Bear Radar

Style Underperformer:

• Large-Cap Value (-.81%)

Sector Underperformers:

• 1) Construction -3.31% 2) Networking -2.0% 3) Banks -1.30%

Stocks Falling on Unusual Volume:

• DLLR, PHG, GSVC, KEYN, SGEN, OPTR, DMND, SAPE, BRLI, CARB, DGII, LORL, VRUS, WCRX, JAZZ, WIN, ARTC, TWIN, UEIC, ALKS, NXTM, TZOO, MTZ, HCN, CHK, LUK and FLR
  

Stocks With Unusual Put Option Activity:

• 1) JEF 2) FNSR 3) CEDC 4) SBUX 5) AMR
  

Stocks With Most Negative News Mentions:

• 1) ANF 2) COH 3) JWN 4) SD 5) MDC
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-cap Growth (-1.27%)

Sector Outperformers:

• 1) Restaurants +.77% 2) Semis -.44% 3) Tobacco -.60%

Stocks Rising on Unusual Volume:

• SBUX, RRGB, QSFT, SNP, MDRX, AIXG, SKUL, MDVN, MDAS, ACOR, SBUX, PANL, CREE, BRY and ACOR
  

Stocks With Unusual Call Option Activity:

• 1) SYY 2) CADX 3) MELA 4) XCO 5) SBUX
  

Stocks With Most Positive News Mentions:

• 1) ARO 2) SMRT 3) CVS 4) SBUX 5) AMD
  

Charts:

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

Friday Watch

Evening Headlines

Bloomberg:

• G-20 Urges EU to Quell Crisis as Greece Teeters. World leaders expressed impatience and irritation with Europe’s inability to defeat its two-year financial crisis as they urged swift resolution for the sake of the global economy. With Greece’s debt-ridden government at risk of collapsing as soon as today, Group of 20 chiefs meeting in Cannes, France, yesterday pushed European authorities to flesh out and enact a week-old rescue plan that has already shown signs of unraveling. “We are grappling with a lack of confidence in markets that leaders will act,” Australian Prime Minister Julia Gillard said in the French seaside resort. “It is therefore very important for leaders to act.” Such calls -- echoed by the U.S., Britain, China and Russia -- highlight international disappointment that Europe missed the G-20’s deadline of this week to deliver a fix for its fiscal woes. German Chancellor Angela Merkel and French President Nicolas Sarkozy sought to regain the initiative by keeping aid for Greece on ice and demanding Italy accelerate austerity. “The euro zone must absolutely send a message of credibility to the whole world,” Sarkozy told reporters. “When we take decisions they must be applied, when we set rules they must be respected.”
  
