Today's Headlines

Bloomberg:

• Italian Yields Reach 7%, French Debt Slides. Italian bonds led a slump in euro- area government debt as investors abandoned all but the safest assets amid rising borrowing costs at auctions and concern the region’s financial woes are deepening. “It’s a confidence crisis,” said Elwin de Groot, a senior market economist at Rabobank Nederland in Utrecht, Netherlands. “Investors have no confidence that the euro zone can solve its problems. They will look for the most safe place they can store their money, which is Germany. Everything else is suffering.” German two-year rates dropped below 0.3 percent for the first time, while the extra yield investors demand to hold 10- year bonds from France, Belgium, Spain and Austria instead of bunds all climbed to euro-era records. Italy’s 10-year yield rose above 7 percent as prime minister-in-waiting Mario Monti wrapped up talks on forming a new government. Spain and Belgium sold less than the maximum target of bills at auctions today as financing costs increased. Italy’s 10-year yield climbed 37 basis points, or 0.37 percentage point, to 7.07 percent at 5 p.m. in London. It rose to a euro-era record 7.48 percent on Nov. 9. The 4.75 percent bond due September 2021 slid 2.285, or 22.85 euros per 1,000- euro face amount ($1,351), to 84.57. The spread investors demand to hold 10-year French debt instead of German bunds widened 26 basis points, the most since the euro started in 1999, based on closing-market rates, to 190 basis points. It touched 191 basis points, also the most since the common currency was introduced. The yield on the 10-year bund fell one basis point to 1.77 percent, less than half France’s 3.67 percent rate.
  
• Monti Moves to Establish Italian Government as Markets Ratchet Up Pressure. Mario Monti, Italy’s premier-in- waiting, wrapped up talks on forming a new government as markets piled on pressure for the former European Union Competition Commissioner to announce his new team.
  
