Stocks Falling into Final Hour on Rising Eurozone Debt Angst, Financial Sector Pessimism, Global Growth Fears, Technical Selling

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  
• Sector Performance: Every Sector Declining
  
• Volume: Light
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 32.16 +7.06%
  
• ISE Sentiment Index 82.0 +18.84%
  
• Total Put/Call 1.22 +31.18%
  
• NYSE Arms 1.69 +295.26%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 128.0 -.91%
  
• European Financial Sector CDS Index 260.12 +6.92%
  
• Western Europe Sovereign Debt CDS Index 348.0 +2.16%
  
• Emerging Market CDS Index 305.10 +1.28%
  
• 2-Year Swap Spread 47.0 +2 bps
  
• TED Spread 46.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 181.0 -1 bp
  
• China Import Iron Ore Spot $138.30/Metric Tonne +.44%
  
• Citi US Economic Surprise Index 36.50 +2.2 points
  
• 10-Year TIPS Spread 2.06 -3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -63 open in Japan
• DAX Futures: Indicating -52 open in Germany

Portfolio:

• Slightly Higher: On gains in my Index hedges and Emerging Markets shorts.
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and 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 fails again near its 200-day moving average on rising Eurozone debt angst, rising global growth worries, technical selling, profit-taking, more shorting and financial sector pessimism. On the positive side, Internet, Computer Service, Gaming and Airline shares are holding up well, falling less than -.5%. "Growth" stocks are outperforming "value". Copper is rising +.7%, gold is falling -.33%, oil is down -.68% and the UBS-Bloomberg Ag Spot Index is down -.56%. Major Asian equity indices rose 1-2% overnight. The Saudi sovereign cds is falling -3.71% to 113.71 bps. On the negative side, Alt Energy, Paper, Bank, Insurance, Homebuilding, REIT, I-Bank and Steel shares are under pressure, falling more than -1.75%. Lumber is falling -.87%. India shares fell another -.43% overnight despite gains in the rest of Asia and are now down -16.5% ytd. Major European equity indices fell 1-2% today. The France sovereign cds is surging +6.5% to 213.83 bps, the Spain sovereign cds is rising +8.6% to 456.17 bps, the Belgium sovereign cds is rising +5.9% to 322.33 bps, the UK sovereign cds is gaining +3.02% to 92.0 bps, the Italy sovereign cds is gaining +3.54% to 559.33 bps and the Germany sovereign cds is rising +2.8% to 93.83 bps. The TED spread continues to trend higher and is near the highest since June 2010. The 2-Year Swap spread is rising to the highest since June 2010 today. The FRA/OIS Spread is now at the highest since June 2010. The 2yr Euro Swap Spread is rising today to the highest since Nov. 2008. The 3M Euro Basis Swap is falling -1.97 bps to -112.97 bps. The Libor-OIS spread is still at the widest since July 2009, which is also noteworthy considering the recent strong equity advance. China Iron Ore Spot has plunged -27.93% since February 16th and -23.59% since Sept. 7th. Volume is poor. Given the ongoing deterioration in gauges of Eurozone debt health, the big jump in some gauges of stock market bullish sentiment and the recent equity rally, investors seem a bit complacent again. Either some new positive catalyst emerges from Europe very soon or stocks are likely range-bound at best. I expect US stocks to trade modestly lower into the close from current levels on rising Eurozone debt angst, rising global growth worries, profit-taking, more shorting, financial sector pessimism and technical selling.

Today's Headlines

Bloomberg:

• Spanish-German Spread Widens to Euro Record; Italy Bonds Slump. Spain's government bonds slid, driving yields to the most relative to German bunds since the euro was created in 1999, after Italy's five-year borrowing costs rose to the highest since June 1997 at a debt sale today. Spanish and Italian debt plunged as European Central Bank Governing Council member Jens Weidmann suggested policy makers should end their support of the region's most indebted nations. Europe's banks need to sell more Italian bonds to avoid being sucked into the debt crisis, said Christian Clausen, president of the European Banking Federation. Spain will auction up to 4 billion euros ($5.45 billion) of bonds due 2022 on Nov. 17. "The investor community is preparing for further setbacks," said David Schnautz, a fixed-income strategist at Commerzbank AG in London. Seeing Italian yields "above 7 percent last week did a lot of damage and there will be a lot of pending desire to offload here," he said. "The demand for safe-haven assets is on the front foot." The yield on 10-year Spanish bonds climbed 25 basis points, or 0.25 percentage point, to 6.10 percent at 4 p.m. London time, surpassing 6 percent for the first time since the European Central Bank was said to start buying the nation's debt on Aug. 8. The 5.5 percent securities maturing in April 2021 fell 1.715, or 17.15 euros per 1,000-euro face amount, to 95.75. The spread over German bunds widened 32 basis points to 428 basis points after touching 430 basis points. The yield on 30- year Spanish debt reached 6.73 percent, the most since Bloomberg began collecting the data in 1998. Credit-default swaps protecting Spain's government bonds rose 21 basis points to a record 441, according to CMA prices. Italian bonds fell for the first time in three days, pushing the 10-year yield 25 basis points higher to 6.70 percent, approaching the euro-era record 7.48 percent set Nov. 9. The difference in yield between 10-year Italian and German bonds expanded by 34 basis points to 490 basis points. It reached a record 575 basis points on Nov. 9. Italy's Treasury sold 3 billion euros of notes due in September 2016 at a yield of 6.29 percent, the highest since June 1997 and up from 5.32 percent at the previous auction on Oct. 13. Demand increased to 1.47 times the amount on offer, from 1.34 times last month. Spain is scheduled to auction as much as 3.5 billion euros of bills maturing in 12 months and 18 months tomorrow, before offering 5.85 percent securities maturing in 2022 on Nov. 17. Italian bonds declined even as the ECB was said to purchase the securities today, according to three people familiar with the transactions who declined to be identified because the deals are confidential. "The co-option of monetary policy for fiscal needs must come to an end," the ECB's Weidmann said today in a speech at a conference in Frankfurt. The increasing pressure on the central bank to act "lessens the imperative" on leaders to implement the "necessary measures," he said. The yield spread between German bonds and Belgian securities widened to as much as 282 basis points, the most since the euro's creation. The French-German spread increased 14 basis points to 164 basis points, and the Austrian-German yield difference climbed 13 basis points to 161 basis points.
• Merkel's CDU Delegates at Party Gathering Support Allowing Exits From Euro. German Chancellor Angela Merkel’s Christian Democratic Union voted to offer euro states a voluntary means of leaving the currency area, for the first time raising the prospect of a move not envisaged under euro rules. CDU delegates meeting in the eastern German city of Leipzig for their annual party congress backed a motion on the euro today that included a clause permitting euro exits without exclusion from the European Union. “We’re not throwing anybody out,” Finance Minister Wolfgang Schaeuble said in an interview from Leipzig with broadcaster Phoenix. “We want Greece to stay in, that everybody stays in,” he said. “But if a country can’t carry the burden or doesn’t want to carry the burden, and the Greek people have to carry a heavy load, then we have to respect the country’s decision.”
• France, Spain Default Risk Rises to Records, Credit Swaps Show. The cost of insuring against default on French and Spanish government bonds rose to records, according to traders of credit-default swaps. Swaps on France climbed six basis points to 207 as of 3 p.m. in London, surpassing the record closing price of 203.5 on Nov. 10, according to CMA. Contracts on Spain climbed 21 basis points to a record 441. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose eight basis points to 342. Belgium jumped 14 to an all-time high of 320 and Italy was 30 higher at 555. An increase signals deterioration in perceptions of credit quality. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings rose 21 basis points to 743.5, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings increased 6.25 to 179.5 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers climbed 12.5 basis points to 279.5 and the subordinated gauge was 17 higher 510.
• Euro-Area Industrial Production Drops Most in 2 1/2 Years. European industrial production declined the most in 2 1/2 years in September, led by capital and consumer goods, as the sovereign-debt crisis pushed the economy toward a recession. Production in the 17-nation euro area dropped 2 percent from August, when it rose 1.4 percent, the European Union’s statistics office in Luxembourg said today. Economists had forecast a drop of 2.3 percent, according to the median of 35 estimates in a Bloomberg News survey.
• Hungary Junk Risk Sends Yield to 2-Year High as Debt Sale Fails. Hungarian bonds tumbled, raising a benchmark yield to the highest in more than two years as the forint weakened and a government debt auction failed on mounting concern the country will lose its investment-grade rating. The forint was the world’s worst-performing currency today, losing 1.5 percent to 315.29 per euro by 4:45 p.m. in Budapest. The yield on notes due in 2017 surged 48 basis points, or 0.48 percentage point, to 8.632 percent. The cost of insuring the debt against default surged to the highest since March 2009. Standard & Poor’s will likely decide on the country’s BBB- credit grade this month, it said in the U.S. late on Nov. 11 after placing Hungary on “CreditWatch with negative implications.” Fitch Ratings cut the outlook on Hungary’s lowest investment grade to negative from stable that day. The rating outlook revision “risks adding fuel to fire given the performance of the forint of late,” BNP Paribas SA strategists led by Bartosz Pawlowski in London wrote in a report today. “We continue to expect a ratings downgrade to Hungary by the end of the month” and “a sub-investment grade rating risks outflows” from the local bond market, the strategists said. Hungary’s “unpredictable” policies, including the dismantling of checks on policies, levying of extraordinary industry taxes and forcing lenders to swallow exchange-rate losses on loans, are harming investment and growth at a time when the economic environment is deteriorating, S&P said.
• Crude Oil Declines as Italian Bond Yields Climb, Adding to Europe Concern. “There’s a growing realization that reform in Italy won’t occur overnight,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The Italian economy and political system have been confounding experts for a long time.” Crude oil for December delivery dropped $1.14, or 1.2 percent, to $97.85 a barrel at 1:01 p.m. on the New York Mercantile Exchange. Prices rose 5 percent last week and have increased for six consecutive weeks, the longest run of gains since April 2009. Brent oil for December settlement fell $2.51, or 2.2 percent, to $111.65 a barrel on the London-based ICE Futures Europe exchange.
• Buffett Bets IBM(IBM) to Avoid 'Wild Swings' That Burned Technology Investors.
• Credit Suisse Rating Under Review by Moody's. Credit Suisse Group AG (CSGN), the second- biggest Swiss bank, may have its long-term credit rating cut by Moody’s Investors Service after the investment banking unit posted a loss and income at the wealth-management division fell. The ratings company put Credit Suisse AG’s Aa1 rating and Credit Suisse Group AG’s Aa2 rating on review for a downgrade, Moody’s said in a statement today. The Zurich-based lender’s results were “more volatile” than peers and its year-to-date returns compared with risk weighted assets were weaker.
• NJ Taxes Cause Rich People to Move, Economist Says. New Jersey’s high taxes drive out wealthy residents, slowing the state’s recovery, said Charles Steindel, the treasury department’s chief economist. Property, income and estate taxes are the top reasons people leave, said Steindel, who released a study of federal tax data and a survey of financial advisers today at an economic forum in Trenton organized by the treasury department.

