Bear Radar

Style Underperformer:

• Small-Cap Growth (-3.09%)

Sector Underperformers:

• 1) Restaurants -4.51% 2) Homebuilders -4.43% 3) Networking -4.01%

Stocks Falling on Unusual Volume:

• DB, TI, PHG, SI, CLMT, VRSN, LULU, SYNT, JCOM, TITN, GIII, CVV, REGN, DLLR, ASCA, MIND, NDSN, OPEN, TSRA, FSLR, UNFI, INSU, KELYA, ADSK, WPRT, PUK, TEF, KFY, FEU, KR, ABM, EZU, MCD, NC, VPL, RPM, LAZ, AUQ, FAS, TSRA and TBI
  

Stocks With Unusual Put Option Activity:

• 1) HST 2) STX 3) BCS 4) FXF 5) NTES
  

Stocks With Most Negative News Mentions:

• 1) RIMM 2) GLW 3) TSO 4) TXN 5) BHI
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth (-2.21%)

Sector Outperformers:

• 1) Semis -.21% 2) Education -.91% 3) Telecom -1.21%

Stocks Rising on Unusual Volume:

• STMP, ULTA, TZOO, DNDN and MRVL
  

Stocks With Unusual Call Option Activity:

• 1) ANF 2) VRSN 3) RSH 4) UUP 5) HCA
  

Stocks With Most Positive News Mentions:

• 1) BIIB 2) MCD 3) L 4) LULU 5) AUXL
  

Charts:

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

Friday Watch

Evening Headlines

Bloomberg:

