Bull Radar

Style Outperformer:

• Mid-Cap Value (+1.09%)

Sector Outperformers:

• 1) Agriculture +3.36% 2) Steel +2.81% 3) Oil Service +2.74%

Stocks Rising on Unusual Volume:

• IVN, NOV, TLM, IOC, BAS, FSLR, EBS, PBR, ACOR, CMTL, ESRX, ZUMZ, WYNN, ZAGG, WBMD, WCRX, BIDU, NUAN, SXCI, ROST, ERTS, PCLN, SFLY, CIX, MHS, STZ, MDR, TGT, MON, MCP, AYI, WAC, SPN, GLW and BKE
  

Stocks With Unusual Call Option Activity:

• 1) MBI 2) NIHD 3) MDR 4) NUAN 5) CY
  

Stocks With Most Positive News Mentions:

• 1) FRED 2) XEL 3) TJX 4) WLP 5) M
  

Charts:

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

Thursday Watch

Evening Headlines

Bloomberg:

• Jobs, Who Built Most Valuable Technology Company, Dies at 56. Steve Jobs, who built the world’s most valuable technology company by creating devices that changed how people use electronics and revolutionized the computer, music and mobile-phone industries, died. He was 56. Jobs, who resigned as Apple Inc. chief executive officer on Aug. 24, 2011, passed away today, the Cupertino, California- based company said. He was diagnosed in 2003 with a neuroendocrine tumor, a rare form of pancreatic cancer, and had a liver transplant in 2009. “We are deeply saddened to announce that Steve Jobs passed away today,” Apple said. “Steve’s brilliance, passion and energy were the source of countless innovations that enrich and improve all of our lives. The world is immeasurably better because of Steve.”
  
• Jobs Rose From Parents' Garage to Technology Icon: Timeline.
• Europe's Rescue Fund Is Only Last Resort: Merkel. German Chancellor Angela Merkel said that Europe’s rescue fund will only be used as a last resort to save banks and that investors may have to take deeper losses as part of a Greek rescue. Merkel’s comments, her most explicit on banks’ role in fighting the debt crisis since the spillover from Greece began to threaten France and Italy, followed talks with European Commission President Jose Barroso in Brussels. Financial shares rose yesterday amid speculation that euro-area policy makers are working on plans to boost bank capital to contain the crisis. “Time is running out” to establish if recapitalization is necessary, Merkel told reporters. Troubled banks need to first seek capital on their own and national governments will help if that’s not possible, she said. “If a country cannot do it using its own resources and the stability of the euro as a whole is put at risk because the country has difficulties, then there’s the possibility of using the EFSF,” the European Financial Stability Facility, she said. Using the rescue fund is “always tied to a certain conditionality.”
• European Bank Rescue May Cost Up to $2 Trillion, Fink Says. Governments and private-sector partners may have to spend as much as $2 trillion to rescue Europe’s banks, said Laurence D. Fink, the chairman and chief executive officer of BlackRock Inc. “Stabilizing Europe is very costly,” Fink, who heads the world’s largest asset manager, said today during an event in Toronto. “It could be as much as a couple trillion dollars.”
  
