Bear Radar

Style Underperformer:

• Small-Cap Value (-.42%)

Sector Underperformers:

• 1) Oil Tankers -8.60% 2) Networking -2.63% 3) Steel -1.40%

Stocks Falling on Unusual Volume:

• CPB, NVLS, NFLX, PANL, PDCO, HSIC, TNGO, ANSS, SHLM, SOHU, SWKS, MXIM, RAVN, FIO, PSS and OSG
  

Stocks With Unusual Put Option Activity:

• 1) GRPN 2) HPQ 3) EWT 4) KRE 5) CTRP
  

Stocks With Most Negative News Mentions:

• 1) WYNN 2) AFL 3) HPQ 4) CVX 5) NVLS
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth (-.62%)

Sector Outperformers:

• 1) Gold & Silver +.42% 2) Biotech +.41% 3) Restaurants +.40%

Stocks Rising on Unusual Volume:

• KGC, FMCN, GILD, VAL, BKS, EBIX and MDT
  

Stocks With Unusual Call Option Activity:

• 1) KGC 2) FRO 3) CPB 4) CVS 5) GILD
  

Stocks With Most Positive News Mentions:

• 1) LMT 2) BDX 3) DLTR 4) RIMM 5) BA
  

Charts:

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

Tuesday Watch

Evening Headlines

Bloomberg:

• France's AAA Status in Tatters as Yields Surge: Euro Credit. Investors aren't waiting for Standard & Poor's or Moody's Investors Service to strip France, Europe's second-biggest economy, of its top credit rating. The extra yield demanded to lend to AAA-rated France for 10 years was 154 basis points more than the German rate yesterday. The gap was 200 basis points on Nov. 17, the widest spread since 1990. The French 10-year yield is at 3.4 percent, about midway between top-rated Holland and Belgium, which is graded one level lower at Aa1 by Moody's. French borrowing costs are more than a percentage point above the AAA-rated U.K. "France isn't trading like a AAA," said Bill Blain, a strategist at Newedge Group in London, who recommends buying U.K. government debt. "The market has made its judgment already." The debt crisis that began more than two years ago in Greece and snared Ireland, Portugal, Italy and Spain is close to reaching France. Moody's said in a report published yesterday that any persistent increase in borrowing costs would amplify the French government's challenges as economic growth slows. President Nicolas Sarkozy has unveiled two sets of budget cuts since August to preserve the credit rating and try to calm jittery markets. Two-year yields on French debt have climbed 59 basis points to 1.7 percent since Sept. 1, while the rate on German bunds of similar maturity fell 24 points to 0.4 percent. "The market is concerned about the dissolution of the euro itself, hence only bunds are acting as a safe haven," said Richard McGuire, a fixed-income strategist at Rabo Bank International in London. Germany is the region's largest nation. French 10-year bond yields may climb above 5 percent, analysts at Credit Suisse Group AG said in a note to investors yesterday. Euro leaders must reach "a momentous deal" for fiscal and political union by mid-January to save the 17-nation bloc, Credit Suisse said in the report. Yield spreads have widened for the other AAA-rated euro- zone countries -- Austria, Finland, the Netherlands and Luxembourg -- bringing the crisis from the periphery to the so- called core. France has the biggest debt burden of the top-rated euro nations, at 85 percent of gross domestic product. Its financial institutions also have the largest debt holdings in the five crisis-hit countries, at 681 billion euros ($921 billion) as of June, according to data from the Bank for International Settlements in Basel. "France is not a AAA at all," said Nicola Marinelli, who oversees $150 million at Glendevon King Asset Management in London. "French banks are very exposed to euro-zone periphery. If they were to mark to market these loans at current levels, there would be huge losses."
• Euro to Drop as Investors Cease Repatriating Funds, Nomura's Nordvig Says. The euro will drop by the end of the year as the region’s sovereign-debt crisis deepens, pressuring investors who have buoyed the currency by repatriating assets to rethink their strategy, according to Nomura Holdings Inc. The 17-nation currency has traded at least 12 percent higher this month than its lifetime average as European investors brought home 65.9 billion euros ($89 billion) in August and 11.6 billion euros in September, higher than the 12-month average of 629 million euros in inflows, according to European Central Bank data compiled by Bloomberg. The inflows may not continue to be so strong as rising bond yields in Italy and Spain increase concern about contagion in the region and damp investor appetite for European assets, said Nomura’s Jens Nordvig, a managing director of currency research in New York. “You have to evaluate the strength and persistency of this repatriation trend,” Nordvig said in a telephone interview. “Given how the crisis is worsening on an almost daily basis, the pressure on the inflow side is going to be very persistent. Eventually that will win out, and we’ll see the euro lower.”
• Greece's Samaras Told to Stop Playing 'Political Games' to Ensure EU Aid. Antonis Samaras, head of Greece’s New Democracy party, was told by the president of the European Commission to quit playing “political games” and drop his refusal to pledge written support for Greek budget cuts as a condition for the next installment of international aid. “For the European Union and IMF to support, they need to be sure that this is for a sustainable effort,” commission President Jose Barroso said yesterday in a joint press conference with Greek Premier Lucas Papademos. “What we have to do now is to concentrate on implementation -- less politics and more commitment. It’s not just a sprint; it’s a marathon.”
• Spain Needs Euro Area Pact to Save Nation's Solvency, People's Party Says. Spain needs a euro-region accord to “save and guarantee the solvency” of its debt amid surging bond yields, said Maria Dolores de Cospedal, deputy leader of the People’s Party, which won the Nov. 20 general election. “Spain cannot continue financing itself at 7 percent,” Cospedal told reporters late yesterday after a meeting of the party’s executive committee in Madrid. “So an agreement through a joint euro-zone operational strategy to save and guarantee our sovereign debt has to come from the European institutions.” PP leader Mariano Rajoy, who won’t take office until the second half of next month, spoke to German Chancellor Angela Merkel yesterday. He told her that “those countries that meet their obligations and responsibilities must be helped by European institutions,” said Cospedal, who is also president of the region of Castilla-La Mancha. Spain’s 10-year borrowing costs rose to 6.553 percent yesterday after the PP, which campaigned on pledges to slash spending and overhaul the economy, won the biggest majority in three decades. In his acceptance speech, Rajoy warned Spaniards to brace for hard times, and said he hadn’t promised any “miracles.”
• U.S. Rating Affirmed by S&P, Moody's as Supercommittee Fails. Standard & Poor’s and Moody’s Investors Service said they won’t lower ratings on the U.S. after the congressional committee charged with finding $1.5 trillion of deficit cuts failed to reach an agreement. S&P, which stripped the U.S. of its top AAA grade on Aug. 5, said yesterday that the supercommittee’s inability to reach agreement didn’t merit another downgrade because the inaction will trigger $1.2 trillion in automatic spending cuts. The deliberations were “not decisive,” Moody’s spokesman Eduardo Barker said in an e-mail after the panel issued a statement. Fitch Ratings reiterated that the talks failure would likely lead to a revision of the U.S. rating outlook to negative.
• Wall Street Unoccupied With 200,000 Job Cuts. John Brady, co-head of MF Global Inc.’s Chicago office, was having a vodka cocktail at the Ritz- Carlton in Naples, Florida, overlooking the Gulf of Mexico, on the day his company reported its largest-ever quarterly loss. “Wow, the sun just set,” Brady said to his wife and two colleagues attending a conference with him, he recalled in an interview. “I hope it doesn’t set on MF Global.”
• Oil Trades Near One-Week Low on European Crisis Concern, U.S. Stockpiles. Oil traded near the lowest price in more than a week in New York as investors speculated that fuel demand may falter as economic growth in Europe stalls and supplies rise in the U.S. Futures were little changed after dropping for a third day yesterday. Growth in Germany, Europe’s largest economy, may slow next year, the Bundesbank said. A U.S. Energy Department report tomorrow may show oil and fuel supplies increased last week, according to a Bloomberg News survey. Saudi Arabian Oil Co. Chief Executive Officer Khalid Al-Falih said the world economy is at risk of a double-dip recession. “We think consumption in the U.S. is still very subdued,” said David Lennox, a resource analyst at Fat Prophets in Sydney, who previously forecast oil would trade from $85 to $95 a barrel. “Any economic slowdown in Europe impacts on crude demand. We see $80 being the floor.”
• Hewlett-Packard(HPQ) Forecast Misses Estimates Amid Slump. Hewlett-Packard Co. forecast first- quarter profit that missed analysts’ estimates, a sign that Chief Executive Officer Meg Whitman may struggle with the slump that led to the ouster of her predecessor, Leo Apotheker. Profit for the quarter ending in January will be 83 cents to 86 cents a share, excluding some items, the company said in a statement today. The average estimate of analysts surveyed by Bloomberg was for $1.11 a share. The profit forecast for 2012 also fell short of predictions.
• Oil-Tanker Rally Threatened as Ships Seen Accelerating: Freight. The biggest rebound in oil-tanker rates in almost two years is already being threatened by signs the surge may spur ships to speed up, increasing vessel supply and undermining the rally. The largest tankers cut their speed to an average of 10 knots in October, from 10.8 knots a year earlier, after eight months of unprofitable rates, data compiled by Bloomberg show. A one-knot change adjusts the fleet’s capacity by 5.8 percent, Oslo-based Arctic Securities ASA estimates. Shares of Frontline Ltd., the biggest operator of the ships, jumped 19 percent in the past two weeks as tanker earnings approached break even.

