Weekly Scoreboard*

Indices

• S&P 500 1,440.67 -1.33%
• DJIA 13,437.10 -1.05%
• NASDAQ 3,116.22 -2.0%
• Russell 2000 837.45 -2.11%
• Value Line Geometric(broad market) 359.58 -2.03%
• Russell 1000 Growth 670.30 -1.57%
• Russell 1000 Value 710.86 -1.16%
• Morgan Stanley Consumer 835.84 -.56%
• Morgan Stanley Cyclical 968.70 -2.98%
• Morgan Stanley Technology 684.40 -2.03%
• Transports 4,892.62 -.37%
• Utilities 475.75 +.93%
• Bloomberg European Bank/Financial Services 81.48 -4.3%
• MSCI Emerging Markets 41.54 -.46%
• Lyxor L/S Equity Long Bias 1,053.88 +.09%
• Lyxor L/S Equity Variable Bias 804.97 -.28%
• Lyxor L/S Equity Short Bias 539.64 unch.

Sentiment/Internals

• NYSE Cumulative A/D Line 156,383 -.43%
• Bloomberg New Highs-Lows Index 147.0 -22
• Bloomberg Crude Oil % Bulls 37.8 +37.8%
• CFTC Oil Net Speculative Position 231,297 -13.42%
• CFTC Oil Total Open Interest 1,555,863 -3.21%
• Total Put/Call .99 +23.75%
• OEX Put/Call .81 -17.35%
• ISE Sentiment 100.0 -7.41%
• NYSE Arms 1.69 +7.64%
• Volatility(VIX) 15.73 +12.52%
• S&P 500 Implied Correlation 48.83 -3.97%
• G7 Currency Volatility (VXY) 7.92 +.76%
• Smart Money Flow Index 11,644.82 -1.41%
• Money Mkt Mutual Fund Assets $2.576 Trillion +.3%
• AAII % Bulls 36.1 -3.7%
• AAII % Bears 36.5 +7.9%

Futures Spot Prices

• CRB Index 309.30 +.10%
• Crude Oil 92.19 -.83%
• Reformulated Gasoline 292.01 +3.26%
• Natural Gas 3.32 +7.91%
• Heating Oil 315.92 +.74%
• Gold 1,773.90 -.05%
• Bloomberg Base Metals Index 219.34 +.28%
• Copper 375.80 -.33%
• US No. 1 Heavy Melt Scrap Steel 361.33 USD/Ton -.19%
• China Iron Ore Spot 104.20 USD/Ton -2.07%
• Lumber 279.0 +.50%
• UBS-Bloomberg Agriculture 1,696.99 -.03%

Economy

• ECRI Weekly Leading Economic Index Growth Rate +3.8% +110 basis points
• Philly Fed ADS Real-Time Business Conditions Index -.5981 +8.2%
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 111.98 +.07%
• Citi US Economic Surprise Index 5.8 -14.8 points
• Fed Fund Futures imply 56.0% chance of no change, 44.0% chance of 25 basis point cut on 10/24
• US Dollar Index 79.94 +.64%
• Yield Curve 140.0 -9 basis points
• 10-Year US Treasury Yield 1.63% -12 basis points
• Federal Reserve's Balance Sheet $2.787 Trillion -.61%
• U.S. Sovereign Debt Credit Default Swap 33.04 +8.61%
• Illinois Municipal Debt Credit Default Swap 205.0 +.88%
• Western Europe Sovereign Debt Credit Default Swap Index 147.87 +11.86%
  
• Emerging Markets Sovereign Debt CDS Index 215.44 +2.15%
  
• Saudi Sovereign Debt Credit Default Swap 94.0 +6.81%
• Iraq Sovereign Debt Credit Default Swap 464.02 -2.07%
• China Blended Corporate Spread Index 415.0 +4 basis points
• 10-Year TIPS Spread 2.42% -7 basis points
• TED Spread 26.75 unch.
• 2-Year Swap Spread 13.25 +.25 basis point
• 3-Month EUR/USD Cross-Currency Basis Swap -26.25 -5.75 basis points
• N. America Investment Grade Credit Default Swap Index 100.07 +4.09%
  
