Bear Radar

Style Underperformer:

• Small-Cap Value (-.31%)

Sector Underperformers:

• 1) Coal -2.11% 2) Networking -1.81% 3) Banks -1.21%

Stocks Falling on Unusual Volume:

• FSLR, VECO, DGII, RIMM, DB, NFLX, MKTX, ZOLL, SSYS, RRGB, OPEN, LUFK, ADBE, PETD, HRBN, MATW, ITRI, PRSP, CIEN, TRMB, UEIC, ARMH, ODC, AIR, TRH and GPC
  

Stocks With Unusual Put Option Activity:

• 1) CEDC 2) EP 3) CBG 4) TXT 5) RIMM
  

Stocks With Most Negative News Mentions:

• 1) ADBE 2) NFLX 3) RIMM 4) WMT 5) COST
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth (-.10%)

Sector Outperformers:

• 1) Utilities +.89% 2) Retail +.79% 3) Gold & Silver +.70%

Stocks Rising on Unusual Volume:

• NDN, TXT, TYC, UBS, TGA, RPXC, DMND, WMGI, PWRD, ZINC, WCRX, VPHM, AWH, JOE and SGA
  

Stocks With Unusual Call Option Activity:

• 1) TYC 2) CLX 3) TSN 4) SVNT 5) MSI
  

Stocks With Most Positive News Mentions:

• 1) WMGI 2) REV 3) MYL 4) LLY 5) KMB
  

Charts:

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

Friday Watch

Evening Headlines

Bloomberg:

• Trichet Urges Euro Officials to Get 'Ahead of Curve' in Crisis. European Central Bank President Jean-Claude Trichet pressed euro-area governments to take decisive action to halt the debt crisis, after the ECB bought them more time by extending an emergency lifeline to lenders. Trichet said finance ministers meeting in Wroclaw, Poland today need to show the same “unity of purpose” as central banks did yesterday in providing extra dollars to European banks bruised by the crisis that has seeped from Europe’s edges to its core. “We are not back to ‘business as usual’ as some thought some months ago,” Trichet said late yesterday in Wroclaw. “We call all authorities to implement swiftly all decisions and to be constantly ahead of the curve.” Eighteen months of crisis-fighting and 256 billion euros ($355 billion) in aid for Greece, Ireland and Portugal have failed to stabilize markets. The turmoil has spread to Italy and Spain, sending tremors through Europe’s banking system and leading to speculation that a currency meant to be permanent might break up.
• Germany Overtakes Spain in Debt Wagers Amid Crisis: Euro Credit. Bets on German credit quality overtook those on Spain for the first time in a year as the mounting cost of bailing out the region's most indebted nations infects Europe's largest economy. The net amount of German debt covered by credit default swaps surged 20% this year to $18.2 billion, making it the third most-referenced European sovereign after France and Italy, according to the Depository Trust & Clearing Corp. Germany has provided the biggest share of the rescue packages for Greece, Ireland and Portugal, and Chancellor Angela Merkel is struggling to maintain taxpayer support after a string of election defeats. Attempts to end the two-year-old crisis failed to stop the rot spreading to Italy and Spain, which now risk missing deficit-reduction targets.
• German Taxpayers Want Equity in Bank Bailouts: Karl Heinz Daeke. When will politicians finally accept that their ideology of cheap money has failed? A low-interest-rate policy after the dot-com frenzy encouraged the housing bubble. The government-sponsored housing boom led to a banking meltdown. And the fight against the banking crisis resulted in the sovereign-debt mess. Now, because it is forced to invest in toxic debt, the European Central Bank is set to lose its independence.
• Correlation Bets Climbing to Record as Europe Overwhelms Earnings: Options. U.S. options traders see almost no chance that earnings, dividends or buybacks will influence stock prices through the end of 2011, instead placing record bets that equities move in lockstep in reaction to Europe’s debt crisis. The Chicago Board Options Exchange S&P 500 Implied Correlation Index jumped 34 percent since the end of July to 79.31 yesterday, and reached 81.52 on Sept. 14, the highest level ever. The gauge uses options to measure expectations for how much Standard & Poor’s 500 Index shares will move together. Traders are speculating correlation among equities, already the highest since the crash of 1987, will increase as the threat of a banking crisis in Europe drowns out news about individual companies.
• China Resource Grab Costs to Rise as Yields Hit '08 High. The highest funding costs since 2008 may make it more expensive for China’s state banks to lend to commodity producing nations, as the world’s fastest-growing major economy tries to secure natural resources to fuel growth. Five-year borrowing costs for the so-called policy banks surged 70 basis points to 4.6 percent this year and touched a three-year high of 4.68 percent on Aug. 4, Chinabond prices show. Top-rated Indian lenders pay 9.45 percent on their five- year debt, compared with 8.94 percent at the end of 2010, data compiled by Bloomberg show. The government relies on China Development Bank Corp. and Export-Import Bank of China to lend to resource-rich nations such as Brazil, Kazakhstan and Venezuela in exchange for commodity and energy supplies. Borrowing costs surged after the central bank raised interest rates to control inflation and lenders increased provisions against loans for local governments. The value of banks’ dollar loans are falling as the yuan strengthened 3.3 percent against the currency in 2011. “Foreign exchange and rising funding costs are working against them and yields are probably decreasing on loans, especially if they are U.S. dollar,” said Mike Werner, an analyst at Sanford C. Bernstein & Co. in Hong Kong. While the profits of policy banks will “be hurt in the current environment,” their lending supports government policies and is “still beneficial to the overall economy,” he said.
• Commodities May Dip to Lowest Since November: Technical Analysis. Commodities may drop to the lowest level since November after failing to breach key resistance levels, according to technical analysis by Commerzbank AG. The S&P GSCI Total Return Index of 24 commodities has failed at the downtrend and 200-day moving average resistance at 5,090 and 5,150, London-based Karen Jones, head of fixed-income, commodity and currency technical analysis, wrote in a Sept. 14 report. A resistance level indicates a price at which sell orders may accumulate when a security is rising. “We favor failure here and will maintain a negative bias,” Jones wrote. “Failure here should initiate a slide back to the August 19th low of 4,723 and then the August low at 4,530.” Further losses could then take the index back to the 50 percent retracement of the 2010 and 2011 advance at 4,446, the report said. A fall below that level may spur a decline to the 4,268 November low and the 2009 and 2011 support line at 4,293, it said.
• Euro Needs Restructuring, Coordinated Polices, FX's Taylor Says. John Taylor, founder and chief executive officer of FX Concepts LLC, said the euro has to be reorganized amid a failure to continuously coordinate policy. The European Central Bank said it worked with the Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank to extend three-month loans to euro-area banks in an effort to ensure they have enough cash for the rest of the year, as policy makers seek to contain the European sovereign- debt crisis. “It certainly doesn’t get at really any of the major problems at all,” Taylor said today in a panel discussion at the Bloomberg Markets 50 Summit in New York, tied to the magazine’s ranking of the 50 most influential leaders in global markets, finance, business and government. “Continuous coordinated action” is needed, he said.
• UBS Placed on Review for Downgrade by Moody's Over Risk Control. UBS AG, which said it sustained a $2 billion loss from unauthorized trading at its investment bank, had its credit ratings put under review for possible downgrade by Moody’s Investors Service. The examination “will center on ongoing weaknesses in the group’s risk management and controls that have become evident again” with the disclosure, Moody’s analysts led by Robert Thomas said yesterday in a statement. The loss “would be manageable for the group given its sound liquidity and capital position.”
• Borrowing by the financing vehicles of local Chinese governments is the nation's version of the subprime crisis that hit the U.S., Cheng Siwei, a former vice chairman of the National People's Congress, said at the World Economic Forum in Dalian today. "Our version of the U.S. subprime crisis is the lending to local governments, which is causing defaults," Cheng said.
• BofA(BAC) Said to Keep Bankruptcy as Option for Countrywide Unit. Bank of America Corp., the lender burdened by its Countrywide Financial Corp. takeover, would consider putting the unit into bankruptcy if litigation losses threaten to cripple the parent, said four people with knowledge of the firm's strategy.
• Muddy Waters' Block Says Chinese Consumer Theme Is 'Overblown'. Carson Block, the short seller who runs research firm Muddy Waters LLC, said U.S. investors are too eager to put their money into China where consumer demand is overstated. “The idea of the Chinese consumer has always been somewhat overblown,” Block said yesterday on a panel at a Bloomberg Link Conference in New York. “Part of the reason for that is that you have luxury-goods manufacturers such as Louis Vuitton that report outstanding sales in China.” Analysts at Capital Economics, a London-based research group, estimate that private consumption in China may have fallen to 34 percent of gross domestic product last year, the lowest level since the country began opening its economy to market mechanisms more than three decades ago. Just 10 years ago, the share was 46 percent, Capital Economics calculates. “We see the tall, shiny buildings in Shanghai or Beijing and we meet with the Chinese who have graduated from Harvard, who have somewhat been inculcated with western values, and we mistakenly extrapolate this to the large portion of the economy,” Block said.

