Bear Radar

Style Underperformer:

• Large-Cap Growth (+1.49%)

Sector Underperformers:

• 1) Tobacco -.23% 2) Biotech -.07% 3) Computer -.05%

Stocks Falling on Unusual Volume:

• WDC, ADTN, VOLC, SQI, GMCR, DMND, VRUS, VPRT, WBMD, CYOU, SOHU, PTP, BAX, EVN, WNI and VSI
  

Stocks With Unusual Put Option Activity:

• 1) BAX 2) VFC 3) EWH 4) INFY 5) XLK
  

Stocks With Most Negative News Mentions:

• 1) FSLR 2) NSC 3) LXK 4) PCX 5) CHRW
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth (+1.58%)

Sector Outperformers:

• 1) Coal +3.63% 2) Banks +3.09% 3) Alt Energy +3.04%

Stocks Rising on Unusual Volume:

• HDB, NIHD, ONXX, JVA, ASML, INFY, SWKS, CSTR, NFLX, CTSH, COO, NSR, WHR, JCI, ONXX, DNR and C
  

Stocks With Unusual Call Option Activity:

• 1) CY 2) WHR 3) WDC 4) ELN 5) CMA
  

Stocks With Most Positive News Mentions:

• 1) HUM 2) IACI 3) GOOG 4) HS 5) MDP
  

Charts:

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

Wednesday Watch

Evening Headlines

Bloomberg:

• Slovak Parties Seek Talks on EFSF Vote Repeat. Slovakia’s opposition leader said lawmakers must find a way to approve Europe’s enhanced bailout fund, which was rejected yesterday amid a dispute over the future of Prime Minister Iveta Radicova. Slovakia “must sign up to the rescue fund,” Robert Fico said late yesterday, adding that his party, which didn’t back the measure yesterday, is awaiting a proposal from the ruling coalition. Radicova said the only country in the 17 nations that use the euro that has yet to approve European Financial Stability Facility, must find a solution to approve the EFSF “as soon as possible.” No time for a new vote has been set. “Eventually a yes vote will be secured,” Tim Ash, head of emerging-market research at Royal Bank of Scotland Group Plc in London, said by phone yesterday. “Does Slovakia really want to be alone among 17 euro-zone members states on this one, and when the future of Europe is at stake?” The political turmoil in the country of 5.4 million people reverberated on global stock and currency markets. Slovak approval of enhanced powers of the EFSF, the temporary bailout fund, is crucial for adopting the key element in the strategy to prevent contagion from the debt crisis that has spread from Greece to other countries in the region.
• Alcoa(AA) Profit Misses Estimates as Europe Orders Cut 'Dramatically' and Costs Rise. Alcoa Inc. (AA), the largest U.S. aluminum producer, posted third-quarter profit that trailed analysts’ estimates and said its customers in Europe “dramatically” cut orders amid uncertainty about the region’s economy. The New York-based company’s earnings excluding restructuring costs and tax benefits were about 14 cents a share. The average of 15 analysts’ estimates compiled by Bloomberg was for 22 cents. Chief Executive Officer Klaus Kleinfeld said yesterday European aluminum demand will decline 13 percent in the second half from the first half. Alcoa is grappling with rising production costs while the price of aluminum on the London Metal Exchange has fallen in the past two months. The company cut thousands of jobs and closed smelters after commodities plunged during the financial crisis in 2008. Alcoa yesterday declined to provide a forecast for its fourth-quarter alumina and primary aluminum production. “They are going through and trying to decide do they need to cut production somewhere and if so, when,” Lloyd O’Carroll, a Richmond, Virginia-based analyst at Davenport & Co., who has a “buy” recommendation on Alcoa, said in an interview. “If the LME pulls back enough, they will. I don’t know what their magic trigger number is, but I think there is one.” Shares of the company dropped 5.3 percent to $9.75 as of 7:59 p.m. in New York. Alcoa fell 33 percent this year before the close of regular trading yesterday, the third-worst performer on the Dow after Bank of America Corp. and Hewlett- Packard Co. “Fearful of a slowing economy, our European customers reduced their orders dramatically, even into September, and drove a significant reduction in this segment’s profitability,” Chief Financial Officer Charles McClain said on the company’s earnings conference call, referring to its unit that produces flat and rolled aluminum. Growth in the three biggest euro-region economies will shrink 0.4 percent this quarter, the OECD said Sept. 8. European Union and International Monetary Fund officials are negotiating a 110 billion-euro ($150 billion) bailout. Alcoa received at least 24 percent of its 2010 revenue from European countries, according to company filings. The cost of goods sold -- excluding selling, general administrative and some other expenses -- increased 20 percent to $6.42 billion in the quarter, Alcoa said.
• CFTC Said to Have Enough Votes to Approve Speculation Limits. The U.S. Commodity Futures Trading Commission has the three votes necessary to approve limits on speculation in oil, natural gas and other commodities at an Oct. 18 meeting, said a person briefed on the rule-making process. At the same meeting in Washington, the agency’s five commissioners may vote on rules governing clearinghouses that stand between buyers and sellers in derivatives markets, CFTC Chairman Gary Gensler said in a speech at a Futures Industry Association conference today in Chicago. The agency also may vote to delay until next year regulations originally set to be completed by July 2010. “We are focusing on considering these rules thoughtfully - - not against a clock,” Gensler said in the speech. The person briefed on the process spoke on condition of anonymity because the decision-making isn’t public. The rules will govern trades conducted by Goldman Sachs Group Inc., JPMorgan Chase & Co. and transactions on CME Group Inc., the world’s largest futures exchange, among others. The so-called position-limits rule to curb speculation will include an analysis estimating that it will cost the financial industry at least $100 million to comply, Scott O’Malia, a CFTC commissioner, told reporters at the conference. The position- limits rule may also come up for a vote on Oct. 18, he said. The CFTC and Securities and Exchange Commission, which are leading U.S. efforts to write derivatives regulations, also are working on a final rule that will define which Wall Street banks, energy firms and other companies are considered swaps dealers or other major swaps participants. Those definitions will lead companies to have higher capital and margin requirements to limit risk in trades.
• Romney Steers Debate Course; Cain Trumpets 9-9-9. Former pizza executive Herman Cain sought to capitalize on his rise in opinion polls by repeatedly promoting his 9-9-9 tax plan at a debate focused on the economy, as other Republican presidential candidates derided it as impractical and criticized each other’s credentials. Mitt Romney, the former Massachusetts governor who is the party’s frontrunner, navigated through repeated attacks from his opponents, including Texas Governor Rick Perry, who is struggling to reignite his candidacy. The debate tonight showcased disputes among the candidates on a range of economic issues, including Chinese currency, housing loans, job creation and the possibility of future bailouts should the nation face another economic crisis. The candidates were united in their criticism of government, blaming President Barack Obama, the Federal Reserve and Congress for the nation’s economic struggles without noting that Republicans control the U.S. House.