• Ghost of Lehman Haunts G-7 Amid European Debt-Crisis Paralysis. Europe's finance chiefs will face international calls today to accelerate efforts to contain their debt crisis as mounting bets on a Greek default highlight the biggest threat to the global economy. As central bankers and finance ministers from the Group of Seven nations convene in Marseille, France, for their first face-to-face talks since they promised "coordinated action" Aug. 8 to calm financial markets, Europe's failure to stamp out investor worries over sovereign debts are set to be the focus. Any global recession "will have Europe's fingerprints on it," said Constance Hunter, who helps manage about $12 billion as chief economist at Aladdin Capital Management LLP in Stamford, Connecticut. "Europe is the real risk." It's not the only risk as policy makers race to head off a recurrence of the contraction, the worst since the Great Depression, that followed the collapse of Lehman Brothers Holdings Inc. three years ago this month. The Organization for Economic Cooperation and Development yesterday said the G-7 will barely expand in the final quarter as the euro region shrinks.
• Bond Investors Consider Greek Debt Exchange as Budget Concerns Escalate. Questions over Greece’s ability to meet the terms of its first rescue package are dogging the indebted nation as bondholders weigh whether to participate in a debt exchange that’s crucial to a second bailout. Greece is seeking preliminary responses today from bond investors to the proposed debt swap, part of a 159 billion-euro ($220 billion) European Union rescue plan agreed upon in July. The government is still trying to show it can reach budget- cutting targets required for the next 8 billion-euro payment from a bailout engineered in 2010. “There are a lot of optics to get exactly right, or European bond investors are going to start trying to get out of more than just their Greek bond holdings,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ. “This is about creating confidence in the markets that the euro -- the currency and union -- is not going to fall apart at the seams.” The cost of insuring Greek government debt soared 240 basis points to a record 3,045 basis points yesterday, according to CMA prices for credit-default swaps.
• Food-Price Gains Defy Policy Makers' Bid to Ease Inflation, Panelists Say. Rising food prices may be an exception to easing inflation worldwide, posing dilemmas for policy makers, particularly in emerging markets including China, panelists at a forum said today. Central banks “should be concerned” about food-price inflation, said Roberto Rigobon, a Massachusetts Institute of Technology professor, while James Rickards, senior managing director of Tangent Capital Partners, said China risks harming employment if the country tries too hard to contain inflation. Their comments compare with signals today from the Federal Reserve and European Central Bank that the inflation outlook is benign enough to allow further easing. China is “between a rock and a hard place, because they’re very concerned about inflation,” Rickards said during a panel discussion. At the same time, raising interest rates too much may hurt export-related jobs important to the country’s economy. “Inflation and unemployment are both highly destabilizing” for China, he said. Inflation remains a major concern of central bankers in Asia’s emerging markets, while policy makers in developed nations are focused on a slowdown in growth. Chinese inflation accelerated to a three-year high of 6.5 percent in July, prompting Premier Wen Jiabao to say Aug. 31 that his top economic priority is stabilizing prices.
• 'Specific Credible' Terror Threat Received by U.S. Officials. The U.S. Department of Homeland Security has “specific, credible but unconfirmed threat information” as the 10th anniversary of the Sept. 11 terrorist attacks nears, agency spokesman Matt Chandler said in a statement. The threat concerns a possible al-Qaeda-sponsored attack targeting New York or Washington on or near the anniversary of the attack, said a different U.S. official, who wasn’t authorized to discuss the matter publicly. The official said the intelligence concerns a possible vehicle-borne attack, perhaps on a transportation hub or bottleneck, and cautioned that the options may be broader than a car or truck bombing. Another intelligence official, who also spoke on condition of anonymity, said the information hasn’t been fully vetted.
• Power Failure Affects Southern California, Arizona. More than 1 million customers lost power in Southern California and Arizona when a transmission line failed. Utility officials said power might not be fully restored until tomorrow. Sempra Energy (SRE)’s San Diego Gas & Electric’s entire service territory was affected, with 1.4 million customers without power, said Jennifer Ramp, a spokeswoman for the utility.
• New Libyan Leaders Face 'Difficult' Unity Fight. Libya’s transitional prime minister, Mahmoud Jibril, called for national reconciliation and unity, saying they may be “more difficult” to achieve than the fight that toppled Muammar Qaddafi’s regime. “There are two battles,” Jibril said after arriving in Tripoli two and a half weeks after opposition fighters entered the capital. Achieving unity will be “our biggest challenge,” he said.
• Brazil Cut to Keep Inflation High, Macquarie's Welch Says. Brazil’s interest-rate reduction last week will prop up domestic demand and prevent inflation from slowing from a six-year high, said John Welch, chief emerging-markets strategist at Macquarie Capital Inc. Welch, speaking at the Bloomberg Global Inflation Conference in New York, said the 50 basis-point rate cut to 12 percent on Aug. 31 shows Brazilian policy makers are “betting” inflation will slow before year-end. Annual inflation surged last month to 7.2 percent, the fastest rate since 2005, in Latin America’s biggest economy. “I don’t see any reason for inflation dropping,” Welch said. “At the margin, it’s accelerating again.” Brazil’s rate cut, which followed five consecutive increases, surprised all 62 analysts surveyed by Bloomberg, who expected rates to be left unchanged. The central bank signaled it may reduce borrowing costs further on expectations the global economic slowdown will help inflation slow in line with its 4.5 percent target next year, according to the minutes of the meeting released today. “They will rethink it,” said Welch, the former chief Latin America economist at Lehman Brothers Holding Inc.
• SEC Files Action Against Deloitte Shanghai Unit. The U.S. Securities and Exchange Commission filed an enforcement action against Shanghai-based Deloitte Touche Tohmatsu CPA Ltd. for failing to produce documents related to an investigation of its former auditing client Longtop Financial Technologies Limited. D&T Shanghai hasn’t provided any documents to the SEC, which issued subpoenas to the firm on May 27, the agency said in a statement today, citing a filing in U.S. District Court in Washington. As a result, the SEC has been unable to access “critical” information in its probe of possible fraud at Longtop, the statement said. Longtop, based in Hong Kong, said in May that D&T Shanghai quit because of errors in the company’s financial records. The SEC also began an investigation.
• Texas Instruments(TXN) Lowers Third-Quarter Revenue Forecast as Orders Recede. Texas Instruments Inc. (TXN), the largest maker of analog chips, said third-quarter sales may fall short of earlier forecasts, citing a slump in orders for electronics components from customers across its product lines. Profit will be 56 cents to 60 cents a share on revenue of $3.23 billion to $3.37 billion, the Dallas-based company said in a statement today. Analysts on average had estimated profit of 60 cents on sales of $3.5 billion, according to Bloomberg data. Texas Instruments gets most of its revenue from analog chips, semiconductors that are key components in everything from medical devices to e-book readers. The company’s customers and distributors are holding off on orders, concerned that a slowing economy will crimp demand for electronics, said Tore Svanberg, an analyst at Stifel Nicolaus & Co. “The weakness is fairly broad-based,” said Svanberg, who recommends buying Texas Instruments shares because of the company’s long-term growth prospects. “I don’t think there’s a place to hide right now.” Texas Instruments stock, down 21 percent this year, fell 1.2 percent to $25.48 in extended trading following the announcement.
• Glenn Beck Debuts Web TV Network to Leverage His Fame After Fox.
• Japan's Economy Contracts More Than Initial Estimate as Yen Hurts Recovery. Japan’s economy contracted more than the government initially estimated in the second quarter as capital spending decreased, adding to concern the stronger yen may derail the nation’s recovery from the March earthquake. Gross domestic product shrank at an annualized 2.1 percent rate in the three months ended June 30, more than the 1.3 percent contraction reported last month, the Cabinet Office said today in Tokyo. The reading was in line with the median forecast of 21 economists surveyed by Bloomberg News.
• Deutsche Bank(DB) Risk Seen Rising as Puts Appreciate Most in Europe: Options. The price of options to protect against losses in Deutsche Bank AG (DBK) shares is rising more than any other European lender as Germany leads the rescue of nations in the region’s shared currency. Three-month options that pay owners should Frankfurt-based Deutsche Bank drop 10 percent cost 1.3 times the price of contracts betting on 10 percent gains, according to data compiled by Bloomberg. That’s up from 1.14 at the end of July, the biggest increase among financial firms in the Stoxx Europe 600 Index, data using five-day averages show. Stocks subject to bans on short selling were excluded.