Wall Street Journal:

• Europe Can't Swap Its Banking Problem. It's the pattern investors have grown used to since the rolling financial crisis began in 2008. The market zeroes in on a point of weakness, policy makers finally apply a band aid, financial apocalypse is averted and the bears retreat before moving on to the next target. This time the trouble was European banks' access to dollar funding. Most importantly, the duration of available market funding was getting shorter. So the world's leading central banks agreed to extend existing swap lines with the Federal Reserve to allow the banks to access three-month dollar funding, rather than just the seven-day funding available before. The positive spin: It neutralizes a key investor concern over liquidity. And the move includes a feel-good factor, because central banks are finally seen to be acting in concert after a series of recent unilateral moves by, say, the Swiss to curb their rising currency or the European Central Bank to stem the rise in Italian bond yields. If this really is the start of greater international cooperation, as some seemed to hope, it is an important development. But investors risk reading too much into it. After all, the overall structure of the deal is not new. And it is fairly painless for the Fed. A central bank that does a swap for dollars with the Fed takes the currency risk as well of the credit risk of lending to its own banks. Thursday's move buys time and soothes funding markets. But European bank credit-default swaps remain way above their 2009 highs. That's a reminder that the real challenge facing the financial system—a solution to the sovereign-debt crisis—remains as elusive as ever.
• Google(GOOG) Says Display Ad Spending Rises Sharply. Google Inc. (GOOG) said Thursday that spending by the biggest advertisers on its display network more than doubled in the past year, a development that comes as the search giant's rivals seek to counter its expansion in the display ad market.
• Goldman Sachs(GS) Shutting Global Alpha Hedge Fund. Global macro has been an awful strategy for hedge funds for much of this year — even for the Vampire Squid. Goldman Sachs is shutting down its Global Alpha fund by the end of October, due to redemptions and general misery, the Wall Street Journal is reporting. It had about $1 billion left under management, down from $12 billion at its peak.
• Global Standards Sought on Derivatives Rules. Treasury Secretary Timothy Geithner in a letter Wednesday assured Congress that the Obama administration and federal regulators are working with their international counterparts to see they adopt similar rules requiring market participants to back their over-the-counter derivatives trades with cash. "Just as we have global minimum standards for bank capital—expressed through international agreement—we need global minimum standards for margin on uncleared over-the-counter derivatives," Mr. Geithner said.
• Foreign Buyers Go Direct. There are increasing signs that foreign buyers are going directly to the Treasury to do their bidding instead of relying on middle-men dealers, a change that is clouding the market's ability to gauge foreign participation in the U.S. debt-auction process. The portion of Treasury auctions awarded to so-called indirect bidders—those who have dealers submit bids on their behalf—is usually considered a reflection of foreign interest. Foreign central banks and monetary authorities traditionally go this route.
• Countrywide Whistle-Blower Had Alleged Subprime Fraud. A whistle-blower at Countrywide Financial, who the Department of Labor says was improperly terminated by Bank of America Corp.(BAC), had investigated widespread fraud in the home lender's subprime operations, including a probe that led to the closing of the majority of Countrywide branches in Boston.
• Road Gets Bumpy for GM(GM) in China. As the world's biggest car maker powers ahead in the world's biggest car market, it's hitting bumps in the road.
• Bank Probe in Stanford Case. Prosecutors Are Investigating Whether Societe Generale Ignored Suspicious Transactions.
• Why the Jobs Plan Falls Short. Instead of temporary tax breaks and more spending, we need permanent tax incentives, development of our energy resources, and entitlement reform.