• Papandreou Struggles to Hold on To Power. Prime Minister George Papandreou struggled to hold on to power after Greece’s largest opposition party rebuffed his overtures to form a national government, raising the prospect of elections that could delay aid needed to prevent default. Opposition leader Antonis Samaras rejected sharing power with Papandreou and called on the premier to quit. Papandreou, 59, scrapped a referendum on an accord with the European Union to avert a split in his party before a confidence vote scheduled for midnight tonight. “I never excluded any topic from the discussion, not even my own position,” Papandreou told lawmakers in Parliament. “I am not tied to a particular post. I repeat I am not interested in being re-elected but just in saving the country.”
• U.S. Banks Guarantee More European Debt. As the European financial crisis worsened during the first half of 2011, U.S. banks increased sales of insurance against credit losses to holders of Greek, Portuguese, Irish, Spanish, and Italian debt. Guarantees provided by U.S. lenders on government, bank, and corporate debt in those countries rose by $80.7 billion, to $518 billion, according to the Bank for International Settlements. BIS doesn’t report which firms sold how much or to whom. Almost all of those guarantees are credit-default swaps, according to two people familiar with the numbers who asked not to be identified because they weren’t authorized to speak. Five banks—JPMorgan (JPM), Morgan Stanley (MS), Goldman Sachs (GS), Bank of America (BAC), and Citigroup (C) — write 97 percent of all credit-default swaps in the U.S., according to the Office of the Comptroller of the Currency.
• Don't Bet on the BRICs. Europe is turning to emerging economies to help solve its debt crisis. Too bad they can’t deliver. Despite such bold plans, however, the emerging giants are far from prepared to deliver on them. Notwithstanding their frequent shows of solidarity, the BRICs and their brethren have about as much unity as the cast of The Bachelor. Their economies have not produced the kind of innovation and competitiveness critical to long-term global growth. Western nations have amassed debt recklessly, but the new powers are about to confront massive economic problems of their own—challenges that could bring them down before they can realize their promise.
• Thai Rice Exports to Plunge on State Buying, Floods, Group Says. Rice shipments from Thailand, the largest exporter, will drop by half from November to January as a state-buying policy raises costs and flooding disrupts transport, according to the Thai Rice Exporters Association. Exports may slump to 500,000 metric tons per month from an average of 1 million tons in the first nine months as state purchases lift local prices and make Thai rice less competitive, Honorary President Chookiat Ophaswongse said by phone yesterday.
• BofA(BAC) May Swap Preferreds for $6 Billion in Shares, New Debt. Bank of America Corp., the lender whose stock lost about half its value this year, may bolster its balance sheet by exchanging preferred securities for a total of $6 billion of common shares and debt. The proposed transactions may lower interest and dividend costs and improve capital levels, the Charlotte, North Carolina- based lender said yesterday in a regulatory filing. The firm may seek to issue as much as 400 million common shares and $3 billion of senior notes in privately negotiated deals, taking advantage of lower prices for the bank’s existing securities.
• SEC Said to Review Possible Insider Trading in MF Global(MF) Bonds. The U.S. Securities and Exchange Commission is reviewing trades in MF Global Holdings Ltd. convertible bonds to determine whether some investors sold the debt based on confidential information before the firm’s demise, according to two people with direct knowledge of the matter.
• Groupon Raised $700M Pricing IPO Above Price Range. Groupon Inc. raised $700 million in its initial public offering, said two people with knowledge of the situation, 30 percent more than it sought and valuing the biggest online-coupon provider at about $12.7 billion. The Chicago-based company sold 35 million shares at $20 each, said the people, who declined to be identified because the information isn’t public. Groupon’s sale is the biggest IPO by a U.S. Internet company since Google Inc. (GOOG) raised $1.9 billion in its 2004 initial offering, according to data compiled by Bloomberg.
• Paulson's Main Hedge Fund Gained 2.4% in October, Paring Loss for the Year. John Paulson, the hedge-fund manager having the worst year of his career, rebounded 2.4 percent in his main fund in October and climbed in all his strategies, according to an investor update obtained by Bloomberg News. Paulson’s main fund, the Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, reduced its year-to-date loss to 44 percent. The gold share class advanced 3.3 percent last month and declined 27 percent this year. Paulson, 55, posted positive returns in all of his funds in October as stocks rallied. The Standard & Poor’s 500 Index of large U.S. companies jumped 11 percent last month on higher- than-estimated earnings and optimism that European leaders would take steps to contain the region’s debt crisis.

Wall Street Journal:

• Berlusconi Faces Key Party Defections. A rebellion is emerging within Italian Prime Minister Silvio Berlusconi's conservative party that could have enough force to threaten his governing majority in Parliament, said people familiar with the matter—exacerbating the premier's struggle to steer Italy through the euro-zone debt crisis. At least a half-dozen lawmakers in the lower house of Parliament, where Mr. Berlusconi has a slim majority, have forged a pact to defect from the premier's ranks in future votes, these people said. The move, in the wake of defections by two other party faithful this week, is the clearest sign yet that Mr. Berlusconi's majority is dwindling.
• Greece Blinks on Euro Threat. Greece's leadership struggled to restore political stability to the country and safeguard its membership in the euro zone, as global powers gathered in France looked for ways to halt the spiraling European debt crisis. Greek Prime Minister George Papandreou on Thursday agreed to shelve a controversial plan for a referendum on Athens's latest financial bailout. The turnabout followed a tumultuous few days that thrust Greece to the brink of political chaos, forcing euro-zone leaders to contemplate the possibility that Greece would exit from the single currency.
• MF Global(MF) Masked Debt Risks. For the past two years, MF Global Holdings Ltd. may have disguised its debt levels to investors by temporarily slashing the debt it was carrying before publicly reporting its finances each quarter, according to an analysis by The Wall Street Journal. The activity, referred to in the financial industry as "window dressing," suggests that the troubled financial firm was shouldering more risk and using more borrowed funds to facilitate its trading than investors could easily detect from the firm's regulatory filings.
• Google(GOOG) Ponders Pay-TV Business. Internet giant Google Inc. is considering a plan to offer paid cable-TV services to consumers, a move that could unleash a new wave of competition within the traditional TV business. Google has looked at ways to expand a previously announced project to build a high-speed Internet service in Kansas City, Mo., and Kansas City, Kan., adding video and phone service in a mirror of offerings from cable and telecom companies, according to people briefed on its plans. As a result, Google has discussed distributing major TV channels from companies like Walt Disney Co., Time Warner Inc. and Discovery Communications Inc.
• Slowpoke Traders Look to Gain Ground on Speedsters. In markets dominated by speed, a new idea is gaining traction: slowing down. Hedge funds, mutual funds and other big investors have been looking for ways to fight back against the powerful computer systems used by so-called high-frequency traders. Such lightening-fast systems, which use algorithms to buy and sell securities, now account for more than half of U.S. stock trading, according to market researchers.

Business Insider:

• Here's What To Look For During The Next 24 Hours In Greece.

