Bear Radar

Style Underperformer:

• Large-Cap Growth (-.31%)

Sector Underperformers:

• 1) Education -4.02% 2) Internet -2.01% 3) Retail -1.51%

Stocks Falling on Unusual Volume:

• AMZN, CHRW, CCI, YPF, WBSN, TMO, SINA, ABG, WAT, MASI, GMCR, DGII, SONO, FTNT, BRCM, BHLB, HTLD, PAAS, VRUS, FEIC, HANS, RIMM, CYOU, MEOH, SODA, VCI, BMS, RSH, HCC, DV, AVY, BCR, POL and F
  

Stocks With Unusual Put Option Activity:

• 1) MF 2) CBG 3) LNG 4) HMY 5) NFX
  

Stocks With Most Negative News Mentions:

• 1) RSH 2) CHRW 3) DV 4) RIMM 5) AMZN
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth (+.98%)

Sector Outperformers:

• 1) HMOs +2.80% 2) Coal +2.09% 3) Steel +1.69%

Stocks Rising on Unusual Volume:

• ABAX, XCO, ONXX, VLO, IRBT, ULTI, SMCI, ITRI, TSS, PNRA, ITRI, QCOR, SLAB, FSLR, FFIV, SSRI, BIIB, ESRX, STX, MIM, MDP, MHS and MTW
  

Stocks With Unusual Call Option Activity:

• 1) SSRI 2) LNG 3) TRGT 4) NKTR 5) AEO
  

Stocks With Most Positive News Mentions:

• 1) FFIV 2) AMZN 3) CPTS 4) F 5) GD
  

Charts:

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

Wednesday Watch

Evening Headlines

Bloomberg:

