Bear Radar

Style Underperformer:

• Large-Cap Value (+2.39%)

Sector Underperformers:

• 1) Gold & Silver -.22% 2) Telecom +.79% 3) Restaurants +88%

Stocks Falling on Unusual Volume:

• LQDT, URBN, CVV, RGLD, DRI and VIP
  

Stocks With Unusual Put Option Activity:

• 1) CREE 2) WLT 3) PAY 4) HFC 5) YHOO
  

Stocks With Most Negative News Mentions:

• 1) X 2) GLD 3) OMX 4) GLBC 5) SONC
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth (+2.68%)

Sector Outperformers:

• 1) Banks +3.98% 2) Disk Drives +3.89% 3) Hospitals +3.37%

Stocks Rising on Unusual Volume:

• VRSN, AVAV, NVDA, LNCR, XTXI, SODA, HRBN, WLT, BTH, SXI, PCX, VSH, PBY, AOL, LNCR, EMN, CNX and AP
  

Stocks With Unusual Call Option Activity:

• 1) SVU 2) NRG 3) HANS 4) STEC 5) YHOO
  

Stocks With Most Positive News Mentions:

• 1) STEC 2) URBN 3) TXN 4) NVDA 5) COF
  

Charts:

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

Wednesday Watch

Evening Headlines

Bloomberg:

• Berlusconi Cabinet Will Call for Confidence Vote on Revised Austerity Plan. Italy’s Senate may approve Prime Minister Silvio Berlusconi’s revised 45.5 billion-euro ($63.7 billion) austerity package in a confidence vote after bond yields surged amid concern the government may weaken the plan. Senators will meet at 9:30 a.m. in Rome to discuss and cast votes on the amended package, which will raise the value-added tax rate by one percentage point to 21 percent, introduce a 3 percent levy on incomes over 300,000 euros a year and increase the retirement age of women in the private sector from 2014. The vote may pave the way for final approval later this week by the Chamber of Deputies. The measures were approved at a Cabinet meeting in Rome yesterday after Italians took to the streets in a general strike to protest the plan, and following weeks of bickering that stoked concern among investors and European leaders that Italy may struggle to tame Europe’s second-biggest debt burden. The confidence vote was forced by the “seriousness of the global financial crisis,” Berlusconi’s office said in a statement. This government only knows how to lie,” said Pier Luigi Bersani, leader of the main opposition Democratic Party, in an e-mailed statement. “The idea is always the same: offload the weight of the budget cuts on the masses and shield the rest.”
• U.S. Company Risk Measure Jumps as Europe Evokes '08 Comparison. A benchmark gauge of U.S. corporate credit risk climbed on concern that Europe's fiscal imbalances will hurt U.S. debt markets, as bankers cite parallels to the 2008 financial crisis. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, rose 5.4 basis points from Sept. 2 to a mid-price of 126.4 as of 4:52 p.m. in New York, according to index administrator Markit Group Ltd. The measure is at the highest closing price since reaching a more than one-year high of 126.8 on Aug. 22. The index has increased from 95.8 basis points on Aug. 1 as investor concerns have mounted about the faltering U.S. economic recovery and upheaval in Europe's government bond markets. "It's a very gloomy market environment right now," said Rizwan Hussain, a credit strategist at Morgan Stanley in New York. "An '08 type of comparison clearly does not bode well.'' Credit-default swaps on Charlotte, North Carolina-based Bank of America Corp. climbed 26.1 basis points from Sept. 2 to 352.9 basis points, according to data provider CMA, as the largest U.S. lender's bid to resolve mortgage liabilities with an $8.5 billion settlement faces drawn-out litigation and may require a bigger payout as investors and regulators scrutinize the deal.
• The cost of protecting debt issued by India's state-run banks against default has climbed to a two-year high, spurred by concern that the lenders may have to set aside more money to cover bad loans. Five-year credit-default swaps on State Bank of India, the nation's biggest lender, rose 102 basis points this quarter to 290 basis points, the highest level since April 2009.
• Erdogan Promises New Sanctions in Escalating Turkey-Israel Feud. Tossing out an ambassador, suspending defense ties and boosting Turkey’s naval presence in the eastern Mediterranean won’t be Prime Minister Recep Tayyip Erdogan’s last word in his most recent showdown with Israel. Erdogan said his government will announce new steps to punish Israel -- not long ago its strongest regional ally -- unless Prime Minister Benjamin Netanyahu apologizes for the killing of nine Turks last year in an Israeli commando raid at sea. Among the moves may be a visit by Erdogan to the Gaza Strip, ruled by the Islamic group Hamas.
• Romney Calls for Corporate Tax Cut, China Sanctions in Plan. Republican presidential candidate Mitt Romney proposed a reduction of U.S. corporate taxes, fewer federal regulations, new trade agreements, and sanctions against China for currency manipulation in a plan he said would boost the U.S. economy and create jobs. The former Massachusetts governor, speaking today at a trucking company in North Las Vegas, Nevada, also called for the elimination of taxes on interest, dividends and capital gains for individuals making $200,000 or less per year. Seeking to highlight the business experience he has said sets him apart from other 2012 Republican presidential contenders, Romney released his 59-point proposal two days before President Barack Obama is scheduled to present his own job-revival ideas in a speech to Congress. "The right course for America is to believe in growth," Romney said. "The right answer for America is not to grow government."
• Citigroup(C) CEO Pandit's 'Globality' Goal Imperiled. Vikram Pandit, who oversaw Citigroup Inc. (C)’s recovery with the help of a $45 billion government bailout, faces a profit squeeze as he adds staff and branches outside the U.S. amid a global economic slump.
• 'Helicopter Ben' May Deter Lending With Lower Rates Policies, Gross Says. Federal Reserve Chairman Ben S. Bernanke risks causing a decline in longer-term lending by holding down benchmark interest rates, Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said in an opinion piece on the Financial Times website. If the Fed seeks to drive down longer-maturity yields, as some are anticipating, then the central bank may “destroy leverage and credit creation in the process,” Gross wrote in the piece, which was titled ‘Helicopter Ben’ Risks Destroying Credit Creation.’
• Dodd-Frank Forces Early Call in SEC Probe of Fannie Mae's Mudd. Last March the U.S. Securities and Exchange Commission told Daniel Mudd, former head of Fannie Mae, that he could face claims for his role in the firm’s collapse. He may be the first chief executive officer to benefit from a rule that regulators sue or drop such cases within six months.