• Bond Traders Left Adrift as Dealers Reduce Risk: Credit Markets. Europe’s crisis of confidence is crippling credit-market trading as banks shrink bond inventories to the least since the depths of the last recession. Federal Reserve data show U.S. primary dealers cut their holdings of corporate debt by 33 percent to $63.5 billion since May, bringing stockpiles to within $4 billion of the five-year low reached in April 2009. Trading in investment-grade company bonds has dropped 27 percent since February, according to Trace data compiled by Barclays Capital, and a measure of the cost to buy and sell debt is at the highest in more than two years. Evaporating liquidity is contributing to the biggest junk- bond losses since the failure of Lehman Brothers Holdings Inc. three years ago as Europe’s leaders seek to prevent the region’s fiscal imbalances from infecting the global banking system and the U.S. economic recovery struggles to gain footing. Sales of new high-yield securities have all but disappeared and prices in debt markets are swinging by the most since 2008. “Everything is moving very quickly,” said Tom Farina, a managing director in New York at Deutsche Insurance Asset Management, which oversees more than $200 billion. “With the experience of the credit crisis still fresh in our minds, there’s a greater appreciation for how much the market could decline over a short period of time.”
• Emerging Debt Swaps Surpass Crisis-Hit Europe. Emerging market government debt is more expensive to insure than that of developed countries on concern the global slowdown will send investors fleeing all but the safest assets. The Markit iTraxx SovX CEEMEA Index of credit-default swaps on 15 governments in central and eastern Europe, the Middle East and Africa now exceeds a benchmark of western European creditworthiness by 14 basis points. Europe's worsening deficit crisis is hurting manufacturers, eroding demand for commodities and undermining capital flows in developing economies. Investors are pulling money out of emerging-market bond and equity funds as the risk of a Greek default and losses on sovereign bond holdings mounts. "Emerging markets are still highly vulnerable through their weak banking systems," said Gabriel Sterne, a senior economist at broker Exotix Ltd. in London.
• HSBC Lowers Forecasts for Most Asian Economies. HSBC Holdings Plc lowered its growth forecasts for most Asian economies in 2011 and 2012, saying risks are rising in a region that’s “still tied to the global trade cycle.” Forecasts for Hong Kong, South Korea, Malaysia, Taiwan and Thailand were among those that were lowered.
• Junk-Bond Spreads Widen to Levels Reached When Lehman Collapsed. Relative yields on junk bonds have soared to the level reached the day Lehman Brothers Holdings Inc. collapsed after systemic risks escalated in both Europe and the U.S., according to Bank of America Corp. analysts. The extra yield investors demand to hold speculative-grade debt has soared 436 basis points to 910 basis points, or 9.1 percentage points, since May, according to Bank of America Merrill Lynch index data. The percentage of corporate bonds considered in distress has surged to 28 percent from 8 percent two months ago, an indicator that is "flashing red," analysts led by Oleg Melentyev wrote in a report yesterday. Bond spreads are signaling another recession as Europe's leaders seek to prevent Greece from defaulting, the U.S. unemployment rate holds above 9 percent and the cost to protect the debt of financial institutions surges. Investors need to be wary of disruptions in the banking system that may lead to mass selling and declining high-yield values, the Bank of America analysts said. "Once the level of distress in a financial system reaches a certain level, it can become an uncontrollable force, with the potential to push market participants into deleveraging as counterparty exposures are being cut," the New York-based analysts said. "This, in turn, would push asset values lower, which, of course, would create further need for deleveraging."
• Oil's Best See No Reversing Worst Run Since 2008: Energy Markets. Brent oil will struggle to recover from its longest slump since the 2008 financial crisis as a weakening global economy cuts growth in demand to the lowest level for any fourth quarter in the past three years. Brent crude will trade an average 2 percent higher than Oct. 5’s opening price of $101.81 a barrel during the final three months of the year, according to the mean prediction of 10 analysts whose third-quarter projections were the most accurate of 31 compiled by Bloomberg. Futures lost 8.6 percent in the third quarter, extending a 4.2 percent drop in the second. Oil is falling as Saudi Arabia, the world’s biggest exporter, pumps crude at near-record levels and Libya revives production just as the economic slowdown shows signs of sapping demand. Consumption, which typically climbs toward the end of the year as the northern hemisphere’s winter approaches, will rise 4 percent this quarter, about half the levels of 2009 and 2010, according to the International Energy Agency. “The outlook is deteriorating more and more, and the velocity is somewhat alarming,” said Eugen Weinberg, the Frankfurt-based head of commodities research at Commerzbank AG who predicts Brent may average less than $100 a barrel in the fourth quarter. “The risks to forecasts right now are to the downside, and not just on demand. Libyan production is coming back sooner than expected.”
• Obama's Bill Would Hinder Work Search by Jobless, Langone Says. Unemployed job applicants would find it harder to get hired under an anti-discrimination provision in President Barack Obama’s jobs bill, according to Home Depot Inc. co-founder Kenneth Langone. The president’s bill, submitted to Congress on Sept. 12, would allow companies to be sued for discrimination if they exclude unemployed applicants from consideration. Businesses will avoid even meeting with unemployed job-seekers for fear of triggering a lawsuit, Langone said in an interview yesterday with Charlie Rose broadcast on PBS and Bloomberg Television. “There’s a provision in the jobs bill, if I am unemployed and you give me an interview and don’t hire me, I can sue you for discrimination because you didn’t hire me because I was unemployed,” said Langone. “You know what’s going to happen? They are not going to get the interview.”
• Microsoft(MSFT) Is Said to Be Nowhere Close to a Bid for Yahoo(YHOO).
• Policy Uncertainty Is Choking Recovery: Baker, Bloom and Davis. The recovery from the recession of 2008-09 remains anemic. Job growth has stalled, unemployment stands above 9 percent, and there are renewed fears of another output drop. A major factor behind the weak recovery and gloomy outlook is a climate of policy-induced economic uncertainty. An index we devised (see attached chart) shows U.S. policy uncertainty at historically high levels.
• Volcker Rule Draft Puts Short-Term Bank Trading Under Scrutiny. U.S. banks seeking to gain from or hedge against short-term price movements in securities and derivatives markets would be subject to restrictions under a proprietary-trading ban contained in the Dodd-Frank Act, according to a draft of the so-called Volcker rule. The 205-page document, dated Sept. 30 and obtained today by Bloomberg News, is the latest version to emerge of the rule that is being written by four federal banking regulators and is scheduled to be released by the Federal Deposit Insurance Corp. on Oct. 11.