Wall Street Journal:

• Europe's Rescue Funds Get Little Traction. Efforts to bolster and accelerate the implementation of the euro zone's rescue funds have hit major roadblocks that will likely delay their launch and further eat away at investor confidence, say people familiar with the matter. Discussions to increase the lending capacity of the European Financial Stability Facility, the euro-zone's transitional €440 billion fund (about $600 billion), have yielded no real progress as major differences persist among member governments, said a European diplomat. Finance ministers last week pledged that an enlarged fund should be operational by December.
• ECB Bazooka Could Spur Euro Crisis. European politicians argue tirelessly that the euro isn't in crisis, and so far the markets seem to believe them. At $1.3622, the euro is up 1.7% against the dollar year-to-date, and far above the lows of $1.20 it hit in June 2010 after the euro-zone debt crisis first exploded.
  

Business Insider:

• Book: Rahm Emanuel Dumped Tons Of Freddie Stock Days Before It Collapsed.
• 10 Brilliant Insights From Hedge Fund Manager Hugh Hendry.
• Analysts Visit Shanghai, And See Some Ominous Signs For Consumers.
• The European Situation Explained In 7 Huge Slides.
• Canada Will Sell Oil To China If US Keeps Delaying The Pipeline.
  

Zero Hedge:

• Congress Must IMMEDIATELY Pass HR 1148: The "Stop Trading On Congressional Knowledge" Act.
• ECB Cut Debt Purchases To A Trickle As Operation "Kick Silvio Out" Proceeded. (graph)
• Italy-Pregnant BlackRock(BLK) Sees Write-Downs of 75-80% for Greece, Portugal and Ireland.
• Italian Austerity Details Appear as Monti Steps Up.
  

Credit Writedowns:

• Contagion: Default Probabilities Blow Out Right Across Europe.

MyFoxNY:

• Small Business Owners Plan Counter-Protest to Occupy Wall Street. Small business owners in Lower Manhattan are planning a counter-protest Monday against the Occupy Wall Street crowd. They say the motley crew hanging around Zuccotti Park is destroying their businesses. Fox 5 News reported that small businesses in the area have lost a reported $479,000 due to a lack of regular traffic. The business owners, who employ hundreds of people, will be on the steps of City Hall at 5 p.m. Their main message will be that it's time for the crowds to go home. They are also upset that Mayor Bloomberg has done nothing to help get rid of the encampment.

The Atlantic

• Obama's Team Relied on Jon Corzine for Economic Advice. (video) In 2009, the president's transition sought input from the now-former governor, who resigned his post at MF Global this month. Will it be an issue in 2012?

Reuters:

• EU Financial Transaction Tax Would Be "Suicide" - Osborne. A European financial transaction tax would be catastrophic for the continent without the participation of countries such as the United States and China, Chancellor George Osborne said on Monday. European Union policymakers have suggested a tax on financial trading to raise cash for a range of areas from development to bailouts, but Britain has rejected the idea, to safeguard London's position as a global centre of finance. "Proposals for a Europe-only financial transactions tax are a bullet aimed at the heart of London," Osborne said in article for the London Evening Standard newspaper. "The ideas of a tax on mobile financial transactions that did not include America or China would be economic suicide for Britain and for Europe." "The EU should be coming forward with new ideas to promote growth, not undermine it."
• U.S. Concerned About U.N. Nuclear Work With Syria. The United States took renewed aim at Syria during an International Atomic Energy Agency meeting on Monday, expressing "strong reservations" about a technical cooperation project between the U.N. body and Damascus.