Wall Street Journal:

• European Bailout Tensions Threaten German Coalition. Merkel Fights to Quell Rebellion as Mock Vote Shows 25 Lawmakers Oppose Legislation on Bigger Bailout Fund. German Chancellor Angela Merkel is fighting to quell a rebellion within her ruling coalition that could potentially destabilize her government, after 25 lawmakers from her center-right camp indicated they might not support legislation to strengthen Europe's bailout fund. Mock votes among lawmakers in Ms. Merkel's coalition late Monday showed she will have to fight to keep her governing majority together in a crucial ballot on Sept. 29, when Germany's parliament will vote on proposals to make the main euro-zone bailout fund bigger and more flexible. The measures in question are a key plank of a deal struck July 21 by European leaders to restore investor confidence in euro-zone government debt. But a larger-than-expected number of backbenchers from Ms. Merkel's Christian Democrats, as well as from her junior coalition partners the Free Democrats, refused to support the measures in Monday's mock votes. The lack of support is a public signal of dissent within the ranks of the party. Germany's parliament is widely expected to pass the measures despite the unrest in government ranks, because opposition parties have said they will back the legislation. But reliance on opposition votes would be a severe embarrassment for the chancellor, raising questions about the survival of her government. The unrest within the coalition reflects many lawmakers' belief that ever-expanding bailouts of poorer euro nations pose a growing risk to German taxpayers.
• Groupon Reevaluating IPO Plans Due to Market Volatility.
• Exclusive: Carol Bartz Out at Yahoo(YHOO); CFO Time Morse Named Interim CEO.
• S&P Met With Bond Firms. Some Investors Got the Impression U.S. Downgrade Was More Likely Than Not. Standard & Poor's Corp. officials held private meetings with large bond investors weeks before the firm's historic U.S. debt downgrade, leaving some believing the chance of a credit-rating cut was higher than they previously thought. Though S&P had put the U.S. on "credit watch" in mid-July, some investors were skeptical that S&P would actually strip the U.S. of its triple-A rating, maintained since 1941. S&P said in a news release on July 14 that "there is at least a one-in-two likelihood that we could lower" the U.S. ratings within 90 days.
• SEC Looks Into Effect of ETFs on Market. U.S. securities regulators are looking into whether turbocharged exchange-traded funds amplified August's topsy-turvy swings in the stock market. Securities and Exchange Commission officials have had discussions with firms that trade ETFs, asking questions about whether they added to the market's volatility, according to people familiar with the talks. ETFs, which typically track market indexes, trade on exchanges like stocks. Exchange-traded funds have surged in popularity and now generate 35% to 40% of exchange trading volume, according to Morningstar Inc. Such funds sometimes are used by high-frequency traders, who buy and sell stocks and other assets at a rapid clip.
• Probe Into Goldman(GS) Widens. Prosecutors in New York are pressing ahead with their inquiry into the way Goldman Sachs Group Inc. marketed certain mortgage-linked instruments before the financial crisis, issuing subpoenas to Morgan Stanley(MS) and other investors in the deals, people familiar with the matter said. Some of the subpoenas were received in recent weeks, the people said. The Manhattan district attorney's office began its probe into Goldman following the release in April of a U.S. Senate subcommittee report into the causes of the crisis. Goldman was featured prominently in that report.
• The Other Climate Theory.
  

