Bear Radar

Style Underperformer:

• Small-Cap Growth (-.21%)

Sector Underperformers:

• 1) Telecom -2.21% 2) Coal -.61% 3) Gaming -.60%

Stocks Falling on Unusual Volume:

• CPF, FOSL, POT, CVV, HANS, SNDA, CGNX, JVA, TZOO, ALTR, DLTR, INFA, PANKL, VOLC, OPEN, T, RGR and CVD
  

Stocks With Unusual Put Option Activity:

• 1) ALU 2) HUM 3) EQR 4) T 5) ADBE
  

Stocks With Most Negative News Mentions:

• 1) DIA 2) CRZO 3) PCS 4) ZLC 5) CMC
  

Charts:

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

Wednesday Watch

Evening Headlines

Bloomberg:

• Euro Declines Versus Yen on Slowing Recovery. The euro fell for a second day against the yen as economists forecast unemployment in the region remained last month at its highest level since February, adding to signs that Europe’s economic recovery is faltering. The 17-nation currency maintained losses versus the dollar on speculation the European Central Bank will cut borrowing costs to support growth. The yen extended this month’s advances against 15 of its 16 major peers before a report projected to show U.S. employers added fewer jobs in August, boosting demand for safer assets. “There are expectations in the market for European rate cuts to bolster the economy instead of a rate increase that hurts the economy,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides foreign- exchange margin-trading services. “A rate cut is a negative for the euro.” The euro traded at $1.4421 at 10:30 a.m. in Tokyo from $1.4441 yesterday in New York. It was at 110.49 yen from 110.82.
• Subprime Mortgage Bonds Get AAA Rating From S&P Denied to U.S. Standard & Poor’s is giving a higher rating to securities backed by subprime home loans, the same type of investments that led to the worst financial crisis since the Great Depression, than it assigns the U.S. government. S&P is poised to provide AAA grades to 59 percent of Springleaf Mortgage Loan Trust 2011-1, a set of bonds tied to $497 million lent to homeowners with below-average credit scores and almost no equity in their properties. New York-based S&P stripped the U.S. of its top rank on Aug. 5, saying Washington politics were making the country less creditworthy. Treasuries gained about 1.95 percent and U.S. borrowing costs have fallen to record lows as investors repudiated the downgrade, according to Bank of America Merrill Lynch indexes. S&P has awarded AAAs to more than $36 billion of securities in the U.S. this year that were created by bankers who continue to gather thousands of loans, bundle them into bonds of varying risk and pay ratings firms a fee to assign credit rankings.
• Capital Rules May Cut Bank Profitability to 11%, McKinsey Says. Lenders may struggle to earn more than an 11 percent return on their equity as they implement rules and capital requirements costing $610 billion over the next seven years, according to a report from McKinsey & Co. Global regulations, including the mandatory clearing of over-the-counter derivatives and higher capital requirements, may force banks to pass on a “portion of the higher regulatory costs” to customers, the study said. Banks should “conserve capital and boost efficiency” to stay profitable, London-based McKinsey said. “After mitigation, average returns-on-equity across businesses will likely be 11 to 12 percent but with considerable variation,” according to the report, written by a McKinsey team led by Philipp Haerle and Thomas Poppensieker in Munich. “Some of the worst-hit businesses with ROEs below the cost of capital may have to be disposed of, especially at banks with weak franchises.” European lenders will need to raise an extra 423 billion euros ($610 billion) by 2019 to comply with global capital rules approved by the Basel Committee on Banking Supervision, according to a European Union study. The Basel committee also said last month that 28 banks would be subject to additional capital requirements to rein in too-big-to-fail banks.
• Containers Slump to 50-Year Low as Sales Slow: Freight Markets. The container-shipping industry is contending with the longest stretch of near-zero rates in its half-century history on the Asia-to-Europe route, as a capacity glut combines with the slowest growth in trade since 2009. Commerce on the world's second-busiest container route rose 4.2% in the second quarter, the weakest since the end of 2009, Woking, England-based Container Trade Statistics Ltd. estimates. Rates excluding fuel surcharges were "practically" zero in July and little changed this month, the worst run ever, said Menno Sanderse, an analyst at Morgan Stanley in London.
• Oil Heads for Biggest Monthly Drop Since May on Signal Stockpiles to Climb. Oil declined, heading for the biggest monthly drop since May, as investors bet that increasing crude stockpiles in the U.S. indicate fuel demand may falter in the world’s biggest consumer of the commodity. Futures slipped as much as 0.4 percent, snapping four days of gains, after the industry-funded American Petroleum Institute said supplies rose 5.13 million barrels last week, the biggest gain since March. An Energy Department report today may say inventories fell 500,000 barrels, according to the median estimate in a Bloomberg News survey. Seven respondents forecast a drop and six expected an increase. Crude for October delivery slid as much as 39 cents to $88.51 a barrel in electronic trading on the New York Mercantile Exchange and was at $88.53 at 8:41 a.m. Sydney time. The contract yesterday advanced $1.63 to $88.90. Prices are down 7.5 percent this month and 23 percent higher the past year.
• Rebels Scrounge for Munitions Ahead of Final Assault on Qaddafi Birthplace. Libyan rebels from three parts of the country converged on the capital in search of weapons as time runs out for those still supporting Muammar Qaddafi to surrender or face attack. The coastal city of Sirte, Qaddafi’s hometown, and the southern town of Sabha are the key remaining bastions of Qaddafi loyalists, rebel leader Mustafa Abdel Jalil said yesterday in Benghazi. He advised people in those areas to surrender by Sept. 3 to avoid further bloodshed.
• China Stocks to ''Head Downward' on Inflation, HSBC Jintrust Says. China's stocks may extend this year's slump as the government maintains policy measures to tame inflation and corporate profit growth slows, according to HSBC Holdings Plc's fund management venture in China. Investors should avoid industries with overcapacity and excess inventories, including metals, automobiles and auto parts, said Yan Ji, investment director at HSBC Jintrust Fund Management Co., which manages $1.6 billion. The Shanghai Composite Index has fallen 8.6% in 2011, adding to last year's 14% drop. The government's Aug. 26 order to lenders to set aside more reserves on margin deposits shows that the central bank still regards controlling inflation as its biggest task, Yan said.