Wall Street Journal:

• Europe Bank Woes Felt Around Globe. Companies in Emerging Markets Feel Pinch as Lenders From Euro-Zone Countries Retreat to Shore Up Their Finances. A pullback in lending by European banks is beginning to be felt by companies in Africa, Australia and Latin America, making borrowing harder and more expensive, and putting pressure on slowing economies. European banks in recent years dramatically boosted lending to emerging markets and were among the biggest cross-border lenders in these countries. Their retreat has tightened credit in industries—from aircraft to media to mining— squeezing economies already feeling the effects of reduced demand from the developed world for their exports.
• BofA(BAC) Warned to Get Stronger. Bank of America Corp.'s board has been told that the company could face a public enforcement action if regulators aren't satisfied with recent steps taken to strengthen the bank, said people familiar with the situation. The nation's second-largest lender has been operating under a memorandum of understanding since May 2009, following repeated tussles with regulators over the purchase of securities firm Merrill Lynch & Co. and a downgrade of the company's confidential supervisory rating. The memorandum, which isn't public, identified governance, risk and liquidity management as problems that had to be fixed, according to people familiar with the document.
• Egypt Unrest Raised Heat on Military. Thousands of protesters clashed with Egyptian security forces for a third straight day Monday in an increasingly violent showdown with the country's ruling generals, who face unprecedented and rapidly escalating discontent less than a week before scheduled elections. As night descended on Cairo, scores of unconscious protesters continued to be dragged from smoke and teargas-clogged side streets leading into Tahrir Square, the heart of Egyptians' protests early this year. Fighting between security forces and protesters have left 33 people dead since Saturday morning and injured more than 1,000, say health officials.
• Senator Schumer Urges Audit Watchdog to Act on China. A prominent senator is expected to urge the U.S. auditing-oversight agency to refuse to allow Chinese accounting firms to audit U.S.-traded companies until American inspectors are allowed to evaluate the firms' work.
• Why the Super Committee Failed.
  

Business Insider:

• Fitch Is Reviewing Its US Credit Rating. Around two hours after S&P and Moody's reiterated their ratings on U.S. credit, Fitch came out with its own statement.
• More Bad News For Netflix(NFLX): It's Raising $400 Million At A Demolished Stock Price.
  

Zero Hedge:

• 35 Seconds Of TV Air Time Explaining Why Austria's AAA Rating Is Doomed.
• Goldman(GS) Explains What The Supercommittee Failure Means.
  

CNBC:

• China Property Dip Sparks Bank Fears. The number of property transactions in China’s largest cities has fallen to dangerously low levels, according to regulatory documents obtained by the Financial Times. According to the documents, the China Banking Regulatory Commission earlier this year ordered domestic banks to weigh the impact of a 30 per cent decline in housing transactions in “stress tests” aimed at determining the health of the Chinese financial system. While the government has been trying to rein in sky-high property prices, a Chinese real estate slump would have a significant ripple effect on the global economy. Property construction accounted for more than 13 per cent of China’s economy last year. In April the CBRC told banks to test their loan books against a 50 percent fall in prices, and also a 30 per cent fall in transaction volumes. In October, however, property transactions fell 39 percent year-on-year in China’s 15 biggest cities , according to government data. Nationwide, transactions dropped 11.6 percent, accelerating from a 7 percent fall in September.The fall-off in transactions has affected developers’ cash flows and, in some cases, their ability to repay bank loans.

Seeking Alpha:

• How Big Derivatives Dealers Caused 'Contagion' In The Eurozone. Did the International Swaps & Derivatives Association (ISDA) throw Europe into chaos? Is it responsible for causing Italy and other European nations' woes, for the sudden spike in southern European interest rates? It is an interesting question to explore.

Seattle Weekly:

• Occupy Oakland Votes to Shut Down Entire West Coast Port System on Dec. 12. Peter McGraw, spokesman for the Port of Seattle, tells Seattle Weekly that he's taking a threat of a "total West Coast port shutdown" by Occupy and labor protestors to "very seriously." The threat was announced via a resolution passed by the Occupy Oakland "general assembly", which cited the ongoing fight between Port of Longview union workers at the port's EGT company as one of the main reasons for demanding the work stoppage. The group released the following call to action, which was picked up by numerous Indy Media sites:

Charles Gasparino:

• Sources tell FBN $1 billion in lost MFGlobal $ may never be found; re: It was likely used to pay off losses; no legal right to force return.

Reuters:

• China Automakers See Slower Growth Ahead. Car sales growth in China will remain stagnant next year in the absence of incentives for buyers and China's tight credit control, raising pressure on car makers to cut prices and improve after-sales services, industry executives and analysts said on Monday. China, the world's largest automobile market, is likely to see car demand grow between 3 and 10 percent in 2012, compared with about 5-6 percent expected for this year and down from 33 percent in 2010, industry executives said at an auto show in Guangzhou. Car sales in China climbed just 1.4 percent in October, causing growth for the first 10 months to ease to 5.9 percent as the government removed subsidies on small cars and raised the eligibility for fuel-saving incentives. "Sales are affected by government policies, including banks tightening lending. We can feel that. Dealer credit and car financing are also tightening," Zeng added.
• China may have a trade deficit in 2012 because of poor overseas demand, citing Xia Bin, a PBOC adviser. The government may face pressure to keep inflation next year at 2% to 3% because of excessive liquidity, Xia said.
• EPA Delays Carbon Limts On Oil Refineries. The U.S. Environmental Protection Agency, struggling with an ambitious agenda on clean air regulations, said it will delay proposing the country's first-ever greenhouse gas limits on oil refineries.

