Stocks Plunging into Final Hour on Soaring Eurozone Debt Angst, Global Growth Worries, Emerging Markets Inflation Fears, US Tax Hike Worries

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  
• Sector Performance: Every Sector Declining
  
• Volume: Heavy
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 28.17 +20.70%
  
• ISE Sentiment Index 70.0 -14.63%
  
• Total Put/Call 1.26 -5.26%
  
• NYSE Arms 4.23 +362.78%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 100.41 +1.41%
  
• European Financial Sector CDS Index 185.18 +12.14%
  
• Western Europe Sovereign Debt CDS Index 294.83 +3.57%
  
• Emerging Market CDS Index 229.84 +5.11%
  
• 2-Year Swap Spread 25.0 unch.
  
• TED Spread 26.0 +3 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .00% -4 bps
  
• Yield Curve 219.0 -12 bps
  
• China Import Iron Ore Spot $177.90/Metric Tonne +.11%
  
• Citi US Economic Surprise Index -88.0 -2.4 points
  
• 10-Year TIPS Spread 2.21% -14 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -250 open in Japan
• DAX Futures: Indicating -45 open in Germany

Portfolio:

• Slightly Lower: On losses in my Technology, Medical, Biotech and Retail sector longs
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, added to my (EEM) short, stopped out of some longs
  
• Market Exposure: Moved to 25% Net Long

BOTTOM LINE: Today's overall market action is very bearish as the S&P 500 takes out technical support on volume on soaring eurozone debt angst, US tax hike concerns, financial sector pessimism, emerging market inflation fears and global growth worries. On the positive side, Telecom and Restaurant shares are holding up relatively well, falling less than -2.0%. Oil is plunging -5.5% and the UBS-Bloomberg Ag Spot Index is falling -1.47%. The AAII % Bulls fell to 27.2% this week, while the % Bears jumped to 49.9, which is a big positive. On the negative side, Coal, Alt Energy, Energy, Oil Service, Steel, Paper, Construction, Hombuilding, Biotech, Disk Drive and Agriculture shares are under severe pressure, falling more than -5.0%. Gold is unch. and Copper is down -1.96%. Rice is hovering near a multi-year high, soaring about +26.0% in less than 1 month. The US price for a gallon of gas is unch. today at $3.70/gallon. It is up .56/gallon in less than 5 months. The Italy sovereign cds is rising +5.96% to 387.82 bps, the Brazil sovereign cds is rising +3.29% to 118.78 bps, the Russia sovereign cds is rising +6.9% to 158.17 bps, the China sovereign cds is surging +7.28% to 93.39 bps, the France sovereign cds is rising +2.3% to 143.89 bps, the Spain sovereign cds is surging +2.41% to 429.65 bps, the Germany sovereign cds is rising +5.48% to 72.25 bps and the Belgium sovereign cds is rising +6.47% to 245.07 bps. The Italy sovereign cds has soared +173 bps in 10 days. The Spain, Italy and France sovereign cds are making new record highs again today. The German sovereign cds is hitting another multi-year high and is only 20.0 bps from its Feb. 09 high of 93.0 bps. The Eurozone Financial Sector CDS Index is now only 24.0 bps from its March 09 record high. India's Sensex fell another -1.4% last night despite the rally in US stocks, which leaves it down -13.7% ytd. Brazil's Bovespa continues to be one of the word's worst-performers, falling another -4.6% today, which leaves it down -22.7% ytd and -26.9% from its Nov. 4th high. Germany's DAX has broken down badly over the last 4 days and is now down -7.2% ytd. French(-3.9%), Italian(-5.2%) and Spanish(-3.9%) stocks are trading horribly again today. Italian stocks are now down -20.05% ytd and are down -28.4% from their Feb. 17th 52-week high. Gauges of investor angst are spiking again today, which is a positive. However, the markets are telegraphing a global recession. As I warned a few weeks ago, investors were too pre-occupied with the US debt ceiling debate and losing sight of how badly Europe and some key emerging markets were deteriorating. Europe appears to be in complete disarray and Brazil trades like its economy is poised for a hard landing on runaway inflation. As well, China and India continue to be a large concern. While Russia has held up much better than most other emerging markets(+3.9% ytd), it likely has the most downside risk from current levels if a global recession truly is in the offing. I suspect another dynamic that is now back in play is forced selling by some very well know hedge funds. Considering how badly many funds were already underperforming and that net long exposure was relatively high before this sell-off gained traction, another round of closures could be in store. While stocks are very oversold near-term and should start bouncing by early next week, more weakness is likely over the intermediate-term. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting and falling energy/food prices.