Wall Street Journal:

• France's AAA Rating Is A Fragile Linchpin In Euro Zone Crisis Plan. Mounting trouble at Franco-Belgian bank Dexia SA (DEXB.BT) and a sudden downgrade of Italy's sovereign debt rating have shined a spotlight on a major risk to the euro zone's effort to avert financial disaster: the prospect that France could lose its triple-A credit rating. If France is downgraded, the euro zone's bailout fund--the European Financial Stability Facility--would also lose its own top-notch rating unless members injected cash, analysts say. That would raise the fund's cost of borrowing and could thus undermine the 17-member euro zone's ability to support the region's debt-burdened countries and beleaguered banks. It would hinder regional leaders' efforts to expand the EFSF's powers and ward off contagion from what many see as an inevitable debt default by Greece. "If France becomes double-A, the whole thing doesn't work," said David Hoffman, managing director at Brandywine Global Investment Management LLC. Moody's Investors Service has previously said the creditworthiness of the EFSF "is particularly sensitive to changes in the ratings of Aaa countries with large EFSF contribution keys," including France.
• Steven Paul Jobs, 1955-2011. Apple Co-Founder Transformed Technology, Media, Retailing And Built One of the World's Most Valuable Companies. Steven P. Jobs, the Apple Inc. chairman and co-founder who pioneered the personal-computer industry and changed the way people think about technology, died Wednesday at the age of 56. His family, in a statement released by Apple, said Mr. Jobs "died peacefully today surrounded by his family." The company didn't specify the cause of death. Mr. Jobs had battled pancreatic cancer and several years ago received a liver transplant. In August, Mr. Jobs stepped down as chief executive, handing the reins to longtime deputy Tim Cook. "Apple has lost a visionary and creative genius, and the world has lost an amazing human being," Mr. Cook said in a letter to employees. "We will honor his memory by dedicating ourselves to continuing the work he loved so much."
• IMF Considers Plan to Purchase European Bonds. New initiatives emerged Wednesday as part of efforts to quell Europe's twin sovereign-debt and banking crises. Germany pushed a proposal to encourage the euro-zone's national authorities to announce backstops in case their banks hit difficulties, and a senior International Monetary Fund official said the IMF could step in to help shore up the bonds of troubled euro-zone governments. On a visit to Brussels, German Chancellor Angela Merkel said euro-zone governments should quickly agree on a system of backstops for banks that relies mainly on national support measures, but could also draw on the euro zone's bailout fund.
• Hedge Funds' Bets Pay Off. Some of the world's largest hedge funds are finally seeing their bearish bets pay off as markets struggle. Brevan Howard Asset Management LLP, one of Europe's biggest hedge-fund firms with $34 billion in assets, is up nearly 13% in its flagship fund this year as of Sept. 23, according to a person close to the fund. The outsize gains—a rarity in a difficult year for hedge funds and much better than the loss of nearly 10% for the Standard & Poor's 500-stock index in the same period—are partly because of the London-based firm's cautious approach to riskier investments tied to global economic growth.
• 5 Truths About Climate Change. During the decade that Al Gore dominated the environmental debate, global carbon-dioxide emissions rose by 28.5%. It's time to move the debate past the dogmatic view that carbon dioxide is evil and toward a world view that accepts the need for energy that is cheap, abundant and reliable.

