Bull Radar

Style Outperformer:

• Large-Cap Growth (+.29%)

Sector Outperformers:

• 1) Gold & Silver +1.89% 2) Steel +1.29% 3) Homebuilders +1.28%

Stocks Rising on Unusual Volume:

• POWI, GOLD, ITMN, CALP, WPRT, HRBN, SNDK, TTWO, REXX, TKC and PAY
  

Stocks With Unusual Call Option Activity:

• 1) HTZ 2) MU 3) TWX 4) KFT 5) SFD
  

Stocks With Most Positive News Mentions:

• 1) DVN 2) MW 3) CSCO 4) DRI 5) POWI
  

Charts:

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

Thursday Watch

Evening Headlines

Bloomberg:

• Trichet May Resist Rate-Cut Calls as Debt Crisis Tightens Money Markets. European Central Bank President Jean-Claude Trichet will probably resist calls to cut the benchmark interest rate today and may opt instead to increase the supply of cash to euro-area banks as the region’s debt crisis worsens. Policy makers meeting in Frankfurt will keep the key rate at 1.5 percent, according to all 57 economists in a Bloomberg News survey. The ECB may lower its inflation and growth forecasts, signaling rates are now on hold after two increases this year. The spreading debt crisis is sapping confidence in European banks and driving up market borrowing costs. “The situation is very, very bad, the money markets have almost stopped functioning,” said Gilles Moec, co-chief European economist at Deutsche Bank AG in London. “The debate in markets has moved to rate cuts but I doubt it will happen, and one way to buffer the inevitable disappointment would be to reintroduce the 12-month tender.” The ECB announces its rate decision at 1:45 p.m. in Frankfurt and Trichet holds a press conference 45 minutes later. Separately, the Bank of England will probably keep its key rate at a record low of 0.5 percent and maintain its bond-purchase program at 200 billion pounds ($320 billion).
• Chinese Developers, Small Caps May Weigh on Equities, Jefferies's Ju Says. Chinese stocks face “challenges” this year because the government is unlikely to ease measures to stem inflation even as global economic growth slows, said Jefferies Group Inc. (JEF)’s head of Hong Kong and China Research. Investors should be cautious on the nation’s property developers as sales may worsen in the next two months, while small-company shares are more vulnerable than their larger peers to a global downturn, said Christie Ju who joined the U.S. investment bank in Hong Kong in January. Ju previously helped Bank of America Corp.’s brokerage unit take the top spots in Institutional Investor’s inaugural All-China Research Team poll and AsiaMoney’s survey of analysts. The Hang Seng China Enterprises Index of Chinese companies available to foreign investors has plunged 17 percent this year amid speculation the government will maintain policies to cool inflation. “Inflation hasn’t really come down as significantly as people expected,” Ju said. “Right now we are still in the tightening cycle. It’s difficult to count on a general loosening cycle such as interest-rate cut and I don’t see that happening in the near term.” The central bank has raised interest rates five times and ordered lenders to set aside more cash as deposit reserves 12 times since the start of 2010 to tame inflation, which jumped to a three-year high of 6.5 percent in July. Jefferies’s Ju said Chinese property stocks haven’t “priced in” the possibility that sales in September and October will worsen amid tighter liquidity. “We are seeing sales starting to decline and mortgage quotas are getting limited,” Ju said. “The situation has not improved, but worsened in the past couple of weeks.” China Vanke Co., the nation’s biggest listed property developer, said sales dropped 13 percent in August from a year ago while Beijing Capital Land Ltd. (2868) said its contracted sales fell 43 percent last month. Chinese small-capitalization stocks may extend their declines given the global economic outlook, Ju said. A ChiNext index of start-up companies has tumbled 21 percent this year on concern monetary tightening will make it more difficult for small companies to borrow from banks and expand businesses. “Small caps don’t weather the downturn as much as their larger counterparts and the outlook for small caps is very challenging,” Ju said.
• Paulson's Fund Said to Lose 34% This Year. John Paulson, the billionaire who is betting on an economic recovery by the end of 2012, has lost 34 percent this year in his largest hedge fund, according to two people familiar with the firm. Paulson’s Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies, lost 15 percent last month, said the people, who asked not to be identified because the fund is private. That compares with a 5.7 percent decline last month in the Standard & Poor’s 500 Index. The fund’s gold-denominated share class has lost 17 percent this year, after declining 7 percent in August. Paulson, 55, whose New York-based firm Paulson & Co. manages $35 billion, has scaled back bullish bets after losses this year. He reduced his stake in Bank of America Corp. (BAC) to 60.4 million shares as of June 30 from 124 million shares on March 31. The bank’s shares have tumbled 44 percent so far this year. The hedge-fund industry has gained 3.4 percent in 2011 after falling 1.1 percent last month, according to the Bloomberg aggregate hedge-fund index. Paulson would have to return about 52 percent in the remainder of the year to break even in the Advantage Plus Fund.