Financial Times:

• Only Way to Stop the Run on Eurozone Debt by Peter Bofinger and George Soros.
  

Caixin Online:

• China Provincial Toll Ways Deeply in Debt. Most toll roads fail to make back the money it cost to build them, according to government reports. Most toll ways in 29 provinces across China are badly in debt after failing to earn back the money they cost to build, according to data compiled by Caixin. As of 2010, outstanding loans for toll way construction in 29 provinces totaled almost 2.2 trillion yuan, according to toll way management reports. Of that amount, 1.95 trillion yuan, or 89 percent, was provided by banks, putting financial institutions at risk if local governments fail to pay up. Guangdong had the most toll-related debt of any province, with an outstanding loan of 227 billion yuan. Eight other provinces each had more than 100 billion yuan outstanding. The reports also reveal that the majority of tolls went to repaying debts, leaving little money to cover expenses like road maintenance.

South China Morning Post:

• Warning on Risk of Property Bubble. Housing prices haven't dropped to "satisfactory" levels, citing Financial Secretary John Tsang's comments to city lawmakers. Tsang said he is still concerned about the formation of another bubble.

Financial News:

• China's economy's relatively fast growth and initial success in fighting inflation faces uncertainty from internal and external sources such as the European debt crisis, citing Hu Xiaolian, the central bank deputy head. China should continue stable monetary policy with "appropriate" minor adjustments, Hu said. Financial institutions should reduce over-reliance on debt for growth, Hu said.
• China's 2011 CPI May Rise More Than 5.5%, citing Zhang Shuguang, the chairman of Unirule Institute of Economics's academic board. Unirule is a private think tank in Beijing.
  

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -1.0% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 222.50 +7.0 basis points.
  
• Asia Pacific Sovereign CDS Index 164.50 +4.0 basis points.
• FTSE-100 futures +.64%.
  
• S&P 500 futures +.45%.
  
• NASDAQ 100 futures +.41%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (PDCO)/.46
• (HRL)/.42
• (GCO)/.94
• (CHS)/.20
• (CPB)/.79
• (DSW)/.80
• (CBRL)/1.07
• (MDT)/.82
• (EV)/.43
• (NUAN)/.41
• (FRED)/.22

Economic Releases
8:30 am EST

• Preliminary 3Q GDP is estimated to rise +2.5% versus a prior estimate of a +2.5% gain.
• Preliminary 3Q Personal Consumption is estimated to rise +2.4% versus a prior estimate of a +2.4% gain.
• Preliminary 3Q GDP Price Index is estimated to rise +2.5% versus a prior estimate of a +2.6% gain.
• Preliminary 3Q Core PCE is estimated to rise +2.1% versus a prior estimate of a +2.1% gain.

2:00 pm EST

• Minutes of FOMC Meeting.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Kocherlakota speaking, 5-year Treasury Note Auction, weekly retail sales reports, China Manufacturing PMI and the Richmond Fed Manufacturing Index could also impact trading today.
  

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

Stocks Falling into Final Hour on Rising Eurozone Debt Angst, Global Growth Fears, Financial Sector Pessimism, US Debt Committee "Failure"

Broad Market Tone:

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

Equity Investor Angst:

• VIX 33.24 +3.88%
  
• ISE Sentiment Index 101.0 +29.49%
  
• Total Put/Call 1.09 +23.86%
  
• NYSE Arms 2.33 +104.59%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 140.06 +3.15%
  
• European Financial Sector CDS Index 299.46 +9.10%
  
• Western Europe Sovereign Debt CDS Index 357.33 +2.05%
  
• Emerging Market CDS Index 335.79 +3.25%
  
• 2-Year Swap Spread 54.0 +4 bps
  
• TED Spread 49.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 169.0 -3 bps
  
• China Import Iron Ore Spot $147.40/Metric Tonne unch.
  
• Citi US Economic Surprise Index 48.90 unch.
  