• Oil Drops First Day in Six on Concern Economy to Falter as Stockpiles Rise. Oil fell for the first day in six in New York, snapping the longest run of gains this year, on concern that fuel demand will falter after U.S. and European lawmakers rejected plans to bolster their economies. Futures slipped as much as 0.9 percent after Slovak lawmakers voted against an overhaul of Europe’s bailout fund and the Senate blocked President Barack Obama’s $447 billion plan to boost job creation. The Organization of Petroleum Exporting Countries cut its global oil demand growth forecast for this year and 2012, citing a weak economic outlook in industrialized nations. A report tomorrow may show U.S. crude stockpiles increased, according to a Bloomberg News survey. “The market is starting to come to grips with the depth of the issues in Europe,” Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney, said by phone today. Investors are “questioning the ongoing demand for crude oil,” he said. Crude for November delivery dropped as much as 81 cents to $85 a barrel in electronic trading on the New York Mercantile Exchange and was at $85.03 at 11:13 a.m. Sydney time. The contract yesterday climbed 0.5 percent to $85.81, the highest close since Sept. 21. Prices are down 6.9 percent this year.
• Senate Blocks Obama's $447B Jobs Plan. Opponents of President Barack Obama’s $447 billion jobs plan blocked the measure in the Senate, with two Democrats joining Republicans to derail his prime proposal to help turn around the struggling economy. The tally on the test vote was 50-49, falling short of the 60 needed to advance the measure and shelving it in its current form. Senate Minority Leader Mitch McConnell called the measure a “lousy idea” that relies on proposals similar to 2009’s $825 billion stimulus, an effort he said that failed to work. Senate Democratic leaders last week revised the president’s initial proposal, partly to try to pick up more support within their party. That scrapped Obama’s method of paying for the jobs plan, including higher taxes on families making more than $250,000 a year. Senate leaders substituted a 5.6 percent surtax on people making at least $1 million annually. Even so, Democratic Senators Jon Tester of Montana and Ben Nelson of Nebraska opposed the plan. “I can’t support tax gimmicks that do little to create jobs” and don’t address the need for a bipartisan deficit-cutting plan, Tester said in a statement. “The president’s jobs initiative is at the end of its legislative life -- not that it really had one,” Stretch said. He said the focus will likely shift away from jobs and toward the work of a congressional supercommittee that is tasked with cutting $1.5 billion from the federal deficit over 10 years. The new method of offsetting the bill’s costs still ran into Democratic opposition. Senator James Webb, a Virginia Democrat, said he would vote to let debate start, but wouldn’t support the Senate jobs legislation as it was drafted. He said a tax on millionaires that is income-based fails to address real issues of inequality in the tax code. He said the best method to spread the tax burden would be to boost taxes on capital gains. “The present proposal looks good at first glance; it sounds good on a TV bite, but in all respect to the people who put it forward, I do not believe it’s smart policy and it does not go where the real economic division lies in our country,” Webb said.
• Volcker Rule Gaps May Leave Uncertainty About Trading Bans. More than a year after they began crafting the details of the Dodd-Frank Act’s ban on proprietary trading by U.S. banks, regulators released their first version of the so-called Volcker rule while acknowledging that hundreds of questions remain unanswered. The proposal written by four regulatory agencies and issued for public comment today would ban banks from making trades for their own accounts, allowing them to continue short-term trades for hedging or market-making. Banks also would face limits on investments in hedge funds and private-equity funds. Within the rule’s 298 pages, regulators seek feedback instead of offering precise definitions for many of the banned activities, which may leave financial firms uncertain about how to prepare for the final adoption of the rule next year. “There aren’t bright lines on many questions and that will make it difficult for banks to put in place their compliance regime,” said Kim Olson, a principal at Deloitte & Touche LLP, who formerly worked at the bank supervision department in the Federal Reserve Bank of New York.
• China Sovereign Fund to Invest $1 Billion in Kremlin-Backed Fund. China Investment Corp., the nation’s sovereign-wealth fund, agreed to invest $1 billion in a Russian private-equity fund, the first foreign commitment to an investment pool championed by President Dmitry Medvedev. Beijing-based CIC, which managed $409.6 billion by end-2010, plans to invest in the Russia Direct Investment Fund, Kirill Dmitriev, head of the Russian company, said by phone from Beijing yesterday, where the agreement was signed during a visit by Prime Minister Vladimir Putin.
• Hong Kong's Tsang Vows to Remedy Public Anger at Home Prices. Hong Kong Chief Executive Donald Tsang pledged to “break with tradition” ahead of his final policy speech today, moving to address discontent at a surge in home prices that threatens to mar his legacy.
• Goldman(GS) May Drop Bank Status on Volcker Rule Costs, Hilder Says. Goldman Sachs Group Inc. and Morgan Stanley may consider dropping their status as bank holding companies to avoid expenses tied to the Volcker rule, said David Hilder, an analyst at Susquehanna Financial Group LLP.

