Stocks Soaring into Final Hour on Less Global Debt Angst, Diminishing Global Growth Fears, Less Financial Sector Pessimism, Short-Covering

Broad Market Tone:

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

Equity Investor Angst:

• VIX 25.46 -14.74%
  
• ISE Sentiment Index 110.0 +30.95%
  
• Total Put/Call .93 -7.0%
  
• NYSE Arms .48 -45.22%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 116.18 -9.65%
  
• European Financial Sector CDS Index 188.63 -16.41%
  
• Western Europe Sovereign Debt CDS Index 309.33 -9.61%
  
• Emerging Market CDS Index 255.15 -14.06%
  
• 2-Year Swap Spread 33.0 -4 bps
  
• TED Spread 42.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .00% -1 bp
  
• Yield Curve 208.0 +16 bps
  
• China Import Iron Ore Spot $120.20/Metric Tonne -5.65%
  
• Citi US Economic Surprise Index 15.20 +.3 point
  
• 10-Year TIPS Spread 2.18 +9 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +160 open in Japan
• DAX Futures: Indicating +90 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is very bullish, as the S&P 500 trades above its 200-day moving-average with volume on less financial sector pessimism, falling global debt angst, diminishing global growth worries, short-covering and technical buying. On the positive side, Coal, Alt Energy, Oil Service, Steel, Networking, Bank, I-Banking, Homebuilding, Gaming and Road & Rail shares are especially strong, rising more than 6.0%. Small-cap and cyclical shares are substantially outperforming. (XLF) has traded very well throughout the day. Lumber is up +1.28% and copper is soaring +6.56%. The 10-year yield is rising +19 bps to 2.39%. The Germany sovereign cds is plunging -17.05% to 71.33 bps, the France sovereign cds is falling -15.85% to 158.33 bps, the Spain sovereign cds is dropping -15.3% to 322.17 bps, the Portugal sovereign cds is falling -11.6% to 986.67 bps, the Ireland sovereign cds is falling -10.4% to 700.33 bps, the Russia sovereign cds is plunging -18.7% to 185.67 bps and the UK sovereign cds is dropping -13.98% to 72.0 bps. Moreover, the European Investment Grade CDS Index is falling -10.7% to 147.44 bps. On the negative side, Utility, Telecom, Wireless, Biotech, Drug and Retail shares are underperforming. Rice is still close to its multi-year high, rising +33.5% in about 15 weeks. The TED spread is at the highest since June 2010. The Libor-OIS spread is still very near the widest since July 2010. The 2-Year Euro Swap spread is still very close to its recent highs, which is also noteworthy considering the recent strong equity advance. China Iron Ore Spot continues to pick up downside steam, plunging -37.4% since February 16th and -33.6% since Sept. 7th. The AAII % Bulls jumped to 43.0 this week, while the % Bears plunged to 25.0, which is another negative. It appears as though Europe has successfully kicked the can down the road one last time. However, while European cds are plunging today, I suspect some of this is related to diminishing perceptions of their usefulness rather than improving perceptions of credit quality. Some gauges of European debt angst are actually higher today. One of the large problems over the last 15 years is the market rewarding politicians for short-term "fixes" to major problems that have devastating longer-term consequences. In my opinion, the actions that European officials have taken over the last 48 hours have dramatically raised the odds for a global recession next year. Volume and breadth were healthy today. In the short-term, stocks should be able to build on recent gains over the coming weeks after a brief period of consolidation. I expect US stocks to trade modestly higher into the close from current levels on less financial sector pessimism, diminishing global growth worries, short-covering, less global debt angst and technical buying.

Today's Headlines

Bloomberg:

• European Stocks Climb on Debt-Crisis Deal; Banks Lead Gains. European stocks rallied to the highest in 12 weeks after the region’s leaders agreed to expand a bailout fund to halt the sovereign debt crisis. BNP Paribas (BNP) SA, France’s biggest bank, and Deutsche Bank AG (DBK), Germany’s largest, surged at least 15 percent as policy makers decided to boost the firepower of the European rescue fund to 1 trillion euros ($1.4 trillion). PPR SA, the French owner of the Gucci luxury-goods brand, jumped 5.4 percent after third-quarter sales surpassed analyst estimates. The Stoxx Europe 600 Index rose 3.6 percent to 249.42 at the close, the highest since Aug. 3. The index has rallied 16 percent from this year’s low on Sept. 22 amid growing speculation that policy makers would agree on a solution to the region’s debt woes. “Some of the fear, which has been the dominant factor in the market, has been removed,” said Pierre Mouton, a fund manager who helps oversee $7.5 billion at Notz Stucki & Cie. in Geneva. “Europe came to an agreement and has a plan. This allows financial stocks to rise because there is no longer the specter of nationalization. There is a sense of relief for the banking sector.” National benchmark indexes gained in all of the 18 western European markets. Germany’s DAX jumped 5.4 percent, its biggest increase since April 2009. France’s CAC 40 climbed 6.3 percent and the U.K.’s FTSE 100 rose 2.9 percent.
• European Bank Bond Risk Falls to 3-Month Low on Crisis Accord. The cost of insuring against default on European bank debt plunged to a three-month low as the region’s leaders agreed on plans to bolster lenders’ capital as part of a strategy to stem the debt crisis. The Markit iTraxx Financial Index of credit-default swaps linked to the senior debt of 25 banks and insurers including Credit Suisse Group AG and BNP Paribas SA fell 32.5 basis points to 209, the lowest since Aug. 4, JPMorgan Chase & Co. prices at 1 p.m. in London show. The gauge, which falls as perceptions of credit quality improve, rose to a record 314 on Sept. 12. Credit-default swaps on Credit Suisse, Switzerland’s second-largest bank, narrowed 15.5 basis points to 135, and BNP Paribas fell 25 to 212.5, according to CMA. RSA Insurance Group Plc dropped 15 basis points to 129 and Hammerson PLC was 17 lower at 170. The Markit iTraxx Financial Index of banks’ subordinated debt tumbled 54 basis points to 415, JPMorgan prices show. Europe’s crisis-fighting package also eased the risk of holding sovereign debt, with the Markit iTraxx SovX Western Europe Index dropping to the lowest since Sept. 1. The gauge of credit-default swaps on 15 governments dropped 34 basis points to 300, its steepest decline since May 11. Credit-default swaps on France fell 22 basis points to 166, the lowest since Sept. 16, according to CMA. Contracts on Italy fell 32 basis points to 425, Spain dropped 33 to 346 and Portugal fell 92 basis points to 1,016. The upfront price to insure $10 million of Greek bonds for five years dropped to $5.5 million from $6 million yesterday, CMA data show. The Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings decreased 68 basis points to 652 basis points, and the Markit iTraxx Europe Index of 125 companies with investment-grade ratings was down 21 at 154 basis points.
• Europe Bolsters Crisis-Fighting Tools. European leaders bolstered their crisis-fighting toolbox with a plan that may generate only limited relief for stressed sovereigns unless it can be fleshed- out within weeks. “It remains a deal long on intentions and short on details,” said Jens Larsen, chief European economist at RBC Capital Markets in London. “Until we know how the mechanisms will work, it will be hard to judge whether this will be sufficient to entice investors to provide support to European governments.”
• Greece Default Swaps Failure to Trigger Casts Doubt on Contracts as Hedge.
  