Wall Street Journal:

• Rescue Fund Hits Snags in Germany and Finland. German Chancellor Angela Merkel is weighing whether to yield to a demand by some lawmakers for a bigger voice in future debt bailouts as a condition to win her party's approval for a stronger euro-zone rescue fund, as a parliamentary vote on the issue was delayed a week. Granting the German parliament the right to approve or reject future bailouts could trigger similar demands from parliaments across the euro zone, whose lawmakers are closely observing Berlin's actions. That could lead to further delays in the EU's approval for the Greek rescue.
  
• Economy Deeply Divides Fed. Federal Reserve officials are as deeply divided as they've been in decades about how to spur the flagging economy, records released Tuesday show, as they stake out positions on what, if any, action to take at their September meeting.
• Exxon(XOM) Wins Arctic Deal, Gives Russia U.S. Access. Exxon Mobil Corp. snatched away a major Arctic exploration deal with Russia's OAO Rosneft from competitors including BP PLC in a sweeping agreement that for the first time gives a Russian state-controlled company access to energy projects in the U.S. Exxon, entering a country where energy investments are fraught with political risk, agreed to invest $2.2 billion to explore potentially giant oil fields with state-run Rosneft in the ice-choked Kara Sea. It also finalized a deal to spend $1 billion looking for oil in the Black Sea.
• Debate Heats Up Over Commodities Holdings. A battle is heating up over whether investors in oil and other commodities markets should be required to lift the veil of secrecy that shrouds their trading bets. The debate has simmered in the three years since oil prices spiked to record highs in 2008, sparking concerns that speculators were driving the move. But it intensified in recent weeks after The Wall Street Journal published confidential regulatory data that identified some of the biggest players in commodities markets, and big chunks of their positions, during that historic rally.
• Bank of America Burns 'Big Short' Star Lippmann. Warning: Irony ahead. LibreMax Capital is among the two dozen investment firms that have objected to Bank of America’s proposed $8.5 billion settlement with mortgage-security investors. For those of you without a hedge fund scorecard, LibreMax is the new firm started by Greg Lippmann, the former Deutsche Bank CDO trader who helped the bank earn billions of dollars betting against shoddy mortgages. Lippmann was among the big shorting stars of Michael Lewis’s book “The Big Short.” So the guy who hated subprime mortgages now has turned long on mortgage bonds, a batch of which has burned him. Hurts, don’t it?
• Bank of America(BAC) to Exit Another Line. Bank of America Corp. intends to sell its correspondent mortgage business, as the troubled lender looks to narrow its focus and bolster its financial strength, said people familiar with the situation.