• European Growth Fails to Accelerate in Third Quarter as Debt Slows Demand. Europe’s economic expansion failed to accelerate in the third quarter as Germany and France struggle to shore up a region bracing for a recession sparked by an escalating debt crisis. Gross domestic product increased 0.2 percent from the previous three months, when it rose at the same pace, the European Union’s statistics office in Luxembourg said in a statement today. That matched the median forecast of 39 economists surveyed by Bloomberg News. From a year-earlier, GDP increased 1.4 percent. A separate report showed that German investor confidence fell to a three-year low in November. European growth may slow in the fourth quarter as leaders continue to battle the sovereign-debt crisis. Italian and Spanish bond yields climbed today on concern governments will struggle to implement promised austerity measures. EU Economic and Monetary Affairs Commissioner Olli Rehn said last week that the recovery “has come to a standstill” and European Central Bank President Mario Draghi warned about the risk of a “mild recession” when the ECB unexpectedly cut rates this month. “An economic contraction in the current fourth quarter seems hard to avoid,” said Martin van Vliet, an economist at ING Groep NV in Amsterdam. “The risk of a new recession threatens to compound the euro zone’s debt crisis, which, judging from today’s surge in Italian and Spanish bond yields, is very much alive and kicking.” The ZEW center in Mannheim Germany said today its index of investor and analyst expectations, which aims to predict developments six months in advance, declined to minus 55.2 from minus 48.3 in October. That’s the lowest since October 2008.
• Italy, Spain Credit Risk Rise to Records as Investors Shun Debt. Italian, Spanish and French credit- default swaps surged to records as Europe’s worsening debt crisis prompts investors to shun the weakest government bonds. Swaps on Italy jumped 27 basis points to 589 and Spain climbed 23 to 480, according to CMA prices at 4 p.m. in London. France rose 19 basis points to 233 and Belgium increased 21 basis points to a record 344. An increase signals worsening perceptions of credit quality. Kokusai Global Sovereign Open, Japan’s biggest mutual fund by assets, dumped almost $1 billion of its holdings of Italian government bonds by Nov. 10, a weekly report from the fund shows. Yields on Italian and Spanish 10-year bonds surged as economic growth in Europe failed to accelerate in the third quarter, the European Union’s statistics office said today. “We now have the possibility of both Italy and Spain calling for help at the same time,” said Bill Blain, the co- head of strategy at broker Newedge Group in London. The yield on Spain’s 10-year bond rose 21 basis points to 6.32 percent, the highest since August 1997, while the yield on Italian 10-year bonds climbed 35 basis points to 7.05 percent, according to data compiled by Bloomberg. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose 19 to 362.5 basis points. Swaps on Finland rose 5 basis points to 72, the Netherlands increased 15 to 120 basis points, and Austria was up 20 at 222 basis points, according to CMA. The cost of insuring corporate debt also increased with contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings rising 28 basis points to 770.5 basis points, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was up 9 at 189.5 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers added 16.5 basis points to 297.5 and the subordinated gauge was 19 higher at 534.
• U.S. Retail Sales Beat Forecast on Autos. Retail sales rose more than projected in October as American shoppers gave the economy a boost at the start of the fourth quarter. The 0.5 percent gain, helped by the biggest jump in electronics purchases in two years, followed a 1.1 percent increase for September, Commerce Department figures showed today in Washington. The median forecast of 81 economists surveyed by Bloomberg News called for a rise of 0.3 percent.
• Hedge Funds Ejected Citigroup(C) as Shares Slid in Third Quarter. Paulson & Co., Lansdowne Partners LP, and Lone Pine Capital LLC were among investment firms that cut stakes in Citigroup Inc. as shares of the bank slid 38 percent in the third quarter. Paulson & Co., founded by billionaire John Paulson, sold about 8.4 million shares of New York-based Citigroup during the quarter while Lansdowne, Europe’s biggest equity hedge fund, sold 1.3 million and Lone Pine disposed of 3.8 million, according to regulatory filings. Hedge funds collectively sold about 30.8 million shares, based on data compiled by Bloomberg from 757 managers.
• Oil Advances in New York, Approaches $100/Barrel. Crude oil for December delivery rose $1.07, or 1.1 percent, to $99.21 a barrel at 12:46 p.m. on the New York Mercantile Exchange. Futures are up 8.6 percent this year. Brent oil for December settlement, which expires today, increased 57 cents, or 0.5 percent, to $112.46 a barrel on the London-based ICE Futures Europe exchange. The January contract climbed 52 cents, or 0.5 percent, to $111.80.
• Fisher: Regulators Should Split 'Behemoth' Banks. Federal Reserve Bank of Dallas President Richard Fisher said regulators should break up so- called too-big-to-fail financial institutions to curtail the risk they pose to financial stability. “I believe that too-big-to-fail banks are too-dangerous- to-permit,” Fisher said in the text of remarks given in New York today. “Downsizing the behemoths over time into institutions that can be prudently managed and regulated across borders is the appropriate policy response. Then, creative destruction can work its wonders in the financial sector, just as it does elsewhere in our economy.”

Wall Street Journal:

• Police Clear Zuccotti Park. Police brought the two-month-old Occupy Wall Street encampment in Zuccotti Park to an abrupt end early Tuesday morning, as hundreds of officers swept in and cleared out protesters and their tents. About 200 protesters were arrested, including many who refused to leave. The raid sent others into the surrounding streets, setting off clashes and marches throughout Lower Manhattan.
• ObamaCare and the Limits of Government. When asked if the health law was constitutional, then-Speaker Nancy Pelosi sneered, 'Are you serious?' Now the Supreme Court has decided it's a worthy question.