Financial Times:

• Oil Shale Boom Boosts US Jobs Market.
• France Struggles as Growth Flags. With France’s economy poised on a knife-edge, growth figures for the third quarter due out on Tuesday will be watched with more than usual concern.

Telegraph:

• Why We Cannot Keep Trying To Breath Life Into The Euro Corpse. The world economy is on the brink of recession because those countries which have a natural tendency to spend don't have the money, while those who do have the money don't want to spend it.
• Debt Crisis: Live.
  

AFP:

• China Cracks Down On 'Fake Journalists and News'. China said on Monday it had launched a campaign to crack down on 'fake journalists and news' and 'illegal media outlets', as it further tightens its grip on the media in the Internet era. The move is the latest in a slew of measures introduced by Beijing in recent weeks aimed at controlling the circulation of information and the fast-growing Internet, which now has more than half a billion users in the country. The General Administration of Press and Publication (GAPP) - China's publishing body - said in a statement that 'fake newspapers and periodicals, media outlets, journalists and news' had repeatedly emerged in the country. This has 'severely disturbed the press and publication order and affected social harmony and stability,' GAPP said, adding it had launched a nationwide crackdown that would last until the end of the year.

Basler Zeitung:

• Lars Feld, an economic adviser to German Chancellor Angela Merkel, said it would be a mistake for the ECB to start printing money to help contain the region's debt crisis. Quantitative easing by purchasing bonds on a large scale "would massively damage the central bank's credibility in the longer term" and undermine its independence, Feld said in an interview. It would also "pose a certain inflation potential." He also said a splitting-up of the currency union or the exit of a member state would trigger "enormous disruptions" on financial markets and threaten banks in countries including Germany and France. "To me, this would be a nightmare," Feld said.

Globe and Mail:

• Canada's Banks Brace for Indirect Exposure to Italian Debt. With Italy teetering on the brink of a default, the question hanging over Canadian banks now is how exposed they are to the latest sovereign debt crisis brewing in Europe.

RTHK:

• Evergrande's housing price outlook in China for the rest of the year is "difficult," citing Chairman Hui Ka Yan.

Xinhua:

• China will face a "severe" external trade situation for a period of time as the global financial crisis continues to deepen, citing Vice Commerce Minister Zhong Shan.
• Yuan revaluation would cause many bankruptcies of small, medium-sized Chinese companies, without improving U.S. trade deficit, Xinhua reported in an unsigned commentary. U.S. politicians "don't have a single thought about global responsibilities" and "squeezing China" is an "old trick" in the run-ups to U.S. presidential elections, the commentary said.
  

Bear Radar

Style Underperformer:

• Small-Cap Value (-1.43%)

Sector Underperformers:

• 1) Banks -2.61% 2) Alt Energy -2.40% 3) REITs -1.91%

Stocks Falling on Unusual Volume:

• GDP, GEOY, TTEC, CTRP, SLXP, MEOH, INTX, PAAS, JOBS, DMND, GMCR, GLRE, STFC, ARMH, AMED, NILE, LHCG, VRTX, CCMP, CLNY, FII, KMT, EV, QEP and BMR
  

Stocks With Unusual Put Option Activity:

• 1) LTD 2) CTRP 3) TXT 4) VMC 5) BID
  

Stocks With Most Negative News Mentions:

• 1) CTRP 2) GMCR 3) DHI 4) COG 5) GEOY
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth (-.13%)

Sector Outperformers:

• 1) Airlines +1.09% 2) Internet +.49% 3) Computer Services +.41%

Stocks Rising on Unusual Volume:

• TGI, CRM, LNG, TIBX and ALXN
  

Stocks With Unusual Call Option Activity:

• 1) WYN 2) CTRP 3) HD 4) LOW 5) AMLN
  

Stocks With Most Positive News Mentions:

• 1) TSN 2) CL 3) PCCC 4) ROK 5) LYB
  

Charts:

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

Monday Watch

Weekend Headlines
Bloomberg:

• Merkel: EU Must Move Toward Closer Union. German Chancellor Angela Merkel said it’s time to move toward closer political union in Europe to send a message to bondholders that euro-area leaders are serious about ending the sovereign debt crisis. Speaking on the eve of her Christian Democratic Union party’s annual congress in the eastern German city of Leipzig, Merkel said that she wants to preserve the euro with all current 17 members. “But that requires a fundamental change in our whole policy,” she said. “I believe this is important for those who buy government bonds: that we make it clear that we want more Europe step by step, that is that the European Union, and the euro area in particular, grows together,” Merkel said in an interview with ZDF television late yesterday. “Otherwise people won’t believe that we can really get a handle on the problems.” Merkel will address her party at about 11 a.m. today after weeks of crisis fighting during which she raised the prospect of ejecting Greece from the euro and joined with French President Nicolas Sarkozy to call on Italy to hold to its budget pledges. After leadership changes in Italy and Greece, the chancellor is turning her attention to shaping the euro and EU’s future.
• Mario Monti to Lead New Italy Government. Former European Union Competition Commissioner Mario Monti will head a new government as Italy reaches outside the political arena for a leader to restore confidence in its ability to cut the euro region’s second- biggest debt. President Giorgio Napolitano offered Monti, 68, the post last night in Rome, less than 24 hours after Prime Minister Silvio Berlusconi resigned. Berlusconi’s government unraveled after defections ended his parliamentary majority and the country’s 10-year bond yield surged over the 7 percent threshold that prompted Greece, Ireland and Portugal to seek EU bailouts. “In a particularly difficult moment for Italy, in a very turbulent European and international landscape, the country must prevail in the challenge of redemption,” Monti said last night after meeting Napolitano in Rome. “Italy must once again be an element of strength, not of weakness, in the European Union, which we helped found and in which we must be protagonists.”
• Germany Deems Greek Exit Positive for Euro Zone, Spiegel Says. The German government assumes that the consequences of an exit of Greece from the euro area can strengthen the single-currency region in the long term, Spiegel magazine reported, without saying where it got the information. Lawmakers are preparing for Greece’s departure from the common currency in case the debt-strapped country’s new government doesn’t commit to carry forward reforms that have already been agreed to, the magazine said. In the government’s baseline scenario, the euro region would become more stable after initial turbulence, while in a very-worst-case scenario, Greece would suffer from increasing debt and recession for decades, Spiegel said.
• Spain Risks Italy's Fate as Euro Flirts With Abyss: Euro Credit. Spain risks seeing its borrowing costs rise closer to those of Italy as ECB buying fails to cap yields and slowing growth threatens to make its deficit-reduction targets unachievable. The gap between 10-year Spanish and Italian yields rose to more than 150 basis points early last week as Spain's borrowing costs held below 6%, while investors drove Italy's to a euro-era record of more than 7.48%. Since Nov. 9, the spread has narrowed to about 60 basis points, with Italian securities rallying to yield 6.5% and Spain paying 5.9%, up from as low as 5% five weeks ago. "There's a high probability of Spain following Italy," said Phyllis Reed, head of fixed-income research at Kleinwort Benson Bank in London. "In the very short term, the trigger is just the fact that we're getting close to the edge of the abyss with the euro."
  
• Prodi Calls for EU-Treaty Change to Allow Euro Exit, Focus Says. Former Italian Prime Minister Romano Prodi said European Union treaties must be changed to allow a member country to exit the 17-nation euro region, Germany’s Focus magazine reported, citing an interview. “Nobody has an interest in a collapse of the euro zone,” Prodi told Focus. “But in the long term, we need more cooperation in Europe. That requires two things: an end of the principle of unanimity and a potential way out of the union,” he was quoted as saying.
• Europe's Banks Should Keep Dumping Italian Bonds, Clausen Says. Europe’s banks need to keep dumping Italian bonds and other assets tainted by the region’s debt woes to avoid being sucked into the epicenter of the crisis, said Christian Clausen, president of the European Banking Federation. “The banks are doing exactly what they should be doing: they are reducing their risk toward this event. We can see that clearly as now Italian bonds are being sold off,” Clausen, who is also the chief executive officer of Nordea Bank AB, said in an interview in Stockholm.
• German Lawmakers Study Reducing Solar Subsidies, Focus Reports. Germany’s coalition government is considering a reduction of solar subsidies, Focus magazine reported, without saying where it got the information. The economy and environment ministries are investigating ways to limit the construction of solar collectors to 1,000 megawatts a year, Focus said. Power generation from newly installed sun panels declined to 5,200 megawatts last year from 7,800 megawatts in 2009, according to the magazine.
• Hungary May Be Pushed to Junk Grade This Month on S&P Move. Hungary’s sovereign credit grade may be cut to junk this month after Standard & Poor’s Ratings Services placed the country’s lowest investment grade on “CreditWatch with negative implications.” S&P is likely to make a decision this month on Hungary’s credit grade, currently at BBB-, the rating company said in a statement today. Fitch Ratings yesterday cut the outlook on Hungary’s lowest investment grade to negative from stable, joining S&P and Moody’s Investors Service. Hungary’s “unpredictable” policies, including the dismantling of checks on policies, levying of extraordinary industry taxes and forcing lenders to swallow exchange-rate losses on loans, are harming investment and growth at a time when the economic environment is deteriorating, S&P said. “A more unpredictable policy environment, stemming from a weakening of oversight institutions and some budgetary revenue decisions, will have a negative effect on economic growth and government finances,” S&P said. “Downside risks to Hungary’s creditworthiness are increasing as the external financial and economic environment is weakening.”
• Buybacks Surging to Four-Year High With S&P Valuations 15% Lower. U.S. companies are buying back the most stock in four years, taking advantage of record-high cash levels and low interest rates to purchase equities at valuations 15 percent cheaper than when the credit crisis began. Corporations have authorized more than $453 billion in repurchases this year, putting 2011 on track for the third- highest annual total behind 2006 and 2007, data compiled by Birinyi Associates Inc. show. Warren Buffett’s Berkshire Hathaway Inc. bought shares for the first time, and Amgen Inc. sold debt to fund its buyback. U.S. companies spent 70 percent more on their stock last quarter than a year ago, according to financial filings as of Nov. 11. Market bulls say the rise shows executives are confident the U.S. economy will avoid a recession. While the Standard & Poor’s 500 Index peaked the last time buybacks were this high, companies in the gauge are generating three times as much cash, price-earnings ratios are lower and 10-year Treasury yields are around 2 percent, data compiled by Bloomberg show. Bears say the increase means companies lack better uses for capital.
• Former Obama Adviser Predicted Solyndra Furor, Sought Chu Ouster. A former campaign adviser to President Barack Obama urged that Energy Secretary Steven Chu be replaced and warned of Republican attacks over "inside" deals including Solyndra LLC that went to Obama supporters. In a February e-mail circulated among administration officials, Dan Carol, who was an issues adviser in Obama’s 2008 presidential campaign, wrote that Obama’s clean-energy agenda was stalled because of ineffective management.
• Obama Told Hu U.S. Is 'Impatient' With China, White House Official Says. President Barack Obama told Chinese President Hu Jintao today that the U.S. public and businesses are growing “increasingly impatient and frustrated” with the pace of progress in relations between the two nations, a White House official said. Obama “made it very clear” that the U.S. wants to see greater cooperation from China on trade, currency and protecting intellectual property rights, Michael Froman, White House deputy national security adviser, told reporters.