• 10-Year TIPS Spread 1.91 -6 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -93 open in Japan
• DAX Futures: Indicating +26 open in Germany

Portfolio:

• Slightly Lower: On losses in my tech, retail and medical sector longs.
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is very bearish, as the S&P 500 breaks convincingly below its 50-day moving average on rising Eurozone debt angst, global growth fears, financial sector pessimism, high energy prices and technical selling. On the positive side, Biotech shares are higher on the day. Oil is falling -1.1%, Gold is falling -2.5% and the UBS-Bloomberg Ag Spot Index is declining -1.25%. On the negative side, Coal, Alt Energy, Oil Service, Oil Tanker, Steel, Internet, Networking, Bank, REIT and Road & Rail shares are under significant pressure, falling more than -3.0%. Small-cap and cyclical shares are underperforming. (XLF) has also traded poorly throughout the day. Copper is falling -2.5% and lumber is falling -1.09%. The 10-year yield is falling -4 bps to 1.97%. Major Asian indices fell 1-2% on average overnight. India's Sensex continues to trade very poorly. It is already testing its Aug/Sept. lows and is now down -22.2% ytd. Major European equity indices fell 3-4% on average today. Italian shares(-28.07% ytd) were Europe's worst-performers today, falling -4.74%, as they broke down from their recent trading range and below their 50-day moving average. The Germany sovereign cds is climbing +2.22% to 97.17 bps, the France sovereign cds is climbing +3.99% to 229.17 bps, the Spain sovereign cds is gaining +2.06% to 465.93 bps, the Japan sovereign cds is gaining +3.2% to 119.27 bps, the Russia sovereign cds is soaring +10.95% to 265.50 bps and the Brazil sovereign cds is gaining +4.3% to 184.0 bps. Moreover, the European Investment Grade CDS Index is jumping +5.2% to 186.43 bps. The France sovereign cds is very near its recent all-time high and the Hungary sovereign cds is very close to its Oct. 24 record high. The TED spread continues to trend higher and is at the highest since June 2010. The 2-Year Swap spread is near the highest since May 2010. The FRA/OIS Spread is near the highest since May 2010. The 2yr Euro Swap Spread is at the highest since Nov. 2008. The 3M Euro Basis Swap is falling -6.85% to -138.90 bps, which is the worst since November 2008. The Libor-OIS spread is near the widest since July 2009, which is also noteworthy considering the recent equity advance off the lows. China Iron Ore Spot has plunged -23.2% since February 16th and -18.6% since Sept. 7th. Part of today's equity weakness is related to the apparent "failure" of the US debt super committee. However, even if an unexpected "successful" compromise materializes that includes massive tax hikes/spending cuts, following the highly contractionary policies of Europe, it would be viewed as a large negative by investors over the intermediate-term, in my opinion. Trading still has a somewhat complacent feel to it as stocks surged off the morning lows, accompanied by below average volume, despite the ongoing significant deterioration in European credit gauges. I still think the risk in equities remains substantial unless a positive catalyst emerges from Europe very soon. I expect US stocks to trade mixed-to-lower into the close from current levels on rising Eurozone debt angst, US debt Super Committee concerns, rising global growth fears, financial sector pessimism, more shorting, high energy prices and technical selling.

Today's Headlines

Bloomberg:

• Spanish Bonds Decline After Election; Bunds Gain on Safety Bid. Spanish bonds dropped, extending six weeks of losses, after Prime Minister-elect Mariano Rajoy told the nation to brace for difficult times as he starts work on tackling the euro-area’s third-largest deficit. Italy’s two-year notes fell as concern the regional debt crisis is worsening pushed up dollar-funding costs for European banks. German bonds rose as the Finance Ministry said economic growth is slowing and as U.S. lawmakers struggled to agree on deficit cuts, spurring demand for safer assets. The European Central Bank said it boosted sovereign-debt purchases last week. “Even with a majority, it will be a hard life for the Spanish government,” said Alessandro Giansanti, a senior interest-rates strategist at ING Groep NV in Amsterdam. “The market is realizing the situation in Spain is not too rosy compared with Italy.” The Spanish 10-year yield rose 17 basis points to 6.55 percent at 4:08 p.m. London time, after climbing to a euro-era record 6.78 percent on Nov. 17. The 5.5 percent bond due in April 2021 fell 1.14, or 11.40 euros per 1,000-euro ($1,347) face amount, to 92.73. Two-year rates climbed 14 basis points to 5.57 percent. Rajoy, whose People’s Party swept the ruling Socialists from power after eight years, said on Nov. 18 he hoped Spain wouldn’t need a bailout before he can be sworn in as prime minister in a month. He inherits a stalled economy with the euro area’s highest jobless rate and a deficit of more than twice the euro-region limit. The extra yield investors demand to hold 10-year Spanish securities instead of German bunds expanded 24 basis points to 465 basis points, after reaching 503 basis points on Nov. 18.
• Euro Zone Needs 'Momentous Deal': Credit Suisse. Euro leaders must reach “a momentous deal” toward fiscal and political union by mid- January to save the 17-nation bloc, Credit Suisse said in a note to investors. The analysts, led by Jonathan Wilmot, the bank’s London- based chief global fixed-income strategist, also predicted the European Central Bank will move “more aggressively” to lower its benchmark 1.25 percent rate and provide banks with longer- term funds. “In short, the fate of the euro is about to be decided,” according to the note, which was published today. At the same time, Italian and Spanish 10-year bond yields could jump above 9 percent and French yields could go above 5 percent, Credit Suisse’s note said. Yields on German bunds could also rise. As things stand now, investors “simply cannot be sure what exactly they are holding or buying in the euro zone sovereign bond markets,” said the report. “We suspect this spells the death of ‘muddle-through’ as market pressures effectively force France and Germany to strike a momentous deal on fiscal union much sooner than currently seems possible, or than either would like. Then and only then do we think the ECB will agree to provide the bridge finance needed to prevent systemic collapse.”
• German Growth May Grind to Halt as Region's Crisis Saps Exports: Economy. Growth in Germany, Europe’s largest economy, may slow to a near standstill next year as the region’s debt crisis saps demand for exports, the Bundesbank said. The Frankfurt-based central bank cut its 2012 growth forecast to between 0.5 percent and 1 percent from a June prediction of 1.8 percent, and said a “pronounced” period of economic weakness can’t be ruled out if the crisis worsens. “The significant weakening in foreign demand coupled with financial market nervousness” means “the German economy faces more difficult terrain in the months ahead,” the Bundesbank said in its monthly bulletin published today. There are “weighty” risks to the outlook, it said.
• War on Sovereign Ratings May Backfire on Bonds: Euro Credit. Europe's sovereign debt market is ossifying as restrictions on default-swap insurance and the threat of a ban on credit ratings for governments make traders and investors wary of owning bonds. "Primary dealers may pull out and won't overbid at auctions because they can't get rid of the bonds," said Soeren Moerch, head of government-bond trading at Danske Bank A/S in Copenhagen. "Banks don't want to hold government debt if they have to take writedowns on supposedly risk-free assets."
• Barton Biggs Sees 60% to 70% Odds of Recession. (video) Biggs said the chance of a recession during the first half of 2012 has risen to between 60 percent and 70 percent.
• Crude Oil Declines to One-Week Low on U.S. Budget Concern, European Debt. Oil dropped for a third day in New York on signs that U.S. lawmakers won’t agree on cutting the budget deficit and on concern that Europe’s debt crisis will send the region’s economy into a recession. Growth in Germany, Europe’s largest economy, may slow next year, the Bundesbank said today. Saudi Arabian Oil Co. Chief Executive Officer Khalid Al-Falih said the world economy is at risk of a double-dip recession. Crude oil for January delivery fell $1.50, or 1.5 percent, to $96.17 a barrel at 1:34 p.m. on the New York Mercantile Exchange. The price ranged from $95.24, the lowest level since Nov. 10, to $97.86. Futures are up 5.3 percent this year. Brent oil for January settlement dropped $1.25, or 1.2 percent, to $106.31 a barrel on the London-based ICE Futures Europe exchange.
• Tahrir Square Clashes Erupt for Third Day as Egyptians Defy Military Rule. Clashes erupted in Cairo for a third day after fighting between security forces and demonstrators protesting military rule left at least 22 people dead, a week before Egypt’s first parliamentary elections since the ouster of Hosni Mubarak. Protesters were driven back by tear gas in Tahrir Square, the center of the uprising that toppled Mubarak in February, some waving Egyptian flags and others hurling stones at riot police, in scenes televised from the site. Besides those killed, hundreds were injured in the fighting that started on Nov. 19, Health Ministry spokesman Mohammed el-Sherbeeny said today by telephone. The events in the square recalled the clashes between police and demonstrators during the anti-Mubarak uprising and have threatened to disrupt elections scheduled to start on Nov. 28 as tensions rise between activists and the ruling military council. Egypt’s government is trying to secure financing to support an economy still struggling to recover from the revolt. This afternoon, demonstrators staged a march through Tahrir Square, chanting “The people want to topple the field marshal,” referring to Mohammed Hussein Tantawi, the head of the military council that took power from Mubarak. Television footage showed protesters carrying away at least one person who appeared to be wounded or dead.
• BofA's(BAC) With Fannie Escalates Over Loan Buyback Stance. Bank of America Corp. told Fannie Mae it refuses to cooperate with the U.S. mortgage firm's new stance on loan buybacks, setting the lender up for a potential surge in claims and penalties. The bank is disputing Fannie Mae's demand that lenders repurchase mortgages or cover any losses themselves if an insurer drops coverage, Bank of America said this month in a regulatory filing. The lender, ranked second by assets among U.S. banks, said it “does not intend to repurchase loans” under what it deems to be new rules, and the refusal may trigger penalties or other sanctions.
• MF Global Shortfall May Exceed $1.2 Billion: Trustee. MF Global Inc.’s shortfall in U.S. segregated customer accounts may exceed $1.2 billion, more than double what was previously expected, said the trustee overseeing a liquidation of the failed brokerage run by former New Jersey Governor Jon Corzine. That would mean customer accounts are missing about 22 percent of their total of $5.4 billion. A shortfall of 11 percent had been previously estimated by a person with knowledge of probes into the firm’s collapse. James Giddens, the trustee, said today that forensic accountants and investigators are working “around the clock,” and the estimate may change.