Wall Street Journal:

• U.S. Accuses Iran in Plot. Two Charged in Alleged Conspiracy to Enlist Drug Cartel to Kill Saudi Ambassador. U.S. authorities said Tuesday they foiled an Iranian-directed plot to assassinate the Saudi Arabian ambassador to Washington, a rare instance where Tehran is accused of fomenting terrorism on U.S. soil. Prosecutors alleged an elaborate international plot, with two men, including an Iranian-born U.S. citizen who had been living in Texas, using funding from the Iranian government to try to hire a Mexican drug cartel to kill the ambassador. Attorney General Eric Holder said elements of Iran's Qods Force, a unit of the Islamic Revolutionary Guard Corps, were ready to spend $1.5 million on the plan. Saudi officials described the alleged plot as an escalation in the confrontation between the two Middle Eastern rivals, which have clashed anew in recent months over Saudi efforts to bolster the monarchy in Bahrain.
• Credit-Card Issuers Circling Subprime Borrowers Again. Credit-card issuers are knocking on the doors of subprime borrowers again as they look for ways to grow their business amid stiff competition. The move is part of a broader effort by banks to lure more credit-card customers after many lenders retrenched from the subprime market.
• The iPhone Finds Its Voice by Walt Mossberg. Features in the 4S Include a System That Answers Questions Out Loud and Learns a User's Speech.
• Red Flags for Green Energy. While Solyndra LLC's flameout has fueled criticism of federal initiatives to encourage alternative power sources, the solar-panel maker is hardly the only disappointment among U.S.-backed energy programs. That's evident in California, which was awarded $4.6 billion by the Energy Department as part of the 2009 Recovery Act—far more than any other state—to fund programs in energy efficiency and other areas.

MarketWatch:

• Alberta Jobs-Increase Figures Are 'Stunning'. Commentary: Maligned oil sands fuel Canada’s strongest economy. Here’s a term you don’t hear too often these days — “blockbuster job growth.” But that’s what analysts are calling the latest employment figures in oil-rich Alberta, an exciting, upbeat place these days.