MarketWatch:

• Japan's July Industrial Production Disappoints. Japan's industrial production rose a seasonally adjusted 0.6% in July, the Ministry of Economy, Trade and Industry said Wednesday. The result was well below an average forecast for a 1.5% rise from a Nikkei and Dow Jones Newswires survey. The ministry's regular survey of manufacturing also showed firms expect industrial output to rise 2.8% in August, up from a previous forecast of 2.0% last month, but to fall 2.4% in September.

CNBC:

• Pockets of Debt Illiquidity Show Rising Bank Fears. Pockets of the fixed income and money markets are starting to reflect concern that recent volatility will extend past August, and that growing risk aversion may again roil banks and funding markets. One sign of worry is the increasing reluctance of banks to use their balance sheets to facilitate trades, which has hit sectors from corporate bonds to the short-term repurchase market, where there is $1.6 trillion in triparty loans. For example, banks have reduced activity in the intra-dealer Treasury repurchase agreement market by 63 percent since the end of June, according to Barclays Capital. To some, this spreading risk aversion suggests that an autumn of troubling headlines could again spark a freeze like the 2008 crisis. There is no shortage of potential flash points, from Europe's debt crisis to a weak U.S. economy. "I think the markets are going to get very stressed," said Abdullah Karatash, head of U.S. fixed income credit trading at Natixis in New York. Three-month interbank dollar lending rates also rose again on Tuesday to their highest in over a year. With rising interbank borrowing costs, futures contracts have also been implying three-month loan rates could rise as high as 60 basis points in December. This suggests nerves that funding pressures could increase over the new year period, when many banks reduce lending to tidy balance sheets for year-end. Commercial paper loans to banks have dropped by 15 percent, or $90 billion, since the beginning of June and lending to European banks has dropped 20 percent, according to Barclays. This has left European banks struggling to obtain the dollar funding they need to finance U.S. exposures, and sent the cost of swapping euros to dollars to post-crisis highs. "This could be Europe's 2008. That's probably the major concern for the market, what does that mean for the ripple effect on our capital markets and globally," said Mikelic. A CDS index based on of 25 European financials is also reflecting elevated concerns over their credit quality. The index traded on Tuesday at 242 basis points, just under last week's record 260 basis points and much higher than the 210 basis point peak reached at the height of the financial crisis, according to data by Markit.
• China Intensifies Purchases of Copper. Chinese companies and investors are stepping up their purchases of industrial commodities such as copper, in a show of confidence in the global economy that stands in contrast to the turmoil in western markets. The wave of buying is providing support for metals and minerals prices after commodities prices fell this month at worries about a double-dip. Senior executives at trading houses, mining companies and banks said Chinese consumers had used the recent drop in prices to rebuild stocks. “China is significantly less pessimistic relative to people in the western world,” said Raymond Key, head of metals trading at Deutsche Bank. “On dips they are restocking, especially in copper.” An executive at an important Chinese trading house added: “There is no doubt some traders have been buying [copper] recently.”

Business Insider:

• Bank of America's(BAC) Lawyers Knew AIG(AIG) Was Ready to Sue for $10 Billion 6 Months Ago.
• A Close Look At One of Those Crashing Solar Equipment Companies. Both China Inc. and Euro Inc. solar panel manufactures are willing to provide 100% of the financing (including “soft” costs) for a viable project. What better evidence could you find that there is a very big imbalance of supply and demand?
  The fundamental issue is that solar panels are a low tech. commodity product. It’s very difficult to make a buck when that is the case. These points all lead me to wonder about a big company in this space, Solyndra. This is a private company. I don’t have any financials to look at as a result. Neither do you. But you should, this company is heavily indebted to Uncle Sam.
  

IBD:

• Coffee Roasters Brewing Hot Growth.

NY Times:

• Bank of America(BAC) Settlement Faces Growing Challenges. The legal onslaught continues for Bank of America. On Tuesday, several homeowners filed suit in Federal District Court in Manhattan, seeking to block a proposed $8.5 billion settlement between Bank of America and major mortgage investors, including BlackRock, Pimco and the Federal Reserve Bank of New York. The suit says the deal fails to address widespread servicing problems and would actually speed up foreclosures. In a separate new case, U.S. Bancorp, the trustee of a $1.75 billion mortgage pool originated by Countrywide Financial in 2005, sued to force Bank of America to buy back the underlying mortgages, arguing that the loans were made without proper documents and did not conform to underwriting standards.
• At N.L.R.B., Flurry of Acts for Unions as Chief Exits. The National Labor Relations Board on Tuesday released a decision that would make it easier to unionize nursing home workers. It is the latest in a flurry of moves favorable to unions that the board completed before the term of its chairwoman, Wilma B. Liebman, expired on Sunday. The board released two other pro-union decisions on Tuesday, both reversing decisions issued under President George W. Bush.