• Hedge funds reduced bets that stocks will rise to almost the lowest level since 2009 this week, according to data from Intl. Strategy & Investment Group. ISI's index of "net exposure" to stocks slipped to 44.7 yesterday, compared with its 2011 high of 54.2 in February, according to a note sent to clients. The measure climbed to 45.5 on Oct. 12 after declining to 44 on Sept. 21, the lowest level since April 2009.
• U.S. GDP Expands at Fastest Pace in a Year. The U.S. economy grew in the third quarter at the fastest pace in a year as Americans reduced savings to boost purchases and companies stepped up investment in equipment and software. Gross domestic product, the value of all goods and services produced, rose at a 2.5 percent annual rate, up from 1.3 percent in the prior three months, Commerce Department figures showed today in Washington. Household purchases, the biggest part of the economy, increased at a 2.4 percent pace, more than forecast by economists. The increase in consumer spending last quarter followed a 0.7 percent gain in the previous period and exceeded the 1.9 percent median forecast in a Bloomberg News survey. Purchases added 1.7 percentage points to growth. Consumers lowered the pace of saving as incomes declined, the report showed. The savings rate last quarter dropped to 4.1 percent, the lowest since the last three months of 2007. After- tax incomes adjusted for inflation decreased at a 1.7 percent annual rate, the biggest drop since the third quarter of 2009. One bright spot is business investment. Corporate spending on equipment and software climbed at a 17.4 percent pace, the most in a year. It contributed 1.2 percentage point to growth.
• Jobless Claims in U.S. Decreased to 402,000. Fewer Americans filed applications for unemployment assistance last week, while those on benefit rolls dropped to a three-year low, signaling limited improvement in the labor market. First-time jobless claims decreased by 2,000 to 402,000 in the week ended Oct. 22, Labor Department figures showed today in Washington. Today’s data showed the four-week moving average, a less volatile measure than the weekly figures, rose to 405,500 last week from 403,750. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, declined to 2.9 percent from 3 percent in the prior week.
• Pending Home Sales Decrease by 4.6%. The number of contracts to purchase previously owned U.S. homes unexpectedly fell in September as lower prices and borrowing costs failed to support demand. The 4.6 percent decrease in the index of pending home sales, the biggest since April, followed a 1.2 percent drop the previous month, the National Association of Realtors said today in Washington. Economists forecast a 0.4 percent gain, according to the median of 38 estimates in a Bloomberg News survey.
• Oil Futures Advance on U.S. Economic Growth, European Debt Fund Expansion. Oil rose for the fourth time in five days as data showed the U.S. economy grew at the fastest pace in a year and as European leaders reached a deal to contain the region’s debt crisis. Crude for December delivery rose $2.99, or 3.3 percent, to $93.19 a barrel at 11:47 a.m. on the New York Mercantile Exchange. Prices have gained 1.9 percent this year.
• Copper Rises to Five Week High, Industrial Metals Jump on European Accord. Copper rose to a five-week high and industrial metals rallied after European leaders agreed to expand a bailout fund to ease the region’s sovereign-debt crisis. On the London Metal Exchange, copper for delivery in three months rose $400, or 5.2 percent, to $8,080 a metric ton ($3.67 a pound) at 3:40 p.m. Earlier, the price reached $8,140, the highest since Sept. 22. This month, the commodity has soared 15 percent, heading for the biggest gain since July 2009. Copper futures for December delivery gained 4.9 percent to $3.661 a pound on the Comex in New York.

Wall Street Journal:

• Pentagon to Lay Out Up to $260 Billion in Cuts. The Pentagon will present Congress in February with a five-year budget plan outlining up to $260 billion in defense-spending cuts, Defense Secretary Leon Panetta said Thursday.
• Alaska Official Expects Oil Drilling Boom in North Slope.
  

MarketWatch:

• CDS Spreads on U.S. Banks Slide After Europe Deal. The cost to insure debt issued by major U.S. banks fell on Thursday after European leaders unveiled a deal where private holders of Greek government debt will take a 50% writedown. The spread on credit default swaps on Bank of America(BAC) slid to 305 from 350, according to data from Markit. Spreads on Citigroup(C) also fell to 223 from 232 while Goldman Sachs(GS) saw its CDS spread decline to 265 versus 304. J.P. Morgan Chase(JPM) CDS spread slipped to 125 from 141 and Morgan Stanley(MS) likewise witnessed its spread falling to 315 versus 354 while the spread for Wells Fargo(WFC) CDS fell to 129 from 144, Markit said.

Business Insider:

• So Far, This is the Most Worrisome Chart Since The Summit. (graph)
• These 11 Countries Can Look Forward to Blazing Hot Inflation in 2012.
• The NYPD Is Now Threatening to Sue Occupy Wall Street Protesters.
  

Zero Hedge:

• Attention Finally Turns to The Two Ultimate Backstoppers of the World: Germany and China.
• Goldman's(GS) 10 Unanswered Questions on the European Bail Out and the Revised EFSF.
  

New York Times:

• What's Really Next for Apple(AAPL) in Television. The company is now close enough that it could announce the product by late 2012, releasing it to consumers by 2013. It is coming though. It’s not a matter of if, it’s a matter of when.

AppleInsider:

• Apple(AAPL) Exploring 3D Gestures to Control Devices From a Distance. Apple is investigating new ways of interacting with devices, such as using hand gestures to navigate and control a video recording system without touching anything.

CNN:

• Will Desperate Hedge Funds Spark a Year-End Rally? HFR says 69% of hedge funds experienced net asset outflows last quarter - pretty dramatic considering the hedge fund industry overall has still enjoyed net asset inflows for the year. That implies a minority of funds are doing most of the gains (or least bad losses).

Charles Gasparino:

• FOX BIZ has learned that wall street firms including canter fitz have pulled lines of credit from MF global making survival more difficult.

Telegraph:

• Libya's Liberation: Interim Ruler Unveils More Radical Than Expected Plans For Islamic Law. Mustafa Abdul-Jalil, the chairman of the National Transitional Council and de fact president, had already declared that Libyan laws in future would have Sharia, the Islamic code, as its "basic source". But that formulation can be interpreted in many ways - it was also the basis of Egypt's largely secular constitution under President Hosni Mubarak, and remains so after his fall. Mr Abdul-Jalil went further, specifically lifting immediately, by decree, one law from Col. Gaddafi's era that he said was in conflict with Sharia - that banning polygamy. In a blow to those who hoped to see Libya's economy integrate further into the western world, he announced that in future bank regulations would ban the charging of interest, in line with Sharia. "Interest creates disease and hatred among people," he said.
• Europe's Punishment Union.
  

