Weekly Scoreboard*

Indices

• S&P 500 1,219.66 -2.83%
  
• DJIA 11,866.30 -2.61%
  
• NASDAQ 2,555.33 -3.47%
  
• Russell 2000 722.05 -3.13%
  
• Wilshire 5000 12,634.40 -2.89%
  
• Russell 1000 Growth 566.33 -3.24%
  
• Russell 1000 Value 604.49 -2.51%
  
• Morgan Stanley Consumer 740.34 -1.0%
  
• Morgan Stanley Cyclical 858.43 -4.87%
• Morgan Stanley Technology 583.18 -5.16%
  
• Transports 4,906.26 -1.02%
  
• Utilities 446.15 -.18%
  
• MSCI Emerging Markets 37.54 -3.52%
  
• Lyxor L/S Equity Long Bias Index 965.44 -2.01%
  
• Lyxor L/S Equity Variable Bias Index 826.46 -1.5%
  
• Lyxor L/S Equity Short Bias Index 605.97 +.67%
  

Sentiment/Internals

• NYSE Cumulative A/D Line 123,816 -2.47%
  
• Bloomberg New Highs-Lows Index -484 -216
  
• Bloomberg Crude Oil % Bulls 35.0 +6.1%
  
• CFTC Oil Net Speculative Position 149,303 -4.2%
  
• CFTC Oil Total Open Interest 1,346,495 +1.05%
  
• Total Put/Call 1.20 +.84%
  
• OEX Put/Call 1.99 +5.85%
  
• ISE Sentiment 74.0 -51.6%
  
• NYSE Arms .82 +57.69%
  
• Volatility(VIX) 24.29 -7.92%
• S&P 500 Implied Correlation 83.94 +6.35%
  
• G7 Currency Volatility (VXY) 12.06 -6.8%
  
• Smart Money Flow Index 10,026.49 -2.58%
  
• Money Mkt Mutual Fund Assets $2.678 Trillion unch.
  
• AAII % Bulls 40.2 +4.20%
  
• AAII % Bears 33.6 -3.22%

Futures Spot Prices

• CRB Index 295.0 -3.73%
  
• Crude Oil 93.53 -6.31%
  
• Reformulated Gasoline 248.70 -4.44%
  
• Natural Gas 3.13 -6.32%
  
• Heating Oil 280.05 -4.05%
  
• Gold 1,597.90 -6.82%
  
• Bloomberg Base Metals Index 199.41 -4.83%
  
• Copper 333.10 -6.79%
  
• US No. 1 Heavy Melt Scrap Steel 401.67 USD/Ton unch.
  
• China Iron Ore Spot 132.10 USD/Ton -5.31%
  
• UBS-Bloomberg Agriculture 1,422.03 -.59%
  

Economy

• ECRI Weekly Leading Economic Index Growth Rate -7.5% +10 basis points
• Philly Fed ADS Real-Time Business Conditions Index -.1237 +13.19%
  
• S&P 500 EPS Estimates (FY 2012 Mean) 108.70 -.17%
  
• Citi US Economic Surprise Index 75.50 -2.5 points
  
• Fed Fund Futures imply 36.0% chance of no change, 64.0% chance of 25 basis point cut on 1/25
• US Dollar Index 80.26 +2.12%
  
• Yield Curve 162.0 -21 basis points
  
• 10-Year US Treasury Yield 1.85% -21 basis points
  
• Federal Reserve's Balance Sheet $2.885 Trillion +2.92%
  
• U.S. Sovereign Debt Credit Default Swap 50.83 -3.02%
  
• Illinois Municipal Debt Credit Default Swap 282.0 +4.59%
  
• Western Europe Sovereign Debt Credit Default Swap Index 379.03 +3.18%
• Emerging Markets Sovereign Debt CDS Index 302.0 +3.19%
  
• Saudi Sovereign Debt Credit Default Swap 127.0 -.50%
• Iraqi 2028 Government Bonds 82.07 -1.11%
• China Blended Corporate Spread Index 787.0 +23 basis points
  
• 10-Year TIPS Spread 1.91% -12 basis points
  
• TED Spread 57.0 +3 basis points
  
• 3-Month Euribor/OIS Spread 94.0 -2 basis points
• 3-Month EUR/USD Cross-Currency Basis Swap -122.0 unch.
  