The Daily Beast:

• America's Secret Libya War. The U.S. military has spent about $1 billion on Libya’s revolution, and secretly helped NATO with everything from munitions to surveillance aircraft. John Barry provides an exclusive look at Obama’s emerging 'covert intervention' strategy.

Gallup:

• Obama Job Approval: Approve 38%, Disapprove 55%. (graph)

Rasmussen Reports:

• Rasmussen Employment Index Falls to 2011 Low. At 69.3, the Employment Index is down eight points from the beginning of the year and down 14 points since last November when hiring expectations peaked. Generally speaking, a decline in the Rasmussen Employment Index suggests the upcoming government reports on job creation will be worse than prior months.

Reuters:

• Fed's Bullard: QE3 Possible Depending on Data - Asahi. The U.S. Federal Reserve could embark on a third round of quantitative easing depending on upcoming economic data but should first confirm that inflation has eased, a senior Fed official said in the Asahi newspaper on Wednesday. The Fed will need to confirm whether its economic outlook is still on track at a policy meeting next month and weigh the best options if additional easing is needed, St. Louis Fed President James Bullard said in an interview with the Japanese daily. Expectations are growing that the central bank could ease policy at its two-day meeting starting Sept. 20 after minutes from last month's gathering showed some policymakers pressed for bold and unconventional steps to shore up a flagging economy. "Depending on future economic data QE3 is one choice, but we need to gather information about how the economy will perform in the second half of the year," Bullard said in the Asahi, referring to the Fed's quantitative easing programme where it buys government debt. "Before any moves, I would like to confirm that inflation is easing." The head of the St. Louis branch does not have a vote on the policy-setting Federal Open Market Committee this year.
• Steel, Other Sectors Point to Slowdown in Brazil.
  

The Standard:

• Chinese Speculators 'Major Force' in Gold Market. "Buying commodities with US dollars has proved to be an attractive investment for many mainlanders in the last few years," he said. According to a report in Yangcheng Evening News last Wednesday, just one city in Guangdong province - Guangzhou - has 2,000 underground investment companies dealing in gold and foreign currencies. Investors can leverage up to 100 times their principal with such black- market brokers, the daily said. The black market for gold in China sees up to 100 billion yuan (HK$122 billion) worth of trade every year, the report said.

China Securities Journal:

• China CITIC Bank Corp.'s reserves placed at the central bank will increase by about 40 billion yuan after the People's Bank of China asked the nation's lenders to include customers' margin deposits when calculating required reserves, citing Vice President Cao Guoqiang.

China National Radio:

• China's full-year consumer price index gains are unlikely to be less than 5%, citing Wang Jian, secretary-general of the China Society of Macroeconomics. Inflation may exceed 7% in November, when sales begin of the autumn grain harvest, the report cited Wang as saying. The China Society of Macroeconomics is affiliated with the National Development and Reform Commission.

China Business News:

• Up to 70% of small and medium-sized enterprises in China currently face "severe" survival difficulties, citing Gu Shengzu, a vice chairman at the national People Congress's internal and judicial affairs committee. Gu also said that only about 10% of the small and medium-sized companies are able to get loans from the standard banking system.

Evening Recommendations
Citigroup:

• Reiterated Buy on (PVH), target $82.

Barclays Capital:

• Rated (LYB) Overweight, target $43.
• Rated (APD) Overweight, target $97.
• Rated (CE) Overweight, target $49.
  

Night Trading

• Asian equity indices are -.25% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 154.0 +1.0 basis point.
  
• Asia Pacific Sovereign CDS Index 147.0 -3.5 basis points.
• FTSE-100 futures -.08%.
  
• S&P 500 futures +.01%.
  
• NASDAQ 100 futures -.08%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ZLC)/-1.15
• (JOYG)/1.50
• (BF/B)/.83
• (COO)/1.08
• (ZUMZ)/.05
• (GCO)/.10
• (SHFL)/.15
  

Economic Releases
8:15 am EST

• The ADP Employment Change for August is estimated at 100K versus 114K in July.