Bear Radar

Style Underperformer:

• Mid-Cap Growth (-3.81%)

Sector Underperformers:

• 1) Coal -11.31% 2) Construction -6.10% 3) Oil Service -6.03%

Stocks Falling on Unusual Volume:

• FDP, WNR, XEC, BCS, PBR, UBS, ABB, CLMT, AIXG, TI, DNDN, SCOR, LAMR, SXCI, DXCM, LFUS, AMRN, HGSI, HNH, LORL, MELI, ITMN, MANT, TLEO, ZUMZ, ABMD, HTHT, FARO, LINE, PIQ, CTB, EXI, PXE, JKJ, IXN, NTL, PZD, ISI, WLT, FEZ, XSD, NYC, VRX, JKI, EWU and VE
  

Stocks With Unusual Put Option Activity:

• 1) WFT 2) LEN 3) XOP 4) WLT 5) PHM
  

Stocks With Most Negative News Mentions:

• 1) RDC 2) DVR 3) HOGS 4) EWP 5) TNK
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Large-Cap Value (-2.81%)

Sector Outperformers:

• 1) Utilities -1.52% 2) Tobacco -1.63% 3) Restaurants -1.65%

Stocks Rising on Unusual Volume:

• NSIT, THS, KFT, WWWW, THOR, GOLD, FIRE, ANSS, MNTA, SWM, SWI, TDC and DVA
  

Stocks With Unusual Call Option Activity:

• 1) WFT 2) DNDN 3) URI 4) WNR 5) WLL
  

Stocks With Most Positive News Mentions:

• 1) LMT 2) MOLX 3) UNG 4) FTR 5) FIRE
  

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume
  

Thursday Watch

Evening Headlines

Bloomberg:

• Euro Problems Need Fixing Before Financial Markets Lose Their Faith: View. The U.S. Congress may have narrowly avoided a government-debt disaster, but financial troubles are resurging across the Atlantic. If European leaders can’t find the political will to implement the drastic measures needed to stem their crisis, markets could soon put them in an untenable position. The market for Italian and Spanish government bonds offers an indication of how little confidence Europe’s most recent package of rescue measures has inspired. As of Wednesday, the yield on the 10-year Italian bond stood at 6.08 percent, near its highest point since the introduction of the euro. The yield was about 3.7 percentage points higher than the yield on 10-year German bonds -- a spread that suggests rising concern that Italy might default. The comparable spread on Spain’s 10-year bond was 3.9 percentage points, up from 3.2 a month earlier. Belgium’s spread hit a euro-era high of 2.1 percentage points. Investors’ jitters are dangerous, because they can become a self-fulfilling prophecy. As worries about default push up governments’ cost of borrowing, debts that were once manageable can become unsustainable. No wonder European Commission President Jose Barroso, while calling the rising yields in Italy and Spain unwarranted, voiced “deep concern” Wednesday about the market developments.
• Yen Plunges as Japan Intervenes in Markets for the First Time Since March. The yen weakened against all its major peers after Japan intervened in the foreign-exchange market for the first time since March to stem gains in the currency that threaten the nation’s economic recovery. The yen also fell on prospects the Bank of Japan will follow its Swiss counterpart in easing monetary policy at a meeting that will end one day early today. Japan last intervened on March 18, joining its Group of Seven counterparts in selling yen the day after the currency jumped to the postwar record of 76.25 per dollar. Japanese Finance Minister Yoshihiko Noda said today the intervention was unilateral. “Intervention will be more effective if it comes with monetary easing,” said Kazuo Kitazawa, the Tokyo-based director of fixed income at Credit Suisse Group AG. “I can’t say intervention is successful until the yen depreciates beyond 80 against the dollar.” The yen fell to 78.36 per dollar as of 10:46 a.m. in Tokyo from 77.06 in New York yesterday. The yen dropped to 112.19 per euro from 110.38. The dollar was at $1.4323 per euro from $1.4323.
• Birinyi, Biggs Advise Holding Stocks After S&P 500's Decline. The seven-day slide that wiped out the 2011 gain in the Standard & Poor’s 500 Index is no reason to sell stocks, according to investors including Laszlo Birinyi and Barton Biggs. Growing concern that the U.S. economy is faltering erased $1.07 trillion from American equities in less than two weeks, according to data compiled by Bloomberg.
  