Wall Street Journal:

• Greek CDS Spreads Go Stratospheric. The cost of insuring Greece’s debt against default shot to a new high on Thursday, as investors increasingly see the country in a risk class of its own, even compared with other troubled euro-zone economies. Greece’s five-year credit default swaps rose to 3008 basis points, up 288 basis points from Wednesday, according to data provider Markit. The Greek government said Thursday the economy contracted in the second quarter even more than was originally thought, by 7.3% instead of 6.9%. Officials conceded the government will fail to cut its budget shortfall as planned this year. The rest of Europe is losing patience with Greece. Germany has hinted Greece will not get its next bailout check unless it gets its act together, and Finland reiterated its insistence on collateral for more Greek aid, a controversial condition that has Europe divided and threatens to delay new agreements. “The euro zone has spent a year trying to bail out an overindebted country by loaning it more money,” LeBas said. “That’s not going to work in the long run. Some form of Greek default is a largely foregone conclusion.” The Italian government has come up with an austerity plan that includes spending cuts and tax increases to the tune of EUR50 billion, which will be put to vote in parliament next week. Spain is also attempting budgetary controls to shore up investor confidence. Meanwhile, there are murmurs about Greece being asked to leave the 17-country euro-bloc. While there are denials from all sides that such a proposal is in the offing, the rumors add fuel to the theory that this may be an option, said Otis Casey, credit analyst at Markit.
• Obama's Bid to Spur Growth. President Asks Congress for $447 Billion In Cuts, Spending; Tepid GOP Response. President Barack Obama called on Congress Thursday to pass a $447 billion package of spending initiatives and tax cuts to boost economic growth, in what might be the White House's last chance to revive its political fortunes before the 2012 campaign kicks into high gear.
• White House, Regulator Considering Refinance Program Revamp. The White House is pushing to revamp an existing federal program to allow more Americans with government-backed loans to refinance, and a federal regulator is weighing changes to accommodate that effort, according to people familiar with the matter.
• BofA(BAC) Job Cuts May Total 40,000. Bank of America Corp. officials have discussed eliminating roughly 40,000 positions during the first wave of a restructuring that Chief Executive Brian Moynihan is expected to discuss Monday, said people familiar with the plans.
• Cities Deep in Red Turn to Green Deals. Financing Strategy Skirts Laws on Using Bonds for Deficits. Cities and states have been firing workers and raising taxes to balance the books. But for some of the shakiest cities, those moves aren't enough. Enter Class Green Capital Partners, a New York financial adviser to municipalities. Class Green has been helping cities to essentially take out mortgages on their public buildings and use many of the proceeds to plug their budget shortfalls. Here is the twist: A portion of the bond proceeds go to improve energy efficiency in the buildings, which are meant to generate savings for the city.
• The Latest Jobs Plan. More temporary and targeted tax cuts and spending increases. If President Obama's economic policies have had a signature flaw, it is the conceit that by pulling this or that policy lever, by spending more on this program or cutting that tax for a year, Washington can manipulate the $15 trillion U.S. economy to grow. With his speech last night to Congress, the President is giving that strategy one more government try.
• We'll Never Get Over It, Nor Should We. Ten years later, remembering a day of horror and heroism.
  

CNBC:

• China August Inflation Pulls Back Slightly From 3-Year High. China's inflation eased slightly to 6.2 percent in August from July's three-year high, raising expectations that the central bank will hold off on further policy tightening amid worries about a global economic slowdown. The People's Bank of China needs to keep policy tight as inflation is likely to stay elevated in the coming months and will almost certainly overshoot the government's full-year inflation target of 4 percent, analysts say. The figure was in line with market forecasts of 6.2 percent, and compares with 6.5 percent in July.
• Underfunded Pensions Pressured to Make Riskier Bets. After a tumultuous August, pension funds for companies, governments and unions are falling further under water, raising pressure on boards to take on more risk at a time when the economic and policy outlook has never been more uncertain.
• Weaker Euro Could Be in Store as Officials Struggle With Debt Crisis.
  

Business Insider:

• ... And Now John Paulson's Credit Fund is Getting Smashed. An investor in the fund tells us...John Paulson's "Credit Opportunities" fund tanked 10.10% last month, and is now down 6.77% for the year. Obviously, Paulson's flagship Advantage fund is getting slaughtered, but the credit fund has been touted as a successful product even as Advantage has stumbled. No more.
• Greece: Here's The Latest, And Here's What's Next.
  