Business Insider:

• James Carville: Obama Needs to Panic, Fire Economic Team, And Indict Bank Execs. Former Clinton advisor James Carville has some blunt advice for President Barack Obama if he wants to maintain a chance at reelection — PANIC!
  
• New York Times: iPhone 5 Announcement is "Weeks Away".
• Google(GOOG) Is Secretly Spending Hundreds of Millions of Dollars Turning YouTube Into a Cable Alternative.
  

Zero Hedge:

• Goldman Sachs(GS) Emerges In The Solyndra Scandal.
• Treasury Inspector General Opens Probe Into Obama's Solargate.
  

IBD:

• J2 Global(JCOM): Not Just The Fax, Ma'am.

NY Times:

• China Consolidates Grip on Rare Earths. In the name of fighting pollution, China has sent the price of compact fluorescent light bulbs soaring in the United States. By closing or nationalizing dozens of the producers of rare earth metals — which are used in energy-efficient bulbs and many other green-energy products — China is temporarily shutting down most of the industry and crimping the global supply of the vital resources.

CNN:

• Mortgage Rates Hit Record Low: 30-Year Fixed Nears 4%. The average rate for a 30-year, fixed-rate loan fell to 4.09% this week, its lowest level in 60 years, according to mortgage giant Freddie Mac. Last week, the 30-year fixed averaged 4.12%. The average rate for a 15-year fixed mortgage -- a popular option among those who wish to refinance -- sunk to 3.30%, down from 3.33% last week, Freddie reported.

Real Clear Politics:

• Slow Employment Growth? Look to Obamacare. No one seems to be talking about the $2,000 per worker tax on employers, to begin in 2014. Enacted as part of the 2010 Patient Protection and Affordable Care Act, it will be levied on firms with 50 or more employees who do not offer the right kind of health insurance to their workers. Millions of Americans are looking for work, and the number in poverty, 46.2 million, is the highest since the Census Bureau began compiling poverty data 52 years ago. This tax might be one reason for the slow employment growth we observe two years after the end of the recession, in June 2009. Although the tax will not take effect until 2014, businesses are adjusting now. They are not stupid, they plan ahead.

Gallup:

• Obama Job Approval: 39% Approve, 53% Disapprove. (graph)

Reuters:

• Rapid Rise in Asians' Costs of Funds Could Slow Loan Market Activity. It has been more than a year that the loan market has been plagued by higher costs of funds, mostly experienced by Asian and European banks. Today, these two groups of banks are still troubled by the issue and the problem has worsened. Basis Point surveyed over 20 Asian banks in Asia and the US, and more than half of the respondents saw costs jump by about 100bp since three months ago. An Asia-based Taiwanese bank said its costs are at over 150bp now, compared to less than 100bp just two months ago. "This situation was not seen in May," said a Taiwanese banker based in the US "But the costs gradually moved in late June and July, then soared in August and are still climbing this month." Many bankers agreed that the issue worsened when Europe announced further debt concerns in July. And some blamed the drastic hike on tightened credit back home. "Our costs are through the roof now as the central government is limiting lending capacity," said a US-based Chinese banker. "We have since stopped accepting new businesses."
  
