in fiscal 2010, which ended for most states in June, according to the group. "At the same time general fund spending was rapidly declining, federal fund spending experienced sizable increases," the report said. The $814 billion economic stimulus plan included the largest transfer of federal funds to states in U.S. history. State spending of federal money shot up 17.7 percent in fiscal 2009 and 23.4 percent in fiscal 2010, the association said.

Telegraph:

• The New START Treaty: President Obama is Pushing for a Monumental Surrender to Russia. The Obama administration has an impeccable track record of caving in to Russian demands, as part of its controversial “reset” policy. Last year, it threw key US allies Poland and the Czech Republic under the bus, ditching plans for Third Site missile defences in deference to Russian opposition. It is now planning another surrender to Moscow, by pressing for Senate ratification of the new START Treaty in the lame duck session of Congress. Instead of allowing the newly elected Congress to vote on the treaty, the Obama administration is trying to ram New START through without proper debate. No major treaty has ever been forced through Congress in a lame duck session. There is mounting opposition in Washington to the New START Treaty, which would significantly weaken US security by undermining America’s ability to deploy an effective global missile defence system.

Irish Times:

• Irish support for the ruling Fianna Fail party fell 7 percentage points to 17%, according to a poll carried out for the Irish Times. Backing for Fine Gael rose 6 percentage points to 30%. Support for the Labour party fell 8 percentage points to 25%.

Oriental Morning Post:

• China Banking Regulatory Commission's Shanghai branch ordered halts on lending to companies for the purchase of fixed assets until the end of the year.

Shanghai Securities News:

• Chinese central bank governor Zhou Xiaochuan urged the use of a "pool" to absorb hot money inflows to the nation.

WSJ China:

• China Construction Bank Corp. Chairman Guo Shuqing said the nation's central bank should raise benchmark interest rates because beative real rates aren't good for China's economic growth.

People's Bank of China Financial News:

• A large movement in the yuan exchange rate would have a "relatively large" impact on China's economic and financial stability next year.

Evening Recommendations
Citigroup:

• Reiterated Buy on (VFC), target $100.
• Reiterated Buy on (AVT), target $39.
• Rated (DRI) Buy, target $60.
• Rated (SBUX) Buy, target $40.
• Reiterated Buy on (DHR), target $53.

Night Trading

• Asian equity indices are -1.0% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 105.0 +2.5 basis points.
  
• Asia Pacific Sovereign CDS Index 105.50 +2.5 basis points.
  
• S&P 500 futures -.09%
  
• NASDAQ 100 futures -.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ATU)/.34
• (DFS)/.43
• (FDX)/1.31
• (GIS)/.78
• (SCHL)/2.19
• (WGO)/.02
• (ACN)/.75
• (ORCL)/.46
• (ZQK)/.07
• (RIMM)/1.64
• (SCS)/.14
• (TTWO)/.31
  

Economic Releases
8:30 am EST

• Housing Starts for November are estimated to rise to 550K versus 519K in October.
• Building Permits for November are estimated to rise to 560K versus 550K in October.
• The 3Q Current Account Deficit is estimated to widen to -$126.0B versus -$123.3B in 2Q.
• Initial Jobless Claims for last week are estimated to rise to 425K versus 421K the prior week.
• Continuing Claims are estimated to rise to 4115K versus 4086K prior.
  

10:00 am EST

• Philly Fed for December is estimated to fall to 15.0 versus a reading of 22.5 in November.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Geithner testimony to Congressional Oversight Panel, weekly EIA natural gas inventory report, BofA Merrill Healthcare Conference, BofA Merrill Industrial Conference, (CNC) investor meeting, (PG) analyst meeting, (LUV) analyst day, (ABC) investor day and the (GPRO) analyst day could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial 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 Slightly Lower into Final Hour on Rising Long-Term Rates, Eurozone Debt Worries, China Inflation Concerns, Profit-Taking

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Almost Every Sector Declining
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 18.10 +2.78%
  
• ISE Sentiment Index 117.0 -22.0%
  
• Total Put/Call .64 -28.09%
  
• NYSE Arms 1.52 +42.93%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 86.24 bps +.29%
  
• European Financial Sector CDS Index 140.12 bps +5.85%
  
• Western Europe Sovereign Debt CDS Index 181.0 bps -1.72%
  
• Emerging Market CDS Index 217.68 bps +3.63%
  
• 2-Year Swap Spread 25.0 +3 bps
  
• TED Spread 17.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .13% unch.
  