MarketWatch:

• Insiders Like These 14 Large-Cap Stocks.

Business Insider:

• Not Everyone's Hurting: Some Hedge Funds Are Making A Killing On The European Collapse.
• 'DO WHAT YOU LOVE': Watch Steve Jobs' Legendary Stanford Commencement Speech In 2005.
  

Zero Hedge:

• Total US Debt Update: $14.86 Trillion; $162 Billion Increase In Three Days; 98.9% Debt/GDP.
• GOP Seeks All White House Communication On Solyndra Since Obama Inauguration.
  

CNBC:

• BofA(BAC) CEO: $5 Feed Need to Pay for Dodd-Frank. Bank of America CEO Brian Moynihan defended the bank's decision to impose a $5 debit card fee on customers next year, saying it was needed, in part, to recoup billions of dollars in costs from complying with Dodd-Frank law.

IBD:

• Polaris(PII) Makes Vehicles For Work and Play.

NY Times:

• Freddie and Fannie Reject Debt Relief. Home values have fallen so much in Arizona that almost half the people with mortgages there owe more than their homes are worth. So when federal money became available to help stem the tide of foreclosures, the state flagged that group for help. If banks would forgive some of a homeowners’ mortgage debt, the state said it would pay half, up to $50,000 of a $100,000 loan reduction. Despite the generous terms, most banks balked. Only three homeowners have been approved for debt reduction since the program began in September 2010. A major obstacle has been that the two largest mortgage guarantors, Fannie Mae and Freddie Mac, will not participate — in Arizona or elsewhere. No loans are eligible for the state’s program if they were bought and held or securitized by the two companies, which are now under government control and guarantee more than 70 percent of the country’s home loans. “It is extremely difficult for the principal reduction program to be successful” when Fannie and Freddie opt out, said Shaun Rieve, a spokesman for the Arizona Department of Housing.
• Greeks Protest Cutbacks Amid Growing Weariness.
  

Rasmussen Reports:

• 26% Have Favorable Opinion of Bernanke, 51% Unfavorable.

AP:

• Retail Trade Group Sees Modest Holiday Sales Gain. The National Retail Federation, the nation's largest retail trade group, expects winter holiday sales to rise 2.8 percent to $465.6 billion this year.That would be smaller than 2010's 5.2 percent increase.

Reuters:

• Paper Talks of Contingency Planning for French Banks. A French government agency has drawn up contingency plans in case it has to take a stake in one or more French banks on behalf of the French state, the French newspaper Le Figaro said on its website. In a brief article, Le Figaro said the agency that manages government shareholdings had been working for a few days on how it would act if it had to move to bolster one or more banks. Quoting what it described as a source close to the matter, Le Figaro said the planning had involved a scenario where intervention was limited to two or three banks, unlike a broader support plan drawn up in 2008, when the global banking system was rattled by the demise of Lehman. "It's just in case," Le Figaro reported its source as having said. As the euro zone's debt crisis grinds on, Franco-Belgian lender Dexia has got into difficulty and the governments of both countries are hoping to come up with a rescue plan, possibly as early as Thursday. A Dexia bailout, the second in three years, has heightened speculation that President Nicolas Sarkozy and his government may need to support other financial institutions. The government has refused to confirm whether any such plans are being considered.
• Ruby Tuesday(RT) Forecasts Q2 Loss; Shares Fall. Ruby Tuesday Inc forecast a second-quarter loss on lower same-restaurant sales, higher advertising costs and increased interest expenses. The company's stock, which already lost more than half its value since January, was down 9 percent at $6.48 in extended trading on Wednesday.
• Christopher & Banks(CBK) Q2 Loss Widens, Shares Down. Women's apparel retailer Christopher & Banks Corp posted a wider second-quarter loss hurt by a fall in sales, sending the company's shares down 11 percent in extended trade.
• Zumiez(ZUMZ) Raises Q3 Outlook, Shares Up. Zumiez Inc's September same store sales blew past expectations as customers spent more at its stores, prompting the apparel retailer to raise its third-quarter outlook. Shares of the company rose 14 percent in trading after the bell.