• European Financial Sector Credit Default Swap Index 203.53 +11.4%
  
• Emerging Markets Credit Default Swap Index 223.28 +4.53%
  
• CMBS Super Senior AAA 10-Year Treasury Spread 97.0 +1 basis point
• M1 Money Supply $2.371 Trillion -1.81%
• Commercial Paper Outstanding 990.10 -1.80%
• 4-Week Moving Average of Jobless Claims 374,00 -3,800
• Continuing Claims Unemployment Rate 2.6% unch.
• Average 30-Year Mortgage Rate 3.40% -9 basis points
• Weekly Mortgage Applications 875.10 +2.8%
• Bloomberg Consumer Comfort -39.6 +1.2 points
• Weekly Retail Sales +2.40% -10 basis points
• Nationwide Gas $3.79/gallon -.04/gallon
• U.S. Cooling Demand Next 7 Days 25.0% above normal
• Baltic Dry Index 744.0 -3.88%
• China (Export) Containerized Freight Index 1,227.03 -.66%
• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 22.50-18.2%
• Rail Freight Carloads 250,253 -.58%

Best Performing Style

• Large-Cap Value -1.16%

Worst Performing Style

• Small-Cap Value -2.24%

Leading Sectors

• Gaming +1.91%
• Utilities +.93%
• Computer Services +.51%
• Hospitals +.07%
• Foods -.17%

Lagging Sectors

• Networking -4.25%
• Steel -4.28%
• Oil Service -4.55%
• Coal -5.28%
• Homebuilding -6.02%

Weekly High-Volume Stock Gainers (15)

• ELOQ, EPOC, AM, KBH, THR, NEOG, WCBO, MDCA, MRLN, CSU, VPHM, MTN, NC, DORM and LBTYA

Weekly High-Volume Stock Losers (13)

• AI, PNNT, USNA, WWD, AXE, SNX, CPHD, FTNT, FWRD, FUL, JBL, VVUS and BTH

Weekly Charts
ETFs

• High-Volume Gainers
• High-Volume Losers

Stocks

• High-Volume Gainers
• High-Volume Losers

*5-Day Change

Stocks Lower into Final Hour on Rising Global Growth Fears, More Weak US Economic Data, Rising Eurozone Debt Angst, Earnings Worries

Today's Market Take:

Broad Market Tone:

• Advance/Decline Line: Lower
• Sector Performance: Most Sectors Declining
• Volume: Below Average
• Market Leading Stocks: Underperforming

Equity Investor Angst:

• VIX 15.57 +4.92%
• ISE Sentiment Index 97.0 -24.22%
• Total Put/Call .99 +22.22%
• NYSE Arms 1.86 +191.18%

Credit Investor Angst:

• North American Investment Grade CDS Index 99.21 bps +.67%
• European Financial Sector CDS Index 203.45 bps +1.15%
• Western Europe Sovereign Debt CDS Index 150.03 +2.63%
• Emerging Market CDS Index 224.09 -.59%
• 2-Year Swap Spread 13.50 -1.0 basis point
• TED Spread 26.75 -.75 basis point
• 3-Month EUR/USD Cross-Currency Basis Swap -26.25 +.25 basis point

Economic Gauges:

• 3-Month T-Bill Yield .09% unch.
• Yield Curve 139.0 +1 basis point
• China Import Iron Ore Spot $104.20/Metric Tonne unch.
• Citi US Economic Surprise Index 5.8 -3.0 points
• 10-Year TIPS Spread 2.42 -2 basis points

Overseas Futures:

• Nikkei Futures: Indicating -25 open in Japan
• DAX Futures: Indicating +19 open in Germany

Portfolio:

• Slightly Higher: On gains in my Biotech sector longs and index hedges
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:

• Spain Banks Have $76 Billion Capital Deficit in Stress Test. Spain’s banks have a capital deficit of 59.3 billion euros ($76.3 billion), less than previously estimated, according to a test designed to lift doubts about a financial industry hit by real estate losses. The Bankia (BKIA) group, a nationalized lender, had a 24.7 billion-euro capital deficit in the tests conducted by management consultants Oliver Wyman that also showed Banco Popular Espanol SA (POP) had a 3.22 billion-euro shortfall. The stress tests of 14 lenders showed no capital deficit for seven banks, including Banco Santander SA, Banco Bilbao Vizcaya Argentaria SA (BBVA) and Banco Sabadell SA, the Bank of Spain and Economy Ministry said in a joint statement today.  
• U.K. AAA Rating Now Faces Greater Downgrade Risk, Fitch Says. The U.K. faces an increased risk of a downgrade to its top credit rating after Fitch Ratings said that government debt will peak at a higher level and later than it previously predicted. Fitch affirmed Britain’s AAA level and kept the nation on negative outlook, according to a statement released today in London. The ratings company said it doesn’t expect to resolve the question mark hanging over the top grade until 2014. “The negative outlook on the U.K. rating reflects the very limited fiscal space, at the ’AAA’ level, to absorb further adverse economic shocks in light of the U.K.’s elevated debt levels and uncertain growth outlook,” Fitch said in the statement. “Weaker than expected growth and fiscal outturns in 2012 have increased pressure on the U.K.’s AAA rating.”
• ECB’s Asmussen Joins IMF in Warning Greece May Need More Aid. European Central Bank Executive Board member Joerg Asmussen said Greece may need more aid, joining the International Monetary Fund in expressing doubt that the two existing bailouts will suffice. Even if Greece meets its budget goals, “there could be additional need for external financing because, for example, growth is worse than was initially anticipated,” Asmussen said at an event in Berlin today. Such financial aid can only come “from the member states of the euro zone,” he said, ruling out ECB involvement because that would be “prohibited monetary state financing.” The comments mean two thirds of the so-called troika that’s inspecting Greece’s financial position have now publicly spoken about the possible need for an additional bailout.
• Hollande Raises Tax on Rich, Companies to Cut French Deficit. President Francois Hollande’s first annual budget raised taxes on the rich and big companies and included a minimum of spending cuts to reduce the deficit. The 2013 blueprint relies on 20 billion euros ($26 billion) in tax increases, including a levy of 75 percent on incomes over 1 million euros, and eliminating limits on the wealth tax. Hollande aims to reduce spending by 10 billion euros, bringing the deficit to 3 percent of output from 4.5 percent in 2012. The budget predicts growth of 0.8 percent.  
• Spanish Bonds Have Weekly Drop Amid Bailout-Request Speculation. Spain’s 10-year bonds had a weekly decline as the nation held off from seeking a bailout that would enable the European Central Bank to buy its debt. The securities erased an intra-day decline, and the market closed before stress tests conducted by management consultants Oliver Wyman showed Spain’s banks have a combined capital shortfall of 59.3 billion euros ($76.3 billion). German bunds extended their longest run of quarterly gains since 1998 even as a report showed euro-area inflation accelerated in September. French bonds rose for the first week since August as President Francois Hollande’s government delivered its budget.
• European Stocks Decline to Lowest in Three Weeks. Hennes & Mauritz AB declined 1.7 percent after SEB AB and CA Cheuvreux SA advised investors to sell the shares. Electrocomponents Plc (ECM) plunged the most in more than seven years after saying full-year profit will miss projections. Cap Gemini SA (CAP) rose 0.8 percent after Accenture Plc forecast full-year earnings that topped analyst estimates. Air France-KLM gained 4.6 percent after UBS AG upgraded the shares. The Stoxx 600 lost 1.2 percent to 268.48 at the close of trading in London, the lowest since Sept. 5, as investors awaited the stress-test report from Oliver Wyman, a New York- based management consulting firm. The gauge, which lost 2.7 percent this week, has still rallied 6.9 percent this quarter as global central banks expanded stimulus.
• S&P 500 Poised for Worst Week Since June on Economy. U.S. stocks fell, sending the Standard & Poor’s 500 Index toward its worst week since June, as business activity unexpectedly contracted in September.
• New York Plaza District Offices Empty as Banks Cut Space. Manhattan’s Plaza district, the area near Central Park that commands the nation’s highest office rents, has a glut of space as financial firms cut back and tenants seek trendier neighborhoods south of Midtown. The availability rate for offices in the Plaza submarket reached 12.3 percent last month, a two-year high, as space leased to Citigroup Inc. (C) and General Motors Co. (GM) went on the market, according to data from brokerage Colliers International. It was 10.5 percent in the third quarter of last year.