CNBC.com:

• More Bond Buying Would Have Risks: Fed's Bullard. More Federal Reserve bond purchases could fuel inflation risks, even though they would be a forceful measure to spur growth, a top Fed policy maker said Tuesday.
• US Pension Agency Deficit Largest Ever at $26 Billion. The U.S. agency that insures corporate pensions reported a record annual deficit of $26 billion on Tuesday with its potential exposure to financially weak companies also on the rise in a tough economy.
• Greece, EU Head For Showdown Over Bailout Pledge. Greek conservatives set themselves on a collision course with the European Commission on Tuesday, refusing its request to sign a pledge to meet the terms of a bailout designed to save the country from bankruptcy and safeguard the euro zone.

Business Insider:

• The Only Surprising Thing About The Collapse Of Europe.
• Scandal Deepens: Energy Department Pushed Solyndra To Wait To Announce Layoffs Until After Midterm Elections.
• There's Something Fishy About The White House's $433 Million Investment In A Smallpox Vaccine.

Zero Hedge:

• European Funding Crisis Accelerating. (graph)
• BTPs Break 7% Again On Italian Downgrade Rumors. (graph)
• Europe Gets It. (graph) The stock market seems to be the last group still buying into the Europe "gets it" argument.

Reuters:

• EU Plans Investigation on US Bioethanol Subsides - Diplomats. The European Union's trade authority plans to start an investigation into whether U.S. bioethanol exporters are receiving illegal state subsidies and selling their fuel to Europe at illegally low prices, diplomats said on Tuesday. The European Commission investigation could result in import tariffs as early as next year on hundreds of millions of litres of the fuel if EU officials were to unearth evidence of unfair trade practices in the United States. "The Commission wants an investigation and EU capitals will not stand in the way, so it will begin this month," said one diplomat. Specifically, trade officials will investigate EU industry allegations that tax credits in the United States allow its exporters to cut their EU selling price by about 40 percent, the diplomats said. They will also investigate EU industry complaints that the price of U.S. ethanol is 15 to 20 percent lower in Europe than at home, the diplomats added -- a practice known as dumping that is illegal under international trade rules.

Telegraph:

• Debt Crisis: Live. ECB: European Governments Won't Make Us The Lender Of Last Resort.
• EC Set to Overhaul Credit Ratings Agencies. The European Commission will crack down on credit rating agencies - forcing them to report how they assign ratings and making them liable for compensation when mistakes are found.

ShanghaiDaily.com

• Shanghai Posts Dismal Data. THE tighter government measures have caused Shanghai's industrial production to weaken sharply in October while investments fell. The outlook for manufacturing is even gloomier when the city's Purchasing Managers' Index, a harbinger of future industrial performance, fell 0.7 point from a month earlier to 47.7 in October, the lowest since July 2009. A reading below 50 means contracting manufacturing activities, and October was third straight month for Shanghai's PMI to fall below 50. Industrial output in Shanghai edged up 0.9 percent from a year earlier to 261.1 billion yuan (US$41.3 billion) last month, a sharp drop from the 4.7 percent in September and 7 percent in August, the Shanghai Statistics Bureau said yesterday. Fixed-asset investment fell 1.9 percent annually to 374.8 billion yuan in the first 10 months, led by less injection of capital in the city's infrastructure projects. Wang Zehua, an analyst at the bureau, attributed the moderation to the tight policies, a cooling economy and the city's efforts to upgrade its economic structure. "Small firms, which account for more than two-thirds of Shanghai's economic output, are under great pressure to survive in the current credit conditions," Wang said. The six key industries in Shanghai - information technology, vehicles, refined oil, fine steel, machinery equipment and biomedicine - reported their output gained 2 percent to 175.6 billion yuan in October, better than the city's average pace. But the sharp moderation in manufacturing growth and falling investment may trigger a disastrous economic slowdown, some analysts said.