Business Insider:

• David Pogue: iPhone 4S Is 'Magical,' Siri Changes The Definition Of 'Phone'.
• Eurozone Crisis: 10 Key Dates for the Eurozone.
• It All Comes Bank To Mexico: The Big Story Behind Today's Iranian Terror Plot.
  

Zero Hedge:

• Saudi Arabia Blasts Iran, Verbally For Now.
• The Evolution Of The EFSF, And Its €726 Billion In Max Losses.
• Senate Passes China Currency Legislation Bill 63-35.
  

CNBC:

• Holiday Sales for Some Retailers Could Beat Forecasts.
• Australia's Carbon Tax Plan Passes Biggest Hurdle. Australia's plan for a sweeping national carbon price passed its biggest political hurdle on Wednesday when the lower house of parliament voted in favor of the scheme — a major victory for beleaguered Prime Minister Julia Gillard.

NY Times:

• Massachusetts Asks Banks for Details on Recruiting. The top financial regulator in Massachusetts on Tuesday asked many of Wall Street’s biggest banks for more information on their hedge fund recruiting services. In a letter of inquiry sent to Bank of America, Goldman Sachs, Deutsche Bank, UBS and Morgan Stanley, William F. Galvin, the secretary of the commonwealth of Massachusetts, asked the firms to give a list of the clients they had provided employment referrals to since January 2009. Mr. Galvin said his letter was aimed at putting the firms “on notice that these are issues that need to be explored.”

Rasmussen Reports:

• Election 2012, Generic Presidential Ballot: Republican 47%, Obama 41%.

Reuters:

• China Set to Raise Threshold for Oil, Gas Windfall Tax - Sinopec. China will raise the threshold for windfall tax on domestic oil and gas production, a top Chinese oil executive said on Wednesday. "The threshold for windfall tax will be raised...the government has such plans," Wang Tianpu, President of Sinopec Corp , told Reuters. But Wang added there was no timeline for such a change yet. Wang's comments come shortly after the government extended nationwide a resource tax on oil and gas.

Financial Times:

• Most Hedge Funds to Escape Tighter Oversight.

Telegraph:

• China's Debt Spree Returns to Haunt. Bail-outs are coming thick and fast in China. In less than a week the authorities have had to step in to prop up the banks, rescue the insolvent railway system and save the near bankrupt city of Wenzhou from a spectacular debt crash.

Handelsblatt:

• Billionaire investor George Soros and 100 supporters, including politicians, managers and economists, called for immediate measures to solve the European debt crisis, citing a letter to the heads of the 17-nation currency bloc. The signatories, among them former German Foreign Minister Joschka Fischer, former German Finance Minister Hans Eichel, Emma Bonino, an Italian former minister for European Affairs, and Timothy Garton Ash, a professor of European Studies at Oxford University, wrote that national solutions for the debt crisis would inevitably lead to an European collapse. Current measures are coming too late, are not sufficient and may trigger global tensions on financial markets.

Kyodo News:

• Rice grown in Japan's Fukushima prefecture was cleared for shipping after post harvest radiation testing, citing the prefectural government.

China Business News:

• The eastern Chinese province of Zhejiang is taking measures to stop company executives from fleeing the repayment of debt.

South China Morning Post:

• Global Trade May Drop Up to 15%, Standard Chartered's Kwan Says. Trade volumes may decline by early next year if there's a recession similar to that caused by the 2008 financial crisis, citing Nicholas Kwan, the bank's chief economist for Asia. China and Asia are now more exposed to Europe's financial problems than during the 2008 crisis, he said.

China Securities Journal:

• More Chinese coal producing provinces may follow Guizhou in the southwest and increase charges for local coal producers, citing analysts. Guizhou raised the charge to 10% of the coal sales price Oct. 1, with the fee put into a local coal prices adjustment that will be used to subsidize coal-fired power plants.

Evening Recommendations
CSFB:

• Reiterated Underweight on Chinese banking sector.

Night Trading

• Asian equity indices are -.50% to +1.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 232.0 +9.5 basis points.
  
• Asia Pacific Sovereign CDS Index 160.0 +3.5 basis points.
• FTSE-100 futures -.09%.
  
• S&P 500 futures -.30%.
  