9:45 am EST

• The Chicago Purchasing Manager report for August is estimated to fall to 53.3 versus 58.8 in July.

10:00 am EST

• Factory Orders for July are estimated to rise +2.0% versus a -.8% decline in June.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -500,000 barrels versus a -2,213,000 barrel decline the prior week. Distillate supplies are estimated to rise by +500,000 barrels versus a +1,731,000 barrel gain the prior week. Gasoline inventories are expected to fall by -950,000 barrels versus a +1,355,000 barrel increase the prior week. Finally, Refinery Utilization is expected to fall by -.5% versus a +1.2% gain the prior week.

Upcoming Splits

• (HFC) 2-for-1
• (VRUS) 2-for-1
• (RGCO) 2-for-1
  

Other Potential Market Movers

• The Challenger Job Cuts report for August, NAPM - Milwaukee for August, weekly MBA mortgage applications report, China PMI, (NVLS) Mid-Quarter Update, Piper Jaffray Semi Summit and the BofA Merrill Euro Tech Conference could also impact trading today.
  

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

Stocks Rising into Final Hour on Less Eurozone Debt Angst, Dovish Fed Commentary, Short-Covering, Bargain-Hunting

Broad Market Tone:

• Advance/Decline Line: Slightly Lower
  
• Sector Performance: Mixed
  
• Volume: Light
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 32.14 -.43%
  
• ISE Sentiment Index 54.0 -59.4%
  
• Total Put/Call 1.08 +10.20%
  
• NYSE Arms 1.15 +315.78%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 121.19 -1.41%
  
• European Financial Sector CDS Index 229.67 -4.26%
  
• Western Europe Sovereign Debt CDS Index 304.25 +.36%
  
• Emerging Market CDS Index 281.64 -2.35%
  
• 2-Year Swap Spread 30.0 unch.
  
• TED Spread 32.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .01% +1 bp
  
• Yield Curve 199.0 -7 bps
  
• China Import Iron Ore Spot $178.90/Metric Tonne +.36%
  
• Citi US Economic Surprise Index -59.6 -4.6 points
  
• 10-Year TIPS Spread 2.03% unch.
  

Overseas Futures:

• Nikkei Futures: Indicating -20 open in Japan
• DAX Futures: Indicating +19 open in Germany

Portfolio:

• Higher: On gains in my Tech and Biotech sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges, then added them back
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish, as the S&P 500 builds on recent gains despite Eurozone debt angst, global growth worries, more poor economic data, financial sector pessimism and rising food/energy prices. On the positive side, Oil Tanker, Homebuilding, Gaming, Education and Road & Rail shares are especially strong, rising over +1.25% on the day. Copper is gaining +1.19% and Lumber is gaining +.63%. The France sovereign cds is falling -3.96% to 158.66 bps, the Portugal sovereign cds is declining -5.77% to 960.90 bps, the UK sovereign cds is falling -5.44% to 79.20 bps and the Germany sovereign cds is falling -1.46% to 83.69 bps. Weekly retail sales rose +4.2% this week versus a +4.4% gain the prior week. On the negative side, Coal, Semi, Bank, I-Bank, Medical, Insurance and Airlines shares are lower on the day. (XLF) has undperformed throughout the day. The 10-Year yield is falling -7 bps to 2.18%. Oil is rising +1.7% and Gold is gaining +2.8%. Rice is hitting a new multi-year high today, rising +32.0% in about 8 weeks. The average US price for a gallon of gas is unch. today at $3.61/gallon. It is up .47/gallon in about 7 months. The Greece sovereign cds is gaining +1.46% to 2,221.32 bps and the US sovereign cds is up +2.59% to 48.57 bps. The 2-Year Euro Swap Spread is rising 3.6 bps to 88.28 bps, which is back near a multi-year high. The Eurozone Financial Sector CDS Index is still near it recent all-time high. The Citi Eurozone Economic Surprise Index has plunged -109.0 points in about 3 weeks to -102.90. The UBS-Bloomberg Ag Spot Index is at a record high, which is also a large negative. The Shanghai Composite did not participate in the Asian equity rally again overnight, falling another -.38%, and is down -8.60% ytd. The ongoing trend higher in key cds remains a large negative. Volume was light again on today's stock advance. Oil Tanker and Hombuilding shares, which have been two of the worst-performing groups this year, led today's advance. As well, the euro continues to sit out the recent stock rally despite equity trader optimism over developments in the region. I continue to believe any sustainable equity advance must be accompanied by a meaningful decline in Eurozone debt angst, which has yet to be seen. As well, I continue to believe QE2 was an overall disaster and that any near-term stock rally on rising QE3 expectations will be short-lived as it would eventually ensure hard-landings in many key emerging markets economies. Food prices, even before any additional QE, are now above levels that sparked riots in some parts of the world and boosted inflation gauges globally earlier in the year. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting, technical buying, less eurozone debt angst and more dovish Fed commentary.