Wall St. Journal: 

• Romney: Under Obama, U.S. on Road to Greece. Republican presidential candidate Mitt Romney said in a new radio interview the U.S. economy would show little improvement and could get worse in the next two years if President Barack Obama were re-elected. Mr. Romney, speaking to WMAL in Washington, D.C., offered a range of criticisms of Mr. Obama, suggesting the White House is not showing enough leadership to head off the so-called fiscal cliff, and claiming efforts by the Federal Reserve to boost the economy have not worked. “I think you’re going to see America on the road to Greece unless we change course,” Mr. Romney said when asked what the economy would look like under Mr. Obama two years from now. He added, “I believe you’d see continued extraordinarily slow economic growth and perhaps even contraction.”
• As Yuan Tests Dollar High, Beijing Comes to Pivot Point. China's yuan on Friday briefly hit its highest level against the U.S. dollar since the launch of the modern Chinese currency-trading system in 1994, underscoring the global impact of U.S. efforts to juice its economy and raising tough questions for Beijing over whether to tolerate or stop further strengthening. Traders and analysts attributed the recent rally to renewed weakness in the dollar in the wake of the latest round of bond purchases launched by the U.S. Federal Reserve, in a move known as quantitative easing.
• Rebel Offensive Intensifies in Syria's Largest City. Rebels in Syria's largest city, Aleppo, said they are pushing into new neighborhoods as fighting intensified in a "decisive battle" to break a stalemate on a key front line in the civil war. Antigovernment fighters in Damascus said they were regrouping for a parallel push in the capital to capitalize on the momentum from an attack on army command headquarters there Wednesday, a security breach that illustrated the growing sophistication of rebel operations.

CNBC: 

• Post Office Expects to Default This Weekend...Again. The struggling U.S. Postal Service expects to default this weekend, the second time in recent months the cash-strapped agency will have missed a deadline to set aside funds for future retiree health benefits. 
• CEO Tim Cook Is ‘Extremely Sorry’ About Apple(AAPL) Maps. 
• The Drones Are Coming...And Americans Are Scared. More than a third of Americans worry their privacy will suffer if drones like those used to spy on U.S. enemies overseas become the latest police tool for tracking suspected criminals at home, according to an Associated Press-National Constitution Center poll. Congress has directed the Federal Aviation Administration to come up with safety regulations that will clear the way for routine domestic use of unmanned aircraft within the next three years.

Zero Hedge:

• China Delivers Crude Supertanker To Iran.
• Chart Of The Day: The Misery In Spain Is Everywhere... And Has Never Been Higher.
• Cue Stagflationary Recession: Chicago PMI Huge Sub-50 Miss, Back To September 2009 Levels; Prices Paid Spikes.
• Goldman(GS) Cuts Q3 GDP Forecast To Stall Speed 1.9%.

Business Insider: 

• Human Sex Trafficking Is Now Affecting America's Elite Communities.
• Obama Demands China Divest From Windfarm, And Rip Up Everything They've Already Built. 
• Check Out The Stunning Two-Page Ad China Daily Took Out In The New York Times. 
• The Chicago PMI Report Was One Of The Nastiest Pieces Of Economic Data We've Seen In A Long Time. (table) 
• SNL Mocks Obama: 'Frankly, I Might Be Long Dead' Before The Economy Gets Better. (video) 
• Libya Is Becoming A Bigger And Bigger Problem For Obama. 
• France's Soak-The-Rich Budget Scheme Has The Same Big Flaw As Spain's. 
• Income Growth Slows — Americans Forced To Reduce Their Savings Rate To Keep On Spending. 
• Food Prices Are Soaring Further Into The Danger Zone. (graph) 
• France's Economic Outlook Is Getting Darker And Social Unrest Is Brewing. 
• A Top Law School's Email Gaffe Reveals Just How Bad Things Look For Its Grads. 