Zero Hedge:

• Bank Of America(BAC) Posts Two $100MM+ Losses In Past Quarter. (graph)
  
• Hugh Hendry Channels Irony and Paradox In His Latest Financial Outlook.
• MF Bankruptcy(MF) Causes Biggest Foreign Bank Liquidity Scramble To 'Fed Safety' Ever, Harbinger Of Major Eurobank Stress. (graph)
  

CNBC:

• As Athens Debates Bailout, EU Weighs Greek Exit. While Greece's teetering government continued to debate whether to stay in the euro on Thursday, European leaders talked for the first time of a possible Greek exit to preserve the single currency.
  
• AMD(AMD) to Cut Workforce 10% by Next Year. Advanced Micro Devices unveiled a plan Thursday to save about $200 million of operating costs in 2012 by slashing its global workforce by 10 percent and streamlining internal business processes.
• Sony(SNE) Tumbles After Forecasting Big Annual Loss. Shares in Sony tumbled nearly 10 percent on Friday, the first day of trading after it warned of a fourth straight year of losses, with its television unit alone set to lose $2.2 billion on tumbling demand and a surging yen.
• Fresh Round of Job Cuts Hits Banks Across Asia. Banks embarked on another round of job cuts this week in Asia, laying off hordes of staff in fixed-income, derivatives and equities businesses, hit by weak trading revenues and a slowdown in dealmaking and new issues.

NY Times:

• As Regulators Pressed Changes, Corzine Pushed Back, and Won.

LA Times:

• U.S. Backs Away From Sanctions On Iran Central Bank. Despite vows to punish Iran for an alleged plot to kill the Saudi ambassador, U.S. officials have decided that such sanctions could disrupt oil markets and further damage the U.S. and world economies.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 20% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-two percent (42%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -22 (see trends).

Reuters:

• California Asks Fannie, Freddie Cut Mortgage Debt. The California attorney general on Thursday called on Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) to cut mortgage debt on the loans they own, a suggestion the government entities have long resisted. "It has become clear to me that the only way to keep distressed California homeowners in their homes is through meaningful principal reduction," attorney general Kamala Harris said in a statement. Harris faces pressure to extract a better deal for California homeowners in long-running multi-state talks to settle mortgage abuses by top banks. The majority of underwater mortgages in the United States are owned by Fannie and Freddie, which the proposed settlement is not expected to include. Harris said Fannie and Freddie's regulator, Edward DeMarco, should step down if he is unwilling to support principal reduction on the underwater mortgages it owns.
• Probability of Recession Over 50%: ECB's Mersch. The probability of a recession has risen to over 50 percent, European Central Bank Governing Council member Yves Mersch said on Thursday in a radio interview after the ECB announced a surprise interest rate cut of a quarter point. "What a few months ago we considered a probability of less than 10 per cent, namely that we could fall back into recession and have negative economic growth over more than one quarter, that probability has in the meantime risen to over 50 percent," he told Luxembourg-based radio station RTL. "We see that over the past weeks and months the economy is practically in free fall," said Mersch, who is also governor of Luxembourg's central bank. "The markets don't believe anyone anymore and the risk aversion has risen so much that no-one is buying government bonds anymore, this is a very big danger," he added in a separate interview with Luxembourg newspaper Tageblatt on Thursday, following the rate cut.
• Freddie Mac Loss Widens, Seeks $6 Billion From Treasury. Freddie Mac , the second-largest source of U.S. mortgage finance, said on Thursday it needed to borrow an extra $6 billion from the federal goverment as the shaky U.S. housing market resulted in its worst quarterly loss in more than a year. The government-owned company said it lost $4.4 billion in the third quarter, a big increase from a $2.5 billion loss in the year-ago period. Low sale prices on foreclosed homes in its inventory, low mortgage rates on its refinanced loans, and losses on derivative investments continued to drain cash from the lender that the government rescued in 2008. The company warned of further weakness ahead as the pace of foreclosure sales picks up.
• LinkedIn(LNKD) Lifts Outlook, Stock Plan Raises Concerns. Professional networking company LinkedIn posted quarterly results that beat estimates and raised its full-year outlook, but margin expectations and plans for a share offer drew scrutiny from investors.
• Obama Advisers Fret Over Energy Pipeline's Political Risks. Stung by months of protests, President Barack Obama's advisers are worried that administration approval for a planned oil pipeline from Canada could cost him political support from Democrats in 2012. Senior officials at the White House and Obama's Chicago campaign headquarters have fielded complaints from supporters who are unhappy about TransCanada Corp's plan to build a massive pipeline to transport crude from Alberta to Texas, sources familiar with the situation said. The State Department, which is overseeing the process, said this week a delay from its end-of-year target for the Keystone XL pipeline decision was possible as it evaluates the proposal. That would push the process into next year, just as the 2012 presidential election heats up. Obama's own re-election plans depend partially on his ability to energize his base of supporters, many of whom are disillusioned with his progress in fighting climate change and attaining other environmental goals. The pipeline has galvanized that discontent, leading to protests in Washington and across the country. More than 6,000 opponents have signed up to form a human ring around the White House on Sunday in what they hope will be a dramatic signal to Obama, according to environmental groups. Obama advisers fear a decision in favor of the project could dampen enthusiasm among volunteers needed for door-to-door campaigning in battleground states that are critical to Obama's re-election. "The potential that it's actually going to deflate their bodies on the ground in key states ... is kind of a new concern," said one environmental advocate close to the administration. He said officials were "very nervous" about the overlap between activists and potential political campaigners. That concern has grounding. The Sierra Club, a prominent environmental advocacy group, said approval of the pipeline would dampen enthusiasm among its 1.4 million members and supporters to fight for Obama next year.
• Fluor(FLR) Q3, Outlook Short of Estimates; Shares Drop. Fluor Corp , the largest publicly traded U.S. engineering company, posted third-quarter earnings short of estimates and gave an outlook for next year below what analysts expected, sending its shares down 4 percent.
• Starbucks(SBUX) Profit Up Despite Economic Jitters. Starbucks Corp's quarterly profit rose slightly more than expected after the summer's economic jitters failed to dilute the coffee habits of customers at the world's largest coffee chain. The stock, which closed at $41.40, rose 3 percent to $42.65 in after-hours trading.
• Investors Want "Secrecy" Lifted in BofA(BAC) MBS Deal. Investors want to lift the "shroud of secrecy" over the proposed $8.5 billion settlement of Bank of America Corp's mortgage-backed securities liability in the coming weeks, a lawyer said on Wednesday.