• N. America Investment Grade Credit Default Swap Index 128.69 +4.97%
  
• Euro Financial Sector Credit Default Swap Index 299.45 +6.10%
  
• Emerging Markets Credit Default Swap Index 312.99 +6.08%
  
• CMBS Super Senior AAA 10-Year Treasury Spread 245.0 -31 basis points
  
• M1 Money Supply $2.148 Trillion -.07%
  
• Commercial Paper Outstanding 991.70 -.60%
  
• 4-Week Moving Average of Jobless Claims 387,800 -1.60%
  
• Continuing Claims Unemployment Rate 2.9% +10 basis points
  
• Average 30-Year Mortgage Rate 3.94% -5 basis points
  
• Weekly Mortgage Applications 677.0 +4.09%
  
• Bloomberg Consumer Comfort -49.9 +.4 point
  
• Weekly Retail Sales +3.0% -20 basis points
  
• Nationwide Gas $3.25/gallon -.04/gallon
  
• U.S. Heating Demand Next 7 Days 17.0% below normal
• Baltic Dry Index 1,888 -1.77%
  
• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 37.50 unch.
  
• Rail Freight Carloads 240,899 -1.27%
  

Best Performing Style

• Small-Cap Value -2.30%

Worst Performing Style

• Mid-Cap Growth -3.97%

Leading Sectors

• Airlines +2.40%
  
• Drugs +.46%
  
• REITs +.07%
• Utilities -.17%
• Telecom -.53%

Lagging Sectors

• Networking -7.08%
• Gold & Silver -8.63%
  
• Oil Service -8.79%
• Alternative Energy -9.0%
• Coal -10.13%

Weekly High-Volume Stock Gainers (9)

• SYNO, BCSI, SONO, VMC, CCMP, TNGO, NVLS, TWTC and OLN
  

Weekly High-Volume Stock Losers (10)

• PRI, ADTN, PTRY, NDSN, LRCX, ATHN, SGI, ITMN, LRN and FSLR
  

Weekly Charts
ETFs

• High-Volume Gainers
• High-Volume Losers

Stocks

• High-Volume Gainers
• High-Volume Losers
  

*5-Day Change

Stocks Slightly Higher into Final Hour on Short-Covering, Euro Bounce, US Economic Data

Broad Market Tone:

• Advance/Decline Line: Slightly Higher
  
• Sector Performance: Mixed
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 24.87 -.96%
  
• ISE Sentiment Index 77.0 -29.36%
  
• Total Put/Call 1.20 -1.64%
  
• NYSE Arms .96 +5.0%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 128.69 +.56%
  
• European Financial Sector CDS Index 305.09 -.38%
  
• Western Europe Sovereign Debt CDS Index 379.08 -.93%
  
• Emerging Market CDS Index 313.62 -.18%
  
• 2-Year Swap Spread 49.0 +1 bp
  
• TED Spread 57.0 +1 bp
  
• 3-Month EUR/USD Cross-Currency Basis Swap -121.75 +18.25 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 162.0 -5 bps
  
• China Import Iron Ore Spot $132.10/Metric Tonne -1.27%
  
• Citi US Economic Surprise Index 75.50 +3.6 points
  
• 10-Year TIPS Spread 1.91 -2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -17 open in Japan
• DAX Futures: Indicating -25 open in Germany

Portfolio:

• Slightly Higher: On gains in my Medical, Retail and Biotech sector longs
  
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short, then added them back
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is mildly bearish, as the S&P 500 gives up morning gains at its 50-day moving average and trades near session lows on rising Eurozone debt angst, rising global growth fears, higher energy prices, technical selling and tech sector pessimism. On the positive side, Oil Tanker, Oil Service, Road & Rail and Airline shares are especially strong, rising more than +1.0%. Small-caps are outperforming again. Copper is rising +2.7% and Lumber is up +1.3%. The Italy sovereign cds is falling -4.02% to 538.33 bps and the Spain sovereign cds is down -3.55% to 420.0 bps. On the negative side, Drug, Wireless and Computer Service shares are under mild pressure, falling more than -.5%. (XLK) has traded poorly again throughout the day. Gold is rising +1.8%, oil is gaining +.53% and the UBS-Bloomberg Ag Spot Index is up +.9%. The 10-year yield is falling -6 bps to 1.85% despite recent better economic data and equity strength. The Germany sovereign cds is jumping +4.0% to 106.67 bps and the France sovereign cds is climbing +1.4% to 227.83 bps. The Western Europe Sovereign CDS Index is still very near its all-time high. The TED spread continues to trend higher and is at the highest since May 2009. The 2Y Euro Swap Spread is near the highest since Nov. 2008. The 3M Euribor-OIS spread is very near the highest since February 2009. The 3M EUR/USD Cross-Currency Basis Swap is rising +13.04% to -121.75 bps, which is back to mid-Nov. levels. The Libor-OIS spread is rising to the widest since May 2009, which is also noteworthy considering the equity surge off the recent lows. China Iron Ore Spot has plunged -31.2% since February 16th and -27.0% since Sept. 7th. The China Corporate Blended Spread Index remains very close to another technical breakout. The Citi Asia-Pacific Economic Surprise Index is at -25.1, which is right at the worst since April 2009. Asian shares bounced back overnight with the exception of India’s Sensex, which reversed a +1% opening gain and finished at session lows -2.2%. This index is now at the lowest since Nov. 2009 and is down -24.5% ytd. Brazil's Bovespa fell another -.42% today and is down -19.1% ytd. Major European equity indices fell today despite Asia/US strength. Overall, European credit gauges are still performing very poorly given that the European debt crisis “can-kicking” solution is supposedly at hand, which remains a large red flag. Tech share performance is also troubling. Market/Tech sector leader (IBM) is breaking below its 50-day moving average today on volume. Trading still has an overall complacent feel as volume remains poor, leadership is lacking and each push lower is met by sloppy dip-buying. This is likely due to year-end window-dressing and seasonality. Today’s equity rally does not have the characteristics I normally see at the beginning of sustainable advances. I expect US stocks to trade modestly lower into the close from current levels on rising Eurozone debt angst, rising global growth fears, tech sector pessimism, technical selling, rising energy prices and more shorting.