China Business News:

• Cash positions of Guyangdong property developers have reached the lowest level in the past 10 years partly because of tightened money supply, citing research by the local government.

Bear Radar

Style Underperformer:

• Large-Cap Value (+3.39%)

Sector Underperformers:

• 1) Biotech +2.22% 2) Utilities +2.35% 3) Telecom +2.39%

Stocks Falling on Unusual Volume:

• NIHD, USMO, BRY, SFLY, IFSIA, QSII, AGNC, NIHD, PRGO, PLXS, BMC, ACOM, USMO, VMED, LHCG, MITK, CPSI, SYMC, CERN, ATHN, CELG, MLNX, MGLN, IDCC, DDD and CAM
  

Stocks With Unusual Put Option Activity:

• 1) ERTS 2) RF 3) BHP 4) MDR 5) WHR
  

Stocks With Most Negative News Mentions:

• 1) DPS 2) MDR 3) LHCG 4) BMC 5) AVP
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value (+2.75%)

Sector Outperformers:

• 1) I-Banks +6.69% 2) Coal +5.59% 3) Steel +5.29%

Stocks Rising on Unusual Volume:

• CETV, TIVO, DB, COG, BCS, OXY, PBR, PHG, HES, CDNS, CEVA, AKAM, OTEX, PMTC, APKT, CTXS, NVLS, CAR, KCE, BYI, CRR, MS, FNSR, FCX, CLF, JPM, GS, JOYG and DO
  

Stocks With Unusual Call Option Activity:

• 1) MTG 2) AVP 3) RCL 4) FXE 5) HL
  

Stocks With Most Positive News Mentions:

• 1) OC 2) HRS 3) URBN 4) CSCO 5) AXTI
  

Charts:

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

Thursday Watch

Evening Headlines

Bloomberg:

• EU Sets 50% Greek Writedown, $1.4 Trillion in Debt Fight. European leaders persuaded bondholders to take 50 percent losses on Greek debt and boosted the firepower of the rescue fund to 1 trillion euros ($1.4 trillion), responding to global pressure to step up the fight against the financial crisis. Ten hours of brinkmanship at the second crisis summit in four days delivered measures that the euro area’s stewards said point the way out of the debt quagmire, even if key details are lacking. Last-ditch talks with bank representatives led to the debt-relief accord, in an effort to quarantine Greece and prevent speculation against Italy and France from ravaging the euro zone and wreaking global economic havoc. “The world’s attention was on these talks today,” German Chancellor Angela Merkel told reporters in Brussels at about 4:15 a.m. today. “We Europeans showed tonight that we reached the right conclusions.” Measures include a bigger role for the International Monetary Fund, a commitment from Italy to do more to reduce its debt and a signal from leaders that the European Central Bank will maintain bond purchases in the secondary market.
  
• China Default Swap Bets Double as Growth Slows: Credit Markets. Investors are taking out a record amount of debt insurance on China amid concern that rising bad bank loans and slowing global growth will depress the world's biggest exporter. The net amount of Chinese sovereign debt covered by credit-default swaps doubled this year to $9.3 billion, the eighth highest of 1,000 entities tracked by the Depository Trust & Clearing Corp. Contracts on China were the sixth most-traded last week behind France, Spain, Germany, Italy and Brazil, with a daily average of $488 million.
  
