Bear Radar

Style Underperformer:

• Mid-Cap Growth (+.13%)

Sector Underperformers:

• 1) Airlines -1.98% 2) Coal -1.33% 3) Homebuilders -.94%

Stocks Falling on Unusual Volume:

• ALLT, SFLY, PHH, MJN and UAL
  

Stocks With Unusual Put Option Activity:

• 1) SVU 2) XOP 3) GPS 4) AET 5) UTX
  

Stocks With Most Negative News Mentions:

• 1) DAL 2) AM 3) BKS 4) RYL 5) UAL
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value (+.38%)

Sector Outperformers:

• 1) Education +1.09% 2) HMOs +1.07% 3) Gaming +1.07%

Stocks Rising on Unusual Volume:

• MNTA, PVD, RE and CHS
  

Stocks With Unusual Call Option Activity:

• 1) CAM 2) SUN 3) SFLY 4) AMD 5) INHX
  

Stocks With Most Positive News Mentions:

• 1) BA 2) C 3) RTN 4) KFT 5) ORCL
  

Charts:

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

Friday Watch

Evening Headlines

Bloomberg:

• King Says Crisis Threatens Europe’s Economy as Stability Outlook Worsens. Mervyn King, vice chairman of the European Systemic Risk Board, said Europe’s sovereign debt crisis is threatening to hurt the real economy and the outlook for financial stability has worsened. Growth prospects “have deteriorated” since September, King, who is also governor of the Bank of England, said at a briefing hosted by the European Central Bank in Frankfurt yesterday. “Investors lack confidence to continue to provide normal levels of funding. Dependence on central banks has risen.” The ECB loaned banks a record 489 billion euros ($636 billion) for three years on Dec. 21 to avert a credit crunch from the sovereign debt crisis. The central bank said earlier this week that the turmoil has taken on systemic proportions not seen since the 2008 collapse of Lehman Brothers Holdings Inc. King said the outlook for financial stability has “worsened” since the last ESRB meeting in September, and while intervention by the ECB is expected to “assuage funding problems in the near term, in the longer term private funding markets must be revitalized.” Bank shares have suffered this year as borrowing costs surged in the euro region. The Stoxx 600 Banks Index has fallen 28 percent since the end of June, compared with a 12 percent decline by the Stoxx Europe 600.
• 'Monti Effect' Fizzles Before $574 Billion New Year: Euro Credit. Prime Minister Mario Monti's market honeymoon is ending as Italian bond yields near 7% signal mounting concern his government may struggle to sell $574 billion of debt next year. Monti took just five weeks in office to push through a 30 billion-euro emergency budget package aimed at taming surging borrowing costs. Investors reacted to the plan's final approval by the Senate yesterday by driving up the yield on Italy's 10-year benchmark bond by 12 basis points to 6.91%, near the 7% level that prompted Greece, Ireland and Portugal to seek bailouts.
• Slovenia’s Debt Rating Cut by Moody’s on Banking Industry Risk. Slovenia had its credit rating lowered one step to A1 by Moody’s Investors Service on the potential need for the government to support its banking system amid Europe’s debt crisis. The euro-area nation’s banking industry has assets that are about 136 percent of gross-domestic product, which is “relatively large when compared to other systems in Eastern Europe,” Moody’s said yesterday in a statement. It assigned a negative outlook to Slovenia’s credit grade, the fifth-highest. Standard & Poor’s ranks the nation AA-, one level higher. Slovenia was downgraded at Moody’s for the second time in three months as the euro area struggles to resolve its sovereign-debt crisis, prompting ratings companies step up scrutiny of the region.
• North Korea Warns Lee Government Over Condolences, Yonhap Says. North Korea said its relationship with South Korea is at a crossroads and could break down completely depending on the Lee Myung Bak administration’s attitude to condolences to the late Kim Jong Il, Yonhap News reported, citing a North Korean website. North Korea is open to all condolence messages and visits from South Korea following Kim’s death and took steps to open air routes and a land corridor via the Gaeseong joint industrial zone, Yonhap said, citing Uriminzokkiri, a website run by the North’s state-run Committee for the Peaceful Reunification of Korea. South Korea’s government on Dec. 20 expressed “sympathy” to the people of North Korea while stopping short of sending an official delegation to offer its communist neighbor condolences. It said it would allow private visits by the wife of late President Kim Dae Jung and family members of the late founder of the Hyundai Group, Chung Ju Yung.
• China May Halt Buying of Corn Until Price Falls to $5 a Bushel, Yigu Says. China, the second-biggest corn consumer, may import more of the grain if global prices fall 19 percent to about $5 a bushel, a level that is significantly below domestic prices, said Yigu Information Consulting Ltd. China’s corn supply is sufficient after a record harvest and the government may import to boost stockpiles only if there is a “clear price advantage,” said Feng Lichen, general manager of Yigu, China’s largest corn information portal. Corn, used as an ingredient in feed and in ethanol, has plunged 20 percent since Aug. 31 on high global grain supplies and concerns that Europe’s deepening debt crisis and a slowing global economy may sap demand. Morgan Stanley on Dec. 13 lowered its price forecasts for agricultural commodities including corn because of rising supplies.
• Mongolia Spending Risks Commodities Bust: IMF. Mongolia’s economy, which grew 20.8 percent last quarter, risks contraction along with a global downturn in commodity prices partly due to a surge in state spending, according to the International Monetary Fund. Government spending jumped 50 percent in real terms to 6.3 trillion tugrik ($4.6 billion) this year, pushing inflation in the $8.4-billion-economy to 14 percent, Steven Bennett, IMF’s head of Mongolia coverage, said in an interview in Tokyo. That may drive up borrowing costs and cut the profitability of mining projects, Mongolia’s biggest industry, he said. “The global economy is in a dangerous phase and what that means for Mongolia is a higher-than-normal chance that commodity prices fall,” Bennett said. “Their spending plans could not be realistically financed if there was a repeat of the 2008 shock. They’d have to cut spending. This is ‘boom-bust’ policy- making.”
• Graduates in 'Weird Limbo' Work for Free While Hunting for Jobs.