Business Insider:

• Obama Jobs Plan to Cost $300 Billion.
• White House to Propose Short Term Plan to Avert Post Office Bankruptcy. President Barack Obama will propose a plan to allow the U.S. Postal Service to push off a scheduled $5.5 billion health care payment until the new year, The New York Times reports.

Zero Hedge:

• European Scramble to ECB Safety at Highest in Over a Year as ECB Deposits Surge to €167 Billion. (graph)
• "The European Financial System Is Finished" In Quotes.
  

IBD:

• McDonald's(MCD) Benefits From New Menu Items.

NY Times:

• U.S. Takes Hard Line in Suits Over Bad Mortgages.
• In Euro Zone, Banking Fear Feeds on Itself. As Europe struggles to contain its government debt crisis, the greatest fear is that one of the Continent’s major banks may fail, setting off a financial panic like the one sparked by Lehman’s bankruptcy in September 2008. European policy makers, determined to avoid such a catastrophe, are prepared to use hundreds of billions of euros of bailout money to prevent any major bank from failing. But questions continue to mount about the ability of Europe’s banks to ride out the crisis, as some are having a harder time securing loans needed for daily operations. American financial institutions, seeking to inoculate themselves from the growing risks, are increasingly wary of making new short-term loans in some cases and are pulling back from doing business with their European counterparts — moves that could exacerbate the funding problems of European banks.

Forbes:

• Sallie Krawcheck Out At Bank Of America(BAC) Merrill Lynch.
• 4 Worrisome Jobs Charts.
• Pentagon Chief: Threat of Another 9/11 is Real. Defense Secretary Leon Panetta says that after a decade of war with al-Qaida the potential for another devastating terrorist assault "remains real."

CNN:

• Dear Mr. President... We asked 10 small businesspeople the one thing they'd ask President Obama to do to make it easier for them to hire. Below are edited excerpts of their conversations.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 22% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-four percent (44%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -22 (see trends).

USA Today:

• More Restaurants are Targeting Customers Who Use Food Stamps. The number of businesses approved to accept food stamps grew by a third from 2005 to 2010, U.S. Department of Agriculture records show, as vendors from convenience and dollar discount stores to gas stations and pharmacies increasingly joined the growing entitlement program. Now, restaurants, which typically have not participated in the program, are lobbying for a piece of the action. Louisville-based Yum! Brands(YUM), whose restaurants include Taco Bell, KFC, Long John Silver's and Pizza Hut, is trying to get restaurants more involved, federal lobbying records show.

Reuters:

• No Plans for Extra Euro Zone Bank Capital Support - Sources. Euro zone governments have no plans to inject any further capital into banks over and above the money earmarked for the financial sector in the emergency loan programmes to Greece, Ireland and Portugal, sources said. Euro zone officials discussed the issue of banking sector recapitalisation on Monday and Tuesday as part of the preparations for the informal meeting of European Union finance ministers in Poland on September 16. The issue has returned to the table after the IMF called for additional capital to boost the European banking sector, estimating the extra need at 200 billion euros (175 billion pounds) in a draft version of an unpublished report leaked to the press.

Telegraph:

• German Austerity Drive Risks Euro-Slump. German finance minister Wolfgang Schäuble has vowed to halt rescue payments to Greece unless the country complies totally with the EU-IMF demands, brushing aside warnings that a Greek collapse would set off a disastrous chain reaction and a global banking crisis. “The next tranche can be paid only when the conditions have been met. There is no room for manouvre here,” he told the Bundestag. Yields on 10-year Greek debt spiked to a fresh record of 19.8pc on fears of a disorderly default. The tough words reflect sentiment in Berlin that Greece should be left to its fate or even be ejected from the monetary union, even though the chief reason Greece has failed to meet its deficit target is the crushing effect of recession. The economy will have shrunk by 12pc by the end of this year, playing havoc with debt dynamics. Mr Schäuble rebuffed calls from the International Monetary Fund for a softening of Europe’s austerity drive. “Piling on more debt now will stunt rather than stimulate growth in the long run. Highly indebted Western democracies need to cut expenditures, increase revenues and remove structural hindrances in their economies, however politically painful,” he wrote.
  

Economic Information Daily:

• The southwestern Chinese city of Chongqing may widen its property-tax trial to target more luxury home owners, citing an official. The existing property-tax trial, already implemented for seven months, has had a limited effect on the city's property market.

Evening Recommendations
Citigroup:

• Upgraded (DHI) to Buy, target $13.

Canaccord Genuity:

• Rated (DKS) Buy, target $43.
• Rated (FINL) Buy, target $24.

Night Trading

• Asian equity indices are +.50% to +2.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 160.50 -14.5 basis points.
  
• Asia Pacific Sovereign CDS Index 146.50 -8.25 basis points.
• FTSE-100 futures +1.39%.
  
• S&P 500 futures +.54%.
  