• Europe Struggles for Crisis Remedy. European leaders “have risen to the challenge,” German Chancellor Angela Merkel said. French President Nicolas Sarkozy proclaimed their July 21 summit a “historic turning point” and Luxembourg Prime Minister Jean- Claude Juncker called it the “final package, of course,” to put out the debt inferno. Then they went on vacation. Before they returned to work, the deal fizzled. The euro’s stewards are back in Brussels today for an emergency summit struggling to heed the world’s calls to once and for all extinguish what U.S. Treasury Secretary Timothy F. Geithner called the “catastrophic risk” of the debt crisis. A potential Greek default threatens shockwaves that could engulf Italy and France, jolt the banking system and spell havoc for the global economy. “Buck up, this crisis is going to be with us still for a while,” Barry Eichengreen, an economics professor at the University of California at Berkeley, said on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “I fear they’re not going to take the kind of steps to resolve it.” The gathering marks the interim climax to six days of haggling among finance ministers, central and commercial bankers, chancellors and prime ministers over the shape of Greece’s second bailout, the recapitalization of banks and the retooling of the 440 billion-euro ($612 billion) rescue fund into a more potent weapon.
• Joke Is on Europe as Sarkozy Laughs at Berlusconi: Euro Credit. The leaders of France and Germany shared a smile when asked whether Prime Minister Silvio Berlusconi can fix his nation’s finances, echoing investor concern about the Italian premier delivering on pledges to tame Europe’s second-biggest debt. The reaction of Nicolas Sarkozy and Angela Merkel at an Oct. 23 Brussels news conference highlights one of the issues policy makers must tackle at today’s European Union summits. Italy plans to sell 10.5 billion euros ($14.6 billion) of bonds today as rising borrowing costs reflect investor skepticism about its creditworthiness. The country has to repay 298 billion euros of debt next year, double its 2013 obligations and more than Germany, France, Spain or any other euro member. ‘‘Berlusconi’s standing in international politics has been seriously damaged,’’ said Nicola Marinelli, who oversees $153 million at Glendevon King Asset Management in London. ‘‘Any hint of a buyers’ strike’’ during today’s auction ‘‘would be negative for risk in general,’’ she said. Berlusconi is struggling to convince investors he can tame Italy’s 1.9 trillion-euro debt burden, worth about 120 percent of economic output and second only to Greece in the euro region. The yield on Italy’s benchmark 10-year bond is about 5.93 percent, close to the 6 percent level that prompted the European Central Bank to start buying the debt in an effort to drive borrowing costs down from euro-era records.
• BHP(BHP), Rio(RTP) Credit-Default Swaps Surge After Iron Ore Price Plunge. The cost of bond protection on BHP Billiton Ltd. and Rio Tinto Group surged after the cash price of iron ore for immediate delivery to China, a benchmark for Asia, dropped yesterday by the most in more than two years. Credit-default swaps on Rio rose 20 basis points to 200 as of 10:23 am in Sydney. Contacts on BHP jumped 10 basis points to 120. Iron ore for delivery to the port of Tianjin fell $10.20, or 7.2%, yesterday to $131.70 a metric ton, according to a price index compiled by The Steel Index Ltd. That is the biggest slump since August 20, 2009, and is the lowest price in 15 months.
• Floods Ruining Thai Rice Erases Global Glut. Thailand’s worst floods in more than a half century may have wiped out as much as 14 percent of paddy fields in the world’s biggest rice exporter, potentially erasing the predicted global glut. The Thai export price, a global benchmark, may climb 20 percent to $750 a metric ton by December, said Sumeth Laomoraphorn, the president of C.P. Intertrade Co., the country’s largest seller of packaged rice. Tropical storms inundated 62 of 77 provinces, destroying 1.4 million hectares (3.5 million acres) and as much as 7 million tons of crops, the government says. That equals 4.6 million tons of milled grain, 1 million more than the surplus anticipated by the U.S. Department of Agriculture. Rice, a staple for half the world, was already this year’s best-performing agricultural commodity after drought cut the U.S. harvest to the lowest level in 13 years. Prices also rose as Thailand started buying at above-market costs to boost farmer incomes. That is adding renewed pressure to global food prices monitored by the United Nations, which had dropped 5 percent from a record in February as other grains declined. “I’ve never seen such a catastrophe, watching the field turning into a sea of floodwater,” said Wichian Phuanglamchiak, a 74-year-old farmer in the central province of Ayutthaya, speaking from the second floor of his house. “My entire crop was wiped out and I have to wait for the water to recede before I can replant in December.”
• Crisis of 2012 May Hurt China More Than U.S.: William Pesek. Many would be taken aback to think that China, too, might experience its share of setbacks compared with the U.S. Some are well-known, including inflation that fans social unrest and a financial crisis erupting as the massive stimulus of 2009 comes back to haunt Beijing. All that investment created the illusion of economic vitality. Too much of it was funneled into unproductive sectors of the economy, setting up China for a banking meltdown. Choyleva adds a less obvious twist to the critique: how China’s financial proximity to the U.S. is a bigger problem than many people appreciate. By tying itself to the dollar and amassing more than $3 trillion of currency reserves, China essentially merged with the U.S. financial system. When the Fed pumps money into the economy, it inflates China more than America. There are rumblings in Washington about punishing China for its undervalued currency. Yet China is only now realizing the extent to which it surrendered sovereignty to the U.S. As the Fed adds more cash to markets, China’s inflation becomes more entrenched and Beijing loses even more control. Over time, this dynamic will harm China’s competiveness more than if Beijing had allowed the yuan to strengthen, as per the U.S.’s demands. China could increase interest rates to temper rising prices, but that would devastate growth. The thing about the G-2 is that pundits often view China as being in the stronger position -- its massive reserve holdings are both leverage and a fortification. Yet China is trapped. It’s addicted to cheap U.S. financing and is increasingly feeling the side effects.
• Occupy Wall Street Knows Not What It Does Hurting Local Jobs. Occupy Wall Street protests assailing income inequality, joblessness and big banks may have some unintended consequences. They’re hurting nearby merchants as police barricades deter shoppers. “If this doesn’t stop soon I will be out of business,” said Marc Epstein, 53, president of Milk Street Cafe on Wall Street, less than a block from the New York Stock Exchange. Sales have dropped about 20 percent since the protests began last month and the 103 jobs created by the cafe’s opening in June are now at risk, said Epstein, who is not alone. Caroline Anderson, general manager of Boutique Tourbillon, a Wall Street jewelry store, said customer traffic is down about 20 percent, and Vincent Alessi, a managing partner at Bobby Van’s Steakhouse on Broad Street, said his lunch business has been cut in half. The Occupy Wall Street movement that began in New York with about 1,000 people on Sept. 17 has spread to cities on four continents as demonstrators from London to Rome and Chicago to Sydney have pitched tents in public spaces. Police, whose displays of force also may be hurting business as they block access to tourist destinations, have arrested hundreds. “These protesters don’t understand the consequences of their actions,” Epstein said. “Who’s going to create the jobs they’re banging their drums for?”
• First Solar(FSLR) Plunges Most Ever After Chief Gillette Departs. Rob Gillette has left First Solar Inc. after almost doubling production capacity during the two years he ran the world’s biggest maker of thin-film solar panels. “Effective immediately, Rob Gillette is no longer serving as chief executive officer,” the Tempe, Arizona-based company said today in a statement that didn’t give a reason. Chairman and founder Mike Ahearn, 54, was named interim CEO. With demand and prices for solar panels falling, expanding First Solar’s production may have been the wrong decision, said Paul Leming, an analyst at Ticonderoga Securities LLC in New York. Declining prices also make it unlikely that the company will be seen as a buyout target. “Rob Gillette made one overwhelmingly bad decision,” Leming said today in an interview. “He made the decision early in his tenure to put the company on an aggressive capacity expansion.” The company’s shares have dropped 71 percent in the past year. First Solar is developing three projects that use its panels. It sold all of them after they received $3.1 billion in backing under the same U.S. Energy Department loan guarantee program that supported the failed solar panel maker Solyndra LLC.
• Amazon(AMZN) Profit Plunges; Shares Tumble. Amazon.com Inc., the world’s largest Internet retailer, reported a plunge in third-quarter profit after it ramped up spending on new products such as the Kindle Fire tablet. The shares tumbled 19 percent in late trading. Net income fell 73 percent to $63 million, or 14 cents a share, from $231 million, or 51 cents, a year earlier, the Seattle-based company said today in a statement. That missed the 24 cents predicted by analysts, according to Bloomberg data. Amazon also said it may post an operating loss this quarter. The company is sacrificing profit margins in search of sales volume and market-share gains. Amazon will sell its Kindle Fire tablet for as low as $199, less than half the price of Apple Inc.’s cheapest iPad. Chief Executive Officer Jeff Bezos is counting on revenue from digital music, books and movies to make up for selling the product at a loss -- estimated by IHS Inc. to be about $10 per device. “They missed investors’ expectations,” said Colin Sebastian, an analyst at Robert W. Baird & Co. in San Francisco. The companies’ growth plans aren’t doing enough to spur profit, rather than just sales, he said. “If they don’t show a corresponding increase in earnings, investors start to scratch their heads.”
• Groupon IPO Said to Ask Triple Amazon's(AMZN) Price-to-Sales for 2012. Groupon Inc. is seeking a valuation of about 5 times projected 2012 sales in its initial public offering, people familiar with the plans said, making it three times more expensive than Amazon.com Inc. Advisers to Groupon based the asking price for the IPO on a projection that the company will have sales of about $2.1 billion next year, said the people, who asked to remain anonymous because the figures are private. The $17 midpoint of Groupon’s IPO price range would value the company at $10.8 billion, or about 5 times that sales prediction. That means unprofitable Groupon would be more expensive than Amazon.com, the biggest online retailer, which trades at about 1.6 times estimated 2012 revenue, according to data compiled by Bloomberg.
• Hong Kong Office Rents May Fall Up to 40%, Barclays Says. Office rents in Hong Kong, the world's costliest place to lease commercial space, may fall as much as 40% over the next two year if China goes through an economic "hard landing," said Barclays Capital Research.
• MetLife(MET) Says Fed Rejects Life Insurer's Plan for Dividend Boost, Buybacks. MetLife Inc., the largest U.S. life insurer, said its plan to increase the dividend and resume share repurchases was rejected by the Federal Reserve. The stock declined in extended trading. “We are disappointed that we cannot commence increased capital actions now,” Chief Executive Officer Steven Kandarian said in a statement today.
• Morgan Stanley Smith Barney Said to Change Broker Pay Structure. Morgan Stanley Smith Barney, the world’s largest brokerage, plans to adjust its compensation structure to boost profitability, according to a person familiar with the discussions. The new pay policies are set to go into effect in 2012, said the person, who declined to be identified because compensation decisions aren’t public. The New York-based firm is raising the minimum amount of revenue a broker must generate to avoid pay cuts to $300,000 from $250,000, the person said.
• China's Communists Vow to 'Strengthen Management' of Internet. China’s ruling Communist Party said it would work to “strengthen management” of online social media sites that have increasingly questioned government actions and exposed official graft. Vowing to promote the development of a “healthy Internet culture,” the party’s Central Committee said it would step up supervision of the world’s biggest online community, promoting “cultural treasures” and “constructive” websites, and punishing the spread of “harmful information,” according to a communique from the committee’s Oct. 15-18 meeting released overnight by the official Xinhua News Agency. China’s leaders are grappling with how to manage Twitter- like social-media sites such as one run by Sina Corp.(SINA) that are hard for government censors to control. Members of the party’s Politburo visited Internet companies after a deadly train crash in July. Web users criticized the government’s handling of the crash and spread commentary and photos of the accident at odds with the official line. China had 195 million microbloggers at the end of June, a 209 percent increase from the end of 2010, Xinhua reported last month, citing the China Internet Network Information Center.
• Gold Advances to One-Month Highs as European Debt Risk Stokes Haven Demand. Gold advanced to the highest level in a month, extending gains above $1,700 an ounce, as concerns European leaders may fail to resolve the region’s debt crisis spurred demand for a haven. Bullion for immediate-delivery gained for a fourth day, rising as much as 0.3 percent to $1,710.70, the most expensive level since Sept. 23. The metal traded at $1,709.25 by 1:01 p.m. Melbourne time. Gold for December delivery climbed as much as 0.7 percent to $1,712.10 on the Comex in New York, the highest price for the most active contract since Sept. 23.

