Today's Headlines

Bloomberg: 

• Spain Prime Minister Rajoy Says Bailout Request Is Not Imminent. Spanish Prime Minister Mariano Rajoy said he has no plans to request a bailout soon, fending off mounting speculation that a bid was near. Asked at a press conference in Madrid today if a bailout request was imminent, Rajoy said: “No.” Rajoy is weighing the terms of a Sept. 6 proposal by the European Central Bank President to buy bonds of cash-strapped nations including Spain if they make for a formal aid request from the euro region’s government-run rescue funds. Reuters news agency yesterday reported that Spain is ready to seek a bailout as soon as this weekend. As Rajoy faces unrest on the streets of Madrid over budget cuts and a separatist movement in Catalonia, leaders of the 17- nation euro area are confronting a tougher approach from the German-led pro-austerity bloc and talks in Athens over keeping emergency aid on track. The first of three summits in the next three months is set for Oct. 18-19.
• Weber Says Euro Crisis to Persist as ECB Fails to Bring Calm. UBS AG Chairman and former European Central Bank Governing Council member Axel Weber said the euro region’s festering debt crisis will “continue to linger” as the ECB fails to ease market disquiet and volatility. “While many expect that the ECB’s strong action would bring stability to financial markets, the risk is that the pattern of short-term rallies and long-term uncertainty will stay with us for some future,” Weber said today at an investment conference in Moscow organized by VTB Capital. The program of unlimited bond purchases unveiled last month by ECB President Mario Draghi has sought to stamp out the crisis by limiting government borrowing costs and giving debt-ridden nations the chance to fix their economies and preserve the euro. Weber, who during his tenure at the ECB opposed the central bank’s previous bond-buying plan, predicted the monetary union will overcome the crisis even as there won’t be a “quick fix.” “The underlying fundamental perspective is not great at the moment,” Weber said. “Austerity programs which are badly needed to restore market confidence and create fiscal room to maneuver will take a toll on the economy. So this will be a rough patch that Europe is going through, but it will get better.” 
• Popular Defying Oliver Wyman Tests Allianz’s Spain Appetite. Banco Popular Espanol SA (POP) is defying the findings of Spain’s bank stress tests as it seeks new money from Allianz SE (ALV) and other investors to plug a capital shortfall. The stress test by consultant Oliver Wyman showed Popular had a capital deficit of as much as 3.22 billion euros ($4.15 billion) and would earn 5.8 billion euros in pre-provision profit from 2012 to 2014 or 4.2 billion euros in its worst-case scenario. Popular, Spain’s sixth-largest lender by assets, said yesterday it would have an operating profit of 7.2 billion euros over that period as it unveiled plans for a share sale of as much as 2.5 billion euros to boost capital.   
• U.K. Would Benefit From Haven Flows in Euro Breakup, Bootle Says. Britain may initially benefit from capital flows in the event of a euro-area breakup as investors seek safety from turmoil in the currency region, said former U.K. Treasury adviser Roger Bootle. “We would find the U.K. being regarded as a safe haven with continued capital inflows for a while,” Bootle, founder of Capital Economics Ltd., said in an interview at an event in London today. “But we’re certainly not a safe haven in terms of the real economy -- we would be one of the hardest hit of all.”
• U.S. Hot-Rolled Steel Prices May Extend Decline Amid Weak Demand. The price of hot-rolled coil steel in the U.S. may drop to as low as $530 a metric ton by year-end amid weak demand as manufacturers hold off on purchases until after the presidential election, according to Jefferies & Co. "A lot of projects and other expenditures that were earlier planned by companies have been put on hold because of uncertainty ahead of the elections and the fiscal cliff," Luke Folta, an analyst at Jefferies, said today in an interview. "Demand has weakened across all key markets." 
• Banks Face Worst Equities Trading Since 2006. Wall Street banks’ equities-trading units aren’t getting much relief from the strongest stock rally since 2009, as sinking volume and already thin margins threaten to make their annual performance the worst in six years. Third-quarter equities-trading revenue probably fell 14 percent from the same period in 2011, the fifth straight drop of more than 8 percent, according to estimates by Kian Abouhossein, a JPMorgan Chase & Co. analyst. Full-year revenue at the five largest U.S. investment banks may be the lowest since 2006, UBS AG’s Brennan Hawken wrote in a Sept. 19 note to clients.  
• AIG(AIG) Says Oversight Panel Weighing Systemic Risk Label. American International Group Inc. (AIG) said a U.S. panel told the insurer it’s under consideration to be labeled a potential risk to the financial system, the first non-bank to report such notification in a process that could lead to tighter capital rules. The Financial Stability Oversight Council informed AIG of its status, the New York-based insurer said today in a statement. The council said last week that it voted to advance “certain” non-bank financial companies to a third stage of review for possible designation as a systemically important financial institution, without publicly identifying the firms. 