Telegraph:

• ECB's Teutonic Mario Chills Bond Rescue Hopes. Investors are slowly digesting the bittersweet message from Mario Draghi, the Teutonic Italian now at the helm of the European Central Bank (ECB). While he surprised and delighted markets with a quarter-point cut in interest rates to 1.25pc, reversing last July's ill-judged rise, he also dashed hopes for mass bond purchases to save Italy and for radical action to stop the crisis spiralling out of control. That matters far more. "What everybody wanted to know was whether the ECB would step up to the plate and do something grand and we didn't get that at all," said David Owen, of Jefferies Fixed Income. In a sombre debut, Mr Draghi warned that Euroland's economy is "heading towards mild recession by year-end" with mounting risks as the debt crisis drags on. He professed his "great admiration" for the hawkish traditions of the Bundesbank, seeking to allay fears in Germany that the ECB might drift away from orthodox monetarism. This was wise. One German tabloid said the job could not safely be entrusted to anyone from Italy, where inflation is as much a part of life as pasta – a crude variant of suspicions held from top to bottom of German society. To drive home the point, Mr Draghi issued a categoric warning that the ECB would not act as final guarantor of the system, or step in to rescue feckless states. "It would be pointless to think that sovereign bond rates can stably be brought down for a protracted period by outside intervention. The first and foremost responsibility lies with national economic policies. Put your public finances in order.
• ECB President Mario Draghi Cuts The Euro's Last Lifeline. Anyone thinking that the arrival of Mario Draghi as president of the European Central Bank might herald a change in approach to the eurozone debt crisis would have been sadly disappointed by his first public appearance in the new role on Thursday.

ARD:

• German Finance Minister Wolfgang Schaeuble wants the Greek public to decide whether they want to stay in the euro area, by referendum or elections, he said in an interview with television station ARD. Germany is willing to help, but Greece must implement the agreed measures, Schaeuble said. If Greece fails to do so, then something must be done to prevent contagion for the euro as a whole.

21st Century Business Herald:

• The Chinese cities of Beijing, Shanghai and Tianjin and provinces including Jiangsu and Zhejiang plan to limit coal use to curb pollution. Beijing will limit annual coal use to 20 million tons by 2015, down 7 million tons from 2010.

ShanghaiDaily.com:

• Housing Index Posts Decline. SHANGHAI'S existing housing index fell in October for the first time in 13 months, with the majority of home owners still reluctant to offer price discounts. The index, which monitors price fluctuations of the city's previously occupied homes, lost 3 points, or 0.12 percent, from a month earlier to 2,597, halting a rally since September 2010, the Shanghai Existing House Index Office said yesterday. "Though the index finally fell after gaining for 12 consecutive months, there are still no signs of notable price cuts at the moment despite an extremely sluggish sentiment," said Zhang Shu, an analyst at the index office. "Discounts of between 5 and 10 percent are offered by a limited number of local home sellers." The prices of existing homes in prime sites, including the four downtown districts in Puxi and Lujiazui in Pudong New Area, dipped 0.03 percent on average in October. The office said prices in 69 of 128 areas it tracked fell 0.24 percent on average last month while seven areas saw a gain of 0.28 percent on average. In the remaining 52 areas, prices were flat from September. A separate research released yesterday by Shanghai Centaline Property Consultants Ltd also showed a wide gulf between owners and buyers over future home prices, affecting sales last month. The nearly 300 branches of Centaline saw sale contracts involving existing homes drop 30 percent last month from September, with those costing between 2 million yuan and 3 million yuan (US$474,000) plunging the most at 50 percent from a month earlier. Song Huiyong, research director at Centaline Property, said: "Most home seekers are now expecting a discount of between 10 percent and 20 percent."