Financial Times:

• The European Banking Authority has been told to provide a country-by-country breakdown of how much new capital banks would need in the event that Greek bonds were written down, citing unnamed senior officials.
• Eurozone Funding Worries Hit US REITs. Over the past five sessions the Bloomberg Mortgage Reit index has fallen 8.2 per cent, against a 2.7 per cent drop for the S&P 500 index. This represents the biggest weekly drop since March 2009. “The risk is that, whether it’s concerns about European banks or any bank whose credit default swaps have been widening, there might be a move to cut risk and stop lending into the repo market,” said Douglas Harter, a Credit Suisse analyst.
• China Sees Surge in CDS on Slowdown Fears. Fears of an economic slowdown in China have fuelled a trading surge in instruments that insure investors against sovereign bond defaults, making the country a new focal point for the widely used financial products. The net value of outstanding credit default swaps on Chinese sovereign debt has soared to $8.3bn, according to data released this week by The Depository Trust and Clearing Corporation. “Clearly there is increasing market concern about China and a few cracks are starting to appear in its economic growth,” said Ann Wyman, head of emerging market research at Nomura. “A ‘hard landing’ still isn’t our house base case scenario, but we’re more concerned about this than we have been in the past.”

Economic Daily News:

• Motech Industries Inc. CEO Chang Ping-heng urged the solar industry to cut output to avoid pushing up inventories, citing Chang.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are +1.0% to +3.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 255.0 -19.0 basis points.
  
• Asia Pacific Sovereign CDS Index 186.75 +13.25 basis points.
• FTSE-100 futures +.40%.
  
• S&P 500 futures -.06%.
  
• NASDAQ 100 futures -.25%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (RBN)/.75
• (STZ)/.66
• (ISCA)/.31

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to rise to 410K versus 391K the prior week.
• Continuing Claims are estimated to fall to 3725K versus 3729K prior.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Fisher speaking, ECB Rate Announcement, BOE Rate Announcement, ICSC chain store sales for Sept., weekly Bloomberg Consumer Comfort Index, RBC Consumer Outlook Index for October, weekly EIA natural gas inventory report, (SMTC) analyst day and the (ORCL) analyst day could also impact trading today.
  

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

Stocks Surging into Final Hour on Less Eurozone Debt Angst, Short-Covering, Bargain-Hunting, Better Economic Data

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Most Sectors Rising
  
• Volume: Above Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 38.53 -5.66%
  
• ISE Sentiment Index 129.0 +61.2%
  
• Total Put/Call 1.11 -5.13%
  
• NYSE Arms .89 +239.0%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 146.50 -3.48%
  
• European Financial Sector CDS Index 255.81 -7.01%
  
• Western Europe Sovereign Debt CDS Index 344.0 -2.48%
  
• Emerging Market CDS Index 364.27 -3.34%
  
• 2-Year Swap Spread 39.0 unch.
  