Wall Street Journal:

• Agreement Reached to Extend Tax Break. House Speaker John Boehner, bowing to heavy pressure from fellow Republicans, agreed Thursday to a two-month extension of a payroll-tax break, ending a stalemate that had created a wedge within the party.
  
• Canada Finance Minister: Euro Zone May Enter 'Serious' Crisis. Canada's Finance Minister Jim Flaherty said the euro zone sits on the brink of a "very serious crisis," and may require European leaders to use taxpayers' cash to recapitalize the region's banks and stabilize financial markets. During a taped interview with the Canadian Broadcasting Corp., Flaherty said the world's big economies, including Canada, wouldn't turn a "blind eye" to the euro-zone's problems, and are prepared to act under certain conditions. "Europeans have taken some steps, but it is belated and incremental," said Flaherty, the longest-serving finance minister among the Group of Seven industrialized countries. "This is not a good picture." He added euro-zone leaders have been inconsistent in their messaging, by stating that they want to keep the euro area together but at the same time indicating they are unwilling to use taxpayers' cash to bailout weaker peripheral countries. "You can't have it both ways, so something has to give, and it has not given yet," Flaherty said. "I think ultimately the large euro-zone countries will have to make an important decision. Are they going to save the euro zone or not? And, if they are, then they have to recapitalize their banks, and they are going to have to use taxpayers' money."
  