Wall Street Journal:

• Bank Group Sees EU Recession Amid Push for Bigger Write-Downs. Amid a push for banks to take a bigger hit on their Greek debt holdings, the Institute of International Finance Tuesday warned that tightening credit conditions in Europe would likely force the euro zone into an economic recession. The group represents more than 440 of the world’s largest banks, insurance companies and other financial service firms, including those in negotiations over the private sector role’s in the Greek debt talks. The IIF has been actively opposing bigger write-downs on Greek debt and is campaigning against more stringent regulations they say would further crimp growth prospects in the U.S. and Europe. One of the major sticking points in talks among euro zone leaders trying to tame the growing sovereign debt crisis is how much of a write-down on Greek debt holdings the private sector should bear. European officials are pushing to double or even triple the hit previously agreed to by the IIF. “We have trimmed our already meager GDP growth forecast for the euro area in coming quarters, and now project a mild recession in the region,” the bank group said in its October Global Economic Monitor. European banks are also being asked to boost their capital buffers to protect against the rising risk of default in the euro zone. “As banks adjust aggressively to this new reality, a wave of credit contraction will severely dampen business activity, especially in credit-sensitive areas, such as construction,” the IIF warned. Compounding poor growth prospects, governments are also tightening their budgets to cut looming debt levels. And while the European Central Bank has taken some measures to offset this market-based tightening, the ECB “is doing too little too late to stave off outright weakness,” the IIF said. The group raised the specter of a European recession sparking a contraction in the U.S. as well.
• Lower Demand Has Iron Ore Under Fire. The iron-ore sector has remained relatively buoyant in the face of broad commodity losses since the summer. But a deterioration in demand for steel in the past six weeks has put prices under pressure. Prices for steel have fallen as the deteriorating economic situation in the West has hit demand and sentiment. In addition, credit tightening in China continues to weigh on heavy industry there. As a result, the prospects for a recovery in iron-ore prices any time soon are looking remote, according to market players. "It is hard to see any significant increase in the price, given the state of the steel market at the moment," said Steve Hardcastle, head of client relations at commodities broker Sucden Financial, which is forecasting a pullback in the iron-ore price to around $120 a ton heading into the end of the year. A common spot iron-ore benchmark, published by the Steel Index, one of several information providers that supply price indexing, marked its eighth straight week of declines last week. Benchmark spot iron-ore prices for delivery into China fell 7.2% to $131.70 per ton Tuesday, the lowest since July 2010. The same benchmark was trading at a record high of just over $190 in February. China's crude steel production has fallen on a month-to-month basis since May, and the number of vessels being chartered to ship iron ore to China is beginning to soften, according to industry analysts. In addition, around 20 million to 25 million metric tons of apparent steel demand could be at stake in 2012 and 2013 if Europe were to re-enter recession, Michel Van Hoey, a partner at management consultancy firm McKinsey & Co. said. Several European steelmakers have cut production due to expectations of lower demand as a result of poor economic growth.
  