Zero Hedge:

• Senate Attempt to Block Debt Ceiling Increase Fails: Debt Target Is Now $15.2 Trillion, Or Over 100% of GDP.

NY Times:

• Settlement Said to Be Near for Fannie and Freddie. Regulators are nearing a settlement with Fannie Mae and Freddie Mac over whether the mortgage finance giants adequately disclosed their exposure to risky subprime loans, bringing to a close a three-year investigation.The proposed agreement with the Securities and Exchange Commission, under the terms being discussed, would include no monetary penalty or admission of fraud, according to several people briefed on the case.
• Judge Widens Antitrust Suit Against Private Equity Firms. A federal judge has greatly expanded the scope of an antitrust lawsuit against the world’s largest private equity firms, broadening the case to include some of the largest leveraged buyouts in history. The four-year-old suit accuses 11 firms, including Blackstone Group and Kohlberg Kravis Roberts, of a huge, overarching conspiracy to rig the market for multibillion-dollar takeovers.

Forbes:

• Customers Complain HP's(HPQ) $99 TouchPad Developing Cracks. Scores of users are complaining on Internet forums about cracks on forming on HP TouchPad tablet computer near the device’s speakers and headphone jacks.
• U.S. Video Game Sales Fall 23% In August Vs. Year Ago.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 20% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-two percent (42%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -22 (see trends).

Telegraph:

• Germany Pushes Greece in Dangerous Brinkmanship. Germany and Holland have threatened to block rescue payments to Greece unless the country complies to the letter with bail-out terms, raising the spectre of default and a chain-reaction through southern Europe.

Sueddeutsche Zeitung:

• Germany has no funds for new road and rail projects and no new projects are therefore likely to be started in the coming few years.

Caixin:

• China's northeastern province of Liaoning defaulted on about 85% of its debt servicing payments in 2010, citing a government audit report. 120 of the province's 184 financing platform companies were operating at a loss. Local government platform companies engaged in fraudulent practices to secure and use loans, the report found.

China National Radio:

• Ba Shusong, a researcher at China's State Council's development research center, said that the effects of U.S. President Barack Obama's plan to spur jobs are "doubtful". Even so, the plan addresses U.S. internal problems as compared with using quantitative easing measures which transfers the cost of crisis to other nations, he said.

Evening Recommendations
Wedbush:

• Rated (PCLN) Outperform, target $675.
• Rated (EXPE) Outperform, target $38.
• Rated (ALLT) Outperform, target $16.

Night Trading

• Asian equity indices are -1.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 159.0 +5.0 basis points.
  
• Asia Pacific Sovereign CDS Index 147.0 unch.
• FTSE-100 futures -.41%.
  
• S&P 500 futures +.23%.
  
• NASDAQ 100 futures +.11%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (KR)/.43
• (LULU)/.22
• (PNY)/-.13

Economic Releases
10:00 am EST

• Wholesale Inventories for July are estimated to rise +.7% versus a +.6% gain in June.
  

Upcoming Splits

• (PII) 2-for-1
  

Other Potential Market Movers

• The Fed's Williams speaking could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

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

Broad Market Tone:

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

Equity Investor Angst:

• VIX 34.44 +3.18%
  
• ISE Sentiment Index 116.0 -2.52%
  
• Total Put/Call 1.10 +23.60%
  
• NYSE Arms 1.41 +229.60%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 122.50 -.53%
  
• European Financial Sector CDS Index 246.33 +2.32%
  
• Western Europe Sovereign Debt CDS Index 315.17 unch.
  
• Emerging Market CDS Index 286.99 +2.54%
  
• 2-Year Swap Spread 31.0 -1 bp
  
• TED Spread 33.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .01% -1 bp
  
• Yield Curve 179.0 -5 bps
  
• China Import Iron Ore Spot $179.90/Metric Tonne -.61%
  
• Citi US Economic Surprise Index -42.30 +12.4 points
  
• 10-Year TIPS Spread 2.01% +3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -81 open in Japan
• DAX Futures: Indicating -62 open in Germany

Portfolio:

• Slightly Lower: On losses in my Tech and Medical sector longs
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
  