• NASDAQ 100 futures -.15%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (PGR)/.28
• (HST)/.17
• (PEP)/1.30

Economic Releases
2:00 pm EST

• Minutes of FOMC Meeting.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Fisher speaking, Fed's Plosser speaking, Fed's Pianalto speaking, ECB's Trichet speaking, ECB's Stark speaking, JOLTs Job Openings report for August, USDA's October Ag Supply/Demand Estimates Report, weekly MBA mortgage applications report, 10-Year Treasury Note auction, Canaccord Energy Conference, (WMT) analyst day, (ALOG) analyst day and the (HPP) investor day could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and industrial 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 Slightly Higher into Final Hour on Bounce in the Euro, Short-Covering, Technical Buying, Less Tech Sector Pessimism

Broad Market Tone:

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

Equity Investor Angst:

• VIX 33.14 +.18%
  
• ISE Sentiment Index 128.0 +14.3%
  
• Total Put/Call 1.49 +24.17%
  
• NYSE Arms .87 +94.28%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 134.97 -1.69%
  
• European Financial Sector CDS Index 227.09 +.89%
  
• Western Europe Sovereign Debt CDS Index 336.33 +.69%
  
• Emerging Market CDS Index 331.90 -3.26%
  
• 2-Year Swap Spread 38.0 unch.
  
• TED Spread 40.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 185.0 +7 bps
  
• China Import Iron Ore Spot $164.40/Metric Tonne -1.26%
  
• Citi US Economic Surprise Index -2.50 +.6 point
  
• 10-Year TIPS Spread 1.96 +2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -18 open in Japan
• DAX Futures: Indicating +8 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is mildly bullish, as the S&P 500 consolidates recent gains above its 50-day moving average despite Eurozone debt angst, rising food prices, emerging markets inflation fears and real estate sector weakness. On the positive side, Coal, Oil Tanker, Education, Airline, Computer and Ag shares are especially strong, rising more than +1.25%. Cyclical and Small-cap shares have outperformed throughout the day again. As well, tech shares have traded relatively well throughout the day. Lumber is rising +.71% and Gold is falling -.61%. The China sovereign cds is falling -3.37% to 162.28 bps, the Japan sovereign cds is falling -9.38% to 111.91 bps, the Russia sovereign cds is falling -3.33% to 269.66 bps and the UK sovereign cds fell -3.48% to 87.17 bps. Weekly retail sales rose +4.8% versus a +4.4% gain the prior week. On the negative side, Utility, REIT and Telecom shares are under pressure, falling more than 1.0%. (IYR) has traded poorly throughout the day. The UBS-Bloomberg Ag Spot Index is jumping +2.8% and Copper is falling -2.2%. Rice is still close to its multi-year high, rising +27.0% in about 13 weeks. The Ireland sovereign cds is rising +2.46% to 695.0 bps and the Belgium sovereign cds is climbing +3.1% to 293.33 bps. The Libor-OIS Spread is unch. at 31.0 bps, which is the highest since July 2010. As well, the TED and 2-Year swap spreads are still very close to their recent highs, which is also noteworthy considering the recent strong equity advance. The Western Europe Sovereign CDS Index, the European Financial Sector CDS Index and the Asia-Pacific Sovereign CDS Index are still near their records and trending higher despite the recent pullbacks. The Shanghai Composite only gained +.16% overnight, finishing near session lows, despite a huge global equity rally and their govt. attempting to prop up bank shares with purchases. Moreover, the China Development Bank Corp. cds jumped +7.23% to 336.68 bps. The Shanghai Property Index fell -.63%. India's Sensex also fell -.13% overnight. I still believe that in the short-term, given high levels of investor pessimism and the S&P 500's technical improvement, more stock gains are likely. I still believe that over the longer-term the massive tax hikes and spending cuts in Europe will further result in a meaningful deterioration in the region's economies which will then lead to an escalation in the debt crisis over the intermediate-term. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking, emerging markets inflation fears, rising food prices, more shorting and global debt angst.

Today's Headlines

Bloomberg:

• Slovakia May Approve EFSF After Rebel Party Topples Radicova's Government. Slovakia may approve the euro region’s retooled bailout fund this week after a political storm that is likely to topple Prime Minister Iveta Radicova’s ruling coalition. The largest opposition party, which said it won’t back the motion today, will support the revamped European Financial Stability Facility in a second vote, should the first try fail and bring down the government, Robert Fico, the group’s leader, told reporters in the capital Bratislava. That would give the measure a majority. There is no date set for a repeated vote. Slovakia is the only country in the 17-nation euro area that hasn’t ratified the measure, following approval in Malta yesterday. The Freedom of Solidarity party, one of the members of Radicova’s four-way coalition, said it won’t support the EFSF even after the premier tied a no-confidence motion on her government, denying the plan a majority. “The government is set to fall, but the bailout fund will eventually be approved,” Grigorij Meseznikov, the head of the Public Affairs Institute, a think-tank in Bratislava, said by phone after Fico’s comments. “It could take a few days, though.” Parliament convened for the session with the EFSF on the agenda at 1 p.m. in Bratislava. There were 12 remaining deputies registered to speak as of 7:50 p.m.
• Rate Swap Spreads Rise With Europe Plan Elusive: Credit Markets. A gauge of stress in credit markets reached its highest level in 16 months even as stocks rallied, a sign that short-term funding concerns have persisted as European leaders recapitalize the region's banks. The two-year interest-rate swap spread, which measures perceived credit risk, climbed 5.75 basis points last week, the biggest jump since June, to 39 basis points, according to data compiled by Bloomberg. The gap expanded 9 basis points in the two weeks ended Oct. 7 as the MSCI World Index of global stocks climbed 2.85 percent.
  