Today's Headlines

Bloomberg:

• Italian Bonds Fall a Seventh Day as Demand Drops at 10-Year Sale. Italian bonds fell for a seventh day, the longest losing streak since February, as demand weakened at the first auction of 10-year securities since the European Central Bank began buying the nation’s debt. Italy’s 10-year bond yield increased two basis points to 5.11 percent as of 4:03 p.m. in London. They earlier climbed to 5.16 percent, the highest since Aug. 10.
  
• European Banks Need Bigger Writedowns on Greek Bonds, Standards Board Says. Some European banks haven’t sufficiently written down the value of Greek government bonds and other “distressed sovereign debt” they own, the organization that sets accounting rules in the region said. Banks and other financial institutions are valuing the bond holdings in a way that, in some cases, reflects internal models instead of market prices, the International Accounting Standards Board said in a letter published on its website today. “It is hard to imagine that there are buyers willing to buy these bonds at the prices indicated,” the IASB said in the letter, dated Aug. 4 and sent to the European Securities and Markets Authority. “This is a matter of great concern to us.” “Although the level of trading activity in Greek government bonds has decreased, transactions are still taking place,” meaning market prices can be assessed, Hoogervorst said. “A company cannot ignore relevant market data.”
• U.S. Consumer Confidence Plunges to Two-Year Low. Confidence among U.S. consumers plunged to the lowest level in more than two years as Americans’ outlooks for employment and incomes soured. The Conference Board’s index slumped to 44.5, the weakest since April 2009, from a revised 59.2 reading in July, figures from the New York-based research group showed today. It was the biggest point drop since October 2008. A separate report showed home prices declined for a ninth month. Economists predicted the Conference Board’s gauge would fall to 52 in August, according to the median forecast in the Bloomberg survey. The index averaged 98 during the economic expansion that ended in December 2007. The share of consumers who said jobs are currently hard to get increased to 49.1 percent, the highest since November 2009, from 44.8 percent in July. Confidence dropped in all nine U.S. regions. The Conference Board’s data showed a measure of present conditions declined to 33.3, the second-lowest this year, from 35.7 in July. The measure of expectations for the next six months slid to 51.9, the weakest since April 2009, from 74.9. The percent of respondents expecting more jobs to become available in the next six months fell to 11.4, the lowest since March 2009, from 16.9 the previous month. The proportion expecting their incomes to rise over the next six months declined to 14.3 from 15.9. The percent expecting a drop rose to 18.7, the highest since November 2009. Fewer respondents in the Conference Board’s survey indicated they were planning to buy a house, while more intended to purchase cars or major appliances in the next six months.
• China Money Rate Jumps Most in Seven Days on Cash Crunch Concern. China’s benchmark money-market rate jumped the most in seven days and the cost of one-year swaps climbed to a record on concern the central bank’s expansion of reserve requirements will worsen a cash crunch. The seven-day repurchase rate, which measures interbank funding availability, has surged 89 basis points this week after Standard Chartered Plc and Bank of America Merrill Lynch said the central bank issued a notice on Aug. 26 including margin deposits in the requirements. Guotai Junan Securities Co, the nation’s biggest brokerage by revenue, yesterday said banks will face “cash depletion” following the “bigger-than-expected” tightening measure. “The new policy will have a big impact on China’s liquidity situation in September,” said Shi Lei, head of fixed- income research in