• Yield Curve 285.0 +2 bps
  
• China Import Iron Ore Spot $168.50/Metric Tonne +.60%
  
• Citi US Economic Surprise Index +14.3 +3.3 points
  
• 10-Year TIPS Spread 2.32% +10 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +45 open in Japan
• DAX Futures: Indicating -17 open in Germany

Portfolio:

• Slightly Lower: On losses in my Tech long positions
  
• Disclosed Trades: None
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades lower despite mostly positive economic data and less tax policy uncertainty. On the positive side, Hospital, Drug and Biotech shares are higher on the day. Healthcare-related stocks continue to trade very well. The Italy sovereign cds is dropping -3.03% to 198.13 bps and the Portugal sovereign cds is falling -3.25% to 435.92 bps. Gold is falling -.82%. On the negative side, Airline, Gaming, REIT, Homebuilding, Construction, Wireless, Disk Drive, Semi, Computer, Steel, Oil Service, Coal and Utility shares are under meaningful pressure, falling more than 1.0%. (XLF)/(IYR) have underperformed again throughout the day. The Greece sovereign cds is climbing +2.35% to 951.74 bps and the China sovereign cds is jumping 3.33% to 69.08 bps. The jumps in the Emerging Markets CDS Index and the Euro Financial Sector CDS Index are big negatives. As well, the Illinois Municipal CDS continues to move higher, rising another +2.11% to 315.0 bps. Copper is dropping -2.54%. Short/intermediate-term gauges of investor sentiment remain overly bullish, which is a big negative. The 10-year yield continues to rise too much, gaining another +5 bps to 3.52%. Late-day weakness has become common of late, which is also a negative. The Hang Seng Index, which fell -2% last night, appears to be rolling over again after another failure at its 50-day. Moreover, Spain's IBEX 35 is displaying meaningful technical weakness. The major averages are masking more material weakness in some key stocks and sectors. However, so far the bears have been unable to gain any significant traction after another sharp reversal lower in stocks. I expect US stocks to trade modestly lower into the close from current levels on China inflation worries, profit-taking, more shorting, higher long-term rates, technical selling and ongoing eurozone debt fears.

Today's Headlines

Bloomberg:

• Spain's Debt Rating May Be Cut by Moody's Amid Struggle to Limit Contagion. Spain’s credit rating may be cut from Aa1, Moody’s Investors Service said, as the government prepares its final bond sale of the year tomorrow amid concern it may follow Greece and Ireland in seeking a bailout. Spain has to raise 170 billion euros ($226 billion) next year, while refinancing needs for its regions total 30 billion euros and for banks around 90 billion euros, Moody’s estimates. “Spain’s substantial funding requirements, not only for the sovereign but also for the regional governments and the banks, make the country susceptible to further episodes of funding stress,” Kathrin Muehlbronner, an analyst at Moody’s, said in a report today. The euro fell and the extra yield that investors demand to hold Spanish 10-year bonds over German bunds widened to as much as 257 basis points after the Moody’s report, less than 30 basis points shy of a euro-era closing record. The spread eased to 250 basis points at 12:30 p.m. in London.
• Germany Stiffens Opposition to Bigger Bailout in Crisis Face-Off With ECB. Germany stiffened its opposition to expanding government-financed aid for debt-plagued euro nations, leaving the European Central Bank to shoulder the bulk of the burden of fighting the crisis. With Chancellor Angela Merkel ruling out an increase in the euro area’s 750 billion-euro ($1 trillion) emergency fund, Germany yesterday put the spotlight on the ECB by endorsing a possible boost in its capital. Discord between Merkel and ECB President Jean-Claude Trichet and Luxembourg Prime Minister Jean-Claude Juncker on the eve of a European Union summit evokes the tensions during the first phase of the debt crisis, when Germany held out for more than two months before consenting to a loan package for Greece. “The consequence is a stalemate that leaves us with a familiar sense of déjà vu,” Ken Wattret, chief euro-area economist at BNP Paribas SA in London, said in a note to investors. “Market tensions are likely to resurface, as governments remain very publicly divided on the appropriate way forward.”
• Wall Street Pushes for Delay in U.S. Rules to Curb Commodities Speculation. U.S. regulators and lawmakers this week are considering rules aimed at curbing speculation in commodities trading, as Wall Street firms call for delay and companies including Delta Airlines Inc. urge strict limits. The CFTC has received hundreds of comments on how to implement a contentious part of the Dodd-Frank financial overhaul -- limits on the influence of big traders in markets for crude, gasoline heating oil and natural gas. Commissioners have discussed so-called position limits in at least 75 of the more than 400 meetings they’ve held with banks, oil companies, hedge funds and others, according to the agency’s website. “The speculative bubble in oil prices has concrete detrimental consequences for the real economy,” said Richard B. Hirst, general counsel to Delta, in a Dec. 13 letter that encouraged the CFTC to move “aggressively” to limit the number of contracts a single firm can hold. The law gives the CFTC until January to impose restrictions on energy and metals trading, and until April to place a cap on agricultural contracts. Gensler said last week that the agency will consider splitting proposals for position limits between spot month and all other months combined. The agency may move “expeditiously” on the spot month proposal, he said. Companies including Goldman Sachs Group Inc.(GS), Vitol and Cargill Inc. have met with the CFTC about the rules, according to the commission’s website. “If the Commission fails to act in a timely way or fails to adopt strong position limits, markets and consumers will be vulnerable to excessive commodity prices and volatility arising from speculative trading activity,” said William F. Galvin, the chief financial regulator for the state of Massachusetts, in a Dec. 9 letter.
• Bearish Illumina(ILMN) Options Volume Rises as Shares Climb to Record. Illumina Inc.’s put-options volume jumped to seven times the four-week average as the maker of DNA analysis equipment rose to a record after the shares more than doubled this year. More than 2,500 puts to sell the stock changed hands, nine times the number of calls to buy, as of 11 a.m. in New York.
• The Baltic Dry Index, a measure of commodity-shipping costs, extended its longest losing streak in almost a month on falling rates to hire smaller iron ore and coal transporters. The index declined 22 points, or 1.1%, to 2,047 points today. That's the seventh straight drop and the longest decline since a 17-day run to Nov. 19.
• RIM(RIMM) Rally May Fizzle as Estimates for iPad Rival Are Seen Too Optimistic. Research In Motion Ltd. has surged 41 percent since August on prospects for its new tablet device. That may be too big a jump given the product is late to a market led by Apple Inc.’s iPad, say analysts who are cutting ratings.
• Wal-Mart(WMT) Raising Toy Prices, Squeezing More Out of Holidays. Wal-Mart Stores Inc., the world’s largest retailer, raised prices on hundreds of toys this month, squeezing more out of sales during the biggest shopping period of the year. Wal-Mart managers in the U.S. received instructions to mark up an average of 1,800 types of toys per store, according to a company e-mail dated Nov. 30 obtained by Bloomberg News.
• BP(BP) Sued by Obama Administration Over Worst Oil Spill. The Obama administration sued units of BP Plc and four other companies, saying they violated environmental laws in the largest offshore oil spill in U.S. history, according to a court filing. The civil lawsuit, filed today in U.S. District Court in New Orleans, is the first brought by the U.S. over the oil spill caused by the explosion of the Deepwater Horizon rig in April. The Justice Department’s civil investigation is continuing, as is a probe of potential criminal violations.
• Goldman Execs to Get $111 Million in 2007, 2009 Bonuses. Goldman Sachs Group Inc. Chief Executive Officer Lloyd C. Blankfein and his top deputies will collect about $111.3 million in stock next month in a delayed payoff from last year and their record-setting 2007 bonuses. Blankfein, 56, is poised to receive about $24.3 million in January, based on yesterday’s share price, while President Gary D. Cohn, 50, will get about $24 million, company filings show. The payouts, just a portion of the $67.9 million bonus awarded to Blankfein for 2007 and the $66.9 million paid to Cohn, reflect a 24 percent decline in the stock’s value since it was granted at $218.86. Within a year after the bonuses were approved, Goldman Sachs took $10 billion from the U.S. Treasury, converted to a bank and was borrowing as much as $35.4 billion a day from Federal Reserve emergency programs. This year the firm paid $550 million to settle U.S. regulators’ fraud charges related to a mortgage-security the company sold in 2007.
• Euro Drops After Moody's Says Spain on Review for Downgrade; Dollar Gains. The dollar rose against most of its major counterparts as a possible downgrade of Spain’s credit rating rekindled concern the euro zone’s financial crisis is spreading, spurring demand for the safety of the U.S. currency. The greenback rose against the euro and yen as U.S. data showed a recovering economy with historically low inflation. The Canadian dollar rallied against most of its major counterparts as industrial production in the U.S. increased more than forecast in November, fueling demand for North American assets.“You still have the debt concerns in Europe, that’s what’s weighing down on the euro,” said Fabian Eliasson, head of U.S. currency sales at Mizuho Financial Group Inc. in New York. “It’s the overall European situation and the uncertainty of how it’s going to be resolved.”
• U.S. Homebuilder Confidence Unchanged in December Amid Depressed Demand. Confidence among U.S. homebuilders was unchanged in December from a month earlier, indicating residential construction will stay near depressed levels. The National Association of Home Builders/Wells Fargo index of builder confidence held at 16, matching the median forecast of economists surveyed by Bloomberg News, data from the Washington-based group showed today. Readings below 50 mean more respondents said conditions were poor.
• U.S. Industrial Production Rises More Than Forecast. Industrial production in the U.S. increased more than forecast in November, helped by gains in computers, home electronics and appliances, signaling factories will support economic growth into next year. Output at factories, mines and utilities rose 0.4 percent, the biggest gain since July, after a revised 0.2 percent drop in October, figures from the Federal Reserve showed today in Washington. Economists forecast a 0.3 percent gain, according to the median of 75 projections in a Bloomberg News survey. Manufacturing rose 0.3 percent for a second month.