• Risk Is Out, and Goldman Sachs(GS) Cuts Ties With Brokers. Goldman Sachs Group Inc. has cut ties with more than a dozen brokers that once steered hedge-fund trades its way amid greater scrutiny of Wall Street’s interactions with customers. Since the beginning of last year, Goldman has cut these broker relationships to roughly six from more than two dozen, people familiar with the matter said. At the same time, Goldman’s prime brokerage division has continued to drop smaller fund clients that aren’t generating enough profits, people familiar with the matter said, in some cases directing them to the brokers Goldman continues to use. The moves come amid increased scrutiny. Last week, Goldman Sachs Execution Clearing LP agreed to pay nearly $10 million to the receiver in a Florida Ponzi scheme that lost $168 million for investors. Goldman hasn’t been accused of wrongdoing, but is connected to the case through Shoreline Trading Group LLC, the “introducing” broker for funds run by Arthur Nadel that cleared trades through Goldman.
• Pyongyang Myth-Builders Step It Up. Kim's Death Forces Propaganda Department to Work Quickly to Bolster New Leader's Legitimacy.
• BMW, Mercedes Duel in U.S. BMW AG and Mercedes-Benz are locked in an expensive race for bragging rights as this year's top-selling luxury car in the U.S. market, and customers are benefiting.
• Fed May Signal Low Rates Into 2014. The Federal Reserve could signal it is likely to keep short-term interest rates near zero into 2014 or beyond, to bolster the fragile economic recovery. Fed officials have grown increasingly uncomfortable with their August statement that they are likely to hold short-term rates exceptionally low at least through mid-2013. Some believe low inflation and high unemployment could warrant low rates for longer. Updating the view on rates has become an important part of Fed discussions about how the central bank explains its goals and policies to the public.
• Interview: China Economist: Beijing Unlikely To Abandon Housing Curbs. Despite slower economic growth, China's central government won't abandon controls on the property market as that would undermine its credibility, a prominent Chinese economist long associated with the country's market-oriented reforms said. Lu Mai--secretary general of the China Development Research Foundation, a Beijing think-tank that studies development issues and whose reports circulate in China's governing State Council--conceded.

Dow Jones:

• NY Fed: New Dollar Swap Facility Borrowings Total $9.891 Billion. New borrowings at the Federal Reserve's dollar swap facility continued to rise in the week ending on Wednesday. Total new borrowing for the week was $9.891 billion, led by $5.122 billion in borrowing from the European Central Bank and $4.769 billion in borrowing from the Bank of Japan. Total outstanding borrowing stood at $62.599 billion, compared to $54.335 billion the week before. Last week, borrowing jumped on a surge in drawings from the ECB.

MarketWatch:

• Hong Kong's Property Market May Be Slowing. (video)

Zero Hedge:

• Moody's Issues Credit Update of the United States.

CNBC:

• Keystone Pipeline Project: What's All the Fuss About? President Obama will be required to make a decision on the Keystone pipeline project now that Congress appears to have worked out a deal to extend the payroll-tax cut.

NY Post:

• Munster of a Stock. Analyst Predicts Apple(AAPL) to Hit $607.

AppleInsider:

• 'Prototype' Apple Store to call on a decade of design knowledge. Construction of what is being called a "prototype" Apple Store is just days from breaking ground in Palo Alto, and is planned to feature an open-space architecture that draws on the company's 10 years of iconic retail space design.
  

Huffington Post:

• MF Global Collapse Spotlights Practice That Heightens Systemic Financial Risk. The swift implosion of MF Global highlights a common practice used by aggressive speculators, one that experts say makes the broader financial system vulnerable to another crisis. It's called rehypothecation, and it allows a firm to essentially pledge the same limited collateral to arrange fresh loans. MF Global is believed to have used client funds as collateral to borrow money to make bets on the risky sovereign debt of Portugal, Spain and Italy, leading to a daisy chain of securitization, Thomson Reuters Business Law Currents reported. It's akin to using a single home as collateral for several loans and then investing that money to earn dividends before payments are due on the loans.