Bear Radar

Style Underperformer:

• Large-Cap Value (+.39%)

Sector Underperformers:

• 1) Retail -.41% 2) Hospitals -.31% 3) Agriculture -.15%

Stocks Falling on Unusual Volume:

• GLPW, SREV, ZAGG, ATVI, CTRP, HSTM, AREX, SPLS, SHLD, CNQR, BWLD, ININ, LNKD, PVR, LRN, MRX, NRGY and COO
  

Stocks With Unusual Put Option Activity:

• 1) EWH 2) KOG 3) LQD 4) REE 5) SUN
  

Stocks With Most Negative News Mentions:

• 1) LDK 2) TSO 3) WDC 4) LOW 5) DISH
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth (-.51%)

Sector Outperformers:

• 1) Tobacco -.03% 2) Drugs -.28% 3) Defense -.29%

Stocks Rising on Unusual Volume:

• CVV, WWD, GMCR, CLNE, FIO, JEC and CFX
  

Stocks With Unusual Call Option Activity:

• 1) TTWO 2) HUM 3) ONXX 4) PEP 5) LMT
  

Stocks With Most Positive News Mentions:

• 1) BAX 2) CSC 3) QLGC 4) CVD 5) SHAW
  

Charts:

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

Tuesday Watch

Evening Headlines

Bloomberg:

• Monti Faces Resistance on Cabinet as Market Honeymoon Turns Sour. Mario Monti, Italy’s premier-in- waiting, faced political resistance on forming a Cabinet as his market honeymoon turned sour, with Italian yields surging amid concern he’ll struggle to tame Europe’s sovereign-debt crisis. Monti, a former European Union competition commissioner, struggled to get political parties to agree on participating in his so-called technical Cabinet during talks in Rome yesterday. A government lacking political representation may find it hard to muster support from the parties in parliament to pass unpopular laws. Monti said he’ll wrap up his talks today. “My commitment is aimed at making sure that politics can transform this difficult moment in a real opportunity for the nation,” Monti told a news conference in Rome yesterday. “The key thing is” to have the support of the parties, “without which I wouldn’t even take on this task, regardless of the physical presence” of politicians in the Cabinet, he said. Europe’s inability to contain a regional debt crisis that started in Greece more than two years ago led to a surge in Italian borrowing costs as investors bet on which nation may need aid next. Monti, an economist and former adviser to Goldman Sachs Group Inc., will try to reassure investors that Italy can cut a 1.9 trillion-euro ($2.6 trillion) debt and spur economic growth that has lagged behind the euro-region average for more than a decade.
  
• Italy Investors Give Junk Rating to Monti's Debt: Euro Credit. Mario Monti's Italian government will have to stave off a ratings downgrade as it refinances $420 billion of bonds and bills coming due next year, as investors price the debt as junk. The ranking implied by Italy's bonds is Ba2, two steps below investment grade and six levels lower than the country's A2 grade, according to Moody's Analytics. The only nation with investment-grade ratings whose bonds cost more to insure using credit-default swaps is Hungary, franked four steps lower. "A downgrade is definitely looming," said Holger Schmieding, London-based chief economist at Joh. Berenberg Gossler & Co., Germany's oldest private bank, which manages about $34 billion. "The business cycle has turned down and there are problems in banking which Italy is not immune to."
• Cameron Rebuffs Merkel Push for Closer European Political Union. U.K. Prime Minister David Cameron rebuffed a call by German Chancellor Angela Merkel for political union in Europe, underlining Britain’s growing distance from the 17-nation euro area as it seeks to resolve its debt crisis. The crisis offers an opportunity for powers to “ebb back” from Europe to nation states, Cameron said in a speech in London last night. Hours earlier, Merkel told her Christian Democratic Union party in the eastern German city of Leipzig that it’s time to push for closer political ties and tighter budget rules. “We should look skeptically at grand plans and utopian visions; we’ve a right to ask what the European Union should and shouldn’t do,” Cameron said. Europe should be “outward- looking, with its eyes to the world, not gazing inwards” and should have “the flexibility of a network, not the rigidity of a bloc,” he said. Merkel’s drive for closer union and Cameron’s riposte set up a potential tussle between European leaders at a summit on Dec. 9 that’s due to discuss an overhaul of the 27-nation EU’s guiding treaty to bolster the euro. Cameron, who will be in Berlin for talks with Merkel on Nov. 18, has pledged to use any changes to EU rules to claw back powers from Brussels.
  