Beijing at Ping An Securities Co., a unit of the nation’s second-biggest insurance company. “The cash shortage will probably worsen in the second half of next month, when banks are desperate for cash to meet month-end capital requirements.” The seven-day repurchase rate climbed 55 basis points to 4.96 percent as of the 4:30 p.m. close in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center. The one-year swap contract, the fixed cost needed to receive the floating seven-day repo rate, rose six basis points to 4.43 percent in Shanghai, according to data compiled by Bloomberg. It touched 4.52 percent today, the highest level since Bloomberg started compiling the data in 2006.
• Gold Rises on Expectations Fed Will Ease. Gold rose in New York on speculation that the Federal Reserve will ease monetary policy further to stimulate the economy, boosting the appeal of the precious metal as an alternative asset. “We need to do more,” Chicago Fed President Charles Evans said today in a CNBC interview. The Standard & Poor’s 500 Index fell after a report showed confidence among U.S. consumers plunged in August to the lowest in almost two years. Gold has rallied 12 percent this month, touching a record $1,917.90 an ounce on Aug. 23. Gold futures for December delivery gained $38.20, or 2.1 percent, to $1,829.80 at 11:09 a.m. on the Comex in New York. Gold futures for December delivery gained $38.20, or 2.1 percent, to $1,829.80 at 11:09 a.m. on the Comex in New York.
• Euro Weakens as Trichet Spurs Bets Rate Rises Over; Franc Gains. The euro weakened against most major counterparts on speculation the European Central Bank has finished raising interest rates as the region’s sovereign-debt crisis curbs economic growth. The euro dropped 0.6 percent to $1.4431 at 12:02 p.m. in New York.
• European Economic Confidence Falls Most Since December 2008. European confidence in the economic outlook plunged the most since December 2008 this month as a persistent debt crisis roiled markets and clouded growth prospects across the 17-nation euro region. An index of executive and consumer sentiment in the single- currency region fell to 98.3 from a revised 103 in July, the European Commission in Brussels said today. That’s the lowest since May 2010. Economists had forecast a decline to 100.2, according to the median of 29 estimates in a Bloomberg News survey. In Europe, a gauge of sentiment among manufacturers dropped to minus 2.9 from 0.9 in the previous month, today’s report showed. An indicator of services confidence fell to 3.7 from 7.9, while a measure of consumer confidence declined to minus 16.5 from minus 11.2.
• Icahn Says He'd Buy Clorox(CLX) for $78 a Share.
• Fed's Evans Favors 'Aggressive' Policy Easing After Weak First-Half Growth. Federal Reserve Bank of Chicago President Charles Evans urged easier monetary policy and said he favors setting unemployment and inflation markers that would trigger a pullback from near-zero interest rates. “I would favor more accommodation,” Evans, a voting member of the Fed’s policy-making committee, said today in a CNBC television interview. “I am in favor of some of the most aggressive policy actions of anyone on the committee.” “I am somewhat nervous about the economic recovery and where we stand at this point,” Evans said. “The first half of this year got revised down and we had very weak growth. We had been hoping to achieve something much more like a launch or escape velocity for growth.” Evans said he “would have wanted to do more” easing earlier this month, when the Fed decided to commit to keeping its target rate near zero through mid-2013. The commitment is conditioned on “low rates of resource utilization and a subdued outlook for inflation,” which Evans said may be too vague. “One thing I think we really ought to do is clarify what our policy intentions are going forward,” he said. “It is conditional. I think we need to explain what we mean by that conditionality.”