Wall St. Journal: 

• WSJ Guide to First Romney-Obama Debate.

Fox News:

• Diplomats asked repeatedly for more security before Libya attack, lawmakers claim. U.S. diplomats in Libya repeatedly asked the Obama administration for more security in Benghazi in the run-up to the Sept. 11 attack on the consulate but were "denied these resources," two congressional lawmakers said. House oversight committee Chairman Darrell Issa, R-Calif., and Rep. Jason Chaffetz, R-Utah, pressed Secretary of State Hillary Clinton for more information on those requests and other concerns in a letter Tuesday. They detailed a string of attacks and other security incidents in Benghazi starting in April, and asked the State Department what measures it took to address the threat. They claimed officials have told the House Oversight and Government Reform Committee of "repeated requests" for additional security. "Based on information provided to the Committee by individuals with direct knowledge of events in Libya, the attack that claimed the Ambassador's life was the latest in a long line of attacks on Western diplomats and officials in Libya in the months leading up to September 11, 2012," they wrote. "In addition, multiple U.S. federal government officials have confirmed to the Committee that, prior to the September 11 attack, the U.S. mission in Libya made repeated requests for increased security in Benghazi.  The mission in Libya, however, was denied these resources by officials in Washington."

CNBC:

• Voters Say Presidential Debates Will Be Key: Poll. Voters say the presidential debates will be important in deciding whom to vote for in this year’s election, according to a new NBC-Wall Street Journal poll released Tuesday. (Read More: Obama-Romney Debate Faces Off-Script Challenge) The poll found that voters say the importance of this year’s debate is greater than it was in 2004 or 2000. That may yet indicate some room for movement in the race: Twenty-two percent of those surveyed said the upcoming debates will be “extremely important,” and 16 percent said “quite important.”
• What a Post-'Fiscal Cliff' Deal Will Cost US Households.
• Affluent Plan to Spend Less If Obama Wins.

Zero Hedge: 

• The ECB - EUR22 Trillion Is Missing.
• Sam Zell On "Class Warfare Crap", QE3 Unreality, And Why Everything Is Mispriced Due To The Fed.
• China Just Killed All "China Bails Out Europe" Rumors For Good.
• This Is Why High Frequency Trading Will Never Go Away.
• Dancing On The Grave Of Keynesianism.

Business Insider:

• Here's The Massive Presentation On REITs That Bill Ackman Delivered At The Value Investing Congress. 
• Chipotle(CMG) Is Getting SLAMMED After David Einhorn Reveals He Is Short The Stock.
• Dylan Grice Writes His Most Negative Note Ever: 'I Am More Worried Than I Have Ever Been'.
• Bleak Photos Capture The Fall Of Detroit.
• Jon Stewart Slams The Obama Administration For Contradicting Itself Over And Over On The Libya Attack. (video)
• French Entrepreneurs Launch Online Protest Against Hollande's Capital Gains Tax Plans.
• FORGET ALL THE HOUSING COMEBACK TALK: Here's Why The Market Is Still A Disaster.
• The Fed Just Doubled-Down On A Plan That Led Us Into The Financial Crisis.