• NASDAQ 100 futures +.54%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (NAV)/1.26
• (MW)/1.04
• (CASY)/1.06
• (HOV)/-.50

Economic Releases
2:00 pm EST

• The Fed's Beige Book.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The German court bailout legality ruling, Fed's Williams speaking, Fed's Evans speaking, JOLTs Job Openings report, weekly MBA mortgage applications report, weekly retail sales reports, BofA Merrill Real Estate Conference, Kaufman Bros. Investor Conference, Stifel Nicolaus Healthcare Conference, CSFB Auto/Transports Conference, Robert W. Baird Healthcare Conference, Barclays Back-to-School Conference, Dahlman Rose Transports Conference, Scotia Capital Financials Summit, William Blair Life Sciences Conference, Goldman Sachs Retailing Conference, Jefferies Shipping Conference, Keefe Bruyette Woods Insurance Conference, (SCOR) Investor Day and the (POOL) Investor Day could also impact trading today.
  

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

Stocks Lower into Final Hour on Rising Eurozone Debt Angst, Global Growth Worries, Emerging Markets Inflation Fears, Financial Sector Pessimism

Broad Market Tone:

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

Equity Investor Angst:

• VIX 37.39 +10.29%
  
• ISE Sentiment Index 122.0 +32.61%
  
• Total Put/Call 1.28 -11.11%
  
• NYSE Arms 1.52 -57.87%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 129.50 +4.10%
  
• European Financial Sector CDS Index 261.26 +1.04%
  
• Western Europe Sovereign Debt CDS Index 315.17 +2.16%
  
• Emerging Market CDS Index 281.08 +4.6%
  
• 2-Year Swap Spread 32.0 +1 bp
  
• TED Spread 32.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.
  
• Yield Curve 178.0 -1 bp
  
• China Import Iron Ore Spot $180.90/Metric Tonne +.22%
  
• Citi US Economic Surprise Index -55.10 +2.6 points
  
• 10-Year TIPS Spread 1.94% -9 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +75 open in Japan
• DAX Futures: Indicating +39 open in Germany

Portfolio:

• Slightly Higher: On gains in my Retail/Biotech sector longs, Index hedges and Emerging Markets shorts
  
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is bearish, as the S&P 500 trades back near the low-end of its recent range on rising Eurozone debt angst, more financial sector pessimism, more shorting, emerging markets inflation fears and global growth worries. On the positive side, Biotech shares are higher on the day. Oil is down -.8%, Gold is down -.3%, Lumber is rising +2.25% and the UBS-Bloomberg Ag Spot Index is down -1.57%. On the negative side, Coal, Alt Energy, Oil Service, Steel, Networking, Bank, I-Bank, Insurance, Homebuilding and Airline shares are under significant pressure, falling more than -2.5%. (XLF) has traded very poorly throughout the day. The Transports are also heavy. Copper is down -1.7%. Rice is still near a multi-year high and has risen +35.5% in about 9 weeks. The average US price for a gallon of gas is +.01/gallon today to $3.66/gallon. It is up .52/gallon in about 7 months. The Russia sovereign cds is gaining +2.77% to 206.67 bps, the Brazil sovereign cds is jumping +6.8% to 163.41 bps, the Greece sovereign cds is gaining +2.39% to 2,559.42 bps, the Portugal sovereign cds is gaining +1.68% to 1,053 bps and the Belgium sovereign cds is rising +5.23% to 288.17 bps. The US Muni CDS Index is jumping +4.65% to 181.89 bps. Moreover, the European Investment Grade CDS Index is rising +1.99% to 165.31 bps. The Italy and Belgium sovereign cds are making new record highs again today. The Greece, Germany, Spain and France sovereign cds are still near their recent all-time highs. The Eurozone Financial Sector and Western European Sovereign CDS Indices are also making new all-time highs today. The 3-Month Euro Basis Swap dropped another -3.06 bps to -99.69 bps, which is another new cycle low. The Citi Eurozone Economic Surprise Index has plunged -109.2 points in about 4 weeks to -103.10. The UBS-Bloomberg Ag Spot Index is still near its recent record high, which is also a large negative. The China Blended Corporate Spread Index is jumping +24.0 bps to a new multi-year high at 637.0 bps. The Nikkei took out its recent lows overnight, falling -2.21%, and is now down -16.0% ytd. Germany's DAX also continues to trade very poorly as it fell another -1.0% today and is now down -24.9% ytd, near a 2-year low. Italian shares also made new cycle lows today, falling another -1.99%, and are down -30.3% ytd. As well, the euro currency remains very heavy. Gauges of eurozone debt angst remain very elevated and continue to trend higher, which is a large concern. Today's equity rebound off the morning lows was on light volume and poor breadth. Given the amount and nature of the negative news over the holiday weekend, today's rebound was impressive, nonetheless. Growth stock leaders traded well throughout the day. I still believe a full test of the recent lows is an increasing possibility over the coming weeks unless the rapidly deteriorating situation in Europe improves materially. I expect US stocks to trade mixed-to-higher into the close from current levels on technical buying, short-covering, falling food/energy prices, bargain-hunting and better US economic data.