• Dalio Returns 25% on Diversified Bets as Markets Convulse: Influential 50. Bridgewater Associates LP founder Ray Dalio can rattle off the investing fads he’s witnessed since he began trading as a 12-year-old golf caddie: the Nifty-50 stock craze of the 1970s, the 1980 gold bubble and even the 60- 40 stock-to-bond mix. “Manias occur when there is group thinking,” Dalio says. Dalio, 62, built Bridgewater into the world’s largest macro hedge-fund firm, with $122 billion in total assets, by tacking against consensus.
• China Stocks May Drop as Trading Value Plunges. China's stocks are poised to drop, if history is any guide, with trading activity at "pretty much dead" levels, according to China International Capital Corp. Trading was a leading indicator at five different activity cycles since 2006 as highs in the Shanghai Composite in October 2007 and July 2009 occurred about five months after activity reached peaks, said CICC, the top-ranked China research provider in Asiamoney magazine's annual survey. Trading on Sept. 6 was a 14-month low of $7.8 billion. "Trading has been pretty much dead in the A-shares market amid recent market routs," Hao Hong, a Beijing-based global strategist at CICC, wrote. "Consensus took this as a sign that Shanghai has bottomed. But we are less enthusiastic."
• Japan's Machinery Orders Fall Most in 10 Months as Yen Gain Stalls Rebound. Japan’s machinery orders fell the most in 10 months in July, as the yen’s gain to a postwar record eroded company profits and discouraged investment. Factory orders dropped 8.2 percent in July from June, when they increased 7.7 percent, the Cabinet Office said today in Tokyo. Orders, an indicator of capital spending in three to six months, were projected to decline by 4.2 percent, according to the median forecast of 27 economists surveyed by Bloomberg News. Today’s report adds to concern that a rising yen may derail the nation’s recovery from March’s record earthquake, putting pressure on officials to take action to stem gains in the currency. Finance Minister Jun Azumi, who was sworn in last week, said on Sept. 4 that the government is ready to take decisive action against speculative moves in the yen. “The rebound may have run its course,” Richard Jerram, chief economist at Bank of Singapore Ltd., who has analyzed Asian economies for two decades, said before the report. The strong yen “is lowering profitability of companies, deterring them from making investments,” he said.
• A Layman's Guide to the President's Jobs Speech: Caroline Baum. Let’s face it: If the president had a plan to create jobs, he wouldn’t have kept it under wraps until now. Why take flak from Republicans and heat from the public if you have what it takes to turn the economy and labor market around? Barack Obama doesn’t have a plan to create jobs. Nor is that his job. The government’s role is to provide an environment in which the private sector will create them. That should be his goal.
• Australia Employers Cut Workers in August. Australian employers unexpectedly cut workers for a second straight month in August, sending the nation’s currency tumbling and bond yields lower as investors added to bets the central bank will cut interest rates. The number of people employed fell by 9,700, after a revised 4,100 drop in July, the statistics bureau said in Sydney today. That compares with the median estimate for a 10,000 increase in a Bloomberg News survey of 24 economists. The jobless rate rose to 5.3 percent, the highest since October 2010, from 5.1 percent. Retailers and factories are getting hurt by a 16 percent gain in the currency in the past year that cuts export income and the developed world’s highest borrowing costs, which were left unchanged at 4.75 percent this week.
• Growth Risk Means Favor Defensive Stocks, BofA's Kim Says. Investors should favor “defensive” utility and telecommunications shares in Asia whose earnings may be sheltered from a slowdown in the world’s biggest economies, Bank of America Corp. (BAC)’s head of Asia Pacific research said. There’s a risk of more selling in regional stocks, Hunsoo Kim at Bank of America’s Merrill Lynch unit said in an interview in Seoul yesterday. Merrill was rated first for Asia research in 2011 by Institutional Investor magazine. Kim, based in Hong Kong, was visiting Seoul for an annual Korea conference hosted by Merrill. The MSCI Asia Pacific Index slumped 8.6 percent last month, the most since May 2010, on signs the U.S. economic recovery is faltering and concern that Europe’s debt crisis will spread. Utility and telecommunications gauges within the MSCI index lost less than 3 percent in August, the best performers among 10 industry groups. “We’re taking a defensive stance, and we acknowledge there are risks out there,” Kim said, without naming individual stocks nor giving an index forecast. “There’s going be less growth most likely next year, and markets reflect that.” Another round of asset purchases, or quantitative easing, in the U.S. is unlikely to happen in a “major” way, and even if it does, it may not necessarily resolve problems of the world’s largest economy, Kim said. The U.S. economy posted zero jobs growth last month, a government report on Sept. 2 showed. Federal Reserve Chairman Ben S. Bernanke is scheduled to speak on the U.S. economic outlook later today. The central bank’s policy makers voted on June 22 to conclude a $600 billion bond-buying program as scheduled and maintain its balance sheet near record levels. The Fed pledged on Aug. 9 to keep its target interest rate near zero until at least mid-2013. “We’re not sure about the effectiveness of such policy to really get the U.S. back on track,” said Kim. “It didn’t create jobs, and at the end of the day, you cannot solve debt issues by creating more debt.”