Reuters:

• Spain jobless rate spikes again as tourist season ends. Spain's jobless rate rose further in September as services sector layoffs accelerated at the end of a busy summer tourist season, suggesting one in four of the country's workforce is now unemployed. Tuesday's Labour Ministry data showed the jobless rate rose by 1.7 percent to leave 4.7 million people out of work. "There is a certain slowing down in the rate of increase in unemployment but the negative side is that jobs are still disappearing," said Estefania Ponte, head of economy at trading house Cortal Consors. The figure had also risen in August after it fell during the summer season. She said Tuesday's monthly figures suggested the rate of unemployment in Spain - already the highest in the European Union - would likely have hit 25 percent in the third quarter. 
• U.S. officials see more financial crisis cases after JPMorgan suit. Federal and state officials pledged on Tuesday to bring more cases against misconduct that fueled the financial crisis, after New York sued JPMorgan Chase & Co late Monday over mortgage-backed securities packaged and sold by Bear Stearns. The case was filed by New York Attorney General Eric Schneiderman, and was the first action to come from a federal-state working group created earlier this year to bring such cases, roughly four years after the peak of the crisis. 
• Iran's Ahmadinejad says Syria crisis may engulf region. Iran's President Mahmoud Ahmadinejad on Tuesday warned that hostilities in Syria could engulf the region and accused some Syrians of trying to use their country's conflict to settle scores with Tehran. 
• US gasoline demand falls in 2 weeks to Sept 28-MasterCard. U.S. retail gasoline demand fell over the past two weeks and continued a downward year-on-year trend, according to the bi-weekly SpendingPulse report from MasterCard released on Tuesday. Gasoline use in the world's top oil consumer dropped 0.9 percent over the two weeks ending Sept. 28, compared with the same period last year, MasterCard said. Demand dipped by 1.1 percent during the week to Sept. 28 and 0.8 percent in the week to Sept. 21 when compared with year-ago levels.
• Portugal finmin likely to detail new austerity steps. Portugal's Finance Minister Vitor Gaspar will hold a press conference on Wednesday on the country's bailout plan, when he is expected to detail fresh austerity measures. The centre-right government has been looking for alternative ways to meet budget goals under the 78-billion-euro bailout since it was forced to back down on a plan to hike social security taxes, which sparked a backlash among many Portuguese.
• US groups fear Mexican trade war over Obama tomato move. U.S. business groups said on Tuesday they were worried about a damaging trade war with Mexico if President Barack Obama's administration follows through on a preliminary decision to end a 16-year-old tomato trade agreement. They also expressed concern that last week's Commerce Department decision was politically motivated to sway voters in Florida, the second largest U.S. tomato producer and one of a handful of battleground states expected to play a decisive role in the Nov. 6 presidential election.
• GM(GM), Ford(F) see slower truck sales as Toyota gains. General Motors Co, the largest U.S. automaker, posted a small gain in September U.S. sales as demand for passenger cars offset a drop in pickup trucks, while Japanese automaker Toyota Motor Corp reported a large sales increase. 
• Iran to enrich uranium to 60 pct if nuclear talks fail - MP. Iran would enrich uranium up to 60 percent purity if negotiations with major powers over its nuclear programme fail, an Iranian lawmaker said on Tuesday, in comments that may add to Western alarm about Iranian intentions.

Telegraph: 

• Debt crisis: troika demand even tougher austerity on stricken Greece. Greece's international creditors are demanding the imposition of even tougher austerity measures despite the delivery this week of Antonio Samara’s hard-won €13.5bn package of cuts. 
• EU plans curbs on bank risk-taking. Risky activities such as proprietary trading will have to be separated from safer operations under EU proposals for banks published today.
• PIMCO: America could 'resemble Greece' before 2020. America could begin to resemble Greece before the turn of the decade if it does not cut spending and raise taxes to tackle its debt, according to Bill Gross, the head of the world's largest bond fund.

Europa:

• Prime Minister Mariano Rajoy told regional leaders from his People's Party that he won't request a bailout for Spain this weekend.