CBS News:

• U.N. Pay Tribute to North Korea's Kim Jong Il. The U.N. General Assembly paid tribute to North Korea's late leader Kim Jong Il on Thursday by observing a minute of silence in his memory. At the start of Thursday afternoon's meeting, Assembly President Nassir Abdulaziz Al-Nasser told diplomats it was his "sad duty" to report that Kim died on Saturday. He asked North Korea's ambassador "to convey condolences" to his country's government and people and then invited diplomats "to stand and observe a minute of silence in tribute to the memory of the late leader of the Democratic People's Republic of Korea." All diplomats then rose, and North Korea's Ambassador Sin Son Ho and several others bowed their heads. Al-Nasser said North Korea's U.N. Mission asked for the General Assembly tribute, which is customary for leaders who die in office. U.N. Deputy Secretary-General Asha-Rose Migiro went to North Korea's U.N. Mission on Tuesday and signed the condolence book for Kim on behalf of the United Nations system.

Chicago Tribune:

• Exclusive: Oil Fund BlueGold Loses Focus, Sinks Deep Into Red. Respected commodities hedge fund BlueGold has veered from its energy-focused strategy, betting half its money on equities and other trades that are worrying investors as it turns in its first down year. The London-based fund, founded by former Vitol oil traders Dennis Crema and Pierre Andurand, is heading for a negative annual return, losing 34 percent through mid-December. Its asset base is down to $1.2 billion from $2 billion about a year ago. The change in fortunes has raised concerns among some investors who question an increase in exposure to equities, as well as "macro-hedges" which investors say is unfamiliar territory for the fund that made its name in crude derivatives.

Reuters:

• Paulson Funds Down Again In December: Source. There will be no holiday cheer for hedge fund manager John Paulson this month, as his dismal performance in 2011 is capped off by another miserable performance so far in December. The Paulson & Co.'s Advantage Plus fund, which has been the firm's worst performer all year, is down another 9 percent through December 16, sending yearly losses to about 52 percent, according to a person familiar with the numbers. The Paulson Advantage fund, the firm's largest portfolio, is also hurting again this month, declining about 6 percent. The fund is down about 36 percent year-to-date. The Standard and Poor's 500 stock index has been flat so far in December. The average hedge fund was down about 4.37 percent through November, according to Hedge Fund Research's broadest industry index. Meanwhile, the gold fund that earned Paulson billions in 2010, is off about 7 percent for the year, according to an investor. The once safe-haven commodity has slumped 18 percent since September, when it hit $1,920 an ounce. At the end of the third quarter, Paulson was the largest shareholder of the SPDR Gold Trust (GLD) exchange-traded fund with about 20 million shares, according to quarterly regulatory filing.

The Daily Mail:

• UK Business Backs PM Over Euro Veto Row: Clegg proved wrong as 77% call for looser relationship with EU. Britain's business leaders have overwhelmingly backed David Cameron’s decision to veto a new EU treaty. A poll of members of the Institute of Directors found that 77 per cent support the defiant stand he took at a Brussels summit earlier this month. In a further boost for the Prime Minister, business bosses said they want the UK to loosen ties with Brussels. The revelations came as Mr Cameron told his MPs that he was right to veto the plans and would ‘do so again tomorrow’. The findings of the survey dramatically undercut claims by the Liberal Democrats that business is concerned Mr Cameron has left the UK isolated in Europe.

Xinhua:

• China will spend less on railway construction next year than it did in 2011.

China Securities Journal:

• Beijing's 2011 land sales may fall 30% from a year earlier to 110 billion yuan, citing Centaline Property Agency Ltd. The city's sales of land for residential housing development may fall to a three-year low of 46 billion yuan this year. Guangzhou's land sales may drop 36% to 29 billion yuan this year from a year earlier, citing Guangzhou Financial Bureau. Land sales in Shanghai have declined 16% to 115 billion yuan in the year to Nov. 20, compared with a year earlier, China Real Estate Information Corp. said.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are +.25% to +1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 207.0 +.5 basis point.
  
• Asia Pacific Sovereign CDS Index 158.0 unch.
• FTSE-100 futures +.65%.
  
• S&P 500 futures +.53%.
  
• NASDAQ 100 futures +.48%.

Morning Preview Links

Earnings of Note
Company/Estimate

• None of note
  

Economic Releases
8:30 am EST

• Durable Goods Orders for November are estimated to rise +2.2% versus a -.7% decline in October.
• Durables Ex Transports for November are estimated to rise +.4% versus a +.7% gain in October.
• Cap Goods Orders Nondef Ex Air for November are estimated to rise +1.0% versus a -1.8% decline in October.
• Personal Income for November is estimated to rise +.2% versus a +.4% gain in October.
• Personal Spending for November is estimated to rise +.3% versus a +.1% gain in October.
• The PCE Core for November is estimated to rise +.1% versus a +.1% gain in October.
  

10:00 am EST

• New Home Sales for November are estimated to rise to 315K versus 307K in October.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• None of note
  

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

Stocks Rising Into Final Hour on Less Financial/Tech Sector Pessimism, Short-Covering, Window-Dressing, Better US Economic Data

Broad Market Tone:

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

Equity Investor Angst:

• VIX 21.27 -.75%
  
• ISE Sentiment Index 131.0 -22.49%
  
• Total Put/Call .98 -9.26%
  
• NYSE Arms .84 +23.92%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 122.23 -3.75%
  
• European Financial Sector CDS Index 270.81 -1.30%
  
• Western Europe Sovereign Debt CDS Index 371.27 -.16%
  
• Emerging Market CDS Index 310.13 -1.26%
  
• 2-Year Swap Spread 48.0 +1 bp
  
• TED Spread 57.0 unch.
  
• 3-Month EUR/USD Cross-Currency Basis Swap -129.0 -1.5 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 168.0 -2 bps
  
• China Import Iron Ore Spot $135.20/Metric Tonne +.30%
  
• Citi US Economic Surprise Index 69.40 -1.1 points
  
• 10-Year TIPS Spread 2.03 -2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +90 open in Japan
• DAX Futures: Indicating +30 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is mildly bullish, as the S&P 500 moves back near its 200-day moving average and trades to session highs, despite Eurozone debt angst, rising global growth fears, higher energy prices and US tax hike concerns. On the positive side, Coal, Alt Energy, Oil Tanker, Steel, Semi, Networking, Bank, Construction and Educaiton shares are especially strong, rising more than +2.0%. (XLF) and (XLK) have outperformed throughout the day. Copper is gaining +.82% and Gold is falling -.73%. The Germany sovereign cds is falling -.95% to 104.17 bps and the Brazil sovereign cds is falling -2.73% to 162.64 bps. Moreover, the Europe Investment Grade CDS Index is falling -1.8% to 168.38 bps. On the negative side, Homebuilding, Restaurant and Airline shares are lower on the day. The UBS-Bloomberg Ag Spot Index is up +.4%, Oil is up +.63% and Lumber is falling -.56%. The Spain sovereign cds is rising +67% to 400.67 bps, the Italy sovereign cds is climbing +2.9% to 505.0 bps and the US sovereign cds is climbing +1.9% to 51.29 bps. The Italian/German 10Y Yield Spread is rising +2.5% to 497.3 bps. The Western Europe Sovereign CDS Index is still very near its all-time high. The TED spread continues to trend higher and is now 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 falling -1.22% to -129.05 bps, which is back to late-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 -29.5% since February 16th and -25.3% since Sept. 7th. The China Corporate Blended Spread Index remains very close to another technical breakout. The Citi Asia Economic Surprise Index is fell another -.3 point today to -28.10, the lowest since April 2009. Asian indices were mixed overnight. The Shanghai Composite tried to reverse sharp morning losses, but couldn’t completely, finishing down -.22%. This index is down -22.1% ytd. 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. Despite the recent improvement in US economic data, the 10-year yield is still at early Nov. levels, which is another red flag. The AAII % Bulls fell to 33.7 this week, while the % Bears fell to 28.2%. Overall, I still think investor sentiment is too bullish given the magnitude of the headwinds emanating from overseas and that the average stock(VGY Index) is down about -18.0% from April’s peak. Year-end window-dressing, short-covering, better US economic data and seasonal strength continue to help out short-term. The S&P 500 is once again approaching significant technical resistance. For a sustainable equity advance into the new year, I would expect to see meaningful European credit gauge improvement, subsiding hard-landing fears in key emerging markets, better volume and higher-quality leadership. I expect US stocks to trade mixed-to-higher into the close from current levels on better US economic data, short-covering, less financial/tech sector pessimism, year-end window dressing and seasonal strength.

Today's Headlines

Bloomberg:

• Monti's Emergency Budget Package Wins Final Approval in Italian Parliament. Prime Minister Mario Monti’s emergency budget plan won final approval in Parliament today as Italy struggles to tame surging borrowing costs before facing 53 billion euros ($69 billion) in debt repayments early next year. The Senate voted 257 to 41 to approve the 30 billion-euro package in a confidence vote in Rome. The legislation, dubbed by Monti the “Save Italy Decree” and the nation’s third austerity plan since June, was passed by the Chamber of Deputies in a 402- to-75 vote last week. The plan includes a pension overhaul, a levy on primary residences and a crackdown on tax cheats, all measures aimed at convincing investors Monti is serious about cutting the euro region’s second-largest debt and meet the commitment of balancing the budget in 2013. It may also push Italy, which must sell 440 billion euros in debt next year, deeper into a recession that is forecast to begin in the current quarter. “The austerity package will be sufficient to bring the deficit-to-GDP ratio down to zero,” UniCredit SpA economists Chiara Corsa and Loredana Federico, both based in Milan, wrote in a note to investors today. “The pension reform is by all means a major achievement, which shows the government’s commitment to reduce public spending in a structural way.” The yield on the benchmark 10-year bond rose to 6.92 percent, up 13 basis points from yesterday. The difference with equivalent-maturity German bonds climbed to 497.3 basis points.
• Financial Credit Risk at Two-Week Low on ECB Cash, U.S. Growth. The cost of insuring against default on financial debt fell to the lowest in two weeks amid optimism the European Central Bank’s cash injection will ease bank stress and after data signaled the U.S. economy is strengthening. The Markit iTraxx Financial Index of credit-default swaps on the senior debt of 25 European banks and insurers fell for a fourth day, dropping 12.5 basis points to 278, according to JPMorgan Chase & Co. at 4 p.m. in London. The Markit iTraxx SovX Western Europe Index of credit-default swaps linked to 15 nations was little changed at 357.5, the lowest in two weeks. Swaps on Italy dropped eight basis points to 484, France declined one basis points to 223 and Germany was two basis points lower at 103, according to CMA prices. Spain rose two basis points to 391, while swaps on Hungary climbed 40 to 610, the highest this month, after the country was downgraded yesterday to junk status by Standard & Poor’s. The Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings fell 19.5 basis points to a two-week low of 756. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings dropped 5.75 to 172.5, according to JPMorgan prices.
• Merkel Adviser Bofinger Sees Six Months to Save Euro, WiWo Says. The future of the euro will be decided in the next six months and the joint currency has “no future” unless Germany changes its stand, Peter Bofinger, a member of Chancellor Angela Merkel’s council of economic advisers, was quoted as saying by Wirtschaftswoche.
• HSBC Strategist on Europe Credit Crunch. (video) Garry Evans, head of global equity strategy at HSBC Holdings Plc, talks about the impact of the European debt crisis on the U.S. economy.
• U.S. Jobless Claims Fall, Consumer Comfort Climbs. Fewer Americans than forecast sought jobless benefits and consumer confidence climbed, giving the world’s largest economy a boost heading into 2012. Unemployment claims fell by 4,000 to 364,000 in the week ended Dec. 17, the lowest level since April 2008, Labor Department figures showed today in Washington. The Bloomberg Consumer Comfort Index improved to minus 45 in the period ended Dec. 18 from a reading of minus 49.9 the prior week, marking the biggest seven-day gain since January.
• U.S. Economy Expands Less Than Estimated. The economy in the U.S. grew less than previously estimated in the third quarter, reflecting a smaller gain in consumer spending that is giving way to a pickup in demand this quarter as the job market improves. Gross domestic product climbed at a 1.8 percent annual rate from July through September, down from the 2 percent estimated last month, revised Commerce Department figures showed today in Washington. The median forecast of 82 economists surveyed by Bloomberg News projected it would hold at 2 percent. Household purchases increased at a 1.7 percent rate, down from 2.3 percent.
• Baghdad Blasts Kill 57 as Political Tensions Rise. Civilians were targeted in bombings across Baghdad that killed 57 people amid an escalation of political infighting in Iraq that has followed the withdrawal of U.S. troops from the country. Today’s attacks also injured 176, Ziad Tariq, a spokesman for the Health Ministry, said by phone from the capital. Residential areas, schools and shops were hit, said Qassim Atta al-Mousawi, spokesman for the security forces in Baghdad. The blasts took place in mainly Shiite Muslim areas, where security forces cordoned off areas and some businesses shut for the day. “The timing of the crimes and the choice of their areas confirms again to all those in doubt the political nature of the objectives that these people want to achieve,” Prime Minister Nouri al-Maliki said in a statement on his website. There was no immediate claim of responsibility for the attacks. Tensions between al-Maliki’s Shiite-led allies and Sunni politicians have intensified since a warrant was issued this week for the arrest of Vice President Tariq al-Hashimi, a Sunni, on terrorism charges. The case comes amid concern that the U.S. pullout will leave a security vacuum in Iraq, which seeks investment and expertise to develop the world’s fifth-largest crude reserves.
• Oil Rises to $100 as Jobless Claims Decline, Leading Indicators Advance. Oil rose to $100 for the first time in a week as the applications for unemployment benefits in the U.S. decreased to a three-year low and the index of U.S. leading indicators signaled that economic growth will accelerate. Crude oil for February delivery rose $1.17, or 1.2 percent, to $99.84 a barrel at 12:39 p.m. on the New York Mercantile Exchange after climbing to $100 for the first time since Dec. 14. Prices have increased 9.3 percent this year after climbing 15 percent in 2010. Brent oil for February settlement gained 54 cents, or 0.5 percent, to $108.25 a barrel on the London-based ICE Futures Europe exchange. U.S. crude oil stockpiles fell 10.6 million barrels last week, the largest decrease since February 2001, yesterday’s Energy Department report showed. Imports dropped to 7.58 million barrels a day, the lowest level since September 2008. Civilians were targeted in bombings across Baghdad that killed 57 people amid an escalation of political infighting in Iraq that has followed the withdrawal of U.S. troops from the country. U.S. troops from the country. Today’s attacks also injured 176, Ziad Tariq, a spokesman for the Health Ministry, said by phone from the city. “The upsurge in violence in Iraq is probably adding to the oil price,” Lynch said. “Chances are that there will be no impact on the oil industry, but the increase in violence does add to a perception of instability.”
• U.S. 30-Year Mortgage Rates Fall to Record-Low. Mortgage rates for 30-year U.S. loans dropped to the lowest level on record amid signs the housing market may be set for a turnaround. The average rate for a 30-year fixed loan fell to 3.91 percent in the week ended today, the lowest in data dating to 1971, from 3.94 percent, Freddie Mac said in a statement. The average 15-year rate matched last week’s previous all-time low of 3.21 percent, according to the McLean, Virginia-based mortgage-finance company.
• Indian Banks' Bad Loans May More Than Double, RBI Says. Indian lenders’ bad loans may more than double by 2013 in a “severe risk” scenario, the Reserve Bank of India said in a report today. Soured loans may jump to as much as 5.8 percent of total advances within two years under such strained conditions, from 2.8 percent in September, according to the central bank report. The ratio is expected to climb to 3.2 percent to 3.5 percent by March 2013 under a baseline scenario, it said. India’s economy last quarter grew at the slowest pace in more than two years after the central bank raised interest rates by a record to tame the fastest inflation among so-called BRIC nations, the world’s largest emerging markets. Credit growth in India fell to a 20-month low of 17.73 percent in November, data compiled by the Reserve Bank of India shows. “While markets have already factored in some rise in bad loans, the higher projections made by the Reserve Bank will definitely weigh on investors’ sentiment,” Sandeep Jain, a banking analyst at IDBI Capital Market Services Ltd. in Mumbai, said by telephone today.

Wall Street Journal:

• McConnell Calls for Payroll-Tax Deal. Senate Minority Leader Mitch McConnell (R., Ky.), seeking to end an impasse on renewing the payroll-tax cut set to expire at the end of the year, on Thursday urged House Republican leaders to pass a short-term extension and said Senate Democrats should name negotiators to work out a longer-term deal.
• U.S. Erred in Deadly Pakistan Attack. New Report on Pakistan Airstrike That Killed 24 Acknowledges U.S. Culpability.
  

Dow Jones:

• Barclays(BCS) Made 'Huge Losses' in Base Metals Trading. Barclays may reshuffle its base metals desk after a series of "huge" losses mostly tied to copper trading, citing people familiar with the situation. Traders estimate losses up to $500 million, though no official figure can be confirmed.

MarketWatch:

• Akamai(AKAM) Gets a Boost With Cotendo Acquisition.

Business Insider:

• Apple(AAPL) Has Plans To Make Your MacBook's Battery Last For Weeks.
• The 10 Most Popular Restaurant Brands In 2011.
• New Evidence Suggests China's Hacking Into US Drones Using Adobe Reader And Internet Explorer.
• Violent Riots In Southern China Force Authorities To Halt Construction On Power Plant.
  

Zero Hedge:

• Here Is The Math: Carry Trade Profits From The LTRO Are Woefully Insufficient To Make Any Impact.
• Flowcharting The True Cause Of The Eurozone Crisis.
  

Washington Post:

• U.S. Exporters Brace For Cutbacks In European Bank Lending. The European Central Bank’s decision Wednesday to offer loan help to the region’s financial institutions was closely watched by U.S. companies, which have extensive ties to troubled European markets. Boeing warned that European banks would cut lending to companies that buy planes. Pharmaceutical companies Pfizer and Bristol-Myers Squibb have said cash-strapped European governments that provide health care are cutting what they spend on drugs. And other U.S. exporters to the region, such as almond farmers, medical equipment manufacturers and car makers, must brace for the possibility that a European recession will depress their sales.

Finanaial Times:

• The LTRO, The Switch and The Basis Swap Market. Were you puzzled by the immediate reaction of the euro following Wednesday’s LTRO? In short, so much euro liquidity hit the market that it didn’t matter that the ECB had just had a successful dollar funding operation. No one was willing to price currency basis swaps in any other way but one which reflected a dollar drought situation during a euro flood. In such a situation, the euro has no choice but to fall.

Telegraph:

• Debt Crisis: Live.
  

Bear Radar

Style Underperformer:

• Large-Cap Growth (+.38%)

Sector Underperformers:

• 1) Gold & Silver -.50% 2) Restaurants -.40% 3) Homebuilders -.36%

Stocks Falling on Unusual Volume:

• DECK, NEOG, BBBY, MLHR, FINAL, MANH, QKIK, PHH, AM, GRR, EMR and MJN
  

Stocks With Unusual Put Option Activity:

• 1) ECA 2) BBBY 3) AKAM 4) SWN 5) EMR
  

Stocks With Most Negative News Mentions:

• 1) KBH 2) MANH 3) PHH 4) BAC 5) VVUS
  

Charts:

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