• IBM(IBM) Names Rometty as Next CEO. International Business Machines Corp. named Virginia M. Rometty as its next CEO, turning to an executive responsible for the technology giant's sales and marketing to lead the company as the industry shifts toward mobile computing and emerging markets. Ms. Rometty, now in her 30th year at IBM, will be the first woman to head Big Blue. She takes over as president and chief executive on Jan. 1 from Samuel J. Palmisano, age 60, who will remain the company's chairman.
• Turkey Hits Group of Militants Inside Iraq. Turkey's military engaged in full combat with militants from the outlawed Kurdistan Workers' Party inside Iraq on Tuesday, said the PKK, as the group is known. The PKK saıd around 1,000 Turkish troops with heavy weaponry had entered part of the militants' base area, supported by planes and "Cobra-type" helicopters.
• The Flat-Tax Sweepstakes. Perry's 20% optional rate joins the GOP debate over pro-growth tax reform.

MarketWatch:

• Australian Inflation Leaves Door Open For Rate Hike.

Business Insider:

• 16 Stocks Investors Are Shorting Like Crazy.

Zero Hedge:

• Ex-Goldman(GS) Director Will Turn Himself In To FBI, To Face Criminal Charges.
• NYSE Short Interest Drops To Two Month Low. (graph)
• Brazil Refuses To Buy European Bonds, Dashing Hopes For A BRIC-based European Rescue.
• The Beginning of the European End Game.
  

CNBC:

• China's Largest Real Estate Developer Warns of Price Falls. China’s largest real estate developer believes the country’s property market, a key driver for the economy, has turned and expects conditions to worsen in the coming months as sales prices and volumes decline further. China Vanke, the country’s biggest developer by market share, said government efforts over the past year to rein in soaring prices were having a severe impact on the market and developers were being squeezed after sales volumes in 14 of the country’s largest cities halved in September from a year earlier. “We can see a trend of declining sales, especially in the major cities,” Shirley Xiao, executive vice-president at China Vanke, said on a conference call with investors on Tuesday. “Prices have begun to decline little by little so we think even buyers who are able to buy will choose to wait for now because they’re targeting even lower price cuts.”

Forbes:

• Obama Kick-Back Cronyism, Part 1: Stimulating Green Energy the Chicago Way. This article is the first in a four-part series discussing the early formative Chicago political career days of Barack Obama as community organizer, lawyer, Illinois state senator, financial foundation executive, and U.S. Senate campaigner. Part 2 will emphasize his activities related to Illinois health care issues leading to Obamacare. What do federal subsidy rip-offs for green energy and Chicago low-cost public housing politics have in common? Just about everything—including certain key players.

Washington Post:

• Money managers lay groundwork for challenge to SEC rules.

cnet:

• Gazelle: BlackBerry Trade-Ins at All-Time High.

Washington Times:

• From Arab Spring to Islamist Winter.
  

Reuters:

• Exclusive: SEC Weighs Easing Hedge Fund Data Rule. Regulators are considering easing a proposed rule so that fewer hedge fund advisers would have to hand over troves of confidential data to the government, according to people familiar with the deliberations. The Securities and Exchange Commission is due to vote on a final rule on Wednesday on the threshold that would trigger extensive reporting requirements for advisers to large hedge funds and other private funds.
• Broadcom(BRCM) Sees Revenue Decline, Stock Falls. Broadcom Corp warned revenue could fall as much as 13 percent this quarter due to broad- based weakness in demand, even in wireless, where it supplies chips for Apple Inc products such as the iPhone. The shares in the maker of chips for products from cellphones to television set-top boxes fell about 5 percent after it forecast fourth-quarter revenue of $1.7 billion to $1.8 billion compared with Wall Street expectations for revenue of $2 billion, according to Thomson Reuters I/B/E/S. "The guidance is disappointing to say the least," said Sanford C. Bernstein analyst Stacy Rasgon. "People thought there might be enough upside in the wireless business to offset the rest. It doesn't seem to be the case."
• Panera(PNRA) Forecasts Top Street, Shares Up. Panera Bread Co on Tuesday forecast fourth-quarter and 2012 earnings above Wall Street expectations, sending its shares up almost 10 percent. Panera shares closed down $115.72 and jumped 9.8 percent to $127.01 in extended trading.
• Express Scripts(ESRX) Profit Beats Views, Shares Rise. Express Scripts Inc posted better-than-expected third-quarter earnings on Tuesday as the U.S. pharmacy benefit manager reported increased use of more profitable generic drugs. The shares rose 3.2 percent to $39.70 in after-hours trading on Tuesday.

Financial Times:

• Bankers Fear Political Moves Will Kill Off CDS. It has been blamed by politicians for causing the eurozone debt crisis and attacked as the favoured asset of “evil speculators”. Now, politicians are seeking to take their revenge: not just with the recent introduction of bans on some trading of credit default swaps but also in their attempts to ensure that any haircut on Greek government bonds does not trigger a credit event. Combined, these two events could spell the end of the credit default swaps market, say bankers.
• Fitch Rejects Third of Complex Debt Packages. One in three new structured finance deals, the complex debt packages that were at the heart of the recent financial crisis, that are being rated by Fitch, are being sent back to issuers for improvements, the agency has said.
• Obama Loses Magic for Young Voters. Mr Obama’s campaign is this week trying to rekindle some of the magic that propelled the president to victory in 2008, when Mr Obama won an unprecedented two-thirds of voters under 30. This time around, the president faces an enormous challenge in generating a similar level of enthusiasm and motivating millions of first-time voters to participate. The jobs problem is a key part of this. The unemployment rate among people under 25 is almost 15 per cent, far higher than the national average of 9.1 per cent.