• TED Spread 38.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 164.0 +10 bps
  
• China Import Iron Ore Spot $169.60/Metric Tonne -.99%
  
• Citi US Economic Surprise Index -16.60 +5.3 points
  
• 10-Year TIPS Spread 1.80 +4 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating +140 open in Japan
• DAX Futures: Indicating +21 open in Germany

Portfolio:

• Higher: On gains in my Tech, Retail, Biotech and Medical 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 yesterday's sharp reversal higher with volume on less Eurozone debt angst, short-covering, bargain-hunting, technical buying, less tech sector pessimism and better economic data. On the positive side, Coal, Alt Energy, Energy, Oil Service, Ag, Steel, Internet, Computer, Networking, Education, Homebuilding, Construction and Biotech shares are especially strong, rising more than +3.0%. Cyclicals are substantially outperforming. Tech shares have also traded well throughout the day again. Copper is rising +1.0% and Lumber is gaining +1.34%. The 10-year yield is rising +8 bps to 1.9%. The Germany sovereign cds is falling -9.1% to 108.33 bps, the France sovereign cds is falling -7.15% to 186.0 bps, the Russia sovereign cds is falling -7.2% to 313.67 bps, the UK sovereign cds is falling -6.7% to 95.5 bps, the Israel sovereign cds is falling -9.1% to 192.69 bps and the Brazil sovereign cds is falling -11.3% to 200.32 bps. Major European equity indexes surged 3-5% today. On the negative side, Oil Tanker, Telecom, REIT and Restaurant shares are lower on the day. The UBS-Bloomberg Ag Spot Index is rising +1.2%, oil is gaining +3.0% and gold is rising +1.18%. Rice is still close to its multi-year high, rising +26.0% in about 12 weeks. The Spain sovereign cds is rising +.71% to 376.83 bps, the Japan sovereign cds is rising +1.59% to 156.7 bps and the Hungary sovereign cds is rising +1.9% to 532.60 bps. The Western Europe Sovereign CDS Index, the European Financial Sector CDS Index and the Asia-Pacific Sovereign CDS Index are still near their records. The China sovereign cds is also still very near the highest level since March 2009. As well, the China Blended Corporate Spread Index, which has been moving higher in a parabolic fashion, is still very close to a multi-year high at 1,025.0 bps. Despite the sharp gains in US stocks during yesterday's final hour, Asian shares were mostly weaker overnight. Korea fell another -2.3% and is now down -18.7% ytd. The recent severe weakness in Korean equities is a bit odd given the extreme strength in US tech shares. As well, Ukraine shares fell another -1.8% and are now down -46.2% ytd. Various global credit angst gauges continue to trend higher despite today's pullbacks, which remains a large negative. Recent stock gains have been mainly the result of a renewed sense of optimism regarding the situation in Europe. If another "kick the can" solution in Europe is forthcoming, stocks should build on recent gains over the coming weeks, however a test of the lows is likely if a solution does not materialize soon. I expect US stocks to trade modestly higher into the close from current levels on less Eurozone debt angst, better economic data, short-covering, bargain-hunting, technical buying and less financial/tech sector pessimism.

Today's Headlines

Bloomberg:

• Merkel Signals More Greek Investor Losses. German Chancellor Angela Merkel said that Europe’s rescue fund will only be used as a last resort to save banks and that investors may have to take deeper losses as part of a Greek rescue. Merkel’s comments, her most explicit on banks’ role in fighting the debt crisis since the spillover from Greece began to threaten France and Italy, followed talks with European Commission President Jose Barroso in Brussels today. Financial shares rose amid speculation that euro-area policy makers are working on plans to boost bank capital to contain the crisis. “Time is running out” to establish if recapitalization is necessary, Merkel told reporters. Troubled banks need to first seek capital on their own and national governments will help if that’s not possible, she said. “If a country cannot do it using its own resources and the stability of the euro as a whole is put at risk because the country has difficulties, then there’s the possibility of using the EFSF,” the European Financial Stability Facility, she said. Using the rescue fund is “always tied to a certain conditionality.” Signals that European politicians may step up efforts to aid banks and push investors to accept bigger losses as part of a Greek bailout reflect international pressure to end the debt crisis and domestic opposition to expanding rescues. Moody’s Investors Service late yesterday followed its three-level downgrade of Italy by warning that euro-area nations rated below the top Aaa level may see their rankings cut.
• Financial Bond Risk Declines in Europe on Bank Support Optimism. The cost of insuring against default on European financial bonds fell on speculation policy makers are planning to shore up the region’s banks to shield them from the sovereign debt crisis. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers declined 11 basis points to 284 and the subordinated gauge was 16 lower at 537, according to JPMorgan Chase & Co. at 11 a.m. in London. A decline signals improved perceptions of credit quality. The cost of insuring sovereign debt fell, with the Markit iTraxx SovX Western Europe Index dropping two basis points to 347.5, according to CMA. Contracts on Belgium fell one basis point from a record closing price to 308 basis points, while France rose 0.5 basis point to 198.5, according to CMA. Swaps on Dexia fell for a fifth day from a record 900 basis points Sept 28, dropping 19 basis points today to 681. Swaps on Germany declined 4.5 basis points to 198.5, Ireland decreased three to 723 and Spain fell one to 390. Italy rose three basis points to 490 and Portugal increased one basis point to 1,168. The Markit iTraxx Europe Index of credit-default swaps on 125 companies with investment-grade ratings fell from a three- year high, dropping 6.25 basis points to 202.75, JPMorgan prices show. The Markit iTraxx Crossover Index linked to 50 companies with mostly high-yield credit ratings dropped 18 basis points to 860.5.
• ADP Estimates U.S. Companies Added 91,000 Jobs in September. Companies in the U.S. added 91,000 jobs in September, according to data from ADP Employer Services. The increase followed a revised 89,000 gain the prior month, Roseland, New Jersey-based ADP said today. The median forecast of economists surveyed by Bloomberg News called for an advance of 75,000. Job gains haven’t been sufficient to bring down the unemployment rate, which has held at or above 9 percent for 26 of the past 28 months. A Labor Department report in two days is projected to show businesses added 90,000 jobs in September, according to the median forecast of economists surveyed.
• Announced Job Cuts in U.S. More Than Triple From Year Ago, Challenger Says. Announced firings jumped 212 percent, the largest increase since January 2009, to 115,730 last month from 37,151 in September 2010, according to Chicago-based Challenger, Gray & Christmas Inc.
• U.S. Service Industries Grew at Slower Pace in Sept. U.S. service industries expanded in September at a slower pace than a month earlier, a sign the recovery is struggling to gain speed. The Institute for Supply Management’s non-manufacturing index fell to 53 from 53.3 in August. The median forecast of 75 economists surveyed by Bloomberg News was for a drop to 52.8. A reading of 50 is the dividing line between expansion and contraction in services, which cover about 90 percent of the economy. Orders picked up, the report showed. The ISM survey showed a bleaker outlook for the labor market. The group’s employment gauge declined to 48.7 in September, the first contraction since August 2010, from 51.6 in the prior month, today’s report showed. The measure of new orders increased to a four-month high of 56.5 in September from 52.8. A measure of business activity rose to 57.1 from 55.6. The index of prices paid decreased to 61.9 from 64.2.
• Crude Oil Increases After Unexpected U.S. Inventory Decline. Oil rose for the first time in four days after the U.S. government reported an unexpected stockpile decline in the world’s biggest crude-consuming country. Futures climbed as much as 4.2 percent after the Energy Department said supplies fell 4.68 million barrels to 336.3 million last week. Inventories were forecast to increase 1.5 million barrels, according to a Bloomberg News survey. Crude oil for November delivery rose $2.68, or 3.5 percent, to $78.35 a barrel at 12:21 a.m. on the New York Mercantile Exchange. Oil traded at $77.77 before the release of the inventory report at 10:30 a.m. Brent oil for November settlement advanced $2.03, or 2 percent, to $101.82 a barrel on the London-based ICE Futures Europe exchange. The contract’s close yesterday represented a 21 percent drop since April 8, when prices ended the session at $126.65 a barrel. A 20 percent drop is the common definition of a bear market.

CNBC.com:

• IMF Official Floats Euro Zone Bond-Buying Idea, Backs Away. An International Monetary Fund official said Wednesday, the global lender could buy Spanish or Italian bonds alongside a euro zone bailout fund, but he later appeared to back away from his own suggestion.
• Greek State Workers Take to Streets to Fight Cuts. Police fired tear gas at stone-throwing youths in central Athens on Wednesday, where thousands of striking state sector workers marched against cuts the government says are needed to save the nation from bankruptcy.