Wall Street Journal:

• Renaissance Quant Fund Adds to Gains. Renaissance Technologies LLC's quantitative hedge fund Renaissance Institutional Equities Fund was up a gross 5.4% in August, bringing the $6.5 billion fund's year-to-date gains to 25.56%, a person familiar with the situation said Wednesday. The strong gross return by the Renaissance fund—gross gains exclude the impact of fees and expenses paid by investors—shows that in a difficult month for hedge funds, some still managed to eke out gains.
• Libya Oil Chief Plans Revival. Rebel Who Quickly Set Up Shop in Tripoli Sees Production Resuming Soon; an Expanding Portfolio. Libya's oil industry will be prepared to resume production within two weeks, while the rebel council is considering keeping their headquarters in Benghazi, said Oil and Finance Minister Ali Tarhouni, who has established himself—in a plush office left behind by the Gadhafi regime—as a key figure in the country's transition. A decision to keep the seat of power in the eastern base of the rebellion against Col. Moammar Gadhafi could sharpen regional rivalries and make it harder for leaders to convince their countrymen that they are the nation's legitimate rulers.
• Feared SEC Watchdog Preps Slew of Reports. The Securities and Exchange Commission is bracing for a battery of reports from its internal watchdog that could be fodder for legislators looking to clip the agency's wings.
• SEC Shifts Tack on Document Destruction Amid Whistleblower Threat. The back-stage action kicked up Wednesday in the ongoing Securities and Exchange Commission whistleblower case involving the agency’s record-keeping. Recall that a longtime SEC enforcement lawyer has accused the regulator of destroying probe-related documents it should have kept over more than a decade, to the likely detriment of Wall Street investigations and policing of the SEC’s own procedures and staff. The SEC has said it considered its policies proper when they were adopted. Wednesday brought a change to the implementation of some of those policies that have long mandated document-purging. Late in the day, SEC General Counsel Mark Cahn issued a memo to Division of Enforcement staff telling them to stop existing record-destruction procedures for closed cases, until further notice.
• U.S. Hits Builders With Pay Probe. The Labor Department is investigating pay practices at many of the top companies in home building, hitting them with a broad demand for records that has led to complaints of regulatory overreach. Recipients of the letters include PulteGroup Inc.,Lennar Corp., D.R. Horton Inc. and KB Home, according to people familiar with the matter. A Labor Department spokeswoman confirmed the investigation but declined to discuss details. A copy of one letter, dated Aug. 1 and reviewed by The Wall Street Journal, said the department was opening a probe under the Fair Labor Standards Act, which governs matters such as overtime pay and limits on using teen workers. The letter instructed the home builder to immediately turn over the names, addresses, Social Security numbers, pay rates and hours worked for all employees over the past two years. It asked the names of all contractors hired in the past year.
• Perry, Romney Clash at Debate. Rick Perry and Mitt Romney clashed from the opening bell of a Republican presidential candidates' debate Wednesday, challenging each other on job creation, health care and Social Security in pointed exchanges that signaled their burgeoning rivalry is likely to dominate the contest in the months ahead.
• The Obama Presidency by the Numbers by Michael J. Boskin.
• Why the Stimulus Failed. New research on what actually happened to a trillion dollars.