• Fed's Fisher Sees U.S. Poised for Growth, Lower Easing Odds. Federal Reserve Bank of Dallas President Richard Fisher said the U.S. economy is “poised for growth” going into next year and that he sees a declining likelihood the central bank will need to ease further. “The direction we’re moving in is positive,” the policy maker said today in an interview from Bloomberg’s headquarters in New York. He said he expects gross domestic product to expand by 2.5 percent to 3 percent in the fourth quarter, “gradually getting better as we go through time.” “We’re poised for growth,” Fisher said, citing recent data on retail sales and consumer sentiment. “I’m more comfortable now in terms of not -- this is me personally speaking -- not anticipating greater accommodation,” he said. The risk of another recession “is negligible,” said the 62-year-old policy maker. In addition, “I’m not worried about immediate inflation right now. What I’m worried about is the efficacy of our policy as it relates to job creation.” “I don’t see us entering into other instruments other than what we’ve already done,” he said. “Our objective is to get back ultimately to an all-Treasury portfolio and a normal operating style.”
• Vinik Purchases U.S. Stock Market ETFs, Sells Emerging Markets. Jeffrey Vinik, the Boston hedge- fund manager who formerly ran the Fidelity Magellan Fund, bought $1.6 billion of exchange-traded funds that track U.S. stock markets, while selling emerging-market ETFs. Vinik bought 8.6 million shares in the SPDR S&P 500 ETF Trust last quarter, valued at $973 million, according to a Form 13F filed today with the U.S. Securities and Exchange Commission. He added $412 million of shares in the iShares Russell 2000 Index Fund, and $257 million of a fund tracking the Nasdaq 100. Vinik sold off $231 million of shares in the iShares MSCI Emerging Markets Index fund last quarter.
• SAC Capital Increases Stakes in Retailers Target(TGT), Dollar General(DG).
• Obama Microphone Slip Shows Scary Israel Rift: Jeffrey Goldberg. OK, so now we know for sure that President Barack Obama more or less detests the Israeli prime minister, Benjamin Netanyahu. Obama made this plain when he was overheard on an open microphone getting catty about Netanyahu with the French president, Nicolas Sarkozy. It was Sarkozy who first brought the harsh on Netanyahu, calling him a liar. But Obama chose not to demur. He said instead, “You’re fed up with him, but I have to deal with him even more often than you.” One mistake here is that the two violated a sacrosanct rule of microphone-wearing, which is: Always assume your mic is broadcasting your lowest-decibel mutterings directly to your most dire enemies. But the incident also revealed two mistaken interpretations of Middle East politics that could have grim consequences as the conflict over Iran’s nuclear program moves to a boil.
• Estimates for Indian corporate earnings may be downgraded as Asia's third-largest economy slows, according to N. Krishnan, head of India research at CLSA Asia-Pacific Markets. The BSE India Sensitive Index, or Sensex, has slumped 17% this year as the central bank raised borrowing costs to curb inflation that has exceeded 9% for a 11 straight months. The benchmark wholesale-price index rose 9.73% in October from a year earlier, the commerce ministry said yesterday. That compares with a 9.72% jump in September and the median forecast of 9.65% in a Bloomberg News survey of 19 economists.
• BofA(BAC) Divests China Construction Bank Stake to Boost Capital. Bank of America Corp. plans to bolster capital by divesting most of its stake in China Construction Bank Corp., locking in investment gains as concern mounts that the Asian lender's defaults may rise as China's economy slows. Bank of America will sell 10.4 billion shares this month in private transactions for a profit of about $1.8 billion, leaving the second-biggest U.S. lender with a 1 percent stake in Beijing-based Construction Bank, according to a statement yesterday.
• Tighter Oversight of China Bank Risk Needed: IMF. The International Monetary Fund called for China to expand oversight of banks as risks increase from off-balance sheet lending and a surge in property prices. "Despite ongoing reform and financial strength, China confronts a steady buildup of financial sector vulnerabilities," the Washington-based IMF said in its first formal evaluation of the Chinese system. Banks need to upgrade risk-management systems, the central bank and regulators should add skilled personnel and disclosure standards must be raised, the IMF said. While a stress test of 17 major commercial banks showed they were resilient to isolated shocks -- such as a real-estate slump or a shift in short-term versus long-term interest rates - - a combination of blows at the same time would leave the system "severely impacted," the fund said. Over the medium term, China is building up "contingent liabilities" from its government- dominated credit allocation model, which could hamper growth. Today’s report underscores concern that China’s slowing growth and a cooling property market may spark a jump in non- performing loans. The MSCI China/Financials Index of shares has tumbled 23 percent this year, underperforming the broader Shanghai Composite Index of equities, which is down 10 percent. “The existing configuration of financial policies fosters high savings, structurally high levels of liquidity and a high risk of capital misallocation and asset bubbles, particularly in real estate,” the IMF said. “The cost of these distortions is rising over time, posing increasing macro-financial risks.” “Instead of credit growth targets, market-based interest rates should become the primary instrument for managing credit expansion,” the IMF said. “This will reduce the risks that monetary control will be increasingly circumvented and ineffective in the face of capital inflows, off-balance sheet lending, and other financial innovations.”
• Eastern Europe's Growth Probably Faltered in Third Quarter on Euro Crisis. Eastern European economic growth probably slowed in the third quarter as Europe’s debt crisis damped demand for exports, the region’s main driver for expansion, and stunted lending by banks.