 RasmussenReports: 

• Swing State Daily Tracking: 51% Disapprove of Job Obama is Doing.
• 51% Trust Romney More on Economy, 44% Trust Obama More.

Reuters: 

• Fed's Fisher says U.S. is 'drowning' in unemployment. The United States is "drowning in unemployment," its economy is running at stall speed and inflation is "not a problem," but easier monetary policy is not the answer, one of the Federal Reserve's most hawkish policymakers said on Friday. "We've had a recovery that is quite disappointing," Dallas Fed President Richard Fisher said. But without more certainty on tax policy and regulation, he said, "all the monetary accommodation in the world" will not get businesses hiring again. In particular, businesses are unable to plan for the future as long as a raft of spending cuts and tax increases dubbed the 'fiscal cliff' looms at the end of the year, he said. "A short-term fix to the fiscal cliff will do nothing but push out the envelope of indecision and we will continue to be plagued by high unemployment," Fisher said.  
• TEXT-S&P: growth in U.S. capital goods is likely to moderate. 
• Iran will stop at nothing to protect Syria-Clinton.

Telegraph:  

• French budget and Spanish bank stress tests: live. Spain has revealed that it needs almost €60bn to shore up its battered banking sector, as France's 2013 budget shows that a new 75pc tax rate will raise just €200m in extra revenue next year.

Bild:

• Hahn Says Bundesbank Mustn't Buy Bonds If Deemed Illegal. Joerg-Uwe Hahn, justice minister in the German state of Hesse said the Bundesbank mustn't participate in the ECB's announced bond-buying program if its lawyers conclude the program violates the law.

Bear Radar

Style Underperformer:

• Small-Cap Value -.41%

Sector Underperformer:

• 1) Oil Tankers -2.20% 2) Networking -1.50% 3) Restaurants -1.20%
  

Stocks Faling on Unusual Volume:

• TEF, E, HMC, TOT, FTE, AAPL, GPN, NRG, WMC, EXP, ADTN, WAIR, ENL, PHG, CAJ, CRI, MO, FWRD, FTNT, TM, CPHD, MLM, MCD, RBA, ASML, NSC, ICUI, TMH, KORS, MT and HTGC
  

Stocks With Unusual Put Option Activity:

• 1) ETP 2) UA 3) COH 4) RIMM 5) NKE
  

Stocks With Most Negative News Mentions:

• 1) BAC 2) MCD 3) WAG 4) BHI 5) ROST
  

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Value -.70%

Sector Outperformers:

• 1) Computer Services +.24% 2) Gold & Silver -.05% 3) Hospitals -.25%
  

Stocks Rising on Unusual Volume:

• ACN and ACHN

Stocks With Unusual Call Option Activity:

• 1) RIMM 2) DG 3) NKE 4) PXP 5) CE
  

Stocks With Most Positive News Mentions:

• 1) TYC 2) ATW 3) UTX 4) MU 5) PNR

Charts:

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

Friday Watch

Evening Headlines
Bloomberg: 