Today's Headlines

Bloomberg:

• France's AAA Outlook Cut; Fitch Reviews Others. Fitch Ratings lowered France’s rating outlook and put the grades of nations including Spain and Italy on review for a downgrade, citing Europe’s failure to find a “comprehensive solution” to the debt crisis. Fitch changed its outlook on France to negative, while affirming its AAA rating. It also placed Spain, Italy, Belgium, Slovenia, Ireland and Cyprus on a “Rating Watch Negative” review, which it expects to complete by the end of January, according to a statement released today in London. The move raises pressure on European leaders after Fitch said on Dec. 12 that the lack of a comprehensive solution at a European Union summit this month increased pressure on sovereign ratings. EU heads, in their fifth attempt to end the debt crisis now in its third year, agreed to forge a tighter fiscal union as the main thrust of their efforts, even as the European Central Bank resists investor calls to step up its bond-buying program. “Of particular concern is the absence of a credible financial backstop,” Fitch said in an e-mailed statement. In the company’s opinion, “this requires more active and explicit commitment from the ECB.” Without a full solution, Fitch said the crisis will persist, “punctuated by episodes of severe financial market volatility that is a particular source of risk to the sovereign governments of those countries with levels of public debt.”“It’s justified,” said Vincent Truglia, managing director at New York-based Granite Springs Asset Management LLP and a former head of the sovereign risk unit at Moody’s Investors Service. “A solution to the crisis that maintains the euro as it is is not tenable,” he said. “The euro must be shrunk dramatically.” Fitch said that it changed France’s outlook because of the “heightened risk of contingent liabilities” that may emerge from the escalating euro-region crisis. The country has almost run out of buffers to absorb shocks “without undermining its AAA status,” it said. “The intensification of the euro zone crisis since July constitutes a significant negative shock to the region and to France’s economy and the stability of its financial sector,” the company said.
• Euro Weakens After Fitch Downgrade Warnings. The euro dropped against the majority of its most-traded counterparts as concern increased that the region’s leaders won’t be able to contain the sovereign-debt crisis after Fitch Ratings said it may downgrade France and six other European nations.
• European Banks Insure $25 Billion of Government Debt via Swaps. European banks have sold insurance on a net 18.9 billion euros ($25 billion) of government debt in the region, according to figures from the European Banking Authority analyzed in today’s Bloomberg Risk newsletter. Data gathered by the EBA for its stress tests, combined with figures compiled by the Depository Trust & Clearing Corp., show that European Union banks are responsible for 17 percent of the credit-default swaps issued on euro sovereign bonds. German, French and Italian banks have the most at stake, the data show. German banks have underwritten 8.1 billion euros of government securities, the most for any country surveyed by the EBA. The four largest French banks, which were downgraded by Moody’s Investors Service last week, wrote 4.1 billion euros of protection, while Italian banks sold 3 billion euros of swaps designed to compensate the buyer in the event of a government failing to meet its obligations. The entanglement between banks and their governments may hamper plans by regulators to move settlement of credit-default swap trades to clearing houses by the end of 2012, said Jon Gregory, partner at Solum Financial Partners in London. French banks, for example, have insured a net 1.5 billion euros of their own government debt, according to the EBA.
• UK Lawsuit Risk May Lead EU to Damp Treaty Plan, FTD Says. European Union leaders who agreed to tighten fiscal rules amid the debt crisis last week may water down the plan over fears the U.K. could oppose the step in court, the Financial Times Deutschland reported, without citing anyone. In amending the rules, the states that signed up for the plan may no longer insist on binding commitments to tighter fiscal rules and instead substitute voluntary agreements on some points, the newspaper reported. EU officials will meet on Dec. 20 in Brussels to resume work on the measures, the newspaper said.
• US Consumer Prices Stagnate as Gas Drops. The cost of living in the U.S. was little changed in November as gasoline prices dropped and food expenses cooled, supporting the Federal Reserve’s view that inflation will remain in check. The stable reading for the consumer-price index followed a 0.1 percent decline in October, a report from the Labor Department showed today in Washington. So-called core prices that exclude food and energy rose 0.2 percent, more than forecast, reflecting higher medical care and clothing costs.
• Zynga Declines in Trading Debut After $1B IPO. The shares, listed on the Nasdaq Stock Market under the symbol ZNGA, fell 4.2 percent to $9.58 at 12:53 p.m. New York time. The developer of games such as “CityVille,” “FarmVille” and “Mafia Wars” sold 100 million shares for $10 each, the top end of a proposed range, Zynga said in a statement.
• Prada Poised to Extend Slump as China's Shoppers Cut Bank Spending: Retail. Prada SpA is falling out of fashion six months into its Hong Kong trading debut as investors brace for Chinese shoppers to curb spending. Shares of the maker of $2,000 bags and Miu Miu shoes, which gets more than 42 percent of sales from Asia, have dropped 32 percent from their July peak. The stock has fallen with companies such as jeweler Luk Fook Holdings International Ltd. (590) and Omega retailer Hengdeli Holdings Ltd. (3389) as property and stock- market declines hurt China’s consumers. Luxury-sales growth in the world’s most populous nation will slow in 2012 from a forecast of at least 20 percent this year, said Royal Bank of Scotland analyst Katherine Chan. Coach Inc. (COH) to Gieves & Hawkes seller Trinity Ltd. (891) are already feeling the effects. “The golden time, or the high-growth period, for many luxurious goods retailers is probably over,” said Chan. Sales growth at high-end stores open more than a year may drop by as much as six percentage points in 2012, she said. Consumption leveled off faster than expected this quarter amid a cooling economy and market declines, Citigroup Inc. said Dec. 8, citing retailer and manufacturer projections at a Hong Kong conference.