• Hedge Funds to Begin Opening Data to Regulators Next Year. The U.S. Securities and Exchange Commission responded to objections from hedge funds and private- equity funds by dialing back demands in its new rule requiring fund advisers to report internal information to regulators. The commission approved its final rule in a unanimous vote today, easing the thresholds for defining which large funds will have to report the most information to regulators. The final rule, which requires some funds to begin reporting as soon as next year, also allows private-equity funds to report less often than initially proposed.
• Commodities Tumble Most in a Week, Led by Oil, Nickel on Economic Concerns. Commodities fell the most in a week, led by oil, nickel and wheat, on a bigger-than-expected gain in crude inventories and speculation that demand for U.S. grain will shrink as the global economy falters. The Standard & Poor’s GSCI Index of 24 raw materials dropped 1.8 percent after oil declined the most in more than three weeks in New York. The index retreated for the first time in four days as commodity prices declined amid concern that European debt-crisis talks are stalling. Gold and silver rose. “The markets that fell were working based on their own fundamentals and the economic outlook,” said Mike Armbruster, a commodities analyst at Altavest Worldwide Trading in Mission Viejo, California. Crude’s supply increase “was a nice excuse for that market to pull back.” The S&P GSCI index dropped to 637.76. Commodity prices have rebounded 11 percent from a 10-month low on Oct. 4. Eighteen of the commodities in the index declined today.
• Congress May Pass Another Short-Term Government Spending Measure. For the sixth time in 2011, Congress may pass another short-term spending measure to keep financing the U.S. government while lawmakers work to complete annual appropriations legislation, lawmakers said. The stopgap legislation would fund the government from the Nov. 18 expiration of the current spending authority until sometime before Congress begins its annual holiday recess in late December, House Appropriations Committee Chairman Hal Rogers told reporters today. Congress hasn’t passed any of the 12 appropriations measures for the 2012 fiscal year, which began Oct. 1.
• Want to Create Jobs? First Cut Capital-Gains Taxes: Amity Shlaes. Along with jobs, raising taxes on the rich is one of things the Wall Street protesters feel strongly about, as Andrew Cuomo, the Democratic governor of New York, is learning all too well. Cuomo has become a target for activists because he’s refusing to fight to extend a state-tax surcharge on the wealthy that expires soon. Cuomo’s insistence on protecting the rich is causing fellow Democrats to ask whether he has forgotten that he stands for workers. But Cuomo’s insistence is born of experience. Higher taxes can destroy jobs. As data from the Tax Foundation show, New Yorkers are net migrants to Connecticut. Both Cuomo and various jubilant governors in Connecticut have attributed the shift to taxes. Cuomo has said that he aims to ensure the tax regime in the Empire State stops driving others away. “I think you are kidding yourself if you think you can be one of the highest-taxed states in the nation, have a reputation for being anti-business and have a rosy economic future,” Cuomo said recently, according to the Daily News. He may also have looked at weightier studies surveying the treatment of capital nationally.
• Currency Traders in Worst Year Since 1991 as Taylor Loses 12%. Currency-trading strategies are losing the most in two decades as the volatility that's boosted volume and profits for investment banks erodes the ability of investors to make money. Three out of four Royal Bank of Scotland Group Plc indexes of foreign-exchange trading strategies are down this year, including a 2.7 percent drop through September for its carry trade index. Deutsche Bank AG's dollar-denominated Currency Returns Index has fallen 3.4 percent, the biggest drop since a 4 percent slide in 1991. The Stark Currency Traders Index and a Barclays Plc index have declined by 8.6 percent and 0.4 percent.
• Chinese Military Suspected in Hacker Attacks on U.S. Satellites. Computer hackers, possibly from the Chinese military, interfered with two U.S. government satellites four times in 2007 and 2008 through a ground station in Norway, according to a congressional commission. The intrusions on the satellites, used for earth climate and terrain observation, underscore the potential danger posed by hackers, according to excerpts from the final draft of the annual report by the U.S.-China Economic and Security Review Commission. The report is scheduled to be released next month. “Such interference poses numerous potential threats, particularly if achieved against satellites with more sensitive functions,” according to the draft. “Access to a satellite‘s controls could allow an attacker to damage or destroy the satellite. An attacker could also deny or degrade as well as forge or otherwise manipulate the satellite’s transmission.”

Wall Street Journal:

• Live Blog: European Debt-Crisis Summit.
• John Paulson Bets Wrong (Again). John Paulson’s push to scale back the bullish bets that led to steep losses earlier this year now is costing the hedge-fund titan a chance at regaining ground during this month’s stock-market rally. One of Paulson & Co.’s largest funds, Paulson Advantage, is up less than 1% in October, two investors say. The S&P500 is 9.92% higher so far this month. October’s lackluster returns come at a critical time for Paulson. Investors in Paulson’s two biggest funds have until Oct. 31 to decide whether they want to pull some or all of their money from the funds before the end of the year.
• Fed Ties Purse Strings of Banks. J.P. Morgan Chase & Co.(JPM) recently approached U.S. regulators about potentially buying back more of its shares but the giant bank was told it might not get the answer it wanted, according to people familiar with the situation. J.P. Morgan decided against submitting a formal application following the Fed's discouraging feedback. But it isn't the only big, healthy bank clashing with regulators over how it may spend its money.
• Bigger Haircuts Would Make Greek CDS Trigger More Likely. The bigger the loss or "haircut" that European officials will force private investors to take on Greek bonds, the more likely it is that an aggressive restructuring of the nation's debts would trigger payouts on the $3.7 billion of credit-default swaps tied to its bonds, analysts said Wednesday.
• Chinese Tech Giant Aids Iran. When Western companies pulled back from Iran after the government's bloody crackdown on its citizens two years ago, a Chinese telecom giant filled the vacuum. Huawei Technologies Co. now dominates Iran's government-controlled mobile-phone industry. In doing so, it plays a role in enabling Iran's state security network.