CNBC:

• The Economy Is Slowing: Blackstone's(BX) Steve Schwarzman. The economy appears to be slowing down dramatically, Steve Schwarzman said in an interview this afternoon with Maria Bartiromo. The Blackstone Group, a publicly traded private equity firm that owns many companies around the world, has seen the growth in its portfolio companies fall by more than half since the beginning of 2011. “We can see the economy slowing down. In the first quarter, our companies were growing around 9 and a half percent. In the second quarter, eight. In the last two months, it looks to be around half of that,” Schwarzman said. “We can see it getting slower in August than it was in July.” Schwarzman points out that the slowdown is taking place both in the US and in Europe. “The basic problem in Europe is that the banks are short capital if you mark to market sovereign debt,” Schwarzman said.
• Libor Investigation of Banks Looks at Criminal Angle. The US investigation into alleged manipulation of interbank lending rates is focusing on possible violations of a commodities law that has previously been used to send financial executives to prison.
• China to Back London as Offshore Renminbi Center. China is for the first time to give formal backing to moves by British banks to turn the City of London into an offshore trading center for the renminbi, UK government officials have told the Financial Times.

Business Insider:

• Fed Considering 3 Options for Next Round of Easing.
• GOP Candidates Want to Get Rid of Bernanke.
  

NY Times:

• Some Hedge Funds, to Stay Nimble, Reject New Investors. Since the financial crisis, big hedge funds like Paulson & Company, Millennium Management and Och-Ziff Capital Management Group have not turned away money, eagerly collecting billions of dollars from investors who have tended to stick with the industry’s marquee firms. The situation makes Anthony Bozza all the more unusual. With assets swelling, the hedge fund manager is closing the door to new investors at his four-year-old firm, Lakewood Capital Management. In a little more than a year, his fund has grown from $200 million to $900 million, according to investors in the fund. Small hedge funds were supposed to be the big losers in after the crisis, hampered by costly regulation and investors who flocked to the seeming safety of larger institutions. But three years later, some small and midsize managers are flourishing, attracting assets at a rapid rate. Rather than risk their returns, they are just saying no to new investors.

Seeking Alpha:

• Is Greece About to Default? Yields on two-year Greek government bonds reached 46.84% recently. This is roughly comparable to yields on Argentine bonds in early December 2001 - only a month before the country defaulted on its debt. Similar interest rates occurred this spring in Greece before the second bailout package was put together. The bailout saved Greece from defaulting back then, but the bailout is now falling apart while the fiscal situation in Greece continues to deteriorate. The risk of default in the near future has returned, but the will to stop it this time around is much weaker than in the past.

Institutional Investor:

• Market Conditions Make Appaloosa's David Tepper Cautious. Think the markets are scary and uncertain? Well, you’re not the only one. Even some of the savviest players are baffled about what is going on and have therefore turned very cautious. Case in point: Appaloosa Management’s David Tepper. Yes, the hedge fund manager who has ice-water in his veins and who likes to ride roller-coasters with his hands in the air, has turned cautious. Sources say he has gone 30 percent to 40 percent in cash, which is very high for him. Some of his cash is invested in U.S. Treasuries, which have in turn risen in value in recent weeks. Keep in mind that Tepper had about 30 percent in cash entering 2009, shortly before he started buying up banks such as Bank of America before anyone else had the guts to do the same and racked up triple-digit gains by the end of the year. Sources say he is not preparing to aggressively start spending this cash any time soon, except to pick up some shares of stocks he already owns on the dips. If you recall, last September Tepper helped to touch off a market rally when he offered his famous win-win analysis on CNBC, asserting stocks would either do well if the economy strengthened or with government stimulus.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday 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).