Business Insider:

• The 10 Biggest Hedge Funds in America.
• Chart of the Day: Citi's(C) 'Panic-Euphoria Model' Screams BUY, And There's A 97% Chance Of A Double-Digit Return. (graph)
• The Truth About The iPhone 4S: I Cannot WAIT to Buy One by Henry Blodget.
• Robert Reich: Behind Europe's Debt Crisis Lurks Another Giant Bailout of Wall Street.
• The Chinese Underground Banking System: What It Is And Why It Should Scare You.
  

Reuters:

• Greek Aid Tranche Not Assured But Likely - Troika Source. A team of EU/IMF/ECB inspectors is likely to recommend releasing a vital international aid tranche to Greece but Athens should not take this for granted but first show it will implement reforms, a senior troika official told Reuters on Wednesday. "We are making progress but slow progress. The main reason is they (the government) need more time," the official told Reuters on condition of anonymity. "So far we have not closed any of the chapters."
• Latin American Economies to See 'Modest Worsening' - IMF.
• China Currency Bill Vote Expected Thursday.
• Green Groups Sue to Stop Work on Keystone Oil Pipeline. The Center for Biological Diversity, the Western Nebraska Resources Council and Friends of the Earth sued the U.S. State Department and U.S. Fish and Wildlife Service to stop work they called "illegal construction" on the 1,700 mile (2,740 km) pipeline. Backers of the $7 billion TransCanada Keystone XL pipeline say it will provide jobs and reduce U.S. dependence on oil from countries that are unfriendly to Washington.

Financial Times:

• EU Banks Face New 'Greek' Stress Test. European Union finance ministers have asked the bloc’s leading bank regulator to test the strength of Europe’s banks on the assumption of a big writedown on Greek sovereign debt.

Der Spiegel:

• The Euro Bomb. How A Good Idea Became A Tragedy. The Greek crisis has revealed why the euro is the world's most dangerous currency. The euro was built on a foundation of debt and trickery, where economic principles were sacrificed to romantic political visions. The history of the common currency is the story of a good idea that turned into a tragedy of epic proportions.

Financial Times Deutschland:

• Germany may have to reactivate the Soffin bank-rescue fund to protect lenders, according to Finance Minister Wolfgang Schaeuble.
• German Interior Minister Hans-Peter Friedrich said the country shouldn't cede more power to Europe as a response to the region's fiscal crisis, citing an interview.
  

Expansion:

• Bank of America Merrill Lynch forecasts Spanish savings banks will need another 23 billion euros next year to keep a Tier 1 core capital of 7%, citing a report by Merrill Lynch provided in a London meeting yesterday. The report suggests savings banks have "problematic assets," mainly linked to real estate, valued at 198 billion euros, which may turn into potential losses that will force banks to boost their capital. If core capital for savings banks, known as cajas, is raised to 10%, these lenders would need 47.57 billion euros.

Bear Radar

Style Underperformer:

• Small-Cap Value (+.71%)

Sector Underperformers:

• 1) REITs -2.96% 2) Oil Tankers -1.39% 3) Banks -.59%

Stocks Falling on Unusual Volume:

• SHLD, APKT, LUFK, LBTYK, WBMD, HMIN, TLM and RNE
  

Stocks With Unusual Put Option Activity:

• 1) MBI 2) EP 3) ARUN 4) OVTI 5) APOL
  

Stocks With Most Negative News Mentions:

• 1) POL 2) AMD 3) KMX 4) SKS 5) SO
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth (+1.09%)

Sector Outperformers:

• 1) Education +6.65% 2) Coal +4.69% 3) Computer Hardware +3.11%

Stocks Rising on Unusual Volume:

• RIMM, OVTI, JNPR, TSO, FSLR, IOC, SU, IMO, FCE/A, XRTX, SWKS, APOL, FFIV, SNDK, JKL, GPN, XME, ANR, ROC, ACI, RPM, BTU and SCCO
  

Stocks With Unusual Call Option Activity:

• 1) LVLT 2) GME 3) ARIA 4) OVTI 5) AKAM
  

Stocks With Most Positive News Mentions:

• 1) EW 2) WAG 3) APOL 4) T 5) SPG
  

Charts:

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