Today's Headlines

Bloomberg:

• Greek Yields, CDS at Records on Debt Concern; Italy Notes Slide. Greece’s two- and 10-year yields rose to records on speculation the nation’s deepening recession may make a second international bailout agreement redundant even before it’s implemented. German two- and 10-year yields dropped to all-time lows as equities fell. The yield difference, or spread, between Greek 10-year bonds and German bunds widened to the most since at least 1998, and the cost of insuring against default on Greek sovereign debt surged to a record. Italian two-year yields rose to the highest level in a month as workers held a general strike. Spanish 10-year bonds rose for the time in eight days as the European Central Bank bought the nation’s debt. “The consensus seems to be that the second bailout package for Greece might be obsolete before it has been put into law, which is obviously detrimental for sentiment,” said Michael Leister, a fixed-income strategist at WestLB AG in London. “The ECB is having a hard time stabilizing these markets. The pressure is rising.” Greece’s 10-year yield climbed 50 basis points to 19.81 percent at 4:51 p.m. in London. The 6.25 percent security due June 2020, fell 1.155, or 11.55 euros per 1,000-euro ($1,400) face amount, to 45.47. Two-year note yields added 283 basis points, or 2.83 percentage points, to 53.20 percent. The yield spread between Greek 10-year securities and similar-maturity German bunds widened as much as 50 basis points to a euro-era record 1,796 basis points. Credit-default swaps on Greece climbed 109 basis points to 2,659, according to CMA. German Chancellor Angela Merkel told members of her Christian Democrat party that Greece will not receive aid payments due this month unless it meets conditions of the rescue, two party officials said. Greece’s economic woes, wavering commitment to budget cuts in Italy and mounting borrowing costs for European banks underscore investor concern that efforts by euro-area officials to contain the debt crisis are unraveling. Portuguese two-year notes fell for a third day, pushing the yield on the securities up 77 basis points to 14.48 percent, after touching 14.62 percent, the highest level since Aug. 4. The nation’s 10-year bond yield reached 10.87 percent, the most since Aug. 30. The yield difference between Belgian 10-year bonds and similar-maturity German bunds widened as much as eight basis points to 233 basis points. That’s the widest since the euro’s debut in 1999, according to data compiled by Bloomberg.
• Schaeuble Urges Curbs on European Debt to Soothe Global Market 'Anxiety'. German Finance Minister Wolfgang Schaeuble called on euro-area governments to fully implement curbs on debt, saying that only fiscal “solidity” will help tame financial-market turmoil. Schaeuble’s comments to lawmakers in Berlin today seek to raise the pressure on euro-area states to follow Germany and clamp down on debt to tackle the core cause of the sovereign crisis that is rocking markets worldwide. Financial markets are in “a state of anxiety,” requiring “a new mentality” rather than short-term stimulus, he said. “Markets are not the problem, excesses are,” Schaeuble said in parliament’s first session after the summer recess, as he opened a debate on the 2012 budget. The constitutionally mandated debt ceiling enacted by Germany and now being emulated by France and Spain is “of fundamental importance,” he said. Only “financial-policy solidity will win the confidence of markets.”
• Berlusconi Cabinet Will Call for Confidence Vote on Revised Austerity Plan. Italian Prime Minister Silvio Berlusconi called a Cabinet meeting today to authorize a confidence vote in Parliament on an amended 45.5 billion-euro ($64.5 billion) austerity plan that prompted a general strike. The meeting at 6 p.m. in Rome will pave the way for a vote on the measures, which will include raising the value-added tax rate by one percentage point to 21 percent, a 3 percent levy on incomes of more than 500,000 euros a year as well as an increase in the retirement age of women in the private sector starting in 2014, Berlusconi’s office said in an e-mailed statement.
• The cost of insuring against default on European bank bonds rose to a record as the region's debt crisis roils credit markets. The Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers increased 7 basis points to 277, according to JPMorgan Chase at 4 pm in London. The subordinated index was up 6.5 basis points at 487.5 basis points. Credit-default swaps on Madrid-based Banco Popular Espanol SA increased 48 basis points to 847, according to CMA. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose 4 basis points to a record 330. The Markit iTraxx Crossover Index of credit-default swaps on 40 companies with mostly high-yield credit ratings increased 15.5 basis points to 771, the highest level since July 2009, according to JPMorgan. The Markit iTraxx Europe Index of 125 companies with investment grade ratings climbed 5 basis points to 188.5.
• U.S. ISM Services Index Increased in August. Service industries unexpectedly expanded at a faster pace in August, easing concern the biggest part of the U.S. economy was slumping. The Institute for Supply Management’s index of non- manufacturing businesses increased to 53.3 last month from 52.7 in July. Economists forecast the gauge would drop to 51, according to the median estimate in a Bloomberg News survey. The index of new orders in the services industry increased to 52.8 from 51.7 the prior month. A gauge of business activity fell to 55.6 from 56.1 in July. The measure of prices paid increased to 64.2 from 56.6. The group’s employment index declined to 51.6, the lowest since September 2010, from 52.5 a month earlier.
• German Factory Orders Decline More Than Forecast on Exports. Factory orders in Germany, Europe’s largest economy, fell more than economists forecast in July, led by a drop in export demand as the global economy cooled. Orders, adjusted for seasonal swings and inflation, dropped 2.8 percent from June, when they rose 1.8 percent, the Economy Ministry in Berlin said in a statement today. The decline, the first in four months, exceeded economists’ forecast of 1.5 percent, according to the median of 37 estimates in a Bloomberg News survey.
• Commodities Drop to One-Week Low on Deepening European Debt-Crisis Concern. Commodities fell to the lowest level in more than a week on deepening concern the European sovereign debt crisis may further slow global economic growth, damping demand for raw materials. Gold fell from a record in London after the Swiss central bank set a minimum exchange rate. The Standard & Poor’s GSCI Index dropped as much as 2.1 percent to 647.88, the lowest intraday level since Aug. 26, and was down 2 percent at 648.46 by 1:58 p.m. in London. Crude oil fell as much as 3.8 percent in New York.
• Zoellick Says World in 'Dangerous' Period as Europe Turmoil Adds to Risks. World Bank President Robert Zoellick indicated that risks to the global economy are intensifying, with the euro region’s outlook dependent on European leaders making the right decisions. “We are moving into a dangerous period,” Zoellick said in an interview with Bloomberg Television in Singapore today. While the U.S. is likely to avoid a return to recession, escaping with slow growth, the euro zone is facing a “particularly sensitive time,” he said.
• Fund Managers Bullish on Stocks in Q3: HSBC. Global fund managers are bullish on stocks for the third quarter, as the turmoil in financial markets offers investors “attractive buying opportunities,” according to a HSBC Holdings Plc (5) survey. A survey of 12 investment companies overseeing $4.4 trillion in funds showed 63 percent are holding “overweight” positions on equities this quarter, up from 44 percent in the previous three months, HSBC said in a statement today. Some 57 percent of fund managers are “underweight” bonds in the third quarter, compared with 38 percent in the previous period.
• U.S. Employment Index Drops for Fourth Time in Five Months. A measure of job prospects in the U.S. fell in August for a fourth time in five months, reflecting declines in consumer confidence and job openings that indicate payrolls may fail to pick up in the final months of the year. The Conference Board’s Employment Trends Index decreased 0.3 percent to 100.8 from the prior month’s revised reading of 101.0, the New York-based private research group said today.
• Fed's Kocherlakota: Economy Does Not Need More Easing. Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said the U.S. economy didn’t need additional stimulus in August and probably won’t require more easing this month. “The data in August did not justify the additional accommodation provided” by the central bank on Aug. 9, Kocherlakota said today in the text of a speech in Minneapolis. “It is unlikely that the data in September will warrant adding still more accommodation.”
• Brazil Inflation Accelerated to Fastest Since 2005 Ahead of Shock Rate Cut. Brazil’s inflation accelerated for the 12th straight month in August to its fastest annual rate since 2005, reinforcing economist views that the central bank may have cut borrowing costs prematurely. Consumer prices, as measured by the IPCA index, rose 0.37 percent in August from the previous month, the national statistics agency said today. That was in line with analyst expectations for a 0.36 percent increase, according to the median estimate of 40 analysts surveyed by Bloomberg. Prices rose 7.23 percent from a year ago, the highest since June 2005. “Inflation is worrying, mostly in the long run with elevated service prices growth,” Mauricio Rosal, chief economist at Raymond James in Sao Paulo, said in a telephone interview. “It will be harder for the central bank to bring inflation down to its target because it’s at such a high rate.”