Telegraph:

• Debt Crisis: Live.
  
• EU Rescue Plans Hostage to Raw Politics. Europe's debt crisis has taken a deeply political turn as parliamentary battles rock Italy and Greece and once again cause simmering dissent in Germany, vastly complicating the search for a workable solution. Italy's coalition was scrambling to head off collapse late on Tuesday after deep rifts on austerity measures dictated by Brussels for a Wednesday deadline, when EU leaders reconvene for yet another crisis summit. "I remain pessimistic," said Umberto Bossi, Northern League leader and key ally of premier Silvio Berlusconi, who had warned earlier in the day that the government was in danger of collapse. Mr Bossi said his party had offered a compromise on fresh austerity but could not accept EU demands for a rise in the retirement age to 67. "The people would kill us," he said. The pension reform is the EU's tacit condition for intervention to shore up Italy's bond markets. Silvio Peruzzo from RBS said the Italian government is likely to "implode" before its mandate ends, risking "an ever more severe deterioration of the crisis in Europe". The warning came as French President Nicolas Sarkozy told an Élysée breakfast meeting held behind closed doors that "Europe has never been so close to explosion".

21st Century Business Herald:

• China may not ease its policies for the real estate market, including limits on home purchases, within a year's time, citing a researcher from the Ministry of Housing and Urban-Rural Development.

Securities Times:

• About 67% Chinese bankers said large declines in the nation's home price are major risks for them, citing a survey conducted by China Banking Association. Almost 60% of bankers are concerned about the risk of loans made to local government financing vehicles, according to the report.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.25% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 200.0 +3.0 basis points.
  
• Asia Pacific Sovereign CDS Index 153.0 -.25 basis point.
• FTSE-100 futures -.13%.
  
• S&P 500 futures +.47%.
  
• NASDAQ 100 futures +.47%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (GLW)/.42
• (DPS)/.70
• (OC)/.76
• (HES)/1.36
• (LMT)/1.81
• (ADP)//.61
• (SEE)/.49
• (EAT)/.27
• (MHS)/1.05
• (WLP)/1.67
• (PX)/1.39
• (WYN)/.88
• (F)/.44
• (GD)/1.77
• (S)/-.22
• (BA)/1.10
• (NOC)/1.68
• (COP)/2.18
• (ACOM)/.35
• (CA)/.49
• (TER)/.23
• (BYI)/.43
• (V)/1.25
• (SFSF)/.00
• (EQR)/.61
• (SYMC)/.39
• (SLG)/.99
• (RYL)/-.08
• (NSC)/1.41
• (AFL)/1.60
• (OI)/.72
• (JNY)/.44
• (NVLS)/.68
• (AKAM)/.33
• (JBLU)/.13
• (BMC)/.80
• (AGN)/.91
• (ATI)/.60
  

Economic Releases
8:30 am EST

• Durable Goods Orders for September are estimated to fall by -1.0% versus a -.1% decline in August.
• Durables Ex Transports for September are estimated to rise +.4% versus a -.1% decline in August.
• Cap Goods Orders Non-defense Ex Air for September are estimated to rise +.5% versus a +1.1% gain in August.
  

10:00 am EST

• New Home Sales for September are estimated to rise to 300K versus 295K in August.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,475,000 barrels versus a -4,729,000 barrel decline the prior week. Distillate inventories are estimated to fall by -2,000,000 barrels versus a -4,266,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,750,000 barrels versus a -3,324,000 barrel decline the prior week. Finally, Refinery Utilization is estimated unch. versus a -1.1% decline the prior week.
  

Upcoming Splits

• (QSII) 2-for-1
  

Other Potential Market Movers

• The EU Leaders Meeting, ECB's Corstancio speaking, ECB's Coone speaking, ECB's Mersch speaking, 5-Year Treasury Note Auction and the weekly MBA mortgage applications report could also impact trading today.
  

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

Stocks Falling Sharply Into Final Hour On Rising Global Debt Angst, Global Growth Worries, Rising Energy Prices and Financial Sector Pessimism

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  
• Sector Performance: Almost Every Sector Declining
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 30.66 +4.78%
  
• ISE Sentiment Index 72.0 -32.71%
  
• Total Put/Call .97 +2.11%
  
• NYSE Arms 1.35 +93.92%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 128.97 -.67%
  
• European Financial Sector CDS Index 224.63 +1.65%
  
• Western Europe Sovereign Debt CDS Index 340.83 -.28%
  
• Emerging Market CDS Index 307.15 +.96%
  
• 2-Year Swap Spread 38.0 +1 bp
  
• TED Spread 42.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 186.0 -9 bps
  
• China Import Iron Ore Spot $131.70/Metric Tonne -7.19%
  
• Citi US Economic Surprise Index 11.90 -5.1 points
  
• 10-Year TIPS Spread 2.03 unch.
  