Reuters:

• U.S. Mutual Fund Flows Break Six Week Losing Streak. U.S. domiciled mutual funds broke a six week losing streak, pulling in an estimated net $902 million in the week ended Aug. 31, data from the Investment Company Institute showed on Wednesday. ICI, a U.S. mutual fund trade organization, reported net outflows for both equity and bond funds, however, the largest net inflow for hybrid funds since early May overcame the deficit. Hybrid funds, which invest in both equities and bonds, pulled in a net $1.1 billion. Municipal bonds had a net inflow of $227 million, breaking a five week outflow streak.
• G-III Apparel(GIII) Misses Expectations, Sees Weak Q3. Clothes maker G-III Apparel Group Ltd's posted second-quarter earnings well below analysts' estimates and forecast a weak third-quarter as more discounts eat into its margins. The New York City-based company's shares fell nearly 13 percent in after-market trade on Wednesday, after closing at $28.66 on Nasdaq.

Financial Times:

• US Damps Likelihood of Joint Action on Currencies.
• U.S. Congressional Budget Office researchers have found a government plan to back mortgages at current low interest rates would mean private investors being saddled with twice as much in losses as borrowers would get in payment relief, citing the CBO. A total of 2.9 million mortgages worth $428 billion would be refinanced, offering savings of $7.4 billion in lower payments and averting 111,000 defaults. The cost to the government would be around $600 million, although investors in government-guaranteed mortgage-backed securities would lose between $13 billion and $15 billion from prepaying for securities above market rates.
  

Telegraph:

• German Court Curbs Future Bail-Outs, Bans EU Fiscal Union. Germany's constitutional court has at last delivered its Solomonic judgment on Europe's rescue machinery.

Sky News:

• France Accuses Syria of War Crimes. France has accused of Syria of crimes against humanity as the EU moves to impose fresh sanctions against the country and its leader. 'The Syrian regime has committed crimes against humanity,' French Foreign Minister Alain Juppe said on Wednesday during talks in Moscow with his Russian counterpart Sergei Lavrov. 'The way it (the Syrian regime) suppressed the popular protests is unacceptable,' he said, expressing hope that Russia would change its stance and back UN condemnation of the crackdown. The Syrian authorities, he said, should be sent 'a powerful signal that such actions cannot continue.'

Securities Times:

• China may raise interest rates this month or next. Increases would be triggered by continuing high inflation, citing an economist at China International Capital Corp.

China Business News:

• China will have a "very difficult" job achieving its price stabilization target, citing Yao Jingyuan, former chief economist at the National Bureau of Statistics.

Evening Recommendations
Citigroup:

• Rated (GPN) Buy, target $53.

CSFB:

• Rated (VFC) Outperform, target $137.
• Rated (WWW) Outperform, target $44.
• Rated (DECK) Outperform, target $110.
• Rated (COH) Outperform, target $64.
• Rated (ZUMZ) Outperform, target $24.
  

Night Trading

• Asian equity indices are -.50% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 154.0 -6.5 basis points.
  
• Asia Pacific Sovereign CDS Index 147.0 +.5 basis point.
• FTSE-100 futures +.15%.
  
• S&P 500 futures -.14%.
  
• NASDAQ 100 futures -.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (VRNT)/.60
• (TITN)/.27
• (SFD)/.66
• (UNFI)/.42
• (KFY)/.33
• (JW/A)/.77
• (ULTA)/.32

Economic Releases
8:30 am EST

• The Trade Deficit for July is estimated to shrink to -$51.0B versus -$53.1B in June.
• Initial Jobless Claims are estimated to fall to 405K versus 409K the prior week.
• Continuing Claims are estimated to fall to 3706K versus 3735K prior.

11:00 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,000,000 barrels versus a +5,281,000 barrel gain the prior week. Distillate inventories are estimated to rise by +500,000 barrels versus a +363,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,400,000 barrels versus a -2,795,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -1.0% versus a -1.1% decline the prior week.
  

3:00 pm EST

• Consumer Credit for July is estimated to fall to $6.0B versus $15.53B in June.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The BoE Rate Announcement, ECB Rate Announcement, Fed's weekly balance sheet/M1, M2 reports, weekly Bloomberg Consumer Comfort Index, (TXN) mid-quarter update, (COV) investor meeting, (ARBA) analyst day, (GD) analyst day and the (ATR) analyst day could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and financial 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 Surging into Final Hour on Less Eurozone Debt Angst, Diminishing Financial Sector Pessimism, Short-Covering, Bargain-Hunting

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Almost Every Sector Rising
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 33.43 -9.65%
  
• ISE Sentiment Index 133.0 +9.02%
  
• Total Put/Call .85 -33.59%
  
• NYSE Arms .54 -62.48%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 123.15 -4.90%
  
• European Financial Sector CDS Index 245.50 -2.46%
  
• Western Europe Sovereign Debt CDS Index 315.17 unch.
  