• Greece's 2011 Deficit May Close at 9.1% of GDP, Kathimerini Says. Greece’s 2011 budget deficit may be 9.1 percent of gross domestic product, according to a European Union, European Central Bank and International Monetary Fund mission, Kathimerini said. The so-called troika, which completed its fifth review of the country’s economy, found Greece will miss the original target of 7.5 percent of GDP as well as a revised target of 8.5 percent for this year in the 2012 budget draft, the Athens-based daily reported, without citing anyone.
• European Banks May Face Forced Recapitalization, Welt Says. European governments are considering setting banks a deadline for boosting their capital levels, the German newspaper Die Welt said, citing an unidentified person involved in the negotiations. Under the plan, governments would force banks to accept public funds to increase their capital after the deadline has expired, the newspaper said today. For a public-funding guarantee to calm markets, European Union countries would have to act jointly, the newspaper cited the person as saying. While there is no agreement on the proposal at this time, a decision may be taken within the next two weeks, the newspaper cited unidentified people involved in the negotiations as saying.
• U.S. Charges Two in Iranian Plot to Kill Saudi's US Ambassador. The Justice Department charged two men, one allegedly a member of a secret Iranian military unit and the other with dual U.S.-Iran citizenship, in a plot to use a weapon of mass destruction to kill Saudi Arabia’s ambassador to the U.S. Manssor Arbabsiar and Gholam Shakuri were charged in a purported conspiracy to murder Ambassador Adel Al-Jubeir in a plan hatched earlier this year, according to papers filed in Manhattan federal court. Arbabsiar, a naturalized U.S. citizen, wired more than a $100,000 to the U.S. as part of the alleged plot, the government said. U.S. Attorney General Eric Holder said today that the U.S. will hold Iran responsible for any terrorist actions tied to the plot, which he said was sponsored by the Iranian government. He called the conspiracy a “flagrant” violation of international law.
• Chanos Says China Banks 'Deteriorating' as Government Buys Stock. Jim Chanos, the hedge-fund manager who’s been betting that Chinese bank stocks will tumble, said a rally spurred by government purchases of the shares hasn’t changed his bearish outlook. The MSCI China Financials Index surged 6 percent today after state-run Central Huijin Investment Ltd. started buying shares in the four biggest Chinese lenders. The gauge of banks, insurers and developers had tumbled as much as 43 percent in 2011 through Oct. 4, sending its price-to-earnings ratio to a record low of 5.6 on concern that slowing economic growth will spur bad debts after a three-year credit boom. “The fact that people are even talking about the government stepping in to shore up the banks, when two months ago people thought there was nothing wrong with the Chinese banks, should tell you just how seriously this situation is deteriorating,” Chanos, founder of New York-based hedge fund Kynikos Associates, said in a Bloomberg Television interview. Chanos, who told Bloomberg News last month he was selling short shares in “virtually all of the large banks in China,” said today that the country’s property market is in the “first parts of a very serious pullback.” China’s home transactions fell during last week’s public holidays after residential prices posted their first monthly decline in a year, according to Soufun Holdings Ltd., China’s biggest real estate website owner. “The property market is what investors ought to be watching, because that drives everything in China,” Chanos said. The decline in property sales volume last week, traditionally a peak period for Chinese developers, may mark a turning point for a property market that had defied the government’s recent efforts to contain surging home values, according to Credit Suisse Group AG.
• Copper Drops Most in a Week as China's Exports May Ebb, Europe Woes Mount. Copper fell the most in a week on persistent concern that metal demand will wane as the global economy falters, Chinese exports wane and Europe’s debt woes escalate. Chinese export growth declined to 20.5 percent in September from 24.5 percent a month earlier, according to economists’ estimates compiled by Bloomberg. European Central Bank President Jean-Claude Trichet said the debt crisis threatens the financial system. Equities in the U.S. and Europe slumped. “China’s economy is contracting, and we are not seeing any greater demand there,” Frank Lesh, a trader at FuturePath Trading in Chicago, said in a telephone interview. “Europe has real troubles that will drag on the world economy, and it will remain a concern for the next year at least.” Copper futures for December delivery fell 2.6 percent to $3.28 a pound at 10:46 a.m. on the Comex in New York. A close at that price would mark the biggest drop for a most-active contract since Sept. 30. In the third quarter, copper tumbled 26 percent, the most since 2008. The metal touched a 14-month low of $2.994 on Oct. 3. “With respect to China, not only are there growing concerns about growth prospects, but renewed attention is being placed on the state of Chinese banks and the billions of dollars of nonperforming loans they are carrying,” Edward Meir, a senior commodity analyst at MF Global Holdings Ltd. in Darien, Connecticut, said in a report.
• Banks May Face Fraud, Municipal Claims After Foreclosure Accord. U.S. banks may still face state securities-fraud claims and municipal lawsuits over unpaid mortgage fees under a settlement that is “getting closer,” the official leading talks for state attorneys general said. Iowa Attorney General Tom Miller said in an interview yesterday that any settlement wouldn’t prevent a growing number of municipalities from suing banks for allegedly cheating them out of millions of dollars in filing fees, or individual states from pursuing securities claims against banks. “They won’t be released. They will go forward,” Miller said about securities claims brought by states. “There will be ongoing litigation” against the banks, he said.
• Egyptians Rally After Clashes Between Christians and Army. Hundreds of mourners carried the body of a protester killed in clashes between Coptic Christians and security forces through Cairo’s Tahrir Square, the site of protests that brought down President Hosni Mubarak. Egypt’s ruling military council, which took over from Mubarak in February, ordered the Cabinet to form a fact-finding committee to investigate the Oct. 9 violence. The clashes, in which at least 25 people died, were the most deadly since Mubarak’s ouster. Sectarian tensions have increasingly turned violent amid complaints about a lack of security and fears expressed by many Christians about a stronger role for Islamists in post-Mubarak Egypt, where parliamentary elections are scheduled to start on Nov. 28. The fighting erupted while Christians were protesting an attack on a church in southern Egypt. “If these protesters hadn’t been Christians, they wouldn’t have been treated that way,” Emad Gad, an analyst at the Al Ahram Center for Political and Strategic Studies in Cairo, said in a telephone interview. “This is a watershed moment for Egypt.” Thousands of mourners chanted against the military during a mass funeral of 17 Christian protesters held late yesterday in the Coptic Christian Cathedral in Cairo, the Associated Press reported.
• Volcker Rule Plan Released by Regulators. U.S. regulators requested public comment on Dodd-Frank Act restrictions that would ban banks from making short-term trades for their own accounts and prevent them from owning or sponsoring hedge funds and private-equity funds. The language of the rule is little changed from drafts that have been leaking in recent weeks. It would ban banks from taking positions held for 60 days or less, exempt certain market-making activities, change the way traders involved in market-making are compensated and make senior bank executives responsible for compliance. The board of the FDIC voted 3-0 today to seek comments on the proposal through January 13. The Federal Reserve also said it would accept feedback by that date.
• Chanos Says He's Shorting Vale, Other Companies With China Ties. Jim Chanos, founder of New York- based hedge fund Kynikos Associates, said he’s betting against Vale SA and other commodity-related companies with ties to China. Vale, the world’s biggest iron ore producer and a major China exporter, is building “a fleet that is larger than the U.S. Navy,” Chanos said today at the GAIM/GMA conference in New York. Rio de Janeiro-based Vale shipped about 41 percent of its total iron ore and pellet sales to China in the first quarter. “Vale is one of the more aggressive miners that has capital expenditure closely tied to China,” Chanos said in an interview. Chanos said he’s also betting against cement producers, without naming them, and reiterated that he’s shorting Chinese banks and property developers.