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are +.75% to +2.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 189.50 -14.0 basis points.
  
• Asia Pacific Sovereign CDS Index 152.0 -3.0 basis points.
• FTSE-100 futures -.13%.
  
• S&P 500 futures -.11%.
  
• NASDAQ 100 futures -.02%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ALU)/.03
• (ZEUS)/.41
• (PXP)/.42
• (VIA/B)/1.03
• (TDS)/.42
  

Economic Releases
8:30 am EST

• The Change in Non-Farm Payrolls for October is estimated at 95K versus 103K in September.
• The Unemployment Rate for October is estimated at 9.1% versus 9.1% in September.
• Average Hourly Earnings for October are estimated to rise +.2% versus a +.2% gain in September.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Tarullo speaking and Papadreou's Confidence vote could also impact trading today.
  

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

Stocks Surging into Final Hour on Euro Bounce, Short-Covering, Less Tech Sector Pessimism, Technical Buying

Broad Market Tone:

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

Equity Investor Angst:

• VIX 30.95 -5.47%
  
• ISE Sentiment Index 93.0 -30.60%
  
• Total Put/Call 1.12 -3.45%
  
• NYSE Arms .77 +36.25%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 122.57 -1.68%
  
• European Financial Sector CDS Index 223.88 -2.13%
  
• Western Europe Sovereign Debt CDS Index 332.49 -1.39%
  
• Emerging Market CDS Index 276.88 -5.39%
  
• 2-Year Swap Spread 34.0 unch.
  
• TED Spread 43.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 183.0 +6 bps
  
• China Import Iron Ore Spot $122.70/Metric Tonne +1.91%
  
• Citi US Economic Surprise Index 13.60 -.4 point
  
• 10-Year TIPS Spread 2.09 -1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +140 open in Japan
• DAX Futures: Indicating +24 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is bullish, as the S&P 500 trades near session highs despite Eurozone debt angst, rising global growth worries and rising food/energy prices. On the positive side, Defense, Coal, Disk Drive, Wireless, Construction and Education shares are especially strong, rising more than +3.0%. Small-caps are outperforming. Tech shares have traded well throughout the day. Major European equity indices rose 2-3% today. The 10-year yield is rising +8 bps to 2.06%. The France sovereign cds is falling -3.89% to 177.17 bps, the Portugal sovereign cds is falling -3.37% to 1,000.17 bps, the Ireland sovereign cds is down -3.62% to 702.0 bps, the Russia sovereign cds is down -4.78% to 206.0 bps and the Brazil sovereign cds is down -4.20% to 143.50 bps. On the negative side, Restaurant, Homebuilding and Insurance shares are undperforming, rising less than +.5%. (XLF) has underperformed throughout the day. Gold is rising +1.64%, lumber is falling -1.15%, copper is flat, the UBS-Bloomberg Ag Spot Index is gaining +1.22% and oil is jumping +1.91%. Hong Kong stocks fell -2.5% overnight are are down -16.5% ytd. The China sovereign cds is up +3.9% to 146.22 bps and the Israel sovereign cds is up +1.9% to 165.14 bps. Rice is still close to its multi-year high, rising +26.8% in about 4 months. Despite equity gains today, the Italian 10-year yield was flat at 6.19%. The TED spread continues to trend higher and is near 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 near cycle highs today. The 3-month Euro Basis Swap is dropping -2.67 bps to -107.72 bps. The 3-month Euribor-OIS spread is surging +11 bps to 98.0 bps, which is the highest since March 2009 and is also noteworthy considering the recent strong equity advance. China Iron Ore Spot has plunged -36.06% since February 16th and -32.20% since Sept. 7th. The US scrap steel benchmark fell -3.98% today, which is the largest decline in months. The AAII % Bulls fell to 40.18 this week, while the % Bears rose to 29.62, which is still a negative given the macro backdrop. Many gauges of Eurozone credit angst are not confirming the strong move higher in equities off the bounce in the euro currency. The ECB's Mersch said over the last hour that economic activity in the Eurozone was in "freefall" and that the odds of recession are above 50%, which would very likely result in multiple sovereign downgrades in the region. However, equities continue to ignore negative news, which is a large positive. I expect US stocks to trade mixed-to-higher into the close from current levels on a bounce in the euro, less tech sector pessimism, short-covering, technical buying and bargain-hunting.