Business Insider:

• Everything That Happened at Wednesday's Big, 10-Hour EU Summit.
• DOWNGRADE WATCH: The Super Committee Is (Predictably) Deadlocked Over Taxes.

Zero Hedge:

• Here Is How The 50% Greek Haircut Is Actually Just 28%.
• Freddie CEO Leaving Company: To Get $3.9 Million For Receiving $14.5 Billion In Bailout Cash Over His Tenure.
• Gun Ownership Soars To 18 Year High: 47% Of Americans Admit To Owning A Gun. (graph)
• Boots On The Ground In China: Signs Of A Slowdown Are Obvious.

CNBC:

• FBR to Cut Workforce Up to 35%. FBR is laying off up to 35 percent of its workforce. The middle market investment bank is cutting its workforce by 30 to 35 percent as it struggles to stay profitable in a difficult environment.
• China Labor Costs Soar as Wages Rise 22%. The government, which has made it a policy priority to boost incomes, welcomed the development, but economists warned that it would add pressure to companies already struggling against weak global demand. As of the end of September, local authorities in 21 of China’s 31 provincial-level regions had increased minimum wages by an average 21.7 percent, the ministry of human resources and social security said. Several more have also promised to raise minimum wages before the end of the year.
• Visa(V) Earnings Beat But Revenue Misses; Shares Slip. Visa reported quarterly profit that beat analysts' expectations on Wednesday but revenue fell slightly short. Shares of the credit-card company slipped in after-hours trading.

IBD:

• Tibco's(TIBX) Software Knows Where You Are.

CNN:

• Investors (and the Fed) are Addicted to Liquidity. Fed vice chair Janet Yellen, Fed governor Daniel Tarullo and NY Fed president William Dudley have all hinted in speeches recently that another so-called quantitative easing program, or QE3, could be possible. Why? The Fed has already pumped trillions of dollars into the economy with the first two renditions of QE. It has left its key interest rate near zero since December 2008 and has pledged to keep rates low until the middle of 2013. And the Fed is buying even more bonds now through Operation Twist, a program that allows the central bank to sell short-term Treasuries and trade them in for longer-term ones so it doesn't have to add more to its already bloated balance sheet.What has this accomplished? The economy is still in a sluggish growth phase that feels more like a recession than a recovery. Unemployment remains above 9%.
• The 53%: We are NOT Occupy Wall Street. Occupy Wall Street protesters might say they represent 99% of the nation, but there's a growing number of Americans who are making it clear they are not part of the dissident crowd. They call themselves the 53%...as in the 53% of Americans who pay federal income taxes. And they are making their voices heard on Tumblr blogs, Twitter and Facebook pages devoted to stories of personal responsibility and work ethic. The number originates in the estimate that roughly 47% of Americans don't pay federal income tax, according to the nonpartisan Tax Policy Center. The 53 percenters stress the fact that they are paying the taxes that support the government assistance the protesters say they want.

LA Times:

• California Eyes Solar Path After Solyndra. Lawmakers and executives say Solyndra's failure shouldn't be used against the clean-tech industry.

Washington Post:

• Banks to Define Greek Bond 'Default'. The world economy may soon find itself in the hands of a small group of bankers who must make a seemingly technical decision that has huge ramifications. As European government leaders rush to find a strategy to contain the debt crisis in Greece and other nations, they are looking for the owners of Greek bonds to take a significant reduction in what they are owed — as much as 60 percent, according to some reports. That prompts a key question: Will that officially count as a “default” for purposes of the massive market that allows investors to insure against those losses? At issue is the market for “credit default swaps,” which allow investors to buy protection against an entity — whether a company or country — failing to pay its debts. If owners of Greek debt are seen as taking a voluntary cut in what they are owed, the credit default swaps would not have to pay off. If the cut is considered to be forced on debt holders, the swaps would have to pay. A committee of representatives from giant banks and other financial firms will make the call.