• RIM(RIMM) Results, Outlook Stun Investors Even After Warning. Research In Motion reported a steep drop in quarterly profit on limp sales of its smartphones and tablets, and offered investors little hope of a turnaround anytime soon, sending its shares tumbling. RIM shipped just 10.6 million smartphones in the second quarter, as carriers struggled to sell year-old devices with limited processing power compared to newer rival products. "I was stunned that the device number was below their guidance," said Peter Misek from Jefferies & Co. Perhaps more ominously, RIM shipped only 200,000 PlayBook tablet computers, which went on sale globally in June after weathering some scathing reviews at a North American launch in April. Analysts had expected RIM to ship almost 12 million phones and 600,000 tablets. RIM's own outlook was for BlackBerry shipments of between 11 million and 12.5 million. Highlighting a widening gap, Apple sold more 20 million iPhones and more than 9 million iPads last quarter after virtually creating the tablet market last year. RIM's Nasdaq-listed shares fell as much as 18 percent to $24.20 in after-hours trade following the results.
• US Equity Funds Take in Cash, Whipsawed by ETF - Lipper.
• Cooper Industries(CBE) Cuts Q3 Profit Outlook, Shares Fall. Electrical products maker Cooper Industries cut its third-quarter earnings outlook, as it faces weakness in its residential and commercial markets, along with softness in its electronics business. The company sees third-quarter earnings of 94-98 cents a share, down from its prior estimates of 98 cents to $1.03 a share. Analysts, on average, were expecting earnings of $1.02 a share, according to Thomson reuters I/B/E/S. Cooper said material inflation and production shortfalls from restructuring activities would also hurt its third quarter. Shares of the Dublin-based company were down 6.5 percent in trading after the bell.

Securities Times:

• China won't change the direction of its monetary policy as curbing inflation gains remain the nation's top priority, citing China Construction Bank Corp. Chairman Guo Shuqing. Risks have increased for banks as underground lending and illegal loans pick up after monetary policy tightened liquidity, Guo said. Overseas demand is also weakening, he said.

Evening Recommendations
Barclays Capital:

• Rated (LNKD) Overweight, target $93.
• Rated (IACI) Overweight, target $55.
• Rated (WBMD) Underweight, target $36.
• Rated (SFLY) Overweight, target $73.
• Rated (OPEN) Underweight, target $60.
• Rated (RLOC) Underweight, target $16.
• Rated (DMD) Overweight, target $11.
  

Night Trading

• Asian equity indices are +.50% to +2.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 164.0 -11.0 basis points.
  
• Asia Pacific Sovereign CDS Index 151.25 -7.0 basis points.
• FTSE-100 futures +1.17%.
  
• S&P 500 futures +.09%.
  
• NASDAQ 100 futures +.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (MLHR)/.32

Economic Releases
9:00 am EST

• Net Long-term TIC Flows for July are estimated at $30.0B versus $3.7B in June.
  

9:55 am EST

• Preliminary Univ. of Mich. Consumer Confidence for September is estimated to rise to 57.0 versus 55.7 in August.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The (AGP) investor day could also impact trading today.
  

BOTTOM LINE: Asian indices are higher, boosted by financial and technology 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 Falling Eurozone Debt Angst, Short-Covering, Less Financial Sector Pessimism, Bargain-Hunting

Broad Market Tone:

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

Equity Investor Angst:

• VIX 32.23 -6.85%
  
• ISE Sentiment Index 108.0 +16.13%
  
• Total Put/Call 1.0 -2.91%
  
• NYSE Arms .42 -14.60%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 127.26 -2.25%
  
• European Financial Sector CDS Index 246.92 -7.16%
  
• Western Europe Sovereign Debt CDS Index 328.50 -3.90%
  
• Emerging Market CDS Index 298.83 -3.05%
  
• 2-Year Swap Spread 32.0 -2 bps
  
• TED Spread 35.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 189.0 +6 bps
  