Today's Headlines

Bloomberg:

• Papandreou Seeks Accord to Secure Aid Without Referendum. Greek Prime Minister George Papandreou reached out to the opposition about setting up a transitional government, indicating an accord would secure aid and remove the need for a referendum on euro membership. Just hours after saying Greeks need to decide on whether their future is in the euro, Papandreou said the country belongs in the currency bloc. He welcomed support shown by the main opposition New Democracy party for last week’s rescue pact agreed with European Union leaders in Brussels. Finance Minister Evangelos Venizelos said Greece won’t hold a referendum. “We had a dilemma: either real consensus or referendum,” Papandreou told ministers, according to an e-mailed transcript of his statements. “As I said yesterday, coming out of the meeting, if there were consensus we wouldn’t need a referendum. I said if the opposition comes to the table to agree on the loan, there’s no need for a referendum.” Papandreou’s decision to call a referendum divided his ruling party and spurred the EU to halt aid, pushing Greece toward a potential default. The European Central Bank unexpectedly cut interest rates today after fallout from Greece pushed up borrowing costs and forced Europe’s rescue fund to cancel a bond issue for the first time.
• ECB Unexpectedly Lowers Rate to 1.25% as Draghi Signals No Debt Backstops. The European Central Bank unexpectedly cut interest rates at Mario Draghi’s first meeting in charge even as the new president signaled no plans to backstop the region’s most vulnerable nations as the escalating debt crisis threatens to splinter the euro region. “What makes you think that becoming the lender of last resort for governments is what you need to keep the euro region together?” Draghi asked reporters in Frankfurt today. “That is not really in the remit of the ECB. The remit of the ECB is maintaining price stability in the medium term.” ECB officials unanimously lowered the benchmark interest rate by 25 basis points to 1.25 percent, confounding 51 of 55 economists in a Bloomberg News survey.
• Euribor-OIS Spread Increases to 2 1/2-Year High After Rate Cut. A measure of banks’ reluctance to lend to one another in Europe rose to the highest in more than 2 1/2 years after the European Central Bank unexpectedly cut its benchmark interest rate. The Euribor-OIS spread, the difference between the euro interbank offered rate and overnight index swaps, was at 95 basis points as of 1 p.m. in London, from 87 yesterday. That’s the highest since March 2009. The ECB lowered its rate 25 basis points to 1.25 percent. The cost for European banks to fund in dollars rose. The three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, was 118 basis points below the euro interbank offered rate, from minus 105 yesterday, according to data compiled by Bloomberg. That’s the widest since December 2008, when the difference was minus 145. Lenders increased overnight deposits at the European Central Bank. Banks parked 253 billion euros ($349 billion) at the Frankfurt-based ECB yesterday, from 229 billion euros on Nov. 1. That compares with a year-to-date average of 68 billion euros.
• ISM Services Index Falls Slightly. The Institute for Supply Management’s index of non-manufacturing businesses eased to 52.9 in October from 53 a month earlier. A reading above 50 signals expansion. The measure was projected to climb to 53.5, according to the median forecast in a Bloomberg News survey. Estimates from 77 economists surveyed ranged from 52 to 55. The Tempe, Arizona- based group’s index averaged 56.1 in the five years to December 2007, when the last recession began.
• Economy Driving More Americans to Extreme Poverty. At least 2.2 million more Americans, a 33 percent jump since 2000, live in neighborhoods where the poverty rate is 40 percent or higher, according to a study released today by the Washington-based Brookings Institution.
• Abu Dhabi's Economic Ambitions Held Back by Dubai-Style Real Estate Slump. Abu Dhabi, the emirate that bailed out Dubai in 2009, set out to avoid the pitfalls suffered by its Persian Gulf neighbor with a decades-long plan to replace oil revenue with industry and tourism as drivers of growth. Now those plans need to be scaled back as companies behind some of the sheikhdom’s biggest developments cut jobs and postpone projects, said Ghassan Chehayeb, associate director of research at Dubai-based Exotix Ltd. Delays include beach-front apartments, the first office building that makes more energy than it uses and branches of the Louvre and Guggenheim museums. “Abu Dhabi has to face the economic realities,” Chehayeb said. The emirate’s plan “was a little too ambitious and they’re realizing now that many of those projects might not make as much economic sense as they initially thought.”
• India Food Inflation Quickens to Nine-Month High on Vegetables, Milk Costs. India’s food inflation accelerated to the highest level in nine months after prices of vegetables, milk and meat climbed. An index measuring wholesale prices of agricultural products gained 12.21 percent in the week ended Oct. 22 from a year earlier, the commerce ministry said in a statement in New Delhi today. It rose 11.43 percent the previous week. India faces a “very real threat” from food inflation, central bank Deputy Governor Subir Gokarn said yesterday. Still, the Reserve Bank of India has signaled a pause in its monetary tightening as Europe’s debt crisis threatens economic growth, saying past interest-rate increases will slow consumer demand.
• Productivity in U.S. Climbed at a 3.1% Pace. The productivity of U.S. workers rose in the third quarter for the first time this year as companies tried to cut costs following a slowdown in growth. The measure of employee output per hour increased at a 3.1 percent annual rate, following declines in each of the previous two quarters, figures from the Labor Department showed today in Washington. Expenses per employee fell at a 2.4 percent rate after a 2.8 percent gain in the second quarter.
• Limited Brands(LTD), Target(TGT) Sales Trail Oct. Estimates. U.S. retailers’ same-store sales trailed analysts’ estimates in October, the first miss this year, as flagging consumer confidence restrained shoppers at Limited Brands Inc., Target Corp. (TGT) and Saks Inc. (SKS). Sales at Limited, operator of the Victoria’s Secret chain, rose 6 percent, missing the average projection for a 6.7 percent gain from analysts surveyed by Retail Metrics Inc. Target posted a 3.3 percent increase in sales, trailing the 4.2 percent estimate. Abercrombie & Fitch Co. (ANF) shares plunged after reporting a slowdown in European flagship stores. The lowest consumer confidence since March 2009 restrained spending between the back-to-school and holiday shopping periods. Warm weather that reduced purchases of coats and sweaters also contributed to the 3.8 percent sales gain that was less than projections for a 4.4 percent increase.
• Sarkozy Confers With Obama on Transaction Tax. French President Nicolas Sarkozy said that he and President Barack Obama shared a “common analysis’ on the financial transaction tax. Speaking after bilateral talks today at a Group of 20 summit in Cannes, France, Sarkozy said that the summit needs to be ‘‘hand in glove with the U.S.’’ ‘‘We need the leadership of Barack Obama,’’ Sarkozy said.