Wall Street Journal:

• Euro Risks Hit Banks. Questions About Hedges Fester as Firms Detail Exposure. Mounting concerns over the euro-zone crisis are prompting some of the world's largest banks, including U.S. banks, to release more information about their exposure. Even so, the flow of new data has so far failed to put worries to rest, partly because of investor doubts about how well banks' hedging strategies might work in the event of a euro-zone financial shock. J.P. Morgan Chase & Co. and Goldman Sachs Group Inc., in regulatory filings this month, published tables detailing their exposures to Portugal, Ireland, Italy, Greece and Spain—figures they didn't include in previous quarterly filings.
• SEC Targets Derivatives Use. The Securities and Exchange Commission is weighing new limits and disclosure requirements on the use of derivatives in mutual funds and exchange-traded funds, and the fund industry is pushing back. Investment companies, including Vanguard Group, T. Rowe Price Group, State Street Global Advisors, and industry groups this past week submitted formal comments to the SEC in response to a request from the agency. Many of the firms defended the use of derivatives as necessary tools to manage risk in their funds, though some are amenable to broader disclosure. Vanguard executives, for example, wrote that the company's funds use derivatives to "achieve a number of benefits for our investors including hedging portfolio risk, lowering transaction costs, and achieving more favorable execution compared to traditional investments."
• Cities Hit as Funds From Bonds Pay Other Bills. Cities and states across the country are using money designated for specific purposes—such as fixing roads or sewers—in order to fill financial holes elsewhere, according to public officials and records. The moves are exposing municipalities to controversy, as federal regulators and local auditors are more heavily scrutinizing their finances to protect bond buyers and taxpayers.
• Obama's Oil Abdication. Cuba, Mexico, the Bahamas, Canada and Russia are all moving ahead on projects adjacent to our borders.

Business Insider:

• JPMorgan's(JPM) Huge Call: Italy Will Need The IMF, And A 'Big Bang' Economic Shock.
• A Brilliant Overview Of Where The Markets And The Economy Are Right Now.
• John Taylor On The Coming 'Cold And Hungary Winter In Athens' And The Inevitable Failure Of The Euro.
• Obama's Health Care Taxes Just Cost A Bunch Of Jobs At Stryker(SYK). Obama’s Affordable Health Care Act of 2010 was paid for (in part) with an excise tax on implanted medical devices. The 2.3% excise tax goes into effect in 2013. It’s already causing some of those “unintended consequences” that we keep hearing about:
• Here's One Example Of Regulations Killing A Small Business.
• Before Monday Comes, You Must Read This Interview With The Head Of The Bundesbank.
• Gingrich Shines, While Romney Plays It Safe On Foreign Policy.
• Obama To Super Committee: Get It Done, But I'm Outta Here. The president has largely steered clear of the committee since putting forward his recommendations to the committee in September — and he will be out of Washington for the next week and a half as he heads to Hawai'i, Australia, and Indonesia. The underlying strategy is simple — if an agreement can't be had, Obama wants to be far removed enough from the process to blame Congress for its failures.
  