• Market Exposure: Moved to 50% Net Long

BOTTOM LINE: Today's overall market action is bearish, as the S&P 500 trades near session lows on rising Eurozone debt angst, more financial sector pessimism, more shorting, emerging markets inflation fears and global growth worries. On the positive side, Utility and Food shares are rising on the day. Lumber is rising +3.42%, Oil is falling -.7% and the UBS-Bloomberg Ag Spot Index is falling -.5%. On the negative side, Airline, Education, Insurance, HMO, Hospital, Medical, I-Bank, Bank, Oil Tanker, Alt Energy and Coal shares are under pressure, falling more than -2.0%. (XLF) has traded poorly throughout the day. Cyclical and small-cap stocks are substantially underperforming. Copper is falling -.17% and Gold is surging +3.0%. Rice is still near a multi-year high and has risen +35.0% in about 9 weeks. The average US price for a gallon of gas is -.01/gallon today to $3.65/gallon. It is up .51/gallon in about 7 months. The Portugal sovereign cds is gaining +1.9% to 1,056.67 bps, the China sovereign cds is rising +1.7% to 117.38 bps, the Belgium sovereign cds is gaining +1.03% to 274.17 bps and the UK sovereign cds is rising +1.22% to 76.93 bps. The Greece sovereign cds is rising +5.4% to 2,811.72 bps, which is another all-time high. The Portugal sovereign cds is now getting uncomfortably close to its record high. The Eurozone Financial Sector and Western European Sovereign CDS Indices are still near all-time highs. The UBS-Bloomberg Ag Spot Index is still near its recent record high, which is also a large negative. The Shanghai Composite fell another -.68% last night and is down -11.0% ytd. I continue to believe most emerging markets have a larger inflation problem than is generally perceived. If China takes the breaks off too soon, which many suggest it might, it would likely prove a huge policy error intermediate-term. The AAII % Bulls fell to 30.2% this week, while the % Bears rose to 40.3, which is still slightly too much bullishness given the backdrop. Most gauges of eurozone debt angst remain very elevated and continue to trend higher, which remains a large concern. The euro currency is breaking down through meaningful technical support today. I still think the euro has much further downside longer-term, notwithstanding any near-term oversold technical bounce. Investors seemed to cheer the passage of further tax hikes/spending cuts yesterday in Italy and Spain, however these same measures are likely to worsen those economies and thus their debt problems as we have seen with Greece. I expect US stocks to trade mixed-to-lower into the close from current levels on rising eurozone debt angst, more financial sector pessimism, more shorting, emerging markets inflation fears and global growth worries.

Today's Headlines

Bloomberg:

• Greek Credit Swaps Surge to Record, Signal 91% Chance Nation Will Default. Credit-default swaps on Greek government debt surged to a record, signaling a 91 percent chance the nation will fail to meet debt commitments, after its economy shrank more than previously reported. Five-year contracts on the country’s sovereign bonds jumped 196 basis points to 3,001 basis points, at 3:45 p.m. in London, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. Gross domestic product shrank 7.3 percent from a year earlier after declining 8.1 percent on an annual basis in the first quarter, the Hellenic Statistical Authority said. Greece’s financial situation is “on a knife’s edge,” German Finance Minister Wolfgang Schaeuble told lawmakers last night, according to parliament’s HIB bulletin. “It’s a combination of Greece continuing to disappoint and probably a growing realization among politicians that they’re throwing good money after bad,” said Gary Jenkins, head of fixed income at Evolution Securities Ltd. in London. “They’ve finally woken up to the fact that they’re not going to get this money back.” The default probability, which is based on a standard pricing model, assumes investors would recover 40 percent of the bonds’ face value were Greece to fail to meet its obligations within five years. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose 2.5 basis points to 322.5. The gauge is approaching the record close of 327 basis points on Sept. 6. Swaps on Portugal jumped 19 basis points to 1,060, Ireland climbed 18 to 834 and Spain rose five to 396. Greek two-year note yields jumped as much as 85 basis points to a euro-era record 55.76 percent today. The nation’s 10-year yield climbed to an all-time high 20.13 percent.
• Trichet Opens Path for Further Steps as Euro Region's Growth Forecasts Cut. European Central Bank President Jean-Claude Trichet said threats to the euro region have worsened and inflation risks have eased, giving officials the option to take further action should the debt crisis worsen. The economy faces “particularly high uncertainty and intensified downside risks,” Trichet said at a press conference in Frankfurt today after the ECB left its benchmark rate at 1.5 percent. While monetary policy is still “accommodative,” financing conditions have worsened in parts of the 17-member euro region and the ECB stands ready to pump more cash into markets if needed, he said. The yield on German 10-year bunds fell to a record as some investors speculated the ECB could cut interest rates or open up more emergency credit lines for banks. The spreading debt crisis is sapping confidence in Europe’s financial institutions, driving up market borrowing costs and forced the ECB to widen its bond purchase program to Italy and Spain. “The hiking cycle has been aborted and Trichet even offered some goodies for rate cut fetishists,” said Carsten Brzeski, an economist at ING Group in Brussels. “A further worsening of the economy and deflationary tendencies could force the ECB’s hand to act. The tightening bias is gone.” The euro dropped as much as 1.1 percent and traded at $1.3952 at 6:19 p.m. in Frankfurt. The currency has depreciated 4 percent against the dollar this year.
• Trichet Loses Cool on Deutsche Mark Question. Almost 13 years after its demise, the Deutsche mark retains enough potency to haunt Jean-Claude Trichet’s final days as European Central Bank president. Trichet, 68, today lost his cool with a reporter who asked whether Germany should abandon the euro and return to the mark as Europe’s debt crisis roils markets and spooks voters.
• Solyndra Headquarters Raided by FBI. Solyndra LLC, the bankrupt solar- panel maker that was backed by the Obama administration, is being raided by the Federal Bureau of Investigation today, an agency spokeswoman said. “We’re executing a search warrant jointly” with the Department of Energy inspector general “regarding an investigation,” FBI spokeswoman Julie Sohn said of the raid at the company’s Fremont, California, headquarters offices and plant. Sohn said she couldn’t provide details about the investigation. The company, whose $535 million federal loan guarantee was criticized by Republicans, filed bankruptcy on Sept. 6, six days after shutting down its factory and firing 1,100 people. The U.S. Federal Financing Bank, owned by the U.S. Treasury Department, is the company’s biggest lender, according to court papers. Congressional Democrats have asked the company’s chief executive officer to explain his optimistic projections about its future. Democratic Representatives Henry Waxman of California and Diana DeGette of Colorado said Solyndra Chief Executive Officer Brian Harrison met with them earlier this year and assured them it was in a “strong financial position.” “At that time, he said the company was projected to double its revenues in 2011, there was ‘strong demand in the United States’ for its shipments, and the company was expected to double the megawatts of panel production shipped this year,” Waxman and DeGette wrote in a letter today to Representative Cliff Stearns, a Florida Republican who heads the oversight panel of the House Energy and Commerce Committee.
• Bernanke: Fed Will Weigh Stimulus at Next Meeting. Federal Reserve Chairman Ben S. Bernanke said policy makers will discuss the tools they could use to boost the recovery at their next meeting this month and stand ready to use them if necessary. Policy makers “are prepared to employ these tools as appropriate to promote a stronger economic recovery in the context of price stability,” Bernanke said in the text of a speech to economists today in Minneapolis.
• Jobless Claims in U.S. Unexpectedly Climbed by 2,000 to 414,000 Last Week. Claims for U.S. unemployment benefits rose last week, a sign the labor market is struggling to gain traction more than two years after the recession ended. Jobless claims rose by 2,000 to 414,000 in the week ended Sept. 3, Labor Department figures showed today in Washington. Economists surveyed by Bloomberg News projected a drop in claims to 405,000, according to the median forecast. Today’s data showed the four-week moving average, a less- volatile measure than the weekly figures, rose to 414,750 last week from 411,000. The unemployment rate among people eligible for benefits remained unchanged at 3 percent in the week ended Aug. 27, today’s report showed.
• Gold Futures Gain in New York After U.S. Jobless Claims Unexpectedly Rise. Gold gained for the first time in three days after an unexpected rise in U.S. jobless claims spurred demand for the metal as a haven asset. Claims for unemployment benefits rose by 2,000 to 414,000 in the week ended Sept. 3, the Labor Department said. Economists surveyed by Bloomberg News projected a drop in claims to 405,000, according to the median forecast. Before today, the metal was up 28 percent this year as waning prospects for global growth boosted investor demand. “Things aren’t looking very positive, and the market continues to remain skittish,” Adam Klopfenstein, a senior market strategist at MF Global in Chicago, said in a telephone interview. “We need some results to show that jobs will be created.” Gold futures for December delivery gained $34.70, or 1.9 percent, to $1,852.30 an ounce on the Comex at 10:33 a.m. in New York. The price touched a record $1,923.70 on Sept. 6.
• U.S. Consumer Sentiment at Second Lowest Level of Year in Bloomberg Index. U.S. consumer confidence last week fell to the second-lowest level this year as Americans grew more pessimistic about the world’s largest economy. The Bloomberg Consumer Comfort Index was minus 49.3 in the period to Sept. 4 compared with minus 49.1 the previous week. This year’s low of minus 49.4 was reached in May, when gasoline prices were the highest in three years. While the drop was within the survey’s 3-point margin of error, the index has been stuck below minus 40 -- the level associated with recessions or their aftermath -- since the end of February. Job creation stagnated in August, the unemployment rate held above 9 percent and hourly wages retreated, giving households little to cheer about. Pessimism stretches across social, economic and political lines, posing a threat to consumer spending that accounts for 70 percent of the economy. “Falling sentiment indicates signs of growing distress in the consumer sector,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. The results reflect “a labor market that has seized up and the lagged effects of inflation that is effectively reducing the purchasing power of households.”
• OECD Slashes Growth Forecasts, Says Rate Cuts May Be Needed. The Organization for Economic Cooperation and Development slashed its growth forecasts for the U.S. and Japan and said central banks around the world should be ready to ease monetary policy if economies weaken further. The U.S. will grow 1.1 percent in the third quarter and 0.4 percent in the fourth, instead of the 2.9 percent and 3 percent predicted in May, the OECD said today in its interim economic assessment. Japan will expand 4.1 percent in the third quarter before stalling in the fourth, and the three biggest euro economies will grow 1.4 percent and then shrink 0.4 percent.
• JPMorgan(JPM) Sees Euro Break-Up Hedge in Sales of Italian Bonds. JPMorgan Chase & Co. said selling Italian and Spanish bonds along with bank stocks and debt, and buying dollars and gold may provide the best protection against the “very unlikely” risk of a euro-area collapse. “There are formidable barriers to break-up, which make it less likely, but also mean it would be more disruptive if it did occur,” Seamus Mac Gorain, a strategist in London, wrote in an investor report yesterday. “The financial turmoil and economic impact would be most pronounced in the euro area, arguing for broad underweight euro-area equity and credit.”
• Illinois Governor Calls for Employee Layoffs to Balance Budget. Illinois needs to lay off more than 1,900 state employees and close some facilities to avoid a partial government shutdown next spring, Democratic Governor Pat Quinn said today. “It’s time for a rendezvous with reality,” Quinn said at a news conference in Chicago. The state “clearly does not have enough money.”