Wall Street Journal:

• Dell(DELL) Sees Weak PC Demand in India. Dell Inc. is seeing some softness in demand for its personal computers in India as the local currency's sharp fall and a shortage of hard disk drives have pushed up the price of PCs, and consumer sentiment is damped by economic uncertainties. "We are seeing lower offtakes [in PCs] pretty much across" the board, Mahesh Bhalla, executive director and general manager at Dell's India unit, said recently. "We see this trend continuing over the next few months," he added.
• Oil Sector Sites Sights High, Adds More Muscle in Iraq. Oil companies active in the south of Iraq have beefed up security to deal with fears over the security implications of the U.S. troop withdrawal, but they say the pullout hasn't caused them to change plans to significantly ramp up production. "We have to wait and see.…If the security situation deteriorates that means we will hire more security personnel to protect us," said an executive of one of the oil majors.
• Investors Turn Away From Emerging Market Funds On Euro Worries. Investors turned away from emerging-market funds in the latest week, demonstrating their disappointment with the recent summit of European Union leaders and continued risk aversion. In the days following last week's summit, which took steps toward greater fiscal integration within the euro zone, market sentiment reflected concerns that such measures may not be enough to stopgap contagion risks.
• SEC Sues Former Fannie, Freddie Executives. The Securities and Exchange Commission has sued the former chief executives of Fannie Mae and Freddie Mac, accusing them of misleading investors about risks of subprime-mortgage loans. The lawsuits, filed in Manhattan federal court, also accused four other former executives at Freddie Mac and Fannie Mae of making false and misleading statements about the firms' exposure. The government took over Fannie and Freddie in September 2008 as investors pulled back from the firms, which took heavy losses on souring mortgages they guaranteed. Taxpayers have since provided $151 billion of support.
  

CNBC.com:

• Bank Layoffs Far From Over: 150,000 Likely in 2012: Bove.

Business Insider:

• Fitch Threatens Massive Euro Downgrade After Saying Comprehensive Solution To Crisis Is 'Beyond Reach'.
• These Are The 29 Massive Banks That Could Take Down The Global Economy.
• The Sharks Small A Bubble Right In The US Heartland.
• Portuguese Politician: 'We Have An Atomic Bomb That We Can Use In The Face Of The Germans And The French'.
  

Zero Hedge:

• Whitney Tilson Down -.6% in November, Down -25% YTD.
• Charting China's Take Over Of The Banking World... And A Stark Warning.
  