Politico:

• Indicted Goldman(GS) Exec Was Major Democrat Donor. Rajat Gupta, the former head of McKinsey & Co. and Goldman Sachs who pleaded not guilty today in his insider trading case, was a major Democratic donor, according to FEC data. Gupta has given to various Democratic candidates and committees, totaling just over $100,000 since 1990. He gave $2,500 to Obama during the '08 cycle and $10,000 to the Democratic Congressional Campaign Committee, plus donations to a handful of congressional candidates. Gupta cut a $23,000 check to the DNC in 2004, plus two $10,000 donations to the DCCC in 2005 and 2006. He also donated to Al Gore, Chris Dodd and Hillary Clinton, among others.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 19% 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 -21 (see trends).

Financial Times:

• Scrutiny is Price SAC Pays for Performance. Too good to be true is the argument that has dogged SAC Capital for years, as outsiders ponder how a hedge fund responsible for about 2 per cent of daily trading volume on the New York Stock Exchange can persistently be one of the industry’s best performers.
• Counterparty Risk Makes An Anxious Return. Every week the fixed income team of one large European bank takes two minutes out of its busy schedule to look at the credit default swap spreads of its competitors. They have been blowing out in recent months, a sign of rising stress at these institutions, becoming a prime marketing tool for the bank.
• Qatar Joins Mexico With 25% Oil Hedge. Qatar, a member of the Opec oil cartel, has joined Mexico in taking out an insurance policy against falling oil prices next year, hedging some of its oil for 2012 as both nations adopt a cautious view about the global economy. Oil brokers said that Mexico hedged the bulk of its net exports for the year, as it has done in the past, of around 800,000 barrels a day at a price of around $75 per barrel for the West Texas Intermediate crude. Qatar, however, hedged only a portion of its oil exports, with some brokers estimating about 200,000 b/d, a quarter of its annual oil output.

Telegraph:

• Debt Crisis: Live.
• European Banks Given Just Eight Months to Raise €106bn.
• Europe's Grand Gamble Risks Failure Without ECB. Europe's banks will be recapitalised for €100bn, first by private funds, then state funds, and only from the EFSF as a last resort. This falls well short of the €200bn figure first mooted by the IMF. Banks will have until next June to meet a core Tier 1 capital ratio of 9pc. The draft said banks must "enhance capital" and "avoid a credit crunch" at the same time, a contradiction in terms. Lenders have already begun to shrink their balance sheets rather than dilute capital. The danger is a brutal contraction of lending, perhaps by €5 trillion, according to RBS. The view in the markets is that only the ECB has the credible lending power to contain the crisis, and on that score the summit did not advance one millimetre.

People's Daily:

• More than 60% of Chinese bankers surveyed felt pressure from limited lending and uncertainty in economic growth and inflation trends, citing a survey by the China Banking Association and PricewaterhouseCoopers. More than half of the bankers felt management of their operations are under pressure from uncertain macroeconomic policy and possible regulatory changes.
• Bill Gates Opens Doors to Help China. China's Ministry of Science and Technology signed a memorandum of understanding with the Bill & Melinda Gates Foundation to invest together in research and development of new products and technologies to help with global health and agriculture. Under the $300 million project, for every dollar the foundation gives to support selected China-grown products and technologies that can help advance health and agriculture, particularly in the developing world, the ministry will offer $2 as grant money.

China Securities Journal:

• It's necessary to continue tightening the housing sector as expectations remain strong for a home price rise, China Securities Journal says today in an editorial. The upward trend in home prices hasn't changed in tier-2, 3 cities. China may take more measures after Premier Wen Jiabao said the government would adjust economic policy at a "suitable time", the editorial said.

Evening Recommendations
Citigroup Global Markets:

• Reiterated Buy on (BA), lowered target to $78.
• Reiterated Buy on (F), target $16.

Night Trading

• Asian equity indices are +.50% to +1.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 201.0 +1.0 basis point.
  
• Asia Pacific Sovereign CDS Index 153.0 unch.
• FTSE-100 futures +1.75%.
  
• S&P 500 futures +1.35%.
  