Wall Street Journal:

• Turkey Suspends Defense Trade With Israel. Turkey's Prime Minister Recep Tayyip Erdogan said Tuesday that his country was suspending defense trade with Israel completely and that Turkish naval vessels would be seen in the Eastern Mediterranean more often, as Ankara ratcheted up pressure in a rising dispute with its former ally.
• Slovak Official's Delay of Rescue Fund Vote Poses Problem for Euro Zone. Slovakia's Parliament Speaker Says He Will Push Back Vote to Widen Role of Fund. Slovak lawmakers will reconvene here Tuesday after their summer break, but a critical piece of legislation will be conspicuously absent from the agenda: A bill to widen the role of a euro-zone rescue fund. Parliament Speaker Richard Sulik said he will do everything he can to delay a vote on the measure—passage of which is necessary for the common currency bloc to move ahead with plans to strengthen the financial safety net for the euro's weakest members. As speaker, Mr. Sulik has significant power in setting Parliament's legislative agenda. "It's not possible to solve a debt crisis by creating new debts," Mr. Sulik said in an interview Friday, in which he made clear his opposition to any expansion of the European Financial Stability Facility. He pledged to postpone a final vote on the measure until at least the end of the year. The delay is one of a growing list of potential disruptions that is vexing European policy makers and unsettling markets, which are anxious about precarious state finances in Greece and Italy and are questioning the political resolve of euro-zone governments.
• Debt Anger Imperils GOP, Democrats Alike. As dark as the political picture is for President Barack Obama right now, Republicans aren't exactly basking in a healthy glow either, suggesting that some wild and unpredictable political forces have been unleashed across the land.
  