Bespoke:

• Bank and Broker Default Risk Remains Elevated. (graph)
  

IBD:

• New Chinese Microblog Regs Hit Sina(SINA); Stock Down 7%. Among other things, Sina (SINA) said the new rules require that "users of microblogging services register their identities with microblogging service providers." That means users, who may or may not post items that criticize the Chinese government, can't hide behind false names or pseudonyms. Microblogging service providers are required to verify the identities of their users, Sina said. Moreover, Sina said the new regulations "identify 11 categories of content that are restricted from being disseminated. Microblogging service providers are required to implement systems and procedures to ensure the security of user information and that the information disseminated by microblogging users is in compliance with the content restriction policy." In its statement, Sina said its executives are "closely monitoring this new regulatory development" and the impact it might have on its Twitter-like service, Weibo. Investors didn't monitor the news long, as Sina's U.S. shares were down 7% in early trading

Reuters:

• Boyer Allan Shutting China, Asia Hedge Funds - Sources. Boyer Allan Investment Management is shutting two of its hedge funds after losses and a fall in assets this year, four sources familiar with the matter said. The company, which managed about $1.8 billion in three products before the financial crisis, was shutting its pan-Asia Boyer Allan Pacific fund after an 18.7 percent loss up to the end of November, two of the sources said. It is also shutting the Boyer Allan Greater China fund, which has lost 7.8 percent this year.
• Europe's Lenders On Central Bank Life Support. European banks face a 725 billion euro funding crunch in 2012, forcing them deeper into the arms of a European Central Bank which is prepared to prop up banks but not governments. The central bank is throwing European lenders a three-year liquidity lifeline in response to pressure from desperate top executives who have seen interbank lending and funding from wary money market investors come to an abrupt halt. "There's a huge funding issue in Q1 where a lot of banks have to refinance debt so there's a big crunch coming," a senior banker at a European firm told Reuters on Friday. "Couple that with uncertainty about what's going to happen with the euro and it could be a very interesting first quarter."

Telegraph:

• IMF Chief Offers Nothing But Platitudes. Christine Lagarde's blood-curdling warning of a 1930s style depression is all very well as far as it goes, but she fails to provide anything in the way of solutions. After a brief interlude in which the multilateral response to the initial banking crisis seemed to be working, it is now manifestly failing.
• Debt Crisis: Live. UK Deputy Prime Minister tells French PM Francois Fillon 'remarks about British economy simply unacceptable', as draft fiscal document states that all 27 members will have a hand in eurozone reforms and Fitch places six countries on watch for possible downgrade.
• Ireland's Economy Shrinks More Than Expected -1.9%. Ireland's economy contracted by 1.9pc in the third quarter, far worse than expected, as global economic turmoil dented export growth, raising the stakes for its fiscal and debt targets under an EU-IMF bailout.

Die Welt:

• A plan to boost the IMF's resources to help finance euro zone nations faces skepticism from countries such as the U.S., Brazil, China and Japan.

Bear Radar

Style Underperformer:

• Large-Cap Value (-.01%)

Sector Underperformers:

• 1) Computer Services -1.50% 2) Wireless -.76% 3) Drugs -.52%

Stocks Falling on Unusual Volume:

• IBM, VRUS, MXWL, VGR, ERTS, FSLR, CRUS, IRBT, AFSI, INHX, ITMN, RIMM, SINA, VPHM, GSVC, NTLS, GKSR, GILD, SHFL, GLRE, DTV, YNDX, SHLD, SGI, CVC, ACN, LRN, PAY and LPS
  

Stocks With Unusual Put Option Activity:

• 1) DTV 2) CAM 3) RIMM 4) CIEN 5) CNX
  

Stocks With Most Negative News Mentions:

• 1) RIMM 2) GS 3) BAC 4) CVC 5) ZNGA
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth (+1.25%)

Sector Outperformers:

• 1) Airlines +2.35% 2) Software +1.79% 3) HMOs +1.65%

Stocks Rising on Unusual Volume:

• ADBE, IPHI, RUSHA, ACTG, CVLT, WU, VRTX, AMGN, URI, RRR, CIE, MTZ, CAM, HANS and AIR
  

Stocks With Unusual Call Option Activity:

• 1) DHI 2) ETFC 3) ADBE 4) INHX 5) ENDP
  

Stocks With Most Positive News Mentions:

• 1) ATHN 2) AKS 3) VRX 4) AMGN 5) NDSN
  

Charts:

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

Friday Watch

Evening Headlines

Bloomberg:

• BofA(BAC), Goldman(GS), Barclays(BCS) Have Fitch Credit Ratings Cut. Bank of America Corp. (BAC), Goldman Sachs Group Inc. (GS) and Citigroup Inc. (C) had their credit grades cut by Fitch Ratings as the impact of financial regulation and market turmoil (VIX) weighed on the industry. The lenders’ long-term issuer default ratings were cut one level to A from A+, Fitch said yesterday in a statement. Barclays Plc (BARC), based in London, Credit Suisse Group AG (CSGN), Deutsche Bank AG (DBK) and BNP Paribas SA also had their grades lowered. The moves complete a review of financial firms by the three major rating companies. Moody’s Investors Service cut banks in September, citing a lower probability that the U.S. will support the industry in an emergency. Standard & Poor’s lowered ratings last month. Lenders including Bank of America and Citigroup have said they may have to post billions of dollars in collateral and face higher funding costs in the event of downgrades.
• CME(CME) Says MF Global Used Customer Money Days Before Failure. MF Global Holdings Ltd. used about $700 million of customer funds to "meet liquidity issues" at its broker-dealer in the days prior to its Oct. 31 bankruptcy filing, according to CME Group Inc. The exchange operator, which had auditing authority over MF Global, detailed its dealings with the failed futures broker in documents released today by the House Financial Services Committee. MF Global officials told Chicago-based CME Group there was a shortfall in accounts with money moved on Oct. 27 and Oct. 28 and possibly as early as Oct. 26, according to a CME Group timeline. Customer funds were also used to make a $175 million loan to the firm's UK subsidiary, the documents show.
• Oil Heads for Biggest Weekly Drop Since September on Industrial Weakness. Oil headed for the biggest weekly decline since September in New York as investors speculated that fuel demand will falter amid shrinking industrial production from the U.S. to Europe and China. Futures were little changed after falling yesterday as figures from the Federal Reserve showed output at factories, mines and utilities in the U.S. slid 0.2 percent in November, the first decrease since April. Chinese factory production may drop for a second month in December, preliminary results from a Markit Economics survey indicated. Euro area manufacturers face a fifth straight month of contraction, a separate report showed. “The demand situation is starting to weigh on the market,” said Michael McCarthy, a chief market strategist at CMC Markets Asia Pacific Pty in Sydney. The Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world’s oil, may boost crude output by 0.6 percent this month as Libya raises production, according to tanker-tracker Oil Movements.
• RIM(RIMM) Forecast Misses Analyst Estimates. Research In Motion Ltd. (RIMM) fell as much as 8.3 percent in extended trading after saying a new generation of BlackBerrys designed to fuel a comeback won’t be out until the “latter part” of 2012. The smartphone maker, which originally planned to release the new devices in the first quarter of next year, also gave a sales and profit forecast that missed analysts’ estimates. The delay adds to the challenges at RIM, which has lost market share to Apple Inc. (AAPL)’s iPhone and Android phones. The company also flubbed its entry into the tablet market, with a device that bombed with shoppers. After all that, investors may not trust the new target for the upgraded BlackBerrys, said Alkesh Shah, an analyst at Evercore Partners Inc. “Given the misexecution they’ve had recently, it’s hard to use that as a solid deadline,” said the New York-based analyst, who has an “equalweight” rating on RIM shares. “Let’s say it’s a year from now, my concern is that it may be too late.” RIM fell as low as $13.88 in late trading after the announcement, which accompanied its third-quarter earnings results. The stock had already dropped 74 percent this year.
• Adobe Forecasts Sales That May Top Estimates On New Programs. Adobe Systems Inc. (ADBE) forecast fiscal first-quarter sales that may top analysts’ estimates amid buoyant demand for a new breed of tools that help customers design Web pages and create online video. Revenue in the quarter that ends March 3 will be $1.03 billion to $1.08 billion, the company said in a statement today. That compared with $1.06 billion, the average estimate in a Bloomberg survey of analysts. Profit excluding certain items will be 54 cents to 59 cents a share, compared with the average 58-cent estimate. Shares gained in late trading.