• Rajoy Raids Reserve Fund for 1st Time to Pay for Higher Pensions. Spanish Prime Minister Mariano Rajoy will raid for the first time a decade-old pension reserve fund that invests in government debt to pay for an increase in retirement payments. The Cabinet agreed to use 3 billion euros ($3.9 billion) from the 67 billion-euro reserve fund, Deputy Prime Minister Soraya Saenz de Santamaria told reporters yesterday in Madrid. It raised pensions 1 percent in the 2013 budget and indicated it would compensate retirees for above-forecast inflation. “The reserve fund is there to be used,” Budget Minister Cristobal Montoro said. “Politically, it’s very important” to maintain pensioners’ purchasing power. The pension reserve invests mostly in Spanish government bonds, and accounts for about 10 percent of the central government’s outstanding debt. The cache that has been built up since 2000 to safeguard pensions from the aging population is being raided as the 25 percent jobless rate undermines the welfare system’s revenue. “It adds pressure for Spain to ask for the bailout since it means less support for Spanish debt,” said Virginia Oregui, the San Sebastian-based managing director at Geroa EPSV Fondos, which manages 1.1 billion euros, including Spanish government bonds.
• Monti Says ECB Conditions, IMF Role Hinder Bond Requests. The European Central Bank should not impose extra economic conditions on nations using its bond- buying mechanism, and the International Monetary Fund shouldn’t have an oversight role, said Italian Prime Minister Mario Monti. Countries such as Italy and Spain are reluctant to request the bond-buying they championed because of uncertainty about what conditions the central bank would seek to impose, he said. The program is only available to countries that are already taming public finances and conditions should not go beyond European Union recommendations made in June, Monti said. Oversight should be limited to establishing “checks so the countries continue to behave in that positive way,” Monti said in an interview with Erik Schatzker on Bloomberg Television yesterday in New York. “If this is the conditionality that will be finally delivered, should a country be in a market situation suggesting its use, there would be nothing dishonorable.” 
• Japan Output Slides More Than Forecast as Contraction Risk Grows. Japan’s industrial production fell more than economists forecast in August as slowing demand in China and Europe undermines a recovery in the world’s third- largest economy. Output fell 1.3 percent from July, when it dropped 1 percent, the Trade Ministry said in Tokyo today. The decline was the biggest in three months and compared with economists' median estimate for a 0.5 percent slide. The data add to evidence that Japan’s economy is at risk of shrinking this quarter as exports fall, political tensions with China mount and the impact of the government’s car subsidy program fades. JPMorgan Securities, Barclays Securities Japan and BNP Paribas expect a contraction after growth slowed to a 0.7 percent annual pace in the previous three months. “There’s no sign of a recovery in Europe and China’s economy remains dull,” Jun Kawakami, an economist at Mizuho Securities Co. in Tokyo, said before the report. “It’s difficult to be optimistic about the outlook for production as exports are weakening and domestic demand lacks momentum.”
• Japan-China Politics Risk Prolonging Worst Ties Since 2005. Political transitions in both nations may prolong what’s become the worst bilateral crisis since at least 2005 and impair a $340 billion trade partnership. President Hu is poised to hand power to the next generation of China’s leaders, and Prime Minister Noda faces elections as soon as this year. With boats from China, Japan and Taiwan in disputed East China Sea waters, any perception of backing down on territorial claims would risk domestic political backlash. Noda faces a newly installed opposition chief who advocates a harder line on China, while Chinese citizens have demonstrated in public over the Diaoyu, or Senkaku, islands.
• Obama Cabinet Flunks Disclosure Test With 19 in 20 Ignoring Law. On his first full day in office, President Barack Obama ordered federal officials to “usher in a new era of open government” and “act promptly” to make information public. As Obama nears the end of his term, his administration hasn’t met those goals, failing to follow the requirements of the Freedom of Information Act, according to an analysis of open-government requests filed by Bloomberg News. Nineteen of 20 cabinet-level agencies disobeyed the law requiring the disclosure of public information: The cost of travel by top officials. In all, just eight of the 57 federal agencies met Bloomberg’s request for those documents within the 20-day window required by the Act. “When it comes to implementation of Obama’s wonderful transparency policy goals, especially FOIA policy in particular, there has been far more ‘talk the talk’ rather than ‘walk the walk,’” said Daniel Metcalfe, director of the Department of Justice’s office monitoring the government’s compliance with FOIA requests from 1981 to 2007.
• Shiller Data Questions Housing Revival Power: Cutting Research. Don't bet the house on a robust revival of the U.S. property market, says the Yale University professor who predicted the bursting of the dot-com and subprime-mortgage bubbles. There is no "unambiguous" sign of a strong recovery in the market, Robert Shiller and fellow economists Karl Case and Anne Thompson say in a paper published this week by the National Bureau of Economic Research. 
• Bullard Says Fed Should Have Waited on Bond Buying. Federal Reserve Bank of St. Louis President James Bullard said policy makers should have taken a “wait-and-see posture” on new bond buying until they had a clearer picture of the global economy. “I didn’t really think the committee had a good case for taking a really big action,” Bullard, who doesn’t vote on monetary policy this year, said in a CNBC interview today. “I would have kept it in our pocket for a little bit and really see if the global slowdown is going to impinge on the U.S. economy and what the next steps in Europe are going to be.” “It could be that global growth drags down the U.S. and sends us into a slower growth environment or even recession,” Bullard said. “I would have wanted to see more data on that and see how that’s unfolding before we’d taken more action.”