Wall Street Journal:

• WSJ/NBC Poll Shows Solid Support for Tax Package. The poll found that 59% approve of the agreement, against 36% that disapprove, and those numbers are relatively consistent across party lines.

CNBC:

• What, Me Worry? Investors are Surprisingly Bullish on Stocks. Call it being complacent over complacency—redundant for sure, but an expression of how even a healthy level of fear has seemed to come completely out of the stock market.
• Obama's CEO Summit: Who Is, and Isn't, Around the Table.
  

Business Insider:

• Jerry Brown: California Budget Is "Much Worse Than I Thought - We've Been Living In Fantasy Land".
• Dylan Grice: Actually, Buying Commodities is a Terrible Idea and Your Real Return Will be Zero. Dylan Grice of Societe Generale doesn't think commodities themselves make a very good investment. In fact, Grice is confident commodities make a real return of 0% over the long-haul. This may be shocking, with all the bullish talk of surging commodity prices, the market seems a natural investment. Grice contends that, actually, a long-term bet on commodities is a long-term bet against human ingenuity.

Zero Hedge:

• Rosie On Further Evidence of the "Mother of all Margin Squeezes". (graphs) A slew of traditionally interesting insights in today's piece by David Rosenberg. Probably the most interesting data point has to do with further evidence of what as we have been claiming for about two months now, is shaping up to be the "mother" of all margin squeezes.

New York Times:

• U.S. Called Vulnerable to Rare Earth Shortages. The United States is too reliant on China for minerals crucial to new clean energy technologies, making the American economy vulnerable to shortages of materials needed for a range of green products — from compact fluorescent light bulbs to electric cars to giant wind turbines. So warns a detailed report to be released on Wednesday morning by the United States Energy Department.
• Anti-Austerity Protest in Greece Turns Violent. Thousands of Greeks took to the streets of the capital on Wednesday for a protest against a fresh wave of austerity measures which was marred by violence as a general strike brought international travel and public services to a standstill.

TheStreet.com:

• Mortgage Activity Eases as Rates Head Up. The volume of mortgage loan applications decreased 2.3% on a seasonally adjusted basis in the week ending Dec. 10, the Mortgage Bankers Association said early Wednesday. Mortgage activity fell 0.9% in the prior week. Refinancing application volume decreased 0.7% from the previous week. It was the fifth consecutive weekly drop in refinancing activity, and came on the heels of a 1.4% drop in the prior week. Home-purchase loan applications fell 5% in the week, on a seasonally adjusted basis, after ticking 1.8% higher a week earlier. On an unadjusted basis, the MBA's purchase index was 16.6% lower than in the year-earlier week. The average rate on a 30-year fixed mortgage increased to 4.84%, from 4.66% in the prior week. It was the highest rate observed since early May and was the fifth consecutive weekly increase.
  

Tech Ticker:

• Europe in Crisis: "There's a Lot of Potential Dominoes Over There," Mauldin Says. (video) Europe's debt crisis returned to center stage Wednesday after Germany again balked at expanding the size of the EU bailout package and Moody's warned it may downgrade Spain's debt. Looking out into 2011, the potential for a European banking crisis is "the one thing that makes me nervous," says John Mauldin, president of Millennium Wave Securities and author of the Thoughts from the Frontline e-letter. EU banks, led by those in Germany and France, have $2.28 trillion of exposure to the debts of Greece, Ireland, Portugal and Spain, according to the Bank for International Settlements. Add in the exposure of European banks to the debts of other European banks - likely in the trillions when the nominal value derivatives are included -- and "there's a lot of potential dominoes over there," he says.