• FX Concepts' John Taylor Says Euro May Decline to Parity With U.S. Dollar. The euro will sink to parity against the dollar as the European sovereign-debt crisis shrinks investor appetite for the 17-nation currency, according to John Taylor, founder of the world’s largest currency hedge fund. “It should be a lot lower than it is,” Taylor said in an interview on Bloomberg Television’s “Street Smart” with Lisa Murphy. “It’s a distinct possibility” that the euro could weaken to trade on a one-to-one basis with its U.S. counterpart in the next 18 months, he said. Taylor predicted in January that the euro would fall below parity with the dollar this year. The shared currency has dropped 2.7 percent this year as the region’s leaders bailed out Portugal after providing rescue packages in 2010 for Ireland and Greece and attempted to rein in rising sovereign debt yields. The currency is trading 8 percent higher against the dollar than its average value of $1.2042 since inception in 1999. Taylor, who said he owns more dollars than anything else, cited European investors repatriating foreign assets as the main driver of the euro’s relative strength this year. European portfolio managers brought home 65.9 billion euros ($85.8 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. Repatriation is occurring as banks rush to increase capital to meet a European Banking Authority mandate that lenders increase their Core Tier 1 capital ratios to more than 9 percent by mid-2012, Taylor said.
• India Profit Forecasts Cut Most Since '09 as Sensex Lags. Indian stocks are ending 2011 with the biggest decline among the world’s largest equity markets, and analysts say the worst is yet to come. Earnings forecasts for BSE India Sensitive Index companies for the year ending in March 2012 have fallen 7.9 percent to 1,160 rupees per share, the biggest drop since the 12 months ended March 2009, according to about 1,500 estimates compiled by Bloomberg. Analysts cut outlooks for Maruti Suzuki India Ltd., the country’s biggest carmaker, and Tata Steel Ltd., the largest producer of the alloy, by at least 29 percent, the data show.
• Chinese Stocks Head for Biggest Weekly Drop Since 2010. China’s benchmark index headed for its biggest weekly losses in 17 months on concern exports will slump next year and the government won’t ease monetary policy fast enough to stem an economic slowdown. China Cosco Holdings Co., the nation’s largest shipping line, slid 1.1 percent after Commerce Minister Chen Deming said he is “not too optimistic” about exports in 2012. Yanzhou Coal Mining Co. dropped for a sixth day amid speculation the economic slowdown will curb energy demand. New China Life Insurance Co., the third-biggest life insurer, jumped 12 percent in its debut. “Investors are still concerned whether the economic slowdown will be gradual and whether consumer prices will rise,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Any gain will be short term.” The Shanghai Composite has slid 6 percent this week, poised for the biggest drop since the week ending July 2, 2010, after reports showed economic growth is decelerating. Foreign direct investment dropped for the first time since 2009, while manufacturing may contract for a second month. The Conference Board’s leading index for China, which captures prospects over the next six months, fell in October, while lending slowed in November and money supply grew the least in a decade.
• Mercedes Leads Luxury-Car Discounts in China as Economy Slows. Mercedes-Benz and BMW dealers deepened their discounts on some models in China last month as slowing property and stock markets weighed on premium-car purchases, according to a research firm. Average prices of Daimler AG’s basic 2012 Mercedes-Benz C200 sedan at Chinese dealerships were 16 percent below the manufacturer’s recommended price last month, compared with 14 percent in October and 3.4 percent in July, when the model became available, according to data from China Auto Market. BMW dealers sold the 2012 320i sedan 11 percent below the suggested price, more than triple the initial discount for the 2011 model. Daimler, Bayerische Motoren Werke AG and Volkswagen AG’s Audi are looking to the world’s biggest car market to prop up deliveries as European demand sags on concern over the region’s sovereign debt crisis. A slowdown in China’s property and stock markets will probably undermine discretionary spending, according to Credit Suisse Group AG and BNP Paribas SA. “Competition is getting fierce, especially in the entry- level luxury car segment,” said John Zeng, a Shanghai-based director at researcher LMC Automotive Asia Pacific. “BMW, Mercedes and Audi are expanding their capacity in China and the majority of that capacity is used to make the entry-level models, and that’s increasing the competition.”
• Einhorn Trades Swaps for Shorts When Betting on Sovereign Debt. David Einhorn, the hedge-fund manager who compared the Greek bailout to a surrealist painting, recast a bet against sovereign debt in a way that reduces risks posed by government regulators and big banks.