Zero Hedge:

• Sovereign CDS, EFSF, And The IIF. We earlier discussed the desperate actions that occurred surrounding the EFSF self-aggrandizement this week and Peter Tchir, of TF Market Advisors, notes that the whole situation was bizarre and is becoming more and more Enronesque every day.
• Congressional Insider Trading Gone Wild. Back in May we penned, "Why A Hedge Fund Comprised Of Junior Congressional Democrats Should Outperform The Market By 9%" in which the simple conclusion was that insider trading is not only rampant in Congress, but completely unregulated, as it is perfectly legal for Congressional staffers to trade at their leisure on inside information.

NY Post:

• Occupy Wall Street Costs Local Businesses $479,400! It makes no cents. The Occupy Wall Street movement has cost surrounding businesses $479,400 so far, store owners said. A Post survey of a dozen restaurants, jewelry shops, beauty salons, a chain store and mom-and-pop establishments tallied almost a half-million dollars lost in the 53 days since the Zuccotti Park siege began on Sept. 17.
  

Seeking Alpha:

• Insiders And Hedge Funds Are Crazy About These Tech Stocks.

Wall Street All-Stars:

• Indicator Update 11/13/11: Big-Time Volatility. Do You Have A Plan?

Boston Herald:

• 'Cash for Clunkers' A Lemon, Studies Say. The $3 billion “Cash forClunkers” program that tried to boost the economy and improve air quality by encouraging motorists to replace older gas guzzlers with new fuel-efficient cars was an expensive fiasco that drove up the price of used cars and failed to boost sales, according to a pair of new studies. “Hundreds of thousands of clunkers were removed from the market and that caused used car prices to surge dramatically,” said Paul Bachman, research director at the Beacon Hill Institute at Suffolk University who studied the give-away. “That hurt consumers, especially young and low-income people who typically buy older vehicles.” Launched in July of 2009 by the Obama administration to help the auto industry and the environment, “Cash for Clunkers” offered consumers up to $4,500 to trade in old cars for new fuel-efficient ones.

Reuters:

• EFSF Denies Report That It Bought Its Own Bonds. The euro zone's bailout fund said on Sunday that it did not buy its own bonds last week, denying a British newspaper report that it spent more than 100 million euros ($137 million) to cover a shortfall of demand. Britain's Sunday Telegraph said that the EFSF had to step in after banks leading the deal were only able to find about 2.7 billion euros of outside demand. The 10-year bond sale raised 3 billion euros last Monday. "The EFSF did not buy its own bonds and the book was 3 billion euros," an EFSF spokesman said, referring to the 3 billion euros raised in last Monday's 10-year bond issue. Top officials of the EFSF have said the modest 3 billion euro issue was a reflection of the unstable market conditions. EFSF head Klaus Regling told the Financial Times on Friday that market upheaval had made it difficult to leverage the fund to the planned 1 trillion euros.
• UniCredit to Announce Cap Hike, Equity Unit Cuts. UniCredit (CRDI.MI), Italy's largest bank by assets, is set to announce a 7.5 bln euro rights issue, thousands of job cuts and the exit from its London-based equity sales and trading business to substantially shore up its capital, sources close to the operation said.
• APEC Countries Brace For Prolonged European Strain. Europe's economic troubles won't be solved quickly, so Asia-Pacific countries need to plan their own policy response over the medium term, a top World Bank official said on Thursday. Unlike the sudden shock of the Lehman Brothers bankruptcy in 2008, Europe's debt crisis is moving relatively slowly, and the remedies will take time, World Bank Managing Director Sri Mulyani Indrawati said. "Everybody expects this weakening of the European economy is going to be quite long because the adjustment is going to be quite severe and significant," she said in a Reuters interview on the sidelines of the Asia-Pacific Economic Cooperation summit in Honolulu. "That's why they're not just making sure that the policy response is going to be short term, six or 12 months, they're thinking more medium term."

Guardian:

• Chinese Ratings Agency Threatens US With New Debt Downgrade. The head of China's biggest ratings agency, Dagong Global Credit Rating, is warning that it may downgrade the US's sovereign debt rating again because of Washington's failure to tackle the federal budget deficit. The remarks by Dagong's chairman, Guan Jianzhong, to be broadcast in an interview with al-Jazeera on Saturday morning, come at the end of another week of deep turmoil for the world economy. Dagong, which has maintained a pessimistic outlook on US fiscal policy, has been leading the charge to downgrade US debt over the last 12 months, lowering the US rating from AA to A+ a year ago.

Times:

• U.K. Deputy Prime Minister Nick Clegg said consumer demand in Britain is dwindling. The economic divide between the nation's northern and southern regions is growing.

Der Spiegel:

• A majority of European Central Bank Governing Council members "could come to terms" with a potential Greek exit from the 17-nation euro region.