• Emerging Market CDS Index 279.50 -4.17%
  
• 2-Year Swap Spread 32.0 unch.
  
• TED Spread 32.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.
  
• Yield Curve 184.0 +6 bps
  
• China Import Iron Ore Spot $181.0/Metric Tonne +.06%
  
• Citi US Economic Surprise Index -54.70 +.4 point
  
• 10-Year TIPS Spread 1.98% +4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +107 open in Japan
• DAX Futures: Indicating +36 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is very bullish, as the S&P 500 builds on yesterday's afternoon rebound on less Eurozone debt angst, less financial sector pessimism, short-covering, bargain-hunting and technical buying. On the positive side, Coal, Alt Energy, Oil Service, Steel, Disk Drive, Networking, Bank, Hospital, HMO, Insurance, Construction and Education shares are especially strong, rising more than +3.5%. Small-caps and cyclicals are outperforming. (XLF) has traded very well throughout the day. Gold is down -3.3% and Lumber is rising +1.98%. Weekly retail sales rose +4.9% this week versus a +4.2% gain the prior week. Major European equity indices surged 3-4% today. The Spain sovereign cds is plunging -12.44% to 368.33 bps, the Germany sovereign cds is dropping -5.06% to 78.17 bps, the France sovereign cds is falling -5.8% to 173.0 bps, the Italy sovereign cds is declining -4.23% to 432.67 bps, the Belgium sovereign cds is falling -5.96% to 271.0 bps and the UK sovereign cds is falling -4.43% to 76.14 bps. Moreover, the European Investment Grade CDS Index is dropping -4.0% to 158.74 bps. On the negative side, Restaurant, Telecom and Utility shares are underperforming, rising less than +1.0%. Oil is up +3.1%. Rice is still near a multi-year high, rising +1.0%, and has risen +36.5% in about 9 weeks. The average US price for a gallon of gas is unch. today at $3.66/gallon. It is up .52/gallon in about 7 months. The Greece sovereign cds is rising +2.1% to 2,616.50 bps, which is an all-time high. The Eurozone Financial Sector and Western European Sovereign CDS Indices are still near all-time highs. The 3-Month Euro Basis Swap dropped another -1.27 bps to -100.96 bps, which is another new cycle low. The UBS-Bloomberg Ag Spot Index is still near its recent record high, which is also a large negative. The 10-year yield rose +6 bps today to 2.04%. However, bonds are still too strong given the last 2 days stock advance. While the euro did bounce today, it wasn't that impressive given recent losses and the surge in eurozone stocks. Moreover, while most eurozone cds fell today, other gauges of eurozone debt angst remain very elevated and continue to trend higher, which remains a large concern. Today's equity surge was on lackluster volume, but much-improved breadth. Until the macro backdrop stops deteriorating, any short-covering fueled equity rallies will likely prove unsustainable over the intermediate-term. I expect US stocks to trade mixed-to-higher into the close from current levels on technical buying, short-covering, a bounce in the euro, bargain-hunting and better US economic data.

Today's Headlines

Bloomberg:

• Germany' s Top Court Rejects Constitutional Challenges to Euro Rescue Funds. Germany’s top court cleared the way for Chancellor Angela Merkel’s coalition to participate in the current euro-area rescue plans, while saying it must seek some additional parliamentary approval for payouts under the funds. The Federal Constitutional Court in Karlsruhe threw out three suits targeting Germany’s share of the 110 billion-euros ($155 billion) in loans for Greece from euro-region governments and the International Monetary Fund as well as a separate 750 billion-euro rescue fund approved last year in an effort to prevent Greece’s debt crisis from spreading. The ruling will aid Merkel’s efforts to gain support for participation in a new round of European Financial Stability Facility programs. The court said its ruling today shouldn’t be seen as “blanket” authorization of future rescue packages and the government must seek approval from the parliament’s budget committee for the individual guarantees it assumes in each bailout under the current EFSF. “Parliamentary decisions about taxing and spending are a central element of democratic self-government under the constitution,” Andreas Vosskuhle, president of the court, said in the ruling. “As representatives of the people, the elected members of parliament thus also need to remain in control over elementary budgetary decisions.”
• EU Said to Delay Ban Bondholder Writedown Plan. The European Union is delaying proposals for senior bondholders of failing banks to take losses because the measures may spook investors at a time of market turbulence and they need more work, according to two people familiar with the situation. Michel Barnier, the EU’s financial services commissioner, will unveil draft legislation on the measures in October at the earliest, said one of the people, who declined to be identified because negotiations on the proposals are continuing.
• Saks(SKS), Nordstrom(JWN) Say Luxury Sales Firm. So far so good in the luxury sector, say top executives of Saks Inc. (SKS) and Nordstrom Inc. (JWN), as stock markets lurch up and down amid global economic uncertainty. Saks Chief Executive Officer Stephen Sadove and Nordstrom Chief Financial Officer Michael Koppel say sales at their luxury chains are holding up and that they are sticking to their forecasts.
• The cost of insuring Greek government debt rose 117 basis points to a record 2,771 basis points, according to CMA prices.
• Gold Drops for Second Day as Equity Rebound Trims Haven Investment Demand. Gold dropped the most in two weeks as a rebound in global equities eroded demand for an alternative asset and spurred investors to sell the metal after its rally to an all-time high. Gold for December delivery declined $67.80, or 3.6 percent, to $1,805.80 an ounce at 11:07 a.m. on the Comex in New York, heading for the biggest drop since Aug. 24.
• Crude Gains on Forecast Stockpile Drop as Cyclone Builds in Gulf of Mexico. Crude oil climbed the most in four weeks in New York as a weather system threatened to reduce U.S. production from the Gulf of Mexico, where shut-ins from last week’s storm probably curbed stockpiles. Crude oil for October delivery rose $3.46, or 4 percent, to $89.48 a barrel at 12:42 p.m. on the New York Mercantile Exchange.
• Tropical Storm Maria Joins Katia in Atlantic. Tropical Storm Maria formed in the Atlantic, the 13th named system of the 2011 season, as Hurricane Katia weakened further on its path around Bermuda.
• IMF to Cut Irish Economic Growth. The International Monetary Fund will cut its Irish economic growth estimate for this year and next as the outlook for its main trading partners, the euro region, U.S. and U.K. “worsened substantially.” The Washington-based fund will lower its 2011 gross domestic product forecast for the country to 0.4 percent and 2012 projection to 1.5 percent as part of its world economic outlook this month, it said in a report today. The IMF had been forecasting growth of 0.6 percent and 1.9 percent, respectively.
• U.S. Job Openings Rose in July as Slower Hiring Signals Lack of Confidence. Job openings in the U.S. rose in July for a third month, while a slowdown in hiring showed businesses lacked the confidence to take on new staff. The number of positions waiting to be filled climbed by 59,000 to 3.23 million, according to Labor Department figures issued today in Washington. Hiring decreased by 74,000 to 3.98 million.
• Hedge Funds' Bets on S&P 500 Futures Are Most Bearish Since September 2007. Bearish bets by investors using Standard & Poor’s 500 Index futures increased to the highest level in almost four years amid concern global economic growth is stalling. Hedge funds and other large speculators were net short 107,913 contracts in the week ended Aug. 30, wagering that the S&P 500 will decrease in value, according to data compiled by Bloomberg and the U.S. Commodity Futures Trading Commission. The position is the highest since September 2007, when bearish bets reached a record 127,474 contracts a month before the benchmark equity gauge peaked at an all-time high, Bloomberg data going back to 1997 show.

Wall Street Journal:

• BP(BP) Feels Shareholder Heat After String of Setbacks. BP PLC shareholders are demanding the oil company come up with a new growth strategy after a miserable week in which rival Exxon Mobil Corp. replaced it in a landmark Russian Arctic deal and its Moscow office was raided by court officials. The latest setbacks come against a background of mounting investor frustration at the slow pace of BP's recovery from last year's Gulf of Mexico disaster.
• BNY Mellon: Funded Status of US Pensions Fell in August. The average funded status of the typical U.S. corporate pension plan declined in August, hitting the lowest level in nearly a year, BNY Mellon Asset Management said Wednesday.
• Eleven Killed, 66 Injured in Delhi Terror Attack. A bomb exploded outside New Delhi's High Court, killing 11 people and injuring more than 60 in an act of suspected terrorism in the heart of India's capital that further heightened concerns about the nation's security vulnerabilities. The high-intensity blast occurred Wednesday at 10:14 a.m. near the courthouse reception area. Officials said they believed the bomb was placed in a briefcase.
• Suicide Blast Kills 23 People in Pakistan. A pair of suicide bombers attacked a top army officer in Pakistan's southwestern city of Quetta on Wednesday, missing him but killing his wife. At least 22 others died, including several guards, a senior officer and two children, officials said. Police said they were investigating whether the strike was in revenge for the recent arrests in Quetta of three top al-Qaida suspects, an operation that was assisted by the CIA.
  