• Oil Climbs as Stimulus Speculation Counters Economy, Gain in U.S. Supplies. Oil rose from a five-week low in New York as speculation that the Federal Reserve may start another stimulus program countered signs of a slowing economy in the world’s biggest crude-consuming nation. Crude for September delivery gained as much as 62 cents to $92.55 a barrel in electronic trading on the New York Mercantile Exchange and was at $92.42 at 10 a.m. Sydney time. The contract yesterday dropped $1.86 to $91.93, the lowest since June 27. Prices are 12 percent higher the past year.
• JPMorgan(JPM) Cuts U.S. Third-Quarter GDP Forecast to 1.5% on Consumption. JPMorgan Chase & Co. cut its forecast for U.S. economic growth in the third quarter by a percentage point to 1.5 percent, partly because of a slowdown in consumer spending, chief U.S. economist Michael Feroli wrote in a note today. Feroli also lowered the forecast for fourth-quarter growth to 2.5 percent from a prior estimate of 3 percent. The world’s largest economy will expand 2 percent in the first six months of 2012, less than a previous projection of 2.5 percent.
• Powerful China Rail Ministry May Face Breakup. China’s deadliest high-speed train crash may hasten the breakup of a ministry that runs the world’s second-largest rail network, employs more people than the U.S. government and has debts larger than Denmark’s economy. Premier Wen Jiabao has pledged more focus on safety and greater accountability following the July 23 crash that killed 40 people, endangering the Ministry of Railways’ dual grip on regulating and operating China’s trains. Dividing these roles may improve management, financial transparency and safety, said Hu Xingdou, an economics professor at the Beijing Institute of Technology. “The rail ministry has been run like an independent kingdom for years,” Hu said. “The concentration of power has caused inefficiency and mismanagement, and it’s a hotbed for corruption.”
• BofA's(BAC) Moynihan to Answer 'Skeptics' in Berkowitz Conference. Bank of America Corp. Chief Executive Officer Brian T. Moynihan plans to answer questions from "skeptics" among fund manager Bruce Berkowitz's investors after shares of the biggest U.S. lender fell to a two-year low. Berkowitz's Fairholme Capital Management LLC will hold a 90-minute conference call with Moynihan on Aug. 10, the manager said today in a statement. The event will help investors of Fairholme, with 92.6 million Bank of America shares as of March 31, understand why the firm is a core holding, Berkowitz said.
• Lehman, Hong Kong Liquidators Resolve $20 Billion of Claims.
• Buffett Can't Get Analysts to Give 'Buy' Rating After Berkshire's(BRK/A) Decline. Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) can’t get a buy recommendation from equity analysts, even as it trades in New York at the cheapest price relative to book value since March 2009. Berkshire fell this week to its lowest since June 2010 and has underperformed the Standard & Poor’s 500 Index over the last 12 months.
• Hackers in China Attack UN, Olympic Networks, Security Firms Say in Report. Hackers based in China spent five years ransacking the computer networks of the United Nations, multinational corporations, the Olympic committees of several countries and the U.S. and Canadian governments, two security companies said. In one of the largest cyberattacks discovered, more than 72 organizations were hacked by spies beginning in 2006, according to computer server logs and other evidence obtained by Santa Clara, California-based McAfee Inc. (MFE) The attack has been traced to servers in at least two of China’s major cities, Beijing and Shanghai, according to Atlanta-based Dell SecureWorks, which separately traced the same series of attacks. “Even we were surprised by the enormous diversity of the victim organizations and were taken aback by the audacity of the perpetrators,” Dimitri Alperovitch, McAfee’s vice president of threat research, said in the report. The details of the incidents, which McAfee dubbed Operation Shady RAT, are part of a mounting body of evidence linking China to sophisticated hacking operations targeted against a broad array of both government and commercial targets.