Welt am Sonntag:

• Soros Says Europe Should Rescue Banks, Not States. George Soros said European governments should concentrate on rescuing the region’s banks instead of debt-strapped euro-member countries, Germany’s Welt am Sonntag reported. Europe’s aid resources would be adequate to end the acute phase of the fiscal crisis and to provide sufficient guarantees for the banking system if deployed properly, the billionaire investor was cited as saying in an interview. Governments’ insistence that banks raise capital is “a fundamental mistake,” the newspaper cited him as saying.
• Robert Bosch GmbH is experiencing a "slight" drop in orders from southern European nations and the United States, citing an interview with CEO Franz Fehrenbach.
  

Handelsblatt:

• Germany called on Greece to offer additional guarantees such as government assets as collateral to receive the next tranche of financial help, citing an interview with Hans Michelbach, a finance spokesman for Chancellor Angela Merkel's Christian Democrats.

Dagens Naeringsliv:

• Europe's crisis is the result of "large imbalances" building up over time, Norway's premier wrote in an opinion piece today. Several countries have borrowed too much and financial stability has been jeopardized, according to Stoltenberg. This crisis is not only economic in nature, but also political, he said. Norway doesn't have a "free ticket" to low unemployment or a stable economy, and thus both authorities and businesses have to reduce the danger of a "strong backlash," he said.

CBC News:

• Ex-Ambassador Calls U.S. Pipeline Delay 'Catastrophic'. U.S. decision to put off pipeline decision could kill project, Flaherty says. The U.S. decision to delay approval of the Keystone XL pipeline is a "catastrophic" cop-out by the Obama administration, former U.S. ambassador to Canada David Wilkins said Friday. Wilkins, who lobbied for the project on behalf of the Canadian oil industry, told CBC's Power & Politics with Evan Solomon that the delay was politics at its worst. “This route has been studied and studied and studied," he said. "It’s the longest permitting process in the history of the world, I think. It sends a bad message that we’re not open for business.” Finance Minister Jim Flaherty said Friday that the delay may kill project and could add momentum to efforts to open up the Asian market for Canadian oil. “The decision to delay it that long is actually quite a crucial decision,” Flaherty told Bloomberg News at the Asia-Pacific Economic Cooperation summit in Honolulu. “I’m not sure this project would survive that kind of delay."

Yonhap News:

• Source: Hundreds of North Korean Nuclear and Missile Experts Working In Iran. Hundreds of North Korean nuclear and missile experts have been collaborating with their Iranian counterparts in more than 10 locations across the Islamic state, a diplomatic source said Sunday. The revelation lends credence to long-held suspicions that North Korea was helping Iran with a secret nuclear and missile program.

Xinhua:

• China fired rail officials after parts of a 2.3 billion yuan construction project were illegally subcontracted to unqualified builders including a former cook. Two bridges and 16 pillars at a site in Jilin province, northeast China, will also be demolished because they were build with shoddy materials, citing the Ministry of Railways.

Economic Observer:

• China's local government debt may be almost $473 billion higher than the figure given by the nation's audit office, if loans taken out by township governments are included, citing Beijing Fost Economic Consulting Company. Local authorities in China, barred from directly selling bonds or taking bank loans, set up at least 6,576 companies to raise money for roads, sewage plants and subways, according to the audit office's report. Duyang, a township in Yunfu city in the southern province of Guangdong, has more than 200 million yuan worth of debt while its annual fiscal revenue is only 500,000 yuan, citing Wu Zhanjiang, a deputy head of the township government. Some townships in Yunfu can't even afford to pay the phone bills of some of their offices and some have failed to pay some workers' salaries.

China Securities Journal:

• China has no reason to change it monetary and fiscal policy stance, citing Jia Kang, head of the Chinese Ministry of Finance's research institute for fiscal science. If problems with Italian sovereign debt continue, the euro zone will become more volatile and could push the global economy into a double-dip recession, Jia said.
• China's economic growth will likely continue to decline, hitting a bottom in 2013, citing Wang Jian, secretary general of the China Society of Macroeconomics. 2012 and 2013 GDP growth may be about 8% and 7%, respectively, Wang said.
  

Weekend Recommendations
Barron's:

• Made positive comments on (GLW), (DRI) and (KFN).
• Made negative comments on (VMC).
  

Night Trading

• Asian indices are +.25% to +2.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 190.50 -14.0 basis points.
• Asia Pacific Sovereign CDS Index 151.25 -.5 basis point.
• FTSE-100 futures +.34%.
  
• S&P 500 futures +.41%.
• NASDAQ 100 futures +.29%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (LOW)/.33
• (JCP)/.11
• (URBN)/.31

Economic Releases

• None of note

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Italy 5-year Bond Sale, Barclays Automotive Conference, BofA Merrill Energy Conference, (RAI) Investor Day and the (BK) Investor Day could also impact trading today.
  

BOTTOM LINE: Asian indices are higher, boosted by industrial and technology 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 week.

Weekly Outlook

U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as global growth worries, Eurozone debt angst and technical selling offsets short-covering, seasonality and lower food/energy prices. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 75% net long heading into the week.