Wall Street Journal:

• Brussels Seeks More Control Over Euro-Zone Member Budgets. The European Commission will set out proposals Wednesday that would significantly tighten Brussels' control over the budget policies of euro-zone member states, according to draft documents. The proposals would see struggling governments forced to submit to frequent reviews of their policies and accounts, and could see euro-zone governments effectively forced to seek financial assistance by a vote of their peers.
• Congress's Deficit 'Bomb': Scary or Not? Now that the committee has apparently failed, lawmakers and others are taking a harder look at the automatic cuts, or “sequester,” which will kick in starting January 2013 unless Congress acts. And they look plenty scary. Here’s what they entail:
• Gilead(GILD)-Pharmasset(VRUS) Deal: Wall Street Reacts. Gilead announced a roughly $10.4 billion deal to buy Pharmasset, a company that doesn’t yet have meaningful revenue but is developing treatments for hepatitis C. The deal price of $137 a share was about 59% more than Pharmasset’s highest-ever closing stock price. Here is a look at early Wall Street analysts’ reaction to the takeover:
• The Two Stocks Smacking Hedge Funds. Stockholdings of J.P. Morgan(JPM) and General Motors(GM) seem to be causing bleeding in hedge funds’ portfolios. About 30 funds count either of the two stocks among their top 10 favored stocks as of Sept. 30, with a 5% portfolio weighting, according to a Goldman Sachs report. But J.P. Morgan’s 21% stock decline year-to-date until Nov. 15, and GM’s 37% decline over the same period don’t bode well for those fund managers.
• US Health Care Costs Rise 4.3% For Insured Workers In 2Q. Health-care costs in U.S. employer-sponsored health-care plans rose 4.3% in the second quarter from a year earlier and edged up 1.3% from the first quarter, according to data from Thomson Reuters.

MarketWatch:

• Hedge Funds and Insiders Love These Stocks.

CNBC.com:

• Why Holiday Sales May Hing on How 'The One Percent' Feels.
• Home Sales Spit by Price. Sales of existing homes in October beat expectations, registering a gain of 1.4 percent from the previous month, but that number masks a market that is heavily weighted to the low end.

Business Insider:

• ECONOMIST: Bernanke Is Going To End Up Bailing Out All Of Europe. Regardless of Bernanke's avowed commitment to save the United States from a repeat of the Great Depression, the political will to truly prop up the rest of the world doesn't seem to exist in the U.S. If Congress is already breathing down the Fed's neck, just wait until the "U.S. taxpayer" is absorbing the fiscal profligacy of Italy and Greece.
• CNBC's Kaminsky Goes Off: MF Global Is Having a Devastating Impact On Psychology.
• Egypt's Cabinet Has Submitted Its Resignation To The Military Council, As Huge Protests Break Out In Cairo. (pics)
• Goldman: Sovereign Risk is Spreading Like Wildfire.
  

Zero Hedge:

• Muddy Waters Releases 80 Page Report Disclosing Latest "Strong Sell" Target: China's Focus Media(FMCN).
• Margin Debt Soars By Most Since June 2007 Just In Time For November Market Rout. (graph)
• The Real Reason The "Voluntary" Greek Haircut Is Hurting.
• Europe Needs Debt Relief and Structural Reforms, Not Hyperinflation.
  

Wall Street All-Stars:

• Hewlett-Packard(HPQ) Reports Tonight.

Jefferies:

• Jefferies Posts Letter to Defend Capital Position.

The Daily Caller:

• MSNBC's Chris Matthews to Obama: 'Just tell us, commander. Give us our orders'. (video) In a Sunday evening interview on MSNBC, “Hardball” host Chris Matthews spoke candidly not just of his allegiance to the president’s agenda, but also of the frustrations many on the professional left are feeling with the administration’s lack of leadership. “There’s nothing to root for,” Matthews lamented. “What are we trying to do in this administration? Why does he want a second term, would he tell us? What’s he going to do in his second term, more of this? Is this it? Is this as good as it gets? Where are we going? Are we going to do something his second term? He’s yet to tell us.” “He has not said one thing about what he’d do in his second term,” Matthews continued. “He never tells us what he’s going to do with reforming our health care systems, Medicare, Medicaid. How he’s going to reform Social Security? Is he going to deal with long-term debt? How? Is he going to reform the tax system? How?" “Just tell us — why are we in this with him? Just tell us, commander. Give us our orders and tell us where we’re going. Give us the mission.”