Overseas Futures:

• Nikkei Futures: Indicating -72 open in Japan
• DAX Futures: Indicating -32 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is bearish, as the S&P 500 failed to maintain 1,250 on rising financial sector pessimism, global debt angst, rising energy prices, emerging markets inflation worries, earnings outlooks and global growth fears. On the positive side, Hospital and HMO shares are rising on the day. Major Asian equity indices rose .5-1.5% overnight. Weekly retail sales rose +4.5% versus a +4.7% gain the prior week. On the negative side, Coal, Alt Energy, Steel, Internet, Disk Drive, Bank, I-Bank, Biotech, Homebuilding, Gaming and Airline shares are especially weak, falling more than 2.5%. Small-cap and cyclical shares are underperforming. (XLF) has traded poorly throughout the day. Oil is rising +1.5%, Copper is falling -1.0%, Lumber is down -1.4% and Gold is surging +2.89% higher. Despite the recent rally in equities, better economic data and rising inflation expectations, the 10-year yield is lower over the last 2 weeks, which is also a negative. Rice is still close to its multi-year high, rising +34.0% in about 15 weeks. The Spain sovereign cds is jumping +7.5% to 381.33 bps, the Italy sovereign cds is rising +2.12% to 456.0 bps and the Ireland sovereign cds is up +1.27% to 782.33 bps. The TED spread is now at the highest since June 2010. The Libor-OIS spread is at the widest since July 2010. The 2-Year Euro Swap 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. China Iron Ore Spot continues to pick up downside steam, plunging -31.4% since February 16th and -27.2% since Sept. 7th. Oil is trading very well, which is a large negative for emerging market economies. This is likely mainly the result of US QE3 talk, EFSF leveraging talk, the US pullout from Iraq, Islamist election victories in the Mideast and Turkey's recent incursions into Iraq. A surge back above $100/bbl would be a large negative for the fragile global economy. While short-term traders focus intensely on whether or not Europe will use more debt to "solve" an acute debt crisis, the real question is whether or not the Eurozone will be able to turn around the deteriorating economies of the region with their current actions. I expect US stocks to trade modestly lower into the close from current levels on global debt angst, profit-taking, technical selling, rising energy prices, emerging markets inflation fears, rising financial sector pessimism, earnings outlooks, global growth worries and more shorting.

Today's Headlines

Bloomberg:

• German, French Notes Advance on Debt-Crisis Concerns; Greek Bonds Slide. German and French two-year notes rose, with Germany’s yields dropping the most in seven weeks, amid speculation European leaders will fail to agree on a solution to the region’s debt crisis and avoid a Greek default. The securities extended gains after the U.K. government said a meeting of European Union finance ministers scheduled for tomorrow had been canceled. The EU leaders’ summit will still take place as scheduled, the statement said. Greek notes fell, sending two-year yields toward a euro-era record. Spain sold 3.48 billion euros ($4.83 billion) of bills, and the Netherlands auctioned 2 billion euros of notes. “If there’s any stumbling block or any sign of significant disunity, then without a doubt that will hurt the periphery and support German bonds,” said Orlando Green, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “We have that divergence in terms of spread -- that seems to be the obvious way it will go.”
• Bigger Bailout Fund for Europe Needs Work as Germany Faces Parliament Vote. Boosting the effectiveness of Europe’s bailout fund will require further talks with investors as German lawmakers prepare to vote on its new powers tomorrow, a European Union document showed. While the European Financial Stability Facility can be bolstered under two models that may be combined and implemented “quickly,” the extent to which the fund is leveraged can only be ascertained after discussions with investors and rating companies, the document provided to German lawmakers said. The draft underscores the gaps remaining in European Union efforts to address the debt crisis as Chancellor Angela Merkel and fellow leaders prepare to return to Brussels tomorrow for a second summit in four days. EU leaders are still jousting with banks over the size of losses they take on Greek bonds while deliberating over leveraging the fund after ruling out tapping the European Central Bank’s balance sheet. “A lot of people will wait to see the detail” of how the EFSF capacity is increased, Kit Juckes, head of foreign-exchange research at Societe Generale SA in London, said in an interview on Bloomberg Television’s “Surveillance Midday” with Tom Keene. “It’s hard to see that the ECB isn’t going to have to print some of this.”
• Bank Bond Risk Increases as Finance Ministers' Meeting Canceled. The cost of insuring against default on European bank debt rose as a meeting of European Union finance ministers scheduled for tomorrow was canceled and U.S. consumer confidence unexpectedly fell. The Markit iTraxx Financial Index of credit-default swaps linked to senior debt of 25 banks and insurers increased 7.5 basis points to 242 and the subordinated gauge was six basis points higher at 474, according to JPMorgan Chase & Co. at 4 p.m. in London. “A complete blow up of the summit will be taken as a disaster from the market,” said Alessandro Giansanti, a senior interest-rates strategist at ING Groep NV in Amsterdam. “I think the full package will not be ready for tomorrow. There are too many details to define.” The Markit iTraxx Crossover Index of swaps on 50 companies with mostly high-yield credit ratings climbed six basis points to 714, according to JPMorgan. An increase signals a deterioration in perceptions of credit quality. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 2.5 basis points to 175 basis points. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose 4.5 basis points to 335.
• Italy Pressured by EU to Boost Economy. European leaders increased pressure on Italian Prime Minister Silvio Berlusconi to say how he will reach budget-reduction targets as German lawmakers prepared to vote on a revamped euro-area bailout package that officials raced to complete before a summit tomorrow. Italy needs to back up commitments with “specific actions” and come up with “clear timing,” European Commission spokesman Amadeu Altafaj said in Brussels today after a crisis Cabinet meeting yesterday failed to announce steps to spur growth. Berlusconi is writing a letter describing initiatives he’s planning to fight the crisis, two Italian officials said, adding that the proposals will be presented at the summit. The focus on Italy underscored a push by leaders to prevent the Greece-fueled debt crisis from swamping the third-biggest euro economy and piling risks onto France and Germany. Policy makers, pressed by politicians and investors around the world, are struggling to devise a plan that persuades markets they can stamp out the contagion.
• Consumer Confidence Falls to 2-Year Low. The New York-based Conference Board’s household sentiment index slumped to 39.8 in October, the lowest level since March 2009 and less than the most pessimistic forecast in a Bloomberg News survey, the group’s data showed today. Estimates for the confidence index in a Bloomberg News survey of 76 economists ranged from 42.5 to 52. This month’s reading was even lower than the 53.7 average during the 18-month recession that ended in June 2009. The report showed American’s outlooks for employment and incomes soured. The share of consumers who said jobs were plentiful dropped to the lowest level since December 2009, while the proportion expecting their incomes to rise over the next six months decreased to smallest in a year.
• U.S. Corporate Credit Risk Benchmark Rises as Confidence Sinks. A benchmark gauge of U.S. corporate credit risk rose from the lowest level in more than a month as consumer confidence unexpectedly sank and home prices fell. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, added 1.9 basis points to 128.1 basis points at 12:18 p.m. in New York, according to index administrator Markit Group Ltd.
  