Wall Street Journal: 

• How Bernanke Pulled the Fed His Way. In late August, Federal Reserve Chairman Ben Bernanke argued on behalf of Fed programs to stimulate the lumbering U.S. economy and signaled that more might follow, making headlines in his highly anticipated speech at the Fed's annual retreat in Jackson Hole, Wyo. As markets rallied at the prospect of new measures to ease credit, a quiet drama was unfolding behind the scenes. Mr. Bernanke was negotiating a high-stakes plan in a flurry of private conversations with colleagues hesitant about aggressively re-engaging the levers of America's central bank.
• Alleged Maker of Anti-Muslim Video Jailed in Fraud Case. A man believed to be behind an anti-Muslim video that spawned international protests was held without bail in Los Angeles on Thursday, after federal authorities arrested him earlier in the day for allegedly violating the terms of probation on his 2010 conviction. Magistrate Judge Suzanne Segal said Nakoula Basseley Nakoula, the 55-year-old alleged filmmaker, had a history of misrepresenting himself and posed a flight risk in denying a request for bail. "The court has a lack of trust in this defendant at this time," the judge said. Federal prosecutors in Los Angeles have accused Mr. Nakoula of eight violations of the terms of his probation for a 2010 bank-fraud conviction. 
• Chinese Slowdown Idles U.S. Coal Mines. 
• Libor Furor: Key Rate Gets New Scrutiny. Banks Often Don't Change the Quotes That They Submit. 
• Tackling the Many Dangers of China's State Capitalism. The U.S. won't solve the problems created by China's economic juggernaut until it finds a way to tackle the big issue rather than sideshows like the country's currency rate. The big issue is China's state capitalism, the tens of thousands of state-owned enterprises that dominate half of China's economic output and that the government heavily subsidizes and protects. Foreign competitors—which threaten these near monopolies—are restricted by government rules, forced to "share" their technology in joint ventures with state enterprises, and denied lucrative government business, which goes instead to the state champions.
• Michael Bordo: Financial Recessions Don't Lead to Weak Recoveries. The evidence since 1880 shows a faster pace of recovery. The Obama years are the exception.
• Evan Bayh: ObamaCare's Tax Raid on Medical Devices. The industry that gave us stents, replacement joints and defibrillators will get a dose of bad fiscal medicine. The Supreme Court decision in June upholding the Affordable Care Act leaves in place a tax on medical devices that threatens thousands of American jobs and our global competitiveness. It will also stifle critical medical innovation in the industry that gave us defibrillators, pacemakers, artificial joints, stents, chemotherapy delivery systems and almost every device we depend on to save lives. The 2.3% tax will be charged to manufacturers on each sale and takes effect in January. Many U.S. device companies, in response, have already announced layoffs, canceled plans for domestic expansion and slashed research-and-development budgets.

MarketWatch.com: 

• BlackBerry sales give RIM(RIMM) surprise boost. Shares jump as smartphone maker increases cash base, cuts costs.

 CNBC: 

• Stocks Face Turbulence in the Fourth Quarter.