Bear Radar

Style Underperformer:

• Large-Cap Growth -.40%

Sector Underperformer:

• 1) Restaurants -1.40% 2) Coal -1.33% 3) Steel -1.05%
  

Stocks Faling on Unusual Volume:

• CLB, CMG, BTH, MRCY, ISIS, SBGI, ECYT, MSCI, GEL, UBA, SFL, FNP, PATK, VCRA, SDT, Z, LL, TSU, AYI, RTN, MOS, CYNO, SKX, RPM, ARUN, APOG, FEIC, MKSI, FNP, SKX and EXPR
  

Stocks With Unusual Put Option Activity:

• 1) CDE 2) WFR 3) DAL 4) EWJ 5) NLY
  

Stocks With Most Negative News Mentions:

• 1) FITB 2) ATI 3) MOS 4) Z 5) MSCI
  

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Value +.19%

Sector Outperformers:

• 1) Telecom +1.47% 2) Biotech +.83% 3) Oil Tankers +.62%
  

Stocks Rising on Unusual Volume:

• ZOLT, HERO, ILMN and PCS

Stocks With Unusual Call Option Activity:

• 1) CELG 2) CMCSK 3) LEAP 4) WLP 5) SYK
  

Stocks With Most Positive News Mentions:

• 1) ZUMZ 2) GPN 3) JEC 4) HRS 5) VZ

Charts:

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

Tuesday Watch

Evening Headlines
Bloomberg: 

• Spanish Banks Need More Capital Than Tests Find, Moody’s Says. Spain’s banks face a capital shortfall that could climb to 105 billion euros ($135 billion), almost double the estimate the government provided last week, according to Moody’s Investors Service. The nation’s lenders may need infusions of 70 billion euros to 105 billion euros to absorb losses and still keep capital ratios above thresholds outlined in legislation last year, Moody’s analysts wrote yesterday in a report. That compares with the 53.7 billion euro shortfall found last week after officials commissioned a stress test designed to lift doubts about the financial industry’s ability to withstand losses.
• Portugal Tolerance for Higher Taxes Reaching Limit: Euro Credit. Prime Minister Pedro Passos Coelho's tax increases during Portugal's two-year recession may be about to backfire. The CGTP labor group said Sept 29 at a demonstration against austerity policies in central Lisbon that it may call a general strike. Portugal already has Western Europe's poorest population in terms of output per capita.
• JPMorgan(JPM) Sued by N.Y. for Fraud Over Mortgage Securities. JPMorgan Chase & Co. (JPM), the biggest U.S. bank, was sued by New York Attorney General Eric Schneiderman over claims that the Bear Stearns business the bank took over in 2008 defrauded mortgage-bond investors. Investors were deceived about the defective loans backing securities they bought, leading to “monumental losses,” Schneiderman said in a complaint filed today in New York State Supreme Court. 
• Investors Doubt QE3 Lift to U.S. Discretionary Spending. Investors are proving skeptical that the Federal Reserve’s announcement of additional quantitative easing will get Americans to spend more. The Consumer Discretionary Select Sector SPDR Fund -- which includes Amazon.com Inc. (AMZN) and Macy’s Inc. (M) --has lagged behind the Consumer Staples Select Sector SPDR Fund by 2.8 percent since Sept. 14, the day after the Fed unveiled plans to buy mortgage- backed securities at a pace of $40 billion a month until the labor market improves.
• Hunt for Obama’s Middle East Policy Comes Up Empty. Like many observers of the Obama administration, I’ve been confused by its unwillingness to take even the relatively modest steps required to bring about a decisive end to the regime of Bashar al-Assad. More than 30,000 people have been killed since the beginning of the uprising against him, according to the Syrian Observatory for Human Rights, and untold numbers have been wounded, tortured or raped.  