Wall Street Journal:

• Interview: IMF Mideast Head: Dollar Peg Has Served Gulf States Well. Saudi Arabia and other Arab Gulf nations that peg their currencies to the U.S. dollar have no reason to drop the link, the International Monetary Fund's director for the Middle East said Wednesday.
• Deficit Committee Adds a Focus on Jobs.
• Fed's Plosser: Monetary Policy Can't Help Jobs Market Much Right Now. Monetary policy has little ability to help the U.S. jobs market in current economic circumstances, a top Federal Reserve official said Thursday. “I am really doubtful that monetary policy is a tool that is going to help us very much” to help spur demand and improve hiring in an economy where many households and companies are still looking to cut borrowing levels, rather than to increase them, Federal Reserve Bank of Philadelphia President Charles Plosser said in an interview with Dow Jones Newswires and The Wall Street Journal.

CNBC.com:

• US Is Great Athlete Who Got Fat: Blackstone(BX) CEO. The CEO of private equity giant Blackstone believes America is like a once great athlete who has stopped training, let themselves go and put on a whole lot of weight.

Business Insider:

• Brooklyn Ad Agency Risks Reputation With "Tea Party Zombies Must Die" Pet Project. An online game called "Tea Party Zombies Must Die," produced by Brooklyn creative agency Starvingeyes, might provoke boycotts from the right over the game's targeted violence against conservative figures, AdWeek reports. Stavingeyes head Jason Oda made the game as a personal project, unrelated to work the agency has done for Pepsi, UPS, Nascar and other major brands.
• It's Falling Apart: Senator Already Threatening to Quit Super Committee.
• Why a Breakup of the Eurozone is Now Likely.
  

Zero Hedge:

• Bring Back the Uptick Rule!
• Bank of America's(BAC) Legal Woes Go Global After Norway's Sovereign Wealth Fund Sues for Mortgage Fraud.
• Rick Santelli Tells Arch Globalization Advocate Friedman He Is An Idiot. (video)
• August is 7th Worst Month Ever for SAC Capital. (Out of 229)
  

New York Times:

• Heat-Seeking Missiles Are Missing From Libyan Arms Stockpile.
• Google(GOOG) to Buy Zagat.
  

The Detroit News:

• Health Costs Trip Up UAW, Chrysler. With just a week left until their contract expires, Chrysler Group LLC and the United Auto Workers are still far apart on key issues — including health care cost sharing — according to people close to the negotiations. Talks between the UAW and Chrysler and General Motors Co. have intensified since the beginning of the week, and have now entered a critical stage.
  

The Daily Caller:

• Solyndra Officials Made Numerous Trips to the White House, Logs Show. Not only does the now-bankrupt solar energy firm Solyndra have a cozy financial relationship with the Obama administration, company representatives also made numerous visits to the White House to meet with administration officials, The Daily Caller has learned. According to White House visitor logs, between March 12, 2009, and April 14, 2011, Solyndra officials and investors made no fewer than 20 trips to the West Wing. In the week before the administration awarded Solyndra with the first-ever alternative energy loan guarantee on March 20, four separate visits were logged.