Wall Street Journal:

• Euro Zone Considers Bank Shares As Collateral For Greek Aid - Report. The euro zone is considering providing donor members including Finland with collateral in the form of Greek banking shares to secure the next aid package for Athens, Germany's Handelsblatt reported.

CNBC.com:

• Risk of Double Dip in Europe Increases: S&P. High unemployment and the recent decline in stock markets pose a risk to spending, rating agency Standard & Poor's wrote on Tuesday in a report headlined 'Slowing Growth in Europe Increases the Risk of a Double Dip.'

Business Insider:

• FOMC Minutes Show Deep Divisions In The Fed.
• Actually Chinese Inflation Hasn't Slowed And It's About To Get Worse. Economists have been virtually universal in their prediction that Chinese inflation would peak this summer — so much so that I’ve felt like a pretty lonely skeptic.

Zero Hedge:

• Lagarde Now Angers France, Which Blames The Collapse In Financial Markets On The Seasons.
• Israel Sends Two More Warships to Egyptian Border to Preempt Expected Militant Attack.
  

Insider Monkey:

• Hedge Fund Performance August 2011. Here is how individual hedge funds performed in August (You can see each fund’s entire 13F portfolio by clicking on each fund’s link):

Reuters:

• Libya Sees Oil Output at Pre-War Levels in 15 Months. The newly-appointed chairman of Libya's National Oil Corporation (NOC) said on Tuesday oil production can restart within weeks and will reach full pre-war output within fifteen months. "Starting up production will be within weeks, not months. After we start it will take less than 15 months (to reach full output)," Nouri Berouin, chairman of the NOC, told Reuters. The OPEC member was producing 1.6 million barrels per day before an uprising began in February against leader Muammar Gaddafi.
• BofA(BAC) Sued Over $1.75 Billion Mortgage Trust. Bank of America Corp was sued by the trustee of a $1.75 billion mortgage pool, which seeks to force the largest U.S. bank to buy back all of the loans in the trust because of alleged misrepresentations.
• Fed Should Not Undo Rate Commitment: Kocherlakota. A top Federal Reserve official who dissented from the U.S. central bank's move this month to ease monetary policy further signaled he would drop his opposition. But Minneapolis Fed President Narayana Kocherlakota stopped well short of saying he would support any further easing, and his remarks show he remains firmly on the hawkish wing of the Fed's policy-setting panel. "I see no reason to revisit the decisions of August 2011," Kocherlakota said in remarks prepared for delivery to the National Association of State Treasurers in Bismarck, North Dakota. "I believe that undoing this commitment in the near term would undercut the ability of the Committee to offer similar conditional commitments in the future, and this ability has certainly proved very useful in the past three years," Kocherlakota said. "So, I plan to abide by the August 2011 commitment in thinking about my own future decisions." Kocherlakota, whose turn to vote on the Fed's policy-setting Federal Open Market Committee runs through the end of this year, stopped short of promising not to dissent on future Fed decisions, however, saying that "the case for any additional easing would have to be made on its own merits." He expects the Fed's preferred gauge of inflation, core PCE (personal consumption expenditure), to rise to 2.1 percent next year versus an expectation of about 1.3 percent last November. Based on Kocherlakota's remarks, such a decision would be a hard sell for him, unless inflation dropped sharply. Both inflation and inflation expectations are higher, and unemployment is lower and expected to drop further, than last November when the Fed embarked on its most recent round of monetary stimulus, Kocherlakota said. Meanwhile, the U.S. unemployment rate, which was then at 9.8 percent, has dropped to 9.1 percent, and he expects it to fall to below 8.5 percent by the end of next year. While it was still "disturbingly high," he said, the Fed would have been unable to push it lower without boosting inflation above its 2 percent target, which in turn could unmoor inflation expectations and undercut the Fed's ability to keep inflation in check.

Financial Times:

• EFG Eurobank Ergasias SA and Piraeus Bank SA have used the Bank of Greece's Emergency Liquidity Assistance program, citing people familiar with the matter. Eurobank borrowed 3 billion euros, one day after Piraeus Bank secured 2 billion euros in emergency funds.
  

Globe and Mail:

• BYD to Cut Sales Staff by 70%. BYD Co Ltd , a Chinese car maker backed by U.S. billionaire Warren Buffett, plans to cut its sales force by about 70 per cent, a Chinese website said on Tuesday, after the company reported a nearly 90-per-cent drop in first-half earnings.

People's Daily:

• US Fed Chair May Face Tough Sell on Quantitative Easing.

Bear Radar

Style Underperformer:

• Large-Cap Value (-.41%)

Sector Underperformers:

• 1) Coal -1.38% 2) Banks -1.10% 3) I-Banks -.80%

Stocks Falling on Unusual Volume:

• CWEI, TOT, GSK, PANL, SMTC, UEIC, CISG, SHPGY, FOSL, VRTU, BOBE, NEOG, VLCCF, AZPN, LABL, SIVB, RRD and IAI
  

Stocks With Unusual Put Option Activity:

• 1) ERTS 2) AMTD 3) ACN 4) CF 5) EWJ
  

Stocks With Most Negative News Mentions:

• 1) AEO 2) EMR 3) SCHW 4) AIG 5) INTC
  

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth (+.09%)

Sector Outperformers:

• 1) Oil Tankers +2.89% 2) Homebuilders +2.29% 3) Gold & Silver +1.19%

Stocks Rising on Unusual Volume:

• RIC, DLLR, OVTI, JVA, JDSU, CBOU, TZOO, BKS, FDO, CLGX, LPS and DG
  

Stocks With Unusual Call Option Activity:

• 1) KBH 2) CEDC 3) DNR 4) USG 5) CBOU
  

Stocks With Most Positive News Mentions:

• 1) TOL 2) JNY 3) ALKS 4) MIPS 5) ESV
  

Charts:

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