Wall Street Journal:

• Three-Month Euro Dollar Cross Currency Basis Swap Widens. NEW YORK-(Dow Jones)- Swapping euros into dollars is becoming extremely expensive, according to a leading indicator that is at its widest level since December 2008. The three-month euro/dollar cross-currency basis swap is at minus 118 basis points versus minus 102 basis points on Wednesday. That's still shy of the minus-215 level it reached amid the financial turmoil of October 2008, but the indicator is now trading at levels where bankers say it is flashing warning signals about the functioning of money markets. The debt crisis in Europe has created stronger demand for dollars, making it more pricey to get access to such funding. Banks and other firms that operate globally and need dollars have had limited access to the greenback, as investors have been wary of lending to them, so they have been relying more heavily on the euro-dollar swap market to meet their financing needs. This route has become increasingly more costly for them. "The widening of the cross-currency basis swap has been driven by the rising risk of a Greek default and concerns about potential spillovers to the rest of the periphery," said Brian Smedley, interest rate strategist at Bank of America Merrill Lynch. "It is becoming more expensive to secure dollar funding versus euros through the FX swap market as the market prices in greater risks of a disaster scenario in Europe."
• NY Governor Cuomo to Battle Democrats Against Tax Hike on the Rich. With next year's budget deficit predicted to grow, New York Gov. Andrew Cuomo and his allies are preparing for a turbulent fight with his own party and liberal groups over his opposition to raising state taxes on the wealthy. Emboldened by the Occupy Wall Street movement and President Barack Obama's embrace of a "millionaire's tax," organized labor and their Democratic allies in Albany are getting ready to square off with Mr. Cuomo, a popular Democrat who has so far been insulated from harsh criticism.
• Jefferies(JEF) Moves to Allay Concern Over European Bet. Jefferies Group Inc., seeking to stem another steep drop in its share price, on Thursday provided details of its exposure to European debt, saying it had a net $38 million in short positions or no meaningful exposure. Shares of the midsize investment bank fell as much as 20% Thursday, adding to this week's declines, as investors' concerns about the company's European debt exposure were renewed by a credit rating downgrade of Jefferies by ratings firm Egan-Jones. Jefferies has been under fire this week since the collapse of broker-dealer MF Global Holdings Ltd. as a jittery market has focused on the possibility that other relatively small financial institutions could be brought down by bad sovereign bets and worries that those firms don't have the support of large balance sheets to absorb potential losses.
• U.S. Report Cites 'Persistent' Chinese, Russian Spying for Economic Gain.
  

CNBC.com:

• Groupon IPO Could Price as High as $21.
• White House to Be Subpoenaed for Solydra Documents. A Republican-led House panel has agreed to subpoena White House documents related to Solyndra Inc., the failed California solar company that received a half-billion-dollar federal loan. By a 14-9 vote, a House Energy and Commerce subcommittee authorized Chairman Fred Upton to issue subpoenas to top White House officials. GOP lawmakers say the subpoenas are necessary because the White House has denied or delayed requests for thousands of documents related to Solyndra. The Fremont, Calif., company received a $528 million federal loan before filing for bankruptcy protection and laying off 1,100 workers.