Wall Street Journal:

• Ties That Bound Europe Now Fraying. A common currency drove investors to Europe's outer reaches, then scared them away. The first decade of the euro intertwined the Continent's financial systems as never before. Banks and investment funds in one euro-using country gorged on the bonds of others, freed of worry about devaluation-prone currencies like the drachma, lira, peseta and escudo. But as the devaluation danger waned, another risk grew, almost unseen by investors: the chance that governments, no longer backed by national central banks, could default.
  
• Broadcom(BRCM) CEO Sees Closing Cellular Chip Gap With Qualcomm(QCOM).Broadcom Corp. (BRCM) expects to close the gap with Qualcomm Inc. (QCOM) in chips that connect phones to wireless networks in the next couple years, the semiconductor maker's chief executive said. Scott McGregor, speaking in an interview a day after Broadcom's analyst meeting in New York, acknowledged Qualcomm's current lead over the company in so-called cellular baseband chips used in mobile phones, but he said Broadcom's new focus on smartphones and next-generation 4G technology, known as Long-Term Evolution, will help it compete.
• Beijing Set to 'Strike Hard' at Revolt. A senior local official has vowed to "strike hard" against the leaders of a revolt in the southern Chinese fishing village of Wukan, and urged them to surrender, at the same time as announcing the property project that triggered the unrest is being put on hold. The comments by Wu Zili, the acting mayor of Shanwei prefecture, which includes Wukan, suggested that authorities were taking a cautious, carrot-and-stick approach as they attempt to resolve the situation without embarrassing Beijing by prompting further violence or emboldening other protesters.
• Solyndra Does Europe. Germany's solar power industry is the latest to flop as subsidies ebb.
• Congress Blinks on Shutdown. Congressional leaders—fearful of voters' wrath over Washington's bickering and brinkmanship—stepped back Thursday from a possible government shutdown, clearing the way for at least a short-term extension of a payroll tax cut that is set to expire at year's end. The shift marked a dizzying change in tone from the contentious atmosphere that prevailed just a day earlier. Republican and Democratic leaders returned to the bargaining table and struck a deal on a $1 trillion spending bill to keep the government operating after Friday.
• Gingrich Defends Stances in Debate. Former House Speaker Newt Gingrich used a televised debate Thursday to try to keep momentum going in his front-running presidential campaign.
• Why Ron Paul Can't Win. The candidate's problem isn't better-funded opponent or media bias—it's his own views on foreign policy.
• The Keystone Ultimatum. Will Obama veto a tax holiday to stop a job-creating pipeline?

Zero Hedge:

• Must Read: Presenting The MF Global Black Box: A Minute By Minute Breakdown Of The Doomed Broker's Last Week On Earth.
• Revised EFSF Draft Shows Italy, Spain Responsible For One Third Of European Bailout Funding.
• Moody's Turns To Canada: Ontario Outlook Revised To Negative, "Softening Economic Outlook" Cited.

CNBC:

• Allen Stanford Appears to Be 'Faking' Amnesia: Prosecutors. Federal prosecutors say accused Ponzi schemer R. Allen Stanford appears to be "faking" memory loss in order to avoid his criminal trial scheduled for next month.
• Zynga IPO Prices at $10 a Share, Top of Range.
• China Toughens Trade Stance With Tariffs. China has fired a warning shot with its decision to impose tariffs on imports of sport-utility vehicles (SUV) and other large cars from the United States as both countries gear up for increased trade friction next year.

Gallup:

• Obama Job Approval: Approve 42%, Disapprove 50%.

Reuters:

• Accenture(ACN) Sounds Caution as Economy Sputters. Accenture Plc posted strong quarterly results but the technology outsourcing and consulting company's cautious view of the second quarter amid the worsening global economy sent its shares down after market. For the second quarter, the company forecast revenue of $6.5-$6.8 billion, a wider-than-usual range, to factor in any delays at the end of the calendar year, especially in the Eurozone.

Financial Times:

• EFSF Weighs Euro Break-Up Warnings for Product Prospectus. The EFSF is weighing including on a product prospectus, among four pages of "risk factors," warnings against the possibility of a country exiting the euro or "the cessation of the euro as a lawful currency," citing the latest draft.

Telegraph:

• The Sad Death of Multi-Lateralism Makes Way for a More Sinister Trend. Like much of what passes as agreed policy in Europe these days, the deal announced only last weekend to address the eurozone's gathering debt storm is fast unravelling.
  

Financial Times Deutschland:

• Germany's central bank expects any bigger involvement by the IMF in trying to resolve Europe's debt crisis to increase the risk of financial losses for Germany, as its participation would also be enlarged, citing people at the Bundesbank.
  

Business Line:

• JSW Steel may slash FY12 capex by half. JSW Steel Ltd proposes to reduce its capital expenditure by over half for the current fiscal and go slow with its capacity expansion. This is because the company is going through tough times with a huge debt burden of over Rs 18,400 crore in the backdrop of sluggish demand for steel.

Business Spectator:

• Australian Banks Ordered to Conduct Stress Tests: Report. With the European debt crisis in focus, the Australian Prudential Regulation Authority (APRA) has ordered Australian banks to conduct stress tests on their ability to withstand a sharp spike in unemployment, a collapse of property prices and a broader recession, according to a report by the Australian Financial Review.

CCTV:

• Beijing Requires Microblog Users to Identify Themselves. All new users will be required from today to register themselves with government agencies for a microblog account, citing new Beijing municipal government regulations. All existing users will also be required to register within three months.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.50% to +1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 212.0 -3.0 basis points.
  
• Asia Pacific Sovereign CDS Index 157.75 -.75 basis point.
• FTSE-100 futures +.29%.
  
• S&P 500 futures +.34%.
  
• NASDAQ 100 futures +.29%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DRI)/.43

Economic Releases
8:30 am EST

• The Consumer Price Index for November is estimated to rise +.1% versus a -.1% decline in October.
• The CPI Ex Food & Energy for November is estimated to rise +.1% versus a +.1% gain in October.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Fisher speaking, Fed's Evans speaking and the ECB's Draghi speaking could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and financial 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.