Wall Street Journal:

• Wenzhou's 'Annus Horribilis' Shakes China. Model of Entrepreneurial Zeal Unravels in City of Shoemakers, Nouveaux Riches; Indebted Factory Bosses Flee. The mystique of Wenzhou—the birthplace of China's private sector, where entrepreneurs have splurged on Bentleys and helicopters—is cracking. This seaside city spearheaded Chinese manufacturing, building export industries around cigarette lighters, buttons and shoes, and transforming itself into a seedbed of investment capital. Its nouveaux riches captivated the rest of China with their special brand of unapologetic consumption, whether they were buying Shanghai apartments, Shanxi coal mines or French wine. Now, the trust-based financing networks that took the place of banks in Wenzhou and fueled its binge are collapsing in the face of slowing exports.
• China Copper Hunger Fades. Demand Has Fallen, and Market Players Cite Speculators Being Reined In. For a clue as to why copper is lagging behind many other commodities, investors could look to Wenzhou, China.
• Let's Give Some Credit To Credit-Default Swaps. The birth of the credit-default swap has been well-chronicled. In recent days, though, we may have witnessed the beginning of the end for that controversial insurance policy against financial disasters.
• Timing Questions Emerge on MF Global(MF) Cash. Hundreds of millions of dollars might have gone missing from customer accounts at MF Global Holdings Ltd. as far back as four days before the securities firm filed for bankruptcy protection, people familiar with the situation said Monday. The possibility of a shortfall in customer funds on Oct. 27 suggests problems might have emerged sooner than MF Global officials initially indicated to regulators and exchange operator CME Group Inc.
• Lawmakers Near Deal on Raising FHA Loan Limits. U.S. lawmakers are near a deal to increase the maximum size of mortgage loans that can be insured by the Federal Housing Administration, a crucial source of mortgages for first-time home buyers, congressional aides said Monday. The likely agreement between House and Senate lawmakers to lift the loan limits is being hashed out as part of a spending bill for several federal agencies that is expected to clear Congress by Thursday, aides said. The loan limits fell on Oct. 1 to $625,500 for mortgages backed by the FHA, Fannie Mae and Freddie Mac in expensive markets like New York, San Francisco and Washington, D.C. The agreement being worked out between House and Senate negotiators wouldn't include loans backed by Fannie and Freddie, which are the main source of funding for U.S. home loans. Instead, the deal would restore the FHA's loan limits to as high as $729,750 in high-cost cities through 2013.
• A Short Econ Quiz for the Super Committee. Why an extra trillion in 'irresponsible' deficit spending can't become 'responsible' if paid for by higher taxes.