CNBC.com:

• Poll: Do You Approve of Obama's Handling of the Economy?
• US Risking Recession With Attack on Big Banks: Bove. Speaking just days after the Federal Housing Finance Agency sued 17 banks over mortgage-related practices during the collapse of the subprime lending industry, Bove told CNBC that Washington is acting without concern over what effect its actions against banks are having.
• More Bad News on Jobs: Stores Trim Holiday Hiring. Although the vast majority of retailers — some 68 percent — plan on keeping holiday hiring at roughly the same level as last year, a quarter expect to trim hiring plans for seasonal workers, according to an annual hiring survey conducted by the Hay Group, a global management consultancy. That’s a greater number than last year, when 17 percent of the retailers Hay surveyed said they would scale back hiring.

Business Insider:

• The 15 Stocks That Everyone is Shorting Right Now.
• A Few Reasons Why Switzerland's All-In Bet Will Fail. I have repeatedly said in these pages that for currency intervention to be successful it has to be done in conjunction with other big central banks. The Go it Alone policy has not worked over the past 20 years.
• A Bunch of Hedge Funds Just Got Burned By The Swiss Bank Intervention. This morning the Swiss Bank intervened, sending the Swissie down. The bank will buy an unspecified amount of Francs until the exchange rate with the Euro hits 1.20 francs. This morning's press release read, "With immediate effect, it will no longer tolerate a EUR/CHF exchange rate below the minimum rate of CHF 1.20." The move will catch a lot of hedge funds, which had flocked to the Swiss Franc as a safe haven. Bridgewater might be one of them. Word was that Bridgewater was invested in gold, Treasuries, and the Swiss Franc as recently as a few weeks ago.
• Jeremy Siegel: Stocks Are Cheap! (And Getting Cheaper)
• Botched U.S. Gun Smuggling Operation Let Grenades, IEDs 'Walk' Into Mexico.
• Chris Whalen: Bank of America(BAC) Should Declare Bankruptcy. Bank of America has over $100 billion in mortgage liabilities, says Chris Whalen Co-founder of Institutional Risk Analytics.

Zero Hedge:

• Italy Announces Austerity Plan 2.0 as Local Protests Spread, Turn Violent.

NY Post:

• 46 Shot in Brooklyn Since Saturday Morning. Gunfire erupted today near the massive West Indian Day Parade in Brooklyn -- not far from where Mayor Bloomberg was marching -- as the entire city reeled from a epidemic of shootings over the past two days. By noon today, a total of 46 people had been shot in the city since Saturday morning, authorities said.

New York Time:

• Hacking in the Netherlands Took Aim at Internet Giants. Attackers who hacked into a Dutch Web security firm have issued hundreds of fraudulent security certificates for intelligence agency Web sites, including the C.I.A., as well as for Internet giants like Google, Microsoft and Twitter, the Dutch government said on Monday. Experts say they suspect the hacker — or hackers — operated with the cooperation of the Iranian government, perhaps in attempts to spy on dissidents. The latest versions of browsers including Microsoft’s Internet Explorer, Google’s Chrome and Mozilla’s Firefox are now rejecting certificates issued by the firm that was hacked, DigiNotar.

Washington Post:

• Obama Ratings Sink to New Lows as Hope Fades. Public pessimism about the direction of the country has jumped to its highest level in nearly three years, erasing the sense of hope that followed President Obama’s inauguration and pushing his approval ratings to a record low, according to a new Washington Post-ABC News poll. More than 60 percent of those surveyed say they disapprove of the way the president is handling the economy and, what has become issue No. 1, the stagnant jobs situation. Just 43 percent now approve of the job he is doing overall, a new career low; 53 percent disapprove, a new high.
• U.S. Postal Service May Lose $8 Billion More. The postmaster general is going to Congress to discuss the Postal Service’s mounting debt. Postmaster General Patrick Donahoe is among the witnesses scheduled to appear Tuesday before the Senate Homeland Security and Governmental Affairs Committee. The Postal Service is facing a second straight year of losses of $8 billion or more. A decline in mail because of the Internet and the loss of revenue from advertising amid the economic downturn have taken a toll on the agency. Postal officials say they will be unable to make this month’s $5.5 billion payment to cover future employee health care costs because the agency will have reached its borrowing limit and doesn’t have enough cash.

Insider Monkey:

• Jeff Vinik and Vinik Asset Management's Top Stock Picks.