Reuters:

• Greek Economy Suffers, Government Rules Out Euro Zone Exit. Greece ruled out quitting the euro on Thursday, shrugging off warnings by its biggest creditor Germany and yet another set of bad economic figures showing it is struggling under the weight of EU/IMF-imposed austerity. Anger at Greece's failure to meet fiscal targets that are a condition for its international bailout is nearing breaking point in Berlin and other European capitals, with senior German politicians now talking openly about the possibility of Athens exiting the euro zone. Greece is missing fiscal and reform targets set out under the first, 110-billion euro bailout it obtained in May 2010, despite the spending cuts and tax hikes it took to comply. Faced with the threat of its EU partners blocking an 8-billion euro bailout tranche due next month if it does not get its act together, the country's socialist government pledged on Tuesday to step up long-promised budget cuts and asset sales. But economic figures released on Thursday show austerity is stretching the economy to the limit, making it more and more difficult for the country to meet its 2011 budget deficit target of 7.6 percent of GDP, from 10.5 percent last year. GDP contracted at an annual pace of 7.3 percent in the three months to June, from 8.1 percent in the previous quarter, according to seasonally unadjusted figures by statistics agency ELSTAT, while unemployment stayed near record highs. The figures confirm austerity is taking a bigger-than-expected toll on the economy, which is in its third consecutive year of recession. The GDP data showed private consumption dropped by an annual 6.1 percent in the second quarter while investment shrank by 17.9 percent, according to the ELSTAT figures. Construction, once one of the country's strongest growth engines, slumped by an annual 47 percent in terms of volume between January and May. Unemployment fell slightly to 16.0 percent in June, helped by seasonal tourism jobs. But it remained close to a record 16.6 percent it hit the previous month, well above its 11.6 percent level in June 2010. "It appears the rise in the unemployment rate will continue. There are no convincing signs of an imminent peak," said Platon Monokroussos, an economist at EFG Eurobank. Rules that make it hard to hire and fire workers have helped make joblessness among the Greek young more than 15 percentage points higher than the euro area average, according to OECD figures. Unemployment in the 15-24 age category stood at 43 percent in June, almost twice as high as three years ago. "If the (euro zone's) core economies demand that Greece passes further fiscal measures, it could prompt Greece to try to implement another debt restructuring as soon as next year," May said. "Exiting the euro zone is a real possibility."
• Euro Hits Two-Month Low Vs. Dollar; ECB Signals Pause.
• German Economy Ministry Opposes Stimulus - Report. Germany's economy ministry opposes new stimulus measures as a way to counter a possible economic downturn, newspaper Die Welt reported on Thursday. Citing a three-page ministry working paper, the daily said the idea had been dismissed by Economy Minister Philipp Roesler, who also heads the Free Democrats, junior coalition partner in Chancellor Angela Merkel's government. "Calls for programmes financed by debt, as they are being made somewhat internationally, are counterproductive given the underlying crisis of confidence in indebted countries," Die Welt quoted the report as saying.
• U.S. Commercial Paper Market Shrinks Again.

Financial Times:

• Market Turmoil Lands Hedge Funds With Big Losses. August, it now seems likely, will be the industry’s worst month since October 2008, when the collapse of Lehman Brothers triggered a worldwide sell-off. It will almost certainly also be one of the top five worst months for the industry since performance data started to be aggregated in 1990. According to the latest provisional figures from Hedge Fund Research, the average hedge fund manager has lost 4.1 per cent in the past four weeks.

Telegraph:

• 'No Quick Fix for Euro'. (video) Herta von Stiegel, author of The Mountain Within and a former senior executive with JP Morgan and Citibank, tells Robert Miller that a single Eurobond for all 17 members of the single currency bloc is not the solution to the sovereign debt crisis.

DeutschlandFunk radio:

• German Finance Minister Wolfgang Schaeuble said Italy's sovereign debt is far too large and that the country must make massive efforts to cut its deficit.

HandelsZeitung:

• Credit Suisse Group AG may wind down its onshore banking business in the U.S. following pressure from authorities there. The bank will instead concentrate on Asia.

Bear Radar

Style Underperformer:

• Small-Cap Growth (-1.21%)

Sector Underperformers:

• 1) Banks -2.61% 2) I-Banks -2.53% 3) Coal -2.40%

Stocks Falling on Unusual Volume:

• SI, CLMT, GGAL, TZOO, GIII, TITN, OPEN, MTRX, UNFI, LAYN, AVAV, CASY, MIND, AIRM, ICLR, HITT, ALOG, INDB, ABCO, DNDN, VRSN, BOKF, CPLA, ORCL, EZU, TRC, PLL, MW, MHK, PKI, DG and VSI
  

Stocks With Unusual Put Option Activity:

• 1) OPEN 2) RRD 3) AGO 4) ECA 5) FXY
  

Stocks With Most Negative News Mentions:

• 1) KWK 2) DG 3) TZOO 4) PBI 5) OPEN
  

Charts:

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