• Reserve Bank of India Raises Rates, Signals End to Cycle on Growth Concern. India raised interest rates for a 13th time since the start of 2010 and signaled it’s nearing the end of its record cycle of increases as the economy cools. Bonds rose and the stock index climbed to near a three-month high. “The likelihood of a rate action in the December mid- quarter review is relatively low,” the Reserve Bank of India said in a statement in Mumbai today after it boosted the repurchase rate to 8.5 percent from 8.25 percent. The Reserve Bank today cut India’s growth estimate, predicting the second-slowest expansion in nine years, and blamed the government’s “expansionary” budget for stoking inflation. “The damage that rate increases are starting to inflict on the economy is getting larger,” said Sanjay Mathur, Singapore- based head of research and strategy for Asia excluding Japan at Royal Bank of Scotland Group Plc. India’s benchmark wholesale-price inflation was 9.72 percent in September, staying above 9 percent since the start of December. By comparison, consumer prices rose 7.3 percent in Brazil, 6.1 percent in China and 7.2 percent in Russia.
• Oil Rises to 12-Week High. Crude oil for December delivery increased $2.50, or 2.7 percent, to $93.77 a barrel at 1:14 p.m. on the New York Mercantile Exchange. The contract touched $94.65, the highest level since Aug. 2. Futures have rallied 24 percent since Oct. 4.
• Copper Futures Decline on Concern Europe Struggles to Resolve Debt Crisis. Copper fell for the first time in three sessions as concerns escalated that European leaders are struggling to resolve debt woes. Copper futures for December delivery fell 0.8 percent to settle at $3.4205 a pound at 1:23 p.m. on the Comex in New York.
• Hong Kong's September Exports Decline for First Time in Almost 2 Years. Hong Kong’s exports declined in September for the first time in almost two years and the government warned the outlook is “bleak,” adding to the risks the city will enter a recession. Overseas shipments fell 3 percent from a year earlier to HK$271.8 billion ($35 billion), the government said on its website today. That compared with a 6.8 percent gain in August. Exports last dropped in October 2009. Elevated unemployment in the U.S. and Europe’s debt crisis are damping economic expansion in the city by weakening overseas demand, Financial Secretary John Tsang said Oct. 16. Trade through Hong Kong is also being hurt by moderating growth in China, the world’s biggest exporting nation. “A prolonged period of low growth in the West, together with a soft landing in China, could mean further downside risk to export growth in the coming months,” Kelvin Lau, an economist at Standard Chartered Plc in Hong Kong, said before today’s report. “This should translate into a bigger drag on overall economic growth.”
• UPS(UPS) Shares Fall as Overseas Growth Cools. United Parcel Service Inc. (UPS), whose deliveries make it a proxy for the economy, fell in New York trading after declining shipments from Asia to the U.S. curbed growth in the company’s international business. UPS cut its airlift capacity for Asia as shipments to the U.S. decreased, the Atlanta-based company said on a conference call after announcing third-quarter earnings. International deliveries overall increased 4.6 percent, trailing the 6.2 percent gain in the previous three months. UPS fell 1.8 percent to $69.58 at 12:06 p.m. after dropping as much as 3.7 percent, the biggest intraday decline since Sept. 22.
• 3M(MMM) Declines After Cutting Forecast. 3M Co. (MMM) fell the most in almost a year after the maker of LCD television parts and Scotch-Brite sponges cut its 2011 forecast and posted profit that trailed analysts’ estimates for the first time in 10 quarters. Earnings will be $5.85 to $5.95 a share this year, the St. Paul, Minnesota-based company said today in a statement. 3M had predicted $6.10 to $6.25, including a 22-cent cost related to pension benefits. Electronics sales are slowing after several quarters of what 3M called “very good growth.” The company, whose stock rallied 14 percent this month before today, is seeing the effect of a slowdown in developed countries earlier than other manufacturers because some of its products, such as components for liquid-crystal-display TVs, are tied to consumer demand.

Wall Street Journal:

• NY Health Firm Will Disclose Data. New York's largest health insurance company has agreed to publicly disclose more data used to justify premium increases. The agreement is part of an effort by state Financial Services Superintendent Benjamin Lawsky to make rate increase filings public, which could result in reducing the number of requested hikes. Lawsky says Tuesday that UnitedHealth Group(UNH) has agreed to end the secrecy now. A law passed in 2010 requires insurers to seek the prior approval of the Department of Financial Services for certain health insurance rate increases. The insurers must use data to support the request. Until now, those detailed filings were kept confidential.
• China's Shadow Banking System: The Next Subprime?
  

MarketWatch:

• Cummins(CMI) Shares Tumble on Weaker Outlook.