CNBC.com:

• Major US Banks Forced Into New Round of Stress Tests.
• US Economy is Basically 'Still In Recession': Chicago Fed's Evans.
• Suggish US Recovery Weakens in Some Areas: Fed. The sluggish recovery failed to gain any speed in recent weeks and softened in some areas of the nation, the Federal Reserve said on Wednesday. "Economic activity continued to expand at a modest pace, though some Districts noted mixed or weakening activity,'' the Fed said in its Beige Book collection of anecdotal reports of economic conditions in the 12 Fed districts.
• Teen Joblessness Was Worst Ever in US This Summer.
• Regulation Will Force BofA(BAC) to Fire 30,000 People: Bove. (video)
  

Business Insider

• Chinese Shipping Giant COSCO Is Freaking Out The Dry Bulk Industry Again.
• A Closer Look at Obama's Connection With The Solyndra Boondoggle.
• Greece: Now Here's What's Next. The good news it that a German high court ruled that bailouts are legal. But other than that, things are looking bad. Here's the latest on the collateral situation and EU gossip:

Zero Hedge:

• UN Security Council Finds Iran is Violating The Nuclear Weapons Program Ban.
• The PIIGS Fleecing of Europe Continues Even as Italy Promises to Implement Another "Austerity" Package Imminently.
• Explaining The German Constitutional Court Ruling.
  

Washington Post:

• SEC Still Destroying Records Illegally, Whistleblower Says. A year after it was warned that it might be violating federal law, the Securities and Exchange Commission is still breaking the law by destroying records of closed enforcement cases, a lawyer in the agency’s enforcement division has alleged. In addition, the purging of files has involved a wider range of investigative documents than previously reported, according to a signed statement by the enforcement lawyer.
  

Forbes:

• Obama's Phony War on Hedge Funds - Attack on Real Estate.

CNN Money:

• Big Hedge Funds Getting Slaughtered. Lyxor Asset Management, an arm of French bank Societe General, feeds $11.7 billion from investors into 100 hedge funds through its managed accounts platform, according to Stefan Keller, head of research and external relations at Lyxor. According to documents obtained by CNNMoney, 15 of these funds generated double digit percentage losses as of September 2. Five funds were down more than 20%.

Reuters:

• Greece Must Make Up Slippage to Get More Aid - Sources. Greece will have to compensate for slippage on its budget deficit target this year in the 2012 budget and in other areas of reform agreed with international lenders to get the next aid tranche, euro zone sources said. German Finance Minister Wolfgang Schaeuble said on Tuesday Greece would not receive the next, 8 billion euro (7 billion pound) tranche of aid due in September if inspectors from the IMF, ECB and European Commission did not give Athens a positive review on reforms set out in the emergency loan programme.
• Italy Senate Approves Austerity Package.
• Italy Police Use Tear Gas on Austerity Protesters.
• Copper Ends Sharply Higher as Supply Threats Mount.
• Oil-Funded Study: More Drilling Would Add 1 Million Jobs.
• Walter Energy(WLT) Shares Up On Report of Possible Bid. Shares of Walter Energy Inc (WLT.N) jumped 28 percent Wednesday morning after a report that Anglo American was weighing a bid for the metallurgical coal miner.

Bild:

• Horst Seehofer, Bavaria's prime minister and Christian Social Union chairman, said Greece's exit from the euro is "possible," though he would prefer it to remain in the single currency by boosting efforts to cut debt, citing an interview. Seehofer, whose CSU is one of three parties in Chancellor Angela Merkel's coalition, said he has "considerable doubt" that Greece and Italy have earnest intentions to cut spending.

Hannoversche Allgemeine Zeitung:

• Germany's Free Democrats, the junior partner in Chancellor Angela Merkel's government, reject joint bond sales by euro members, Economy Minister Philipp Roesler, the party's chairman, said.

Expansion:

• Spain's biggest business lobby group called on the government to raise taxes on the rich to help the country rein in its budget deficit.

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