Reuters:

• Baidu(BIDU) Sees Growth Rate Slowing in 2011. China's top search engine, Baidu Inc (BIDU), sees its top-line and bottom-line growth rates softening over the next year on a higher base of comparison, as it eyes acquisitions and "contextual" ads to boost growth in the future. "No ... We have such a bigger base," Haoyu Shen, Baidu's senior vice president of business operations, said at the Reuters China Investment Summit when asked whether the firm can keep up its stellar top and bottom-line growth rates into 2011.
• US Credit Card Delinquencies, Usage Fall. Credit card delinquency rates fell at major U.S. lenders in November as fewer consumers fell behind on their bill payments, signaling that they are recovering from the stress of the financial crisis. But consumers are also avoiding racking up more debt on their credit cards, even during the holiday shopping season, in a sign that lenders will be struggling to rebuild their businesses for some time to come.
• U.S. Equity Investors Most Bullish in 2 Years - Data. U.S. equity investors are more bullishly positioned than at any time in the last two years, figures from Data Explorers show, following a sharp market rally since September. Investors currently have 10.8 times as many long positions as short positions -- bets on falling prices -- in the United States, the highest since the ratio was calculated two years ago, according to the data.

Financial Times:

• No Easy Exit From Vicious Spanish Debt Circle.

Die Zeit:

• Germany must be prepared to sacrifice more sovereignty and money in order to preserve the euro, former Chancellor Helmut Schmidt said. Germany ought to be prepared to sacrifice more to the European project because the country had "massively contributed to conflict" in the past, Schmidt said.

RTE:

• The European Union will charge Ireland a 3% interest margin on teh 22.5 billion euros of its aid package. RTE in the report broadcast today also cited the European Court of Auditors as saying that the EU has never charged an interest margin for money it has lent or guaranteed.

ABC:

• Spanish Prime Minister Jose Luis Rodriguez Zapatero will ask the European Union to be more flexible with the use of the region's bailout fund. Zapatero will request that the fund be used spontaneously to give lines of credit to member countries which are experiencing a lack of liquidity due to the excessive lack of confidence shown by markets.

Xinhua:

• Chinese are decreasingly satisfied with their lives, including economic status, occupation and social security, citing the Chinese Academy of Social Sciences. Migrant workers born in the 1980s work longer and earn less than older migrants, citing the government research body's annual "Blue Book" on Chinese society.

Macau Daily Times:

• Government Says No More Direct Land Grants to Casinos. There will be no more land plots granted for casino projects without a public tender once the new Land Law comes into effect, the Land, Public Works and Transport Bureau (DSSOPT) director Jaime Carion said yesterday.

Bear Radar

Style Underperformer:

• Large-Cap Value (-.28%)

Sector Underperformers:

• 1) Gaming -1.75% 2) Steel -1.25% 3) Semis -1.15%

Stocks Falling on Unusual Volume:

• PVTB, PT, BCS, ASBC, PTR, MTW, CEDC, KMT, CCE, MOTR, DDMX, TGA, CBOU, SAFM, SMSC, CEDC, ACAT, ULTI, VRNT, CISG, DORM, ULTA, BSFT, AIXG, PSMT, AMGN, ICFI, SRCL, BIDU, EOI, GNI, WF, ADC and SYX
  

Stocks With Unusual Put Option Activity:

• 1) MA 2) JOYG 3) ADBE 4) ADI 5) JOE
  

Stocks With Most Negative News Mentions:

• 1) PRU 2) JBHT 3) TRB 4) STI 5) TMK
  

Bull Radar

Style Outperformer:

• Small-Cap Growth (+.58%)

Sector Outperformers:

• 1) Hospitals +1.19% 2) Biotech +.79% 3) Drugs +.62%

Stocks Rising on Unusual Volume:

• LPSN, JOYG, CPRT, NVS, NIHD, CTRP, VECO, APKT, FNSR, SAM, EBS and KOP
  

Stocks With Unusual Call Option Activity:

• 1) TS 2) JOYG 3) SWKS 4) CTRP 5) NVS
  

Stocks With Most Positive News Mentions:

• 1) LB 2) HRLY 3) HCP 4) NIHD 5) CMTL