9To5Mac:

• GameStop(GME) to Carry iOS Devices Soon. We’ve received a word from several sources that GameStop will soon begin offering the entire lineup of Apple’s(AAPL) popular iOS mobile devices such as iPhones, iPods and iPads at their stores. The announcement was made to dealers at an annual trade show in Las Vegas this past week. Also, as of this week, GameStop began accepting iOS device trade-ins for in-store credits.

Reuters:

• 25 German MPs Rebel in Preliminary EFSF Votes. Twenty-five lawmakers from Germany's ruling coalition refused to back a draft law that would boost the powers of the euro zone's rescue mechanism in votes late on Monday, underscoring the risk that Chancellor Angela Merkel might fail to secure a conservative majority for the measure. In a vote taken by members of Merkel's conservative bloc of Christian Democratic Union (CDU) and Christian Social Union (CSU), 12 members of parliament voted against introducing the law into parliament and seven others abstained, party sources told Reuters. In a separate vote by lawmakers from the Free Democrats (FDP), two voted against the measure to boost the European Financial Stability Facility (EFSF) and four abstained. Germany's Bundestag lower house of parliament is due to vote on new powers for the EFSF on Sept. 29. Although a majority in the broader house is a foregone conclusion due to opposition support for the legislation, Merkel would face pressure to dissolve parliament and call new elections if she was unable to secure a majority with conservative allies alone. Her coalition has 330 seats in the 620-seat Bundestag, meaning she can afford 19 dissident votes.
• Alden Global Hedge Fund Down 13% in August - Letter. U.S.-based hedge fund manager Alden Global Capital saw its Distressed Master fund fall 13 percent in August, as tumbling global markets played havoc with hedge funds' returns. New York-based Alden, which runs approximately $3 to $4 billion in assets, also saw its Value Recovery fund lose 13.9 percent, according to an investor letter obtained by Reuters.
• Eurozone Worries Raise Dollar Funding Costs.
• Italy to Hike VAT as Strikers Protest Austerity. Italy's government pledged on Tuesday to hike value added tax and introduce a constitutional balanced budget amendment as hundreds of thousands of people went on strike against an already widely criticised plan.
  
• Global Private Sector Growth Weakest in 2 Years - PMI. The global private sector grew at its weakest pace since August 2009 last month as a subdued service sector added to feeble growth amongst manufacturers, a business survey showed on Tuesday. JPMorgan's Global All-Industry Output index, which is based on the results of purchasing managers surveys of thousands of companies worldwide, nudged down to 51.5 in August from July's 52.5.

Telegraph:

• Cost of Insuring RBS, Lloyds Against Default at New High. (graph) Credit default swaps, effectively insurance on a borrower becoming unable to payback their debt, written on state-backed lenders Royal Bank of Scotland and Lloyds Banking Group yesterday hit new highs. At yesterday’s close, RBS credit default swaps were quoted at 355 basis points, up 37.9 basis points on their Friday close. Lloyds TSB credit default swaps hit a new high of 340 basis points, up 33.4 basis points on last Friday. The cost of insuring the junior debt of the two banks also soared to new highs of 653 basis points for Lloyds and 705 basis points for subordinated bonds issued by RBS. HSBC and Standard Chartered saw their credit default swaps widen to new 12-months highs, while Barclays saw its trade just below the 12-month high it reached late last month.
• Debt Crisis: Live. UN: Eurozone Austerity Could Lead to 'Lost Decades'.
  

ynetnews.com:

• IDF General: Likelihood of Regional War. Senior IDF officer warns of 'radical Islamic winter' that may lead to regional war, could prompt use of WMDs; new, more lethal weapons discovered in hands of terrorists during latest round of fighting in Gaza, Major General Eisenberg says. "It looks like the Arab Spring, but it can also be a radical Islamic winter," he said in a speech at the Institute for National Security Studies in Tel Aviv. "This leads us to the conclusion that through a long-term process, the likelihood of an all-out war is increasingly growing," the IDF general said.

Bear Radar

Style Underperformer:

• Large-Cap Value (-1.51%)

Sector Underperformers:

• 1) Steel -2.71% 2) Coal -2.52% 3) Networking -2.35%

Stocks Falling on Unusual Volume:

• UBS, ABB, PHG, DB, MBT, TSU, CEO, ECA, TOT, HRBN, KNXA, WPPGY, INFA, SSRI, PNFP, CIEN, PWRD, STMP, FNSR, CBSH, BOOM, HUBG, ICFI, VRA, AIMC, MIDD, VLCCF, UEIC, FSLR, IXG, EWO, EWP, CCH, VCO, BKE, CS, INFA and KNXA
  

Stocks With Unusual Put Option Activity:

• 1) FXY 2) FXF 3) HRBN 4) EGO 5) NTES
  

Stocks With Most Negative News Mentions:

• 1) KLAC 2) HOG 3) BBY 4) LDK 5) WHR
  

Charts:

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