CNBC.com:

• Meeting The Hedge Fund Demon. He is eagerly anticipating an expansion of the European Financial Stability Facility and a recapitalization of European banks. Because he thinks both will ultimately fail. "Turning the EFSF into a monoline insurance company for European sovereigns will not prevent default, and will only temporarily stem fear," he explains. He expects the EFSF expansion to temporarily calm markets, leading to tighter spreads on credit default sw span#ExplainsLink a, span#ExplainsLink a img, span#ExplainsLink a:visited img, span#ExplainsLink a:visited {border:none;} aps. But this effect will be fleeting. Eventually spreads will blow out again.
• Will US Taxpayers Be Drawn Into Euro Bailout Fund? Here’s your quick translation of the report that the International Monetary Fund is “considering” a plan to back a special investment vehicle being proposed as part of the expansion of the European Financial Stability Facility. Translation: The US taxpayer may wind up funding the EFSF bailout fund.
• Greenspan: Why European Union Is Doomed to Fail.
• EU Summit Unlikely to Reach Deal: Official. A European official says there is now serious doubt that EU heads of government will agree on a broad package of financial measures at a summit meeting in Brussels on Wednesday.

Business Insider:

• IMF Is 'Considering' Participating In EU Bailout Fund. This means a bailout from the U.S. The IMF is "considering" a plan to back a special purpose investment vehicle (SPIV) that would leverage the European Financial Stability Facility, according to Reuters. Analysts have been chattering about the size of IMF involvement in the eurozone bailout, but this is the first confirmation that the fund is actively thinking about playing an even bigger role than it is now. That would equate with a substantial contribution from the U.S., by far the largest IMF subscriber, with a quota of 17.72%.
• Citi's(C) Steven Englander: European Leaders Are Ignoring One Thing, And It Will Come Back To Haunt Them. The one area that the European leaders are ignoring, and which will come back to haunt the euro, is growth.

Zero Hedge:

• FT Reports Italian Government On Brink Of Collapse.
• Annotated European Union Document on EFSF Status.
• Charting The Impact of Eurozone Meetings on the Most Critical European Security.
  

Insider Monkey:

• Hedge Funds Lose Big on AK Steel(AKS) 3rd Quarter Report.

PIMCO:

• Gross: EU is a dysfunctional family. Recession ahead even if agreement is reached. Greek default certain, Portugal/Ireland loom.

LA Times:

• California's Unemployment Insurance Fund Debt Grows. The state has borrowed $11 billion from the federal government in recent years to pay jobless benefits, requiring hundreds of millions of dollars in interest payments to service its debt.

Open Secrets:

• Obama's New Adviser Is A Former Lobbyist, Once Represented Bank of America(BAC), Chase(JPM), Fannie Mae. Ex-Lobbying Becomes Top Obama Surrogate, Who Are the 99.95%? and More in Capital Eye Opener: Oct. 25.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 18% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty percent (40%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -22 (see trends).

Reuters:

• Heavy Weapons Lying Around Unsecured in Libya - HRW. Large numbers of weapons, including surface-to-air missiles that could down commercial airliners, are still strewn around unguarded in Libya more than two months after Muammar Gaddafi was toppled in a civil war, Human Rights Watch said on Tuesday.The New York-based group said it had seen two sites near Sirte, hometown of the late Gaddafi, containing surface-to-air missiles, tank and mortar rounds, munitions and thousands of guided and unguided aerial weapons. "Surface-to-air missiles can take down civilian aircraft, and the explosive weapons can be converted easily into car bombs and IEDs (improvised explosive devices or bombs) that have killed thousands in Iraq and Afghanistan," Peter Bouckaert, the group's emergencies director, said in a statement. He said Human Rights Watch had been warning the leaders of Libya's National Transitional Council (NTC) and its NATO supporters for months about stockpiles of unsecured weapons that had been regularly raided.
• Gold Surges as U.S. Consumer Turn Gloomy. Gold rallied sharply on Tuesday after data showed U.S. consumers were at their gloomiest in 2-1/2 years this month, which undermined the dollar and fed safe-haven demand for bullion. Earlier, a European Union spokesman said a meeting of finance ministers on Wednesday had been canceled, while euro zone officials said leaders from the single currency bloc would be unlikely to provide many hard numbers to flesh out their response to the debt crisis. EU leaders are to meet on Wednesday to discuss tentative plans for Greece's debt to be reduced, European banks to be recapitalized and the euro zone's EFSF rescue fund to be increased to provide partial insurance for sovereign bonds. Spot gold was last up 2 percent on the day at $1,685.70 an ounce, having risen by 4.0 percent over the last three trading days, its best three-day performance in two months.

Telegraph:

• Debt Crisis: Live.

Handelsblatt:

• Plans to increase the euro rescue fund's firepower are aimed at supporting Italy and should be rejected, citing German Free Democratic Party lawmaker Frank Schaeffler. The euro region's sovereign debt crisis would take a "new dimension" if Italy would require access to the European Financial Stability Facility, citing Schaeffler. Even a leveraged EFSF won't be big enough to support Italy, Schaeffler said.

Bear Radar

Style Underperformer:

• Mid-Cap Growth (-1.92%)

Sector Underperformers:

• 1) Coal -3.30% 2) Homebuilders -2.30% 3) Steel -2.21%

Stocks Falling on Unusual Volume:

• HBHC, ZION, NVS, ININ, NFLX, IIVI, HUBG, VLTR, HSTM, DMND, VRUS, CIEN, GMCR, PCH, VECO, UNFI, USTR, SFLY, JDSU, HANS, UBSI, PLCM, RMD, IGN, TNC, RZG, PJP, MMM, SCO, CMI, VLO, MPC and SLM
  

Stocks With Unusual Put Option Activity:

• 1) ASML 2) NFX 3) NTAP 4) KRE 5) KLAC
  

Stocks With Most Negative News Mentions:

• 1) NFLX 2) HUBG 3) MMM 4) RMD 5) DOW
  

Charts:

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