MarketWatch:

• Tepper's Appaloosa Cuts Bank Stakes. Appaloosa Management LP, the New Jersey hedge fund run by investor David Tepper, continued cutting stakes in banks during the third quarter, completely eliminating its positions in Bank of America Corp.(BAC), Wells Fargo(WFC) and Fifth Third Bancorp (FITB), according to a filing Monday with the Securities and Exchange Commission.
• Paulson Cuts Stakes in Gold ETF(GLD), Citigroup(C), H-P(HPQ).
• Einhorn's Greenlight Bulks Up on Apple(AAPL), Microsoft(MSFT).
  

Business Insider:

• Professor: Oh Please, Of Course Congressional Insider Trading Is Totally Illegal.
• FULL DETAILS: How Congress Insider Traders Abused The Public's Trust During The Financial Crisis. Specifically, Schweizer tells how on September 16, Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke held a private meeting with legislators in which they reported that the economy was in deep trouble and predicted near-term disaster in the markets. Congressmen privy to this information reacted--not by dropping everything and drawing up a plan to save the economy, but by dumping stock and avoiding the losses everyone else would take in the coming month. Others bought stocks in financial firms that would later be saved by the federal government. If this behavior had happened in the private sector, Congress would be outraged. The fact that it happened in Congress should have the public outraged.
• Here's Video Of The Bizarre Bob Costas-Jerry Sandusky Interview.
• Yale Bans Sex Week After Finding Organizers In Bed With The Porn Industry.
  

Zero Hedge:

• Bearish Euro Exposure Continues To Drop. (graph)
  

CNBC:

• Greece's New Coalition Is Already Divided Over Austerity. Greece's conservatives vowed on Monday to reject any new austerity measures in return for the aid that is keeping Athens from bankruptcy, signaling a new coalition government may not enjoy the kind of cross-party support its lenders demand.

The Detroit News:

• U.S. Boosts Estimate of Auto Bailout Losses to $23.6B. The Treasury Department dramatically boosted its estimate of losses from its $85 billion auto industry bailout by more than $9 billion in the face of General Motors Co.'s(GM) steep stock decline. In its monthly report to Congress, the Treasury Department now says it expects to lose $23.6 billion, up from its previous estimate of $14.33 billion. The Treasury now pegs the cost of the bailout of GM, Chrysler Group LLC and the auto finance companies at $79.6 billion.
  

Financial Times:

• Toll road operators in Greece have been hit by mass toll-dodging as some Greek road-users join a civil disobedience campaign in response to their country's economic crisis.

Telegraph:

• Spain and Italy's Borrowing Costs Soar as Angela Merkel Remains Defiant Over Eurobonds. Spain and Italy's borrowing costs soared as economists warned that Europe is sliding into recession and Angela Merkel defied intense pressure and ruled out issuing European-guaranteed debt.
• Utopian Germans Risk Full-Blown EMU Depression. Berlin wants limited EU changes under the Lisbon Treaty's "ratchet clause"– avoiding the need for ratification – to make it easier to impose discipline, including an EU "austerity commissioner" with powers to administer delinquent nations. Mrs Merkel may wish to go further – and her finance minister Wolfgang Schauble is a diehard integrationist – but her hands are tied by Germany's Basic Law, the anchor of German democracy, and the constitutional court. The judges ruled in September that the fiscal powers of the Bundestag may not be transferred to EU bodies. "There is little leeway left for giving up core powers to the EU. If one wants to go beyond this limit... then Germany must give itself a new constitution. A referendum would be necessary," said chief justice Andreas Vosskuhle. The pro-European wing of the CDU is floating plans for changes to the Basic Law to allow for a quantum leap to a European superstate. This is vehemently opposed by Bavaria's Social Christians, and part of the CDU itself. It would require a two-thirds majority in both houses of parliament. There is a high likelihood that German voters would reject the plan. It would in any case take two or three years to push through. Yet the crisis is escalating by the day. Moody's said it is not clear whether Europe's EFSF bail-out machinery can "fund itself in the markets at low cost", raising doubts about its ability to contain the debt crisis. The rating agency said plans to leverage the EFSF to €1 trillion have come to little, leaving it with just €266bn after funding Ireland, Portugal and Greece. "This limits the EFSF's role as an important pillar of the euro area crisis management strategy," it said. There is nothing yet standing behind the system as Europe spins wildly into the eye of the storm.

Handelsblatt:

• European Union Financial Services Commissioner Michel Barnier won't succeed with a plan that would allow banning the publication of new ratings on any sovereign debt in "extraordinary situations," citing people in the European Commission. EU Competition Commissioner Joaquin Almunia and EU Trade Commissioner Karel de Gucht has told Barnier that a blanket ban would risk roiling markets, citing the people. A ban may still be possible for countries that are dependent on funds from the euro region and the IMF, such as Greece, Portugal and Ireland. A draft of the rules will be determined tomorrow.

China Daily:

• China should raise electricity prices while inflationary pressure is easing, citing Jiang Kejun, a researcher with the Energy Research Institute of the National Development and Reform Commission. There will be a "severe" discrepancy between coal and power prices with "serious" power shortages this winter, Jiang said.

National Business Daily:

• China's foreign trade next year is "not very optimistic" as there is a low likelihood of external demand improving, citing Zhang Yansheng, a researcher at the National Development and Reform Commission.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -1.0% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 201.0 +10.5 basis points.
  
• Asia Pacific Sovereign CDS Index 153.25 +2.0 basis points.
• FTSE-100 futures -.37%.
  
• S&P 500 futures -.19%.
  
• NASDAQ 100 futures -.23%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (JEC)/.72
• (SPLS)/.47
• (BZH)/-.36
• (HD)/.58
• (WMT)/.97
• (DKS)/.26
• (SKS)/.09
• (TJX)/1.05
• (A)/.80
• (DELL)/.47
• (ADSK)/.41

Economic Releases
8:30 am EST

• The Producer Price Index for October is estimated to fall -.1% versus a +.8% gain in September.
• The PPI Ex Food & Energy for October is estimated to rise +.1% versus a +.2% gain in September.
• Advance Retail Sales for October are estimated to rise +.3% versus a +1.1% gain in September.
• Retail Sales Less Autos for October are estimated to rise +.2% versus a +.6% gain in September.
• Retail Sales Ex Auto & Gas for October are estimated to rise +.2% versus a +.5% gain in September.
• Empire Manufacturing for November is estimated to rise to -2.0 versus -8.48 in October.

10:00 am EST

• Business Inventories for September are estimated to rise +.1% versus a +.5% gain in August.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Fisher speaking, Fed's Lacker speaking, Fed's Williams speaking, Fed's Evans speaking, Fed's Bullard speaking, ECB's Gonzalez-Paramo speaking, ECB's Praet speaking, EU's Barnier presenting draft law on credit-rating companies, weekly retail sales reports, UBS Tech/Services Conference, Lazard Healthcare Conference, Morgan Stanley Consumer Conference, Citi Healthcare Conference, Stephens Investment Conference, BofA Merrill Financial Services Conference, Citi Small/Mid-Cap Conference, (VIP) analyst day and the (PXP) analyst meeting could also impact trading today.
  

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

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.