• China Import Iron Ore Spot $177.90/Metric Tonne -.61%
  
• Citi US Economic Surprise Index -42.20 -2.8 points
  
• 10-Year TIPS Spread 1.97% +4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +82 open in Japan
• DAX Futures: Indicating +71 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is bullish, as the S&P 500 builds on recent gains US tax hike concerns, some more disappointing economic data, emerging markets inflation fears and global growth worries. On the positive side, Coal, Oil Tanker, I-Bank, HMO, Education, Energy, Computer and Software shares are especially strong, rising more than +2.25%. Cyclical shares are outperforming. (XLF) has outperformed throughout the day. Moreover, tech stocks have been relatively strong again today. Gold is falling -1.7%, Copper is surging +1.71% and the UBS-Bloomberg Ag Spot Index is down -1.21%. The France sovereign cds is declining -6.64% to 169.33 bps, the UK sovereign cds is falling -5.08% to 79.33 bps, the Italy sovereign cds is falling -4.84% to 451.67 bps, the Portugal sovereign cds is declining -6.7% to 1,057.90 bps, the Ireland sovereign cds is falling -5.07% to 790.0 bps and the Belgium sovereign cds is falling -6.51% to 259.0 bps. The European Investment Grade CDS Index is dropping -5.04% to 167.72 bps. The FRA/OIS Spread is dropping -6.4 bps to 43.0 bps. The 3-Month Euro Basis Swap is soaring +16.49 bps to -81.91 bps, which is also a large positive. On the negative side, Alt Energy and Airline shares are lower to flat on the day. Oil is rising +.79% and Lumber is down -.87%. Rice is still very near its multi-year high, rising +36.0% in about 10 weeks. The average US price for a gallon of gas is -.01/gallon today to $3.62/gallon. It is up .48/gallon in about 7 months. The China sovereign cds is rising +1.58% to 133.17 bps, which is a multi-year high. The China Development Bank Corp. cds is continuing its recent parabolic move higher, soaring +18.2 bps to 302.7 bps, which is the highest since March 2009. The Greece sovereign cds is still near an all-time high. The Western Europe Sovereign CDS Index is also still near its all-time high. The Shanghai Composite fell another -.23% overnight, despite gains in most of the rest of Asia, and is now down -11.7% ytd. While it is a little too soon to tell, Europe may have pulled off another successful "can kicking", which could lead to more short-covering/bargain-hunting over the coming weeks. However, the intermediate-term situation is still very problematic as Europe's "solutions" of jacking up taxes and slashing spending will only further dampen economic activity and worsen budget deficits over the longer-term. As well, the technical action in some Asian indices and their higher trending cds are becoming concerns. I expect US stocks to trade modestly higher into the close from current levels on declining eurozone debt angst, short-covering, bargain-hunting, technical buying and falling food prices.

Today's Headlines

Bloomberg:

• Central Banks Push Dollar Cost to August Lows. Policy makers’ decision to offer unlimited dollar loans pushed the cost for European banks to fund in the U.S. currency back to levels at the end of August, indicating markets view the measures as a short-term fix. “This has done a trick,” said John Raymond, an analyst at CreditSights Inc. in London. “Whether it’s done the trick is another matter. The underlying issue of Greece is still there.” The cost of converting euro payments into dollars, measured by the three-month cross-currency basis swap, plunged 16.8 basis points to 81.9 below the euro interbank offered rate in London. That’s after the European Central Bank and peers in the U.K., Switzerland, Japan and the U.S. said they’ll provide unlimited three-month money to lenders in three tenders starting October.
• Bond Risk Falls in Europe as ECB, Fed Coordinate on Bank Loans. The cost of insuring European sovereign and corporate debt extended declines after the European Central Bank said it will lend dollars to euro-area banks and as the prospect of default by Greece receded. The Markit iTraxx SovX Western Europe Index of swaps tied to 15 governments dropped 16 basis points to 327 as of 4:25 p.m. in London, the lowest since Sept. 9 and signaling an improvement in perceptions of credit quality. Swaps on France fell 11 basis points to 170, contracts on Italy dropped 21 basis points to 450 and Spain fell 20 basis points to 372, CMA prices show. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 10.25 basis points to 173.75. The Markit iTraxx Financial Index of swaps on the senior debt of 25 banks and insurers dropped 24 basis points to 261, the lowest since Sept. 8, while the subordinated index was down 45.5 basis points at 472. Contracts on UBS AG fell, reversing an earlier increase when Switzerland's biggest bank said it may post a third-quarter loss after unauthorized trading at its investment bank cost it about $2 billion. Contracts insuring the lender's senior bonds fell 12 basis points to 198, while those on its subordinated notes dropped 15 basis points to 322, according to CMA. The Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings decreased 27 basis points to 714, according to JPMorgan Chase & Co. at 5 p.m. in London.
• Euribor-OIS Spread Falls for Third Day Amid Backing for Greece. A gauge of banks’ reluctance to lend to each other in Europe fell for a third day after Germany and France insisted they saw a future for Greece as part of the euro region. The Euribor-OIS spread, the difference between the three- month euro interbank offered rate and overnight index swaps, was at 77.2 basis points as of 11:17 a.m. in London, down from 79.6 yesterday and 84.6 on Sept. 12, which was the highest level since March 2009.
• Consumer Prices, Jobless Claims Exceed Forecasts. The cost of living in the U.S. climbed more than forecast and unemployment claims rose, battering the confidence of Americans squeezed by stagnant wages and higher prices of food, housing and energy. The consumer-price index increased 0.4 percent in August, and jobless claims climbed by 11,000 to 428,000 in the week ended Sept. 10, Labor Department figures showed today in Washington. The Bloomberg Consumer Comfort Index held last week at the second-lowest level of 2011 as the most households in three years said it was a bad time to spend. Today’s report showed inflation-adjusted hourly wages fell 0.6 percent in August, the most since July 2008, and were down 1.9 percent from the same month a year ago.
• Gold Slumps on Signs Europe Cash Infusion May Ease Sovereign-Debt Crisis. Gold dropped to a two-week low on signs that European banks will have enough cash through yearend, easing concern that the region’s debt crisis will worsen and eroding demand for the metal as an alternative asset. “This is an initial knee-jerk reaction after ECB’s statement as people are viewing it positive for the European economy,” Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago, said in a telephone interview. “The ECB has managed to find a band-aid for now.” Gold futures for December delivery fell $39.90, or 2.2 percent, to $1,786.60 an ounce at 10:01 a.m. on the Comex in New York, after touching $1,779.70, the lowest since Aug. 29. Before today, the precious metal climbed 29 percent this year, reaching a record $1,923.70 on Sept. 6.
• Commodity Derivatives May Need More Regulation, IOSCO Says. Global regulators may need to tighten their rulebooks for commodity derivatives markets to ensure they operate transparently and free from abuse, the International Organization of Securities Commissions said. IOSCO recommended supervisors use position limits, publication of open contracts and reporting of over-the-counter derivatives to tame commodity markets that operate in “disorderly conditions,” according to an e-mailed statement. The principles “help to ensure that the physical commodity derivatives markets serve their fundamental price discovery and hedging functions, while operating free from manipulation and abusive trading schemes,” Masamichi Kono, chairman of IOSCO’s technical committee, said.
• Boehner Asks Panel to Reject Tax Rate Hikes. House Speaker John Boehner called on the congressional debt-reduction supercommittee to lay the foundation for a tax-code overhaul that would reject rate increases and curb some tax breaks.
• Morgan Stanley(MS) Names Gorman Chairman. Morgan Stanley, the sixth-biggest U.S. bank by assets, said Chief Executive Officer James Gorman will take the additional job of chairman of the board on Jan. 1 as John Mack steps down.
• iPhone 5 Rush Orders Seen to Benefit Broadcom(BRCM). Broadcom Corp. (BRCM) stands out as one of the biggest beneficiaries from orders from Apple Inc. (AAPL), whose need for parts that go into iPhones and iPads represents a bright spot for a semiconductor industry plagued by weak demand.
• GOP Uses Solyndra to Bash Obma's Jobs Plan. House Republicans used a hearing on Solyndra LLC’s slide into bankruptcy to attack the Obama administration’s stimulus plans, past and proposed, showing the issue may linger as a political liability for the White House.The Fremont, California, solar-panel maker won a $535 million federal loan guarantee in September 2009, the first awarded by the Energy Department, using funds from that year’s stimulus package. The company filed for bankruptcy protection on Sept. 6, and the FBI raided its offices two days later. Republicans released a report at a House Energy and Commerce Committee panel hearing yesterday that they said showed White House officials sought to rush a decision on the loan award, and that Energy Department officials failed to see signs of the rising risks in supporting the company. Solyndra is a “poster child” of the first stimulus and a reason to oppose Obama’s proposed $447 billion package intended to create jobs, Representative Steve Scalise, a Louisiana Republican, said at the hearing.