Zero Hedge: 

• A Chinese Mega City Is On The Verge Of Bankruptcy.
• How Crony Capitalism (Or The 'Undiluted Lunacy' Of The Fed) Corrupts The Free Markets.
• GDP And Durable Goods - Heading To Recession? (graphs)
• Summarizing What Spain Just Announced, And What Was Left Unsaid (Hint: Cash).

Business Insider: 

• Nike's(NKE) Profit Decline In China Is Stunning. 
• FELDSTEIN: The Federal Reserve Has Embarked On A Very Dangerous Strategy.
• Russian Cyber Expert: Hackers Could Shut Down Power In Most Of The World In A Decade.
• EXPERT: Military Conflict 'Looms' Between China And Japan.
• FINALLY: After Stiffing Them All year, George Soros Bails Out The Democrats With A $2 Million Check.

IBD: 

• Parexel(PRXL) Gets Sales, Profit Bump From Big Pharma.

NY Times: 

• Hackers May Have Had Help With Attacks on U.S. Banks, Researchers Say.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows both President Obama and Mitt Romney attracting support from 46% of voters nationwide. Four percent (4%) prefer some other candidate, and four percent (4%) are undecided.

Reuters: 

• TEXT-Fitch Cuts China, India 2012 Growth Forecasts as Risks to Global Recovery Mount.
• Italian unions to strike against Monti spending cuts. Two of Italy's biggest unions have called a strike by public sector workers on Friday to protest against spending cuts enacted by Prime Minister Mario Monti in his attempts to pull the country out of crisis. Thousands are expected to march through central Rome to a rally near the Coliseum. The strike follows clashes between anti-austerity protesters and police in Madrid and Athens this week, and coincides with labour unrest at the ILVA steel plant in southern Italy.
• Micron(MU) misses estimates on weak chip sales.   
• Nikkei sags on China tensions despite Spain's pledged cuts.

MNI:

• China's Wen Not Inclined To 'Ease Dramatically'. China Premier Wen Jiabao isn't inclined to ease policies "dramatically," citing a person familiar with State Council discussions. Wen's desire for stability towards the end of his term as Premier suggests that there won't be aggressive moves on policies. Any room for future easing is "limited", according to the person.

eFXNews: 

• Moody’s Close To Downgrade Spain; Stay Cautious On EUR -Crédit Agricole.

Telegraph: 

• Spain must leave the euro. Mario Draghi's promise to do “whatever it takes” to save the euro never did look like inducing any more than a temporary lull in the storm; still less did the German Constitutional Court’s thumbs up to the European bail-out fund and the trouncing that eurosceptic parties received in the Dutch election.   
• Spain's rising debt costs eat up austerity gains. Spain has pushed through €40bn of fresh austerity measures in the teeth of recession, despite violent protests across the country and separatist crises in Catalonia and the Basque region that threaten to break the country apart.
  

China Securities Journal:

• China Should Speed Up Nationwide Property Tax Trial. China should accelerate the introducing of nationwide property tax trial, citing Wang Juelin, a researcher at the Ministry of Housing and Urban-Rural Development.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.50% to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 137.0 -6.0 basis points.
• Asia Pacific Sovereign CDS Index 114.75 -5.25 basis points.
• FTSE-100 futures +.33%.
• S&P 500 futures +.08%.
• NASDAQ 100 futures -.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FINL)/.44
• (WAG)/.56
• (AM)/.07

Economic Releases
8:30 am EST

• Personal Income for August is estimated to rise +.2% versus a +.3% gain in July.
• Personal Spending for August is estimated to rise +.5% versus unch. in July. 
• PCE Core for August is estimated to rise +.1% versus unch. in July.

9:00 am EST

• NAPM-Milwaukee for September is estimated to rise to 45.0 versus 42.9 in August.

9:45 am EST

•  Chicago Purchasing Manager for September is estimated to fall to 52.8 versus 53.0 in August.
  

9:55 am EST

• Final Univ. of Mich. Consumer Confidence for September is estimated to fall to 79.0 versus a prior estimate of 79.2.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Fisher speaking, ECB's Asmussen speaking and the Eurozone inflation data report could also impact trading today.

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