Rasmussen Reports:

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

Financial Times:

• Le Pen Calls for France to Quit Euro. Marine Le Pen, the leader of France’s far-right National Front, has made abandoning the euro one of the pillars of her presidential election campaign, launching a powerful attack on the ailing single currency as she seeks to bolster her already strong showing in the opinion polls. Presenting her “presidential project”, Ms Le Pen said Europe should give up the euro, which had “asphyxiated our economies, killed our industries and choked our jobs” for years, as well as causing France to accumulate “Himalayan” debts. In any case, she added, the country should prepare a planned exit from the currency union. “We need to anticipate the collapse of the euro rather than suffer from the collapse of the euro,” she said in a television interview on Sunday.
• CDS' Demise Has Been Greatly Exaggerated. There has been so much criticism of credit default swaps (CDS) of late that you would think no one was using them any longer. Yet today we see net open positions of $2,900bn, up from $2,400bn at this time last year. This simple fact belies the inordinate amount of misperceptions surrounding the CDS market. In spite of all the rhetoric, CDS remain a robust and effective financial tool for hedging risk or taking on exposures.
• China Property Sale Falls Could Hit Banks. The number of property transactions in China’s largest cities has fallen to dangerously low levels, according to regulatory documents obtained by the Financial Times. According to the documents, the China Banking Regulatory Commission earlier this year ordered domestic banks to weigh the impact of a 30 per cent decline in housing transactions in “stress tests” aimed at determining the health of the Chinese financial system.

Telegraph:

• France Warned on Outlook for AAA Credit Rating by Moody's. Moody's warned France that a sustained rise in its debt yields coupled with weakening economic growth could harm its ratings outlook, fuelling concern the eurozone's second largest economy might lose its AAA status. Today, the rating agency said that a worsening in the French bond market - amid fears the sovereign debt crisis was spreading to the eurozone's core - posed a threat to its credit outlook, though not at this stage to its actual rating. "Elevated borrowing costs persisting for an extended period would amplify the fiscal challenges the French government faces amid a deteriorating growth outlook, with negative credit implications," Moody's said. The premium investors charge on French 10-year debt compared to the German equivalent was up around 20 basis points at 163 bps following publication of Moody's report but remained well short of the 202 bps hit last week, a new euro-era high.
• Self-Serving Myths of Europe's Neo-Calvinists. Eurozone leaders now face a choice between two unpalatable alternatives. Either they accept that the eurozone is institutionally flawed and do what is necessary to turn it into a more stable arrangement. This will require some of them to go beyond what their voters seem prepared to allow, and to accept that a certain amount of ‘rule-breaking’ is necessary in the short term if the eurozone is to survive intact. Or they can stick to the fiction that confidence can be restored by the adoption (and enforcement) of tougher rules. This option will condemn the eurozone to self-defeating policies that hasten defaults, contagion and eventual break-up.
• Graphic: How Bureaucracy is Slowing Europe's Recovery.
  

Die Welt:

• Germany should have a greater say at the ECB given the country holds 30% of the financial responsibility, citing Alexander Dorindt, general-secretary of the Christian Social Union, as saying. ECB President Mario Draghi has gotten off to a "very problematic" start in the job by accelerating the central bank's government bond purchases, Dobrindt said in an interview.

O Estado de Sao Paulo:

• Brazil's government may reduce its forecast for economic growth this year to 3.5% after cutting its estimate to 3.8% on Nov. 18, citing Deputy Finance Minister Nelson Barbosa.

South China Morning Post:

• Last Chance for China to Burst Bubble Without Chaos: Andy Xie. The bursting of China's housing bubble may lead to bankruptcies, but laid-off workers should find new jobs quickly as the labor market remains tight, writes independent economist Andy Xie. The biggest mistake China could make is to allow the property bubble to grow, leading to hyperinflation, currency devaluation, and social/economic chaos, Xie said. The bubble may burst even without government curbs, he said. Lobal governments and developers are unlikely to succeed in pressuring Beijing to keep the bubble going, like before, says Xie.

Bear Radar

Style Underperformer:

• Small-Cap Value (-3.03%)

Sector Underperformers:

• 1) Steel -4.31% 2) Alt Energy -4.25% 3) Networking -3.52%

Stocks Falling on Unusual Volume:

• Y, DVY, KNM, IXP, MTK, SDY, TAC, VVC, IYJ, PIV, PVD, AIXG, DOV, FMCN, Z, GILD, YNDX, SPRD, SHPGY, SIRO, SCVL, CTRP, ANSS, TECD, CRDN, HTHT, CYOU, JACK, AMZN, FCFS, CPSI, ARUN, MAKO, LSTZA, CRM, LCAPA, ETG, BKF, PHK, VVC, LNKD and FIO
  

Stocks With Unusual Put Option Activity:

• 1) ESV 2) FMCN 3) TOL 4) UAL 5) VALE
  

Stocks With Most Negative News Mentions:

• 1) VNO 2) RIMM 3) GILD 4) SINA 5) WMT
  

Charts:

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