Wall Street Journal: 

• Militant Link to Libya Attack. U.S. Tracks Egyptian Operative Freed From Prison in Wake of Arab Spring. The revolutions that swept the Middle East and North Africa also emptied prisons of militants, a problem now emerging as a potential new terrorist threat. Fighters linked to one freed militant, Muhammad Jamal Abu Ahmad, took part in the Sept. 11 attack on U.S. diplomatic outposts in Libya that killed four Americans, U.S. officials believe based on initial reports. Intelligence reports suggest that some of the attackers trained at camps he established in the Libyan Desert, a former U.S. official said. Western officials say Mr. Ahmad has petitioned the chief of al Qaeda, to whom he has long ties, for permission to launch an al Qaeda affiliate and has secured financing from al Qaeda's Yemeni wing. U.S. spy agencies have been tracking Mr. Ahmad's activities for several months. The Benghazi attacks gave a major boost to his prominence in their eyes.
• Strike Looms at ABC Ahead of Presidential Debate. As media outlets prepare for Wednesday’s first presidential debate, the specter of strike action is looming at ABC, which is providing broadcast coverage for all networks. The membership of the National Association of Broadcast Employees and Technicians has authorized its negotiation committee to call a strike, if necessary, among its members employed by ABC, which include camera operators. The Walt Disney Co.-owned network and the union have been in negotiations since the union’s labor contract ended in early 2011. The talks have been tense and have lately required the addition of a federal mediator.  
• Greece's Creditors Look Askance at Cutbacks. Greece's international lenders cast doubt on parts of Athens' plans to save billions of euros through new cutbacks and tax measures, throwing a potential wrench in the government's efforts to reach a quick deal to unlock new aid for the country. 
• Earnings Wizardry. CFOs around the nation have been busy closing their books and preparing for yet another earnings season. (It kicks off in earnest on Oct. 9, as always, with Alcoa Inc.) But what exactly have they been busy with? If you believe a recent academic study, one out of five U.S. finance chiefs have been scrambling to fiddle with their companies' earnings. Not Enron-style, fraudulent fiddles, mind you. More like clever—and legal—exploitations of accounting standards that "manage earnings to misrepresent [the company's] economic performance," according to the study's authors, Ilia Dichev and Shiva Rajgopal of Emory University and John Graham of Duke University. Lightly searing the books rather than cooking them, if you like. 
• Property Owners Face a New Surtax. Passed in 2010 to help fund the health-care overhaul, this 3.8% surtax kicks in next year on many forms of investment income—including some interest, dividends, rents and capital gains.
• Stephens: Benghazi Was Obama's 3 a.m. Call. Libya was a failure of policy and worldview, not intelligence. Why won't the Libya story go away? Why can't the memory of U.S. Ambassador Chris Stevens and his staff be consigned to the same sad-and-sealed file of Americans killed abroad in dangerous line of duty? How has an episode that seemed at first to have been mishandled by the Romney camp become an emblem of a feckless and deluded foreign policy? The story-switching and stonewalling haven't helped. But let's start a little earlier.

MarketWatch.com: 

• The fault lines of Anti-Japan fury in China. Police did little to calm unrest and looters of stores were organized. Recent anti-Japan fury spurred angry crowds to march through streets in cities across China. The protests sometimes turned violent, as when a vicious rampage in Xi’an, in the northern province of Shaanxi, left a father paralyzed.

 CNBC: 

• After 'Fiscal Cliff,' 90% of Americans' Taxes Would Rise. In the latest forecast of trouble ahead if Capitol Hill cannot overcome its fiscal paralysis, the Tax Policy Center, a Washington think tank, predicted taxes would rise by $500 billion in 2013, or an average of almost $3,500 per household.

Zero Hedge: 

• China's Broken Growth Model.  
• Presenting Spain's Economic Collapse In Context. (graph) 
• Everything You Wanted To Know About Tri-Party Repo Markets But Were Afraid To Ask. 
• Australian Government 'Finds' Extra $338bn Assets (But No Unicorns Yet).

Business Insider: 

• Mexican Diplomat Says America Pretty Much Invited The Sinaloa Drug Cartel Across The Border. Leaked emails from the private U.S. security firm Stratfor cite a Mexican diplomat who says the U.S. government works with Mexican cartels to traffic drugs into the United States and has sided with the Sinaloa cartel in an attempt to limit the violence in Mexico. Most notably, the reports from MX1 line up with assertions by a Sinaloa cartel insider that cartel boss Joaquin Guzman is a U.S. informant, the Sinaloa cartel was "given carte blanche to continue to smuggle tons of illicit drugs into Chicago," and Operation Fast and Furious was part of an agreement to finance and arm the Sinaloa cartel in exchange for information used to take down rival cartels.   
• Student Loan Default Rates Are Getting Real Ugly. (graph)

Rasmussen Reports:

• Generic Congressional Ballot: Republicans 45%, Democrats 41%.