Wall Street Journal:

• Yahoo(YHOO) Interest From Possible Bidders.
  

CNBC.com:

• Geithner Is Likely to Suggest Europe Leverage Bailout Fund. Treasury Secretary Timothy Geithner is likely to suggest to European finance ministers on Friday that they leverage their bailout fund along the lines of the U.S. TALF program, EU officials said.

Business Insider:

• Leon Cooperman's 'Avoid Treasuries' Call Turns Into Big Rant.

Zero Hedge:

• SocGen Redux - ETF Trader at Center of UBS(UBS) Rogue Trade.
• U.S. Misery Index at Fresh 28-Year High. (graph)
  

Reuters:

• EU Debt Woes Raising Risk to Commodities Outlook - Goldman(GS). Debt problems in the European Union are raising the risk to a bullish view for commodities, but a deeper recessionary event would be required to derail the outlook, Goldman Sachs analysts said on Thursday.
• Does The Euro Have a Future? by George Soros.
  

Telegraph:

• China Risks Hard Landing as Global Woes Spread. China's carefully-managed soft landing is turning harder by the day, threatening to deflate the torrid credit bubble of the past three years.

Financial Times Deutschland:

• Europe's rescue fund would have to be used to bail out banks facing losses on Greek sovereign bonds if the country defaults, citing people in Germany's governing coalition. The comments show that European policy makers are considering the possibility of a Greek default.

Sueddeutsche Zeitung:

• Greece won't be able to avoid a sovereign default even with an expanded European bailout fund, citing an analysis from the Kiel, Germany-based IfW Institute. The government in Athens would have to generate surpluses that have been historically impossible in order to remain solvent, citing the researchers. Greece's fiscal problems won't be manageable without a "significant" debt restructuring, the research paper said.

Handelsblatt:

• German Chancellor Angela Merkel was urged by Wolfgang Franz, the head of her council of economic advisers, to oppose secondary-market bond purchases by Europe's overhauled rescue fund, citing an interview with Franz. Joint debt issuance by euro-area countries, known as euro bonds, is illegal after a ruling this month by Germany's Federal Constitutional Court, Franz said.

Dagens Naeringsliv:

• Norway's Foreign Minister Jonas Gahr Stoere said it wasn't immediately apparent that the euro would survive the current crisis, citing the minister. The euro zone requires greater integration to succeed with a common currency system, which may not be achievable in today's Europe, Stoere said. The minister said he wasn't convinced the EU would be able to cope with the debt crisis, as it lacked the instruments required to respond to the challenges.

L'Hebdo:

• Jean-Pierre Roth, the former president of the Swiss National Bank, said he's "very pessimistic" about Europe's economy as governments struggle to contain the region's debt crisis. Historians will judge this period as a "total failure" of European leadership, Roth said.

El Pais:

• The wealth tax that Spain's government plans to re-introduce tomorrow will affect 150,000 people and raise 1 billion euros, citing a Public Works Minister Jose Blanco, who is also the government's spokesman.

Epoch Times:

• Chinese State Media Use 9/11 Anniversary for Anti-American Reports. While the 10th anniversary of 9/11 was a solemn occasion in the U.S., and a chance to remember America’s values of freedom and democracy, for Chinese state media it was a chance to go on the offensive.

Bear Radar

Style Underperformer:

• Mid-Cap Growth (+1.10%)

Sector Underperformers:

• 1) Alternative Energy -.59% 2) Gold & Silver -.39% 3) Homebuilders +.29%

Stocks Falling on Unusual Volume:

• PWRD, AIXG, NFLX, VECO, STMP, CYOU, ASNA, INSU, NTES and CLC
  

Stocks With Unusual Put Option Activity:

• 1) CNQ 2) P 3) SWN 4) YGE 5) NFLX
  

Stocks With Most Negative News Mentions:

• 1) KR 2) CL 3) GIII 4) HCA 5) NFLX
  

Charts:

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