Business Insider:

• Stunning Photos of How Occupy Oakland Took Over The City Last Night.
• Paul Tudor Jones: In 3-4 Years, There Might Be A Once In A Generation Opportunity.
  

Zero Hedge:

• All Fixed in Greece? Not So Fast.
• Europe Closes With Equities Outperforming Credit and Financials Weakest. (graphs)
• Final Tally - Outgoing Freddie CEO Gets $4 Million Bonus to Receive $21 Billion In Bailouts After Massive 3Q Loss.
• Consumer Comfort Index and State of Economy Almost Record Lows. (graph)
  

FINalternatives:

• More Lawsuits Likely In Hedge-Fund Linked CDO Cases. Merrill Lynch and Standard & Poor's may face civil charges over their sale of collateralized debt obligations allegedly structured on behalf of Magnetar Capital. The Securities and Exchange Commission hopes to file the lawsuits in the next few months, the Financial Times reports, ending a probe that has already ensnared Citigroup, Goldman Sachs and JPMorgan Chase. All three banks settled the allegations. But the SEC is still looking into a $1.5 billion CDO set up by Merrill Lynch, now part of Bank of America, for Magnetar, as well as another structured by Mizuho Financial Group and rated by S&P. The latter would be the first such case against a rating agency. "It's fair to say we're not at the end," Kenneth Lench, head of structured and new products enforcement at the SEC, told the FT. "There will be a handful of additional cases, I believe, over the next several months."

Reuters:

• Islamist Jihad Ready for All-Out War With Israel. The Palestinian militant group Islamic Jihad, which traded deadly fire with Israel at the weekend in Gaza, does not expect a subsequent truce to last long and has at least 8,000 fighters ready for war, a spokesman said. Islamic Jihad is the second largest armed group in Gaza, after Hamas, which rules the tiny Mediterranean enclave. The two share a commitment to the destruction of Israel and both are classified as terrorist groups by most Western governments. However, while Hamas has recently spent much of its energy on the business of government, Islamic Jihad has kept its focus firmly on the conflict, gaining in prominence and enjoying significant backing from Muslim supporters, including Iran. "We are proud and honored to say that the Islamic Republic of Iran gives us support and help," Abu Ahmed, the spokesman for Islamic Jihad's armed wing, the Jerusalem Brigades, told Reuters in a rare, long interview. He denied widespread reports that Iran had provided his group with arms and smiled at suggestions it now receives more sophisticated weaponry from Tehran than Hamas. He also declined to comment on rumors that the Jihadists were trained by Iran.

Telegraph:

• Debt Crisis: Live. George Papandreou rejects calls from Greek opposition leader Antonis Samaras to resign, while his plans for a referendum over the bail-out package are scrapped.

CapitalVue:

• Chinese Rare Earth Prices Collapse. The rare earth sector in China, which had seen the two biggest domestic rare earth producers, including Inner Mongolia Baotou Steel Rare Earth Hi-Tech (600111), halting production recently in a failed bid to fight falling prices, is now facing a huge selloff, reports Economic Information. With recent media reports that the government is planning to introduce specialized invoices for the rare earth sector in order to better control industry output, curb illegal sales and smuggling activities, small companies which possess rare earths from unidentified sources had begun to dump their inventory of rare earth minerals on the market. This led to the price of such rare earth minerals plunging to 100,000 yuan per ton, compared with the price of more than 300,000 yuan per ton for rare earth minerals from official sources. Market insiders said there were many companies and individuals conducting private mining and extraction of rare earth minerals in order to take advantage of the surge in prices earlier in the year. Due to the lack of proper surveillance and control measures, the rare earth minerals produced by these companies and individuals flooded the market, accelerating the formation of a bubble. The trend of rising rare earth prices began to reverse in July when orders from downstream customers shrunk by half from the second quarter, while two-thirds of the downstream companies either halted production, or were operating at reduced capacity.
  

Bear Radar

Style Underperformer:

• Large-Cap Value (+1.38%)

Sector Underperformers:

• 1) Restaurants +.29% 2) Insurance +.58% 3) Retail +.59%

Stocks Falling on Unusual Volume:

• GEOY, WFM, FOSL, SNE, ECPG, WBMD, NTRI, NXTM, MWIV, MEAS, USPH, VCLK, LNCE, ZIP, SIMO, TRNX, BRLI, PODD, AMRS, LVLT, PCG, CVD, LNCE, THOR, CPSI, CAR, TGP, XEC, MDC, JEF, ANF, LUK, K and RIG
  

Stocks With Unusual Put Option Activity:

• 1) JEF 2) IBKR 3) RIG 4) FOSL 5) XRT
  

Stocks With Most Negative News Mentions:

• 1) WBMD 2) CECO 3) CBEY 4) F 5) ANF
  

Charts:

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