Wall Street Journal:

• How White House Wooed Wall Street in Debt Debate. This week's vote to avert a debt-ceiling crisis brought together a variety of uneasy political alliances. But few were as fraught with tension as the one between Wall Street and the Obama administration. Banks and the White House found themselves on the same side in recent weeks as they worked to back a compromise that would fend off a default by the U.S. government. White House Chief of Staff Bill Daley even tried to enlist the help of his former employer, J.P. Morgan Chase & Co.(JPM), as part of a final push to get a deal done in Congress, said people familiar with the situation.
• Iran Claims Progress Speeding Nuclear Program.
• Signs of Slowdown Creep Into Europe's Powerhouses. Jean-Claude Trichet no longer needs to gaze toward southern Europe and Ireland to spot signs of economic weakness. As he prepares for Thursday's European Central Bank meeting, the president can simply look out his office window in Frankfurt. The economic slowdown—once limited to Greece, Spain, Ireland, Portugal and Italy—is creeping into Germany and other powerhouses such as France and the Netherlands. Those three countries alone account for over half of euro-zone gross domestic product.

CNBC:

• Moody's May Cut Credit Ratings on Two Big Banks. Moody's Investors Service said it may cut its ratings on Bank of New York Mellon(BK) and JPMorgan Chase(JPM) over the next 18 months, saying the banks might get less U.S. government support in the future.
• Corzine to Replace Geithner at Treasury?
  

Business Insider:

• This Nebraska Village May Be Sitting On The World's Largest Untapped Deposit Of Rare Earth Minerals.

Zero Hedge:

• EFSF - Too Small? Too Big? Or Just Wrong?
• Gross US Debt Surges By $240 Billion Overnight, US Debt To GDP Hits Post World War II High 97.2%. Two things happened when the Senate voted in the "Bipartisan" plan into law yesterday: i) deferred debt on the Treasury's balance sheet finally caught up with reality, and ii) as a result of i) America's Debt/GDP just hit a post World War 2 High of 97.2%. Becasue as the Daily Treasury Statement as of last night indicates, total US marketable debt surged by $124.6 billion, while debt in intragovernmental holdings (Social Security, Government Retirement Accounts, etc), soared by $113.6 billion, for a combined one day change of $238.2 billion, the single biggest one day increase of US debt in history.

IBD:

• RPX(RPXC) Protects Tech Companies From Patents Lawsuits.

Forbes:

• How Cloud Computing Is Reshaping The Role Of The CIO.

NY Times:

• The Manifesto of a Hedge Fund King. DealBook’s Evelyn M. Rusli and Azam Ahmed discuss Paul Singer’s latest letter to investors, and whether his views have greater significance for the world of hedge funds.
• Large Banks in Europe Struggle With Weak Bonds. Ever since the European debt crisis began, the risk of contagion — of problems spreading from smaller countries to bigger ones, like Italy and Spain — has worried government officials and investors. Now, another type of contagion is causing concern: the risk of problems spreading to big banks, especially in Italy and Spain. The growing vulnerability of the giant banks in these two countries is spurring investor fears that Europe’s latest bid to get a handle on its festering debt crisis, adopted just a few weeks ago, has come up short.

Rasmussen Reports:

• 14% Say U.S. Heading In Right Direction, Lowest Level Since November 2008. Eighty percent (80%) of voters say the country is heading down the wrong track, the highest finding since early November 2008.

Reuters:

• Syrian Tanks Thrust Into Hama, 45 Killed: Activist. At least 45 civilians were killed in a tank assault by Syrian President Bashar al-Assad's forces to occupy the center of Hama, an activist said on Thursday, in a sharp escalation of a military campaign aimed at ending an uprising against his rule.
• US Congress Leaders Agree On Path to Trade Deals. Congressional leaders said on Wednesday they have agreed upon a path to approve three long-delayed free trade agreements and a program to help U.S. workers who lose their jobs because of foreign competition.
• ECB to Halt Rate Hike Cycle, Faces Pressure On Bond-Buying. An economic slowdown and debt market turmoil mean the European Central Bank will probably hit 'pause' on its interest rate raising cycle for several months and may even signal on Thursday a readiness to buy bonds again.
• Dendreon(DNDN) Pulls Forecast as Provenge Falls Short. Dendreon Corp on Wednesday reported far lower-than-expected second-quarter sales of the prostate cancer vaccine Provenge and withdrew its full-year revenue forecast, sending its shares into a tailspin. The biotechnology company, whose shares fell 62 percent after hours, also plans to reduce expenses, including through job cuts, at a time when Wall Street was expecting sales to take off as manufacturing capacity for the vaccine increases.
• Walter Energy(WLT) Q2 Lags Wall Street; Shares Fall. Coal miner Walter Energy's second-quarter profit missed expectation hurt by higher costs and weather-related challenges at its Alabama and North-East British Columbia operations. Shares of the Tampa, Florida-based company were down 5 percent at $105.5 in after market trade.
• Obama Turns 50th Birthday Into Campaign Fundraiser.
  

BBC:

• Italy 'to default' but Spain may 'just' escape'. Debt-laden Italy is likely to default, but Spain might just avoid it, according to the British think tank, the Centre for Economics and Business Research. In a report published on Thursday, the CEBR calculated that Italy's debt would rise from 128% of annual output to 150% by 2017 if bond yields stay above the current 6% and growth remains stagnant. "Even if the cost of borrowing goes back down to 4%, the growth rate is so anaemic that we see the debt-GDP ratio remaining at 123% in 2018," said Doug McWilliams, the CEBR's chief executive.

China Business News:

• China's southern province of Guangxi has asked companies with heavy energy consumption to halt production on certain days of the week as the region faces a power shortage of about 30%. The steel, aluminum, lead and zine makers will be affected.

China Securities Journal:

• Cash in the Chinese banking system will remain "tightly balanced" as long as banks' reserve requirement ratio remains high and excess reserve ratio stays low, China Securities Journal said today in a commentary on its front page.

Financial News:

• China should continue to use price tools, reserve requirements, open-market operations and a more flexible yuan to manage inflation, the Financial News said in a front-page commentary. The country when using interest rates should pay more attention to the effect of international factors and the impact on consumption, according to the commentary by a writer at the central bank publication.

People's Daily:

• China's Communist Party must directly confront corruption which is the biggest danger facing the ruling party. China must resolutely solve corruption, the editorial said.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.50% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 121.50 -1.5 basis points.
  
• Asia Pacific Sovereign CDS Index 123.0 +.75 basis point.
  
• S&P 500 futures +.41%.
  
• NASDAQ 100 futures +.38%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FSS)/.08
• (CBOE)/.32
• (ATK)/1.99
• (FO)/.98
• (EP)/.24
• (TBL)/-.39
• (LEA)/1.29
• (LUV)/.20
• (TDW)/.42
• (DTV)/.85
• (CI)/1.29
• (CVS)/.64
• (DISCA)/.61
• (GM)/1.19
• (CAH)/.58
• (APA)/3.13
• (DNR)/.33
• (PCG)/1.02
• (KFT)/.58
• (LNKD)/-.01
• (FSLR)/.92
• (PBI)/.51
• (CF)/5.97
• (WMS)/.53
• (AIG)/.98
• (DLB)/.61
• (PCLN)/4.85
• (FLR)/.81
• (MCHP)/.55
• (CEC)/.32
• (ASEI)/.98
• (ZEUS)/.78
• (MHK)/.93

Economic Releases
8:30 am EST

• Initial Jobless Claims for last week are estimated to rise to 405K versus 398K the prior week.
• Continuing Claims are estimated to fall to 3700K versus 3703K prior.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The ECB Rate Announcement, BoE Rate Announcement, ICSC Chain Store Sales for July, RBC Consumer Outlook Index for August, Bloomberg weekly Consumer Comfort Index, weekly Fed Balance sheet report, M1/M2 reports, weekly EIA natural gas inventory report and the (STEC) Analyst Day could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and industrial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

Stocks Reversing Higher On Volume Into Final Hour On Euro Bounce, Less Tech Sector Pessimism, Short-Covering, Bargain Hunting

Portfolio:

• Higher: On gains in my Technology, Medical and Retail sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short, then added back some (IWM)/(QQQ) hedges
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 reverses morning losses and holds 1,250 on good volume despite rising eurozone debt angst, US tax hike concerns, mixed US economic data, emerging market inflation fears and global growth worries. On the positive side, Internet, Software, Semi, Computer, Computer Service, I-Banking, Hospital, Restaurant, Gaming, Networking and Wireless shares are especially strong, rising more than +.75%. The MS Tech Index has outperformed substantially throughout the day. "Growth" stocks are also strongly outperforming "value" shares. Oil is falling -1.55% and the UBS-Bloomberg Ag Spot Index is falling -1.38%. The 3-Month Euribor/OIS spread is falling -2 bps to 37 bps. On the negative side, REIT, Homebuilding, Paper, Steel, Oil Service, Energy, Oil Tanker and Coal shares are under pressure, falling more than -.75%. Lumber is dropping another -.74%, gold is rising +.33% and Copper is down -1.333%. Lumber is now back to its June 16th 52-week low. Rice is hovering near a multi-year high, soaring about +27.0% in less than 1 month. The US price for a gallon of gas is -.01/gallon today to $3.70/gallon. It is up .56/gallon in less than 5 months. The Italy sovereign cds is rising +1.43% to 364.17 bps, the France sovereign cds is rising +5.89% to 140.67 bps, the Spain sovereign cds is surging +3.32% to 418.96 bps, the Germany sovereign cds is rising +4.67% to 68.53 bps, the Belgium sovereign cds is rising +2.75% to 230.17 bps and the Ireland sovereign cds is rising +.96% to 850.17 bps. The Italy sovereign cds has soared +149 bps in 9 days. The Spain, Italy and France sovereign cds are making new record highs again today. The German sovereign cds is hitting another multi-year high. The Eurozone Financial Sector CDS Index is very close to record highs, as well. Asian indices were weak again overnight, with India's Sensex falling another -.94%, which leaves it down -12.5% ytd. Brazil's Bovespa continues to be one of the word's worst-performers, falling another -2.2% today, which leaves it down -19.1% ytd and -23.2% from its Nov. 4th high. Germany's DAX has broken down badly over the last 3 days and is now down -3.96% ytd. French(-1.93%), Italian(-1.54%) and Spanish(-.85%) stocks continue to trade very poorly. Italian stocks are now down -15.7% ytd and are down -24.5% from their Feb. 17th 52-week high. The action in European equities and cds remain a huge concern, notwithstanding today's US stock reversal. Gauges of investor angst spiked this morning, which is a big positive. This morning's lows provided a good entry for a tradable move higher in stocks. However, I would like to see euro cds show signs of reversing lower before becoming more aggressive on the long side. I expect US stocks to trade modestly higher into the close from current levels on short-covering, a bounce in the euro, technical buying, bargain-hunting, tech sector optimism and falling energy/food prices.

Today's Headlines

Bloomberg:

• Spanish, Italian Bonds Rise on Bets European Officials May Act on Crisis. Spanish and Italian bonds rose for the first time in six days after the Swiss central bank cut interest rates, stoking speculation euro-area policy makers may also take action to ease stresses in financial markets. German bunds swung between gains and losses as European Commission President Jose Barroso today urged governments to quickly approve a planned upgrade of the euro-area rescue fund, saying the perception that leaders haven’t found a “systemic” answer to the crisis is hurting investor sentiment. The European Commission said it will issue a statement on the “situation in the financial markets” today, while the European Central Bank will make its monthly decision on interest rates tomorrow. “There’s short-covering driven by an expectation of some sort of action,” said Steven Major, global head of fixed-income research at HSBC Holdings Plc in London. The Italian 10-year bond yield dropped three basis points to 6.10 percent at 4 p.m. in London. The 4.75 percent security maturing in September 2021 rose 0.19, or 1.9 euros per 1,000- euro ($1,428) face amount, to 90.57. The difference in yield, or spread, between Italian 10-year bonds and similar-maturity German debt was little changed at 372 basis points. The yield on 10-year Spanish bonds also fell three basis points, to 6.26 percent. The Spanish spread over bunds shrank four basis points to 387 basis points.
• ADP Says U.S. Companies Added 114,000 Jobs. Companies in the U.S. added 114,000 workers to payrolls in July, according to a private survey. The increase followed a revised 145,000 gain the prior month, according to data from ADP Employer Services. The median forecast of economists surveyed by Bloomberg News called for an advance of 100,000.
• U.S. Service Industry Grows Less Than Forecast. Service industries expanded in July at the slowest pace in 17 months as orders and employment cooled, indicating the biggest part of the U.S. economy had little spark to begin the second half of the year. The Institute for Supply Management’s index of non- manufacturing businesses, which covers about 90 percent of the economy, dropped to 52.7 from 53.3 in June. Readings above 50 signal expansion, and the median projection in a Bloomberg News survey was for 53.5 in July.
• MasterCard(MA) Jumps as Card Spending Increases. MasterCard Inc. (MA), the world’s second- biggest payments network, climbed the most in five weeks in New York trading after second-quarter profit beat analysts’ estimates, helped by an increase in customers’ spending. The stock gained 8.5 percent to $323.85 at 12:27 p.m. on the New York Stock Exchange, the biggest jump since June 29 and the highest since the company’s initial public offering in May 2006. Net income rose 33 percent to $608 million from the same period a year earlier, the Purchase, New York-based firm said today in a statement. Earnings per share of $4.76 exceeded the $4.23 average estimate of 29 analysts surveyed by Bloomberg as net revenue increased 22 percent to $1.7 billion.
• Crude Oil Declines to Five-Week Low on Concern U.S. Economy Is Faltering. Crude oil tumbled to a five-week low on concern that a faltering economy will curb fuel demand in the U.S., the world’s biggest oil-consuming country. “The main driver is the economy,” said Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Florida. “If the U.S. economy is slowing the easiest path for oil is lower. We’ll soon be testing support just below $90.” Crude oil for September delivery dropped $2.15, or 2.3 percent, to $91.64 a barrel at 1:29 p.m. on the New York Mercantile Exchange. Futures touched $91.22, the lowest level since June 28. Prices have climbed 11 percent in the past year.
• Wal-Mart(WMT) Visits Drop as Products Fail to Draw. Visits to Wal-Mart Stores Inc. (WMT)’s U.S. locations open at least a year dropped 2.6 percent from February through June, according to an internal memo, while rivals are attracting customers.

Wall Street Journal:

• Former Top Fed Officials Signal Support For QE3 If Inflation Slows. The U.S. economy faces a risk of falling back into recession and the Federal Reserve might need to consider a new round of securities purchases to deal with it, even though it isn’t in a strong position to address a slowdown, three former top officials at the central bank said. In an exclusive interview with the Wall Street Journal, Donald Kohn, Vincent Reinhart and Brian Madigan – the last three directors of the Fed’s powerful monetary affairs committee — put the risk of a new economic contraction at between 20% and 40%.

CNBC.com:

• Mortgage Applications Rose Last Week on Lower Rates. The MBA's seasonally adjusted index of refinancing applications rose 7.8 percent, while the gauge of loan requests for home purchases rose 5.1 percent.

Business Insider:

• Boehner Introduces Revised Debt Ceiling Plan, Senate Democrats Pledge To Vote Against It.
  
• 11 Big Things Worrying Hedge Funder John Burbank.
• Google+ Panic at Facebook? Engineers Embrace Another "Lockdown" In Response to Google's Social Network.
• Sorry Liberals, There's Almost No Chance The "Super Committee" Can Raise Taxes.
• "Sudden and Unexpected" Burst Of Downsizing Causes Layoffs to Explode Nearly 60% in July.
  

Rasmussen Reports:

• 69% Say It's Likely Scientists Have Falsified Global Warming Research.

Reuters:

• Sovereign Rot Hits Italian Banks. Italian banks' reliance on the ECB has jumped to its highest since the beginning of the year as they struggle to access the bond market as a result of the sovereign crisis. "We are increasingly concerned about Italy and its banks being drawn into a vicious circle of shrinking market access, rising funding costs and deteriorating credit ratings and - ultimately - fundamentals," said Georg Grodzki, head of credit research and Legal and General Investment Management.

Telegraph:

• ECB To Protect Europe By Buying Bonds. The European Central Bank is expected to signal it is stepping into the eurozone debt crisis on Thursday by reopening its purchases of government debt, amid fears the turmoil will claim the economy of a nation that is "too big to bail".