Reuters: 

• Exclusive: Spain ready for bailout, Germany signals "wait"- sources. Spain is ready to request a euro zone bailout for its public finances as early as next weekend but Germany has signaled that it should hold off, European officials said on Monday. 
•  Samsung allowed to sell Galaxy Tab in US as court lifts ban. A U.S. court removed a temporary sales ban against Samsung Electronics Co Ltd's Galaxy Tab 10.1 won by Apple Inc(AAPL) in a patent dispute, allowing the South Korean company to sell the product in the United States.  
• Lockheed(LMT) won't issue notices on job cuts after US government guidance. The White House got some good news on Monday when Lockheed Martin said it would not issue notices of possible job reductions before the Nov. 6 election. With numerous defense industry jobs on the line in critical states including Virginia, a wave of job cuts could embarrass Democratic President Barack Obama's administration.  
• Brazil car sales plunge in Sept as tax breaks lose punch. Brazilian auto sales plunged 31 percent in September from a record-breaking August, an industry group said on Monday, as the effect of extended tax breaks waned on consumers. Sales of cars and light trucks were also down 8 percent compared with September of last year, according to data from dealer association Fenabrave.

Financial Times: 

• Call for bank bonuses to be paid in debt. Banks should pay bonuses in debt, which would be wiped out if a bank failed, an EU banking report will suggest as Europe attempts to step up the fight against bankers’ pay. The Liikanen commission, an independent review set up almost a year ago by EU commissioner Michel Barnier, will on Tuesday recommend reforms for long-term pay incentives as well as advocating ringfencing trading activities to make big banks safer. 
• Banks reap profits on mortgages after QE3. Although the average rate on a fixed 30-year mortgage reached 3.4 per cent this week – a record low – mortgage rates could be lower if banks passed on the full drop in their funding costs. “For banks which are mortgage originators this [QE3] was some of the best news they could possibly have heard,” said Steven Abrahams, mortgage strategist at Deutsche. “They will continue originating loans and selling them into the market at a significant premium.”

Telegraph: 

• Why Germany must face up to its €1 trillion headache. Here's another fine mess the political hubris of the euro has got Europe into.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are +.25% to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 136.50 unch.
• Asia Pacific Sovereign CDS Index 114.25 -1.0 basis point.
• FTSE-100 futures -.60%.
• S&P 500 futures +.06%.
• NASDAQ 100 futures +.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AYI)/.93
• (MOS)/1.16

Economic Releases
Afternoon:

•  Total Vehicle Sales for September are estimated to rise to 14.5M versus 14.46M in August.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Eurozone inflation data, Brazil industrial production report, China's Non-Manufacturing PMI, Australia trade figures, ISM New York for September, weekly retail sales reports, RBA rate decision, (PVH) analyst day and the (ATU) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted  by commodity and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

Stocks Weakening into Final Hour on Rising Global Growth Fears, US Fiscal Cliff Worries, Earnings Jitters, Tech/Real Estate Sector Weakness

Broad Market Tone:

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

Equity Investor Angst:

• VIX 16.41 +4.32%
• ISE Sentiment Index 110.0 +10.0%
• Total Put/Call .87 -12.12%
• NYSE Arms .93 -45.16%

Credit Investor Angst:

• North American Investment Grade CDS Index 98.98 bps -.17%
• European Financial Sector CDS Index 200.81 bps -1.34%
• Western Europe Sovereign Debt CDS Index 145.61 -1.53%
• Emerging Market CDS Index 219.22 -1.82%
• 2-Year Swap Spread 13.25 -.25 basis point
• TED Spread 27.5 +.75 basis point
• 3-Month EUR/USD Cross-Currency Basis Swap -27.25