• NASDAQ 100 futures +1.33%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (IP)/.80
• (BG)/1.58
• (LLL)/2.15
• (CLI)/.67
• (CAH)/.72
• (HOT)/.39
• (JCI)/.76
• (XOM)/2.13
• (DBD)/.60
• (GR)/1.51
• (MWW)/.12
• (PHM)/.00
• (CL)/1.30
• (AET)/1.14
• (TWC)/1.14
• (ZMH)/1.03
• (CTXS)/.58
• (PFCB)/.32
• (RTN)/1.33
• (GILD)/1.00
• (MCRS)/.47
• (KLAC)/1.16
• (CLF)/3.67
• (LVS)/.52
• (ERTS)/-05
• (FII)/.38
• (CSTR)/.88
• (CERN)/.47
• (MET)/1.09
• (AMD)/.10
• (PCP)/2.04
• (AVP)/.46
• (OXY)/1.94
• (EXPE)/.73
• (HSY)/.84
• (OMX)/.23
• (DECK)/1.35
• (PG)/1.03
• (CELG)/.95
• (RCL)/1.83
• (UAL)/2.08
• (BMY)/.58
  

Economic Releases
8:30 am EST

• Advance 3Q GDP is estimated to rise +2.5% versus a +1.3% gain in 2Q.
• Advance 3Q Personal Consumption is estimated to rise +1.9% versus a +.7% gain in 2Q.
• Advance 3Q GDP Price Index is estimated to rise +2.4% versus a +2.5% gain in 2Q.
• Advance 3Q Core PCE is estimated to rise +2.2% versus a +2.3% gain in 2Q.
• Initial Jobless Claims are estimated to fall to 401K versus 403K the prior week.
• Continuing Claims are estimated to fall to 3700K versus 3719K prior.
  

10:00 am EST

• Pending Home Sales for September are estimated to rise +.3% versus a -1.2% decline in August.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The 7-Year Treasury Note Auction, ECB's Weidmann speaking, Kansas City Fed Manufacturing Activity for Oct., weekly Bloomberg Consumer Comfort Index and the (ETH) Investor Conference could also impact trading today.
  

BOTTOM LINE: Asian indices are higher, boosted by financial and commodity shares in the region. I expect US stocks to open higher and to maintain gains into the afternoon. The Portfolio is 75% net long heading into the day.

Stocks Surging into Final Hour on Less Financial Sector Pessimism, Short-Covering, Diminishing Global Growth Worries, Falling Food/Energy Prices

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Most Sectors Rising
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 30.56 -5.15%
  
• ISE Sentiment Index 84.0 +18.31%
  
• Total Put/Call 1.0 -2.91%
  
• NYSE Arms .90 -59.68%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 128.59 -.29%
  
• European Financial Sector CDS Index 222.96 -1.13%
  
• Western Europe Sovereign Debt CDS Index 340.50 -.69%
  
• Emerging Market CDS Index 298.41 -4.0%
  
• 2-Year Swap Spread 37.0 -1 bp
  
• TED Spread 41.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .01% +1 bp
  
• Yield Curve 192.0 +6 bps
  
• China Import Iron Ore Spot $127.40/Metric Tonne -3.26%
  
• Citi US Economic Surprise Index 14.90 +3.0 points
  
• 10-Year TIPS Spread 2.09 +6 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +17 open in Japan
• DAX Futures: Indicating +47 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is bullish, as the S&P 500 reverses morning losses on less financial sector pessimism, diminishing global growth worries, short-covering and falling energy prices. On the positive side, Coal, Energy, Oil Service, Steel, Computer, Disk Drive, Bank, Biotech, HMO, Insurance and Homebuilding shares are especially strong, rising more than 2.0%. Small-cap and cyclical shares are substantially outperforming. (XLF) has traded well throughout the day. Oil is dropping -2.23%, lumber is up +2.09%, copper is gaining +2.54% and the UBS-Bloomberg Ag Spot Index is down -1.45%. The 10-year yield is rising +10 bps to 2.20%. The US sovereign cds is falling -2.59% to 42.04 bps. On the negative side, Defense, Internet, Software, Semi, Wireless, Retail and Education shares are lower on the day. Tech shares have traded poorly throughout the day. Despite the recent rally in equities, better economic data and rising inflation expectations, the 10-year yield is lower over the last 10 days, which is also a negative. Rice is still close to its multi-year high, rising +33.0% in about 15 weeks. The China sovereign cds is surging +9.54% to 148.94 bps, the Italy sovereign cds is gaining +.65% to 457.33 bps and the Portugal sovereign cds is gaining +.29% to 1,115.59 bps. The TED spread is still very near the highest since June 2010. The Libor-OIS spread is still very near 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 -33.6% since February 16th and -29.6% since Sept. 7th. Gauges of Eurozone credit angst are mixed-to-higher, which is a large negative given investor perceptions that the crisis is finally on its way to being "solved". While these perceptions may persist for awhile longer, I continue to believe leveraging the EFSF will prove a massive mistake over the intermediate-term. I expect US stocks to trade mixed-to-higher into the close from current levels on less financial sector pessimism, diminishing global growth worries, short-covering, falling food/energy prices and technical buying.