Wall Street Journal:

• Slovakia Dithers on European Bailout Vote. Slovakia's lawmakers were scrambling to vote on a crucial expansion of the euro zone's bailout fund, but their slow progress Tuesday renewed concerns about prospects for the region, while the European Central Bank's president warned the crisis has "reached a systemic dimension." Slovakia, the poorest country in the bloc, is the last of the 17 euro-zone countries to vote on the €440 billion ($600.34 billion) European Financial Stability Facility, which was agreed upon by euro-zone members in July to address the euro zone's debt crisis.
  
• U.S., U.K. Regulators to Weigh High-Frequency Registration. Top market regulators of the U.S. and the U.K. this week will discuss the idea of formally registering high-speed electronic trading firms, the chairman of the U.S. Commodity Futures Trading Commission said Tuesday. Such a move could give regulators a better idea of the identities of the often small firms that use computer-driven strategies to power a big chunk of each day's trade in stocks, futures and options markets.
• Christie to Endorse Romney for President.
• Wall Street Job Losses Are Seen Hitting 10,000.
  

Business Insider:

• Here's The Real Reason Why China's Sovereign Wealth Fund Is Buying Bank Shares. Last time when Huijin announced a similar purchasing plan of bank shares on Sep 18, 2008, SHCOMP and HSCEI rose by +9.5% and +15.5% respectively the next day. However, the market fell back even more after just a week’s rally with SHCOMP and HSCEI declined by 26% and 51% respectively within a month of the short-term peak.
• Nouriel Roubini's Firm Is Losing Millions and Now He's Trying to Sell It.
• Here's The Real Reason Why Occupy Wall Street Protesters Aren't Getting Kicked Out Of Zuccotti Park. Coming on the heels of the Solyndra debacle, the Obama administration has just approved a $168.9 million loan guarantee for the Granite Reliable wind farm project owned by Brookfield Asset Management (BAM). Among its many holdings BAM owns Brookfield Renewable Power, which owns the Granite Reliable and it also owns Brookfield Office Properties, whose holdings include the now famous Zuccotti Park.
• John Paulson Just Took Two Big Steps To Retail Investors As 25% Might Flee.
• Jeff Immelt's Plan To Save The Economy: More Solyndras Please. President Barack Obama's jobs council, headed by GE CEO Jeff Immelt, is calling on the federal government to offer more loans like the one given to the failed solar company Solyndra, in order to promote job creation.
• The Entire World Is Close To Stall Speed. (graphs)
  

Zero Hedge:

• Italy Votes, IMF Gives, And EFSF Yields Increase. (graph)
• PrimeX Update.
  

ForexTV:

• EBA Demands European Banks to Achieve 7% of Core Tier 1 Ratio in Internal Stress Tests. EU Banking regulator demands banks to achieve a core tier one ration of 7 pct in internal stress tests, - Reuters quotes a regulatory source as saying. But it is not clear whether capital qualifying for the core tier one will be defined as per Basel III or Basle 2.5. Source added that banks failing meet this will be asked to bolster their capital. Source expects a significant number of banks to fail in the current internal stress tests.

Politico:

• Obama Jobs Bill May Not Get 51 in Senate. President Barack Obama’s jobs plan is at risk of getting less than 51 votes Tuesday evening in the Senate as a handful of politically vulnerable moderate Democrats hold out on the president’s signature economic proposal. Adding to the uncertainty, Sen. Jeanne Shaheen (D-N.H.) who supports the proposal, may be a no-show due to a scheduling conflict, potentially leaving Democrats short of the symbolic simple majority on the jobs bill.

Reuters:

• S&P Cuts 10 Spanish Banks, Including Santander, BBVA. Standard & Poor's on Tuesday downgraded the credit ratings of 10 Spanish banks, saying that dimming economic prospects for the country will continue to hurt the banking sector in the next 15-18 months. Among the banks downgraded were Santander and BBVA, the country's largest banks. S&P also revised the rating outlooks of four banks to negative from stable, and placed one bank on CreditWatch negative. The banks downgraded were:

Financial Times:

• Eurozone Crisis: Live Blog.

La Figaro:

• Estonia wants the EFSF to be ratified as soon as possible and doesn't believe that the amount in the facility should be increased, citing the country's prime minister Andrus Ansip.

European Systemic Risk Board:

• Introductory Statement by Jean-Claude Trichet. Let me start by describing the current situation and the actions that, in our view, need to be taken. The crisis has reached a systemic dimension. In a press release published after the ESRB General Board meeting of 21 September, we stated the following: “ Over the last months, sovereign stress has moved from smaller economies to some of the larger EU countries. Signs of stress are evident in many European government bond markets, while the high volatility in equity markets indicates that tensions have spread across capital markets around the world. The situation has been aggravated by the progressive drying-up of bank term funding markets. The high interconnectedness in the EU financial system has led to a rapidly rising risk of significant contagion. This threatens financial stability in the EU as a whole and adversely impacts the real economy in Europe and beyond.

Bear Radar

Style Underperformer:

• Large-Cap Value (-.21%)

Sector Underperformers:

• 1) REITs -1.93% 2) Utilities -1.12% 3) Alt Energy -.90%

Stocks Falling on Unusual Volume:

• RVBD, TECD, CPX, PTR, CNP, EOC, NFLX, VOLC, FSLR, OPNT, INFY, ASML, SPN, FMX, AVX, KUB and SBH
  

Stocks With Unusual Put Option Activity:

• 1) STEC 2) PXP 3) FTR 4) CCL 5) AXL
  

Stocks With Most Negative News Mentions:

• 1) LM 2) COP 3) RBCN 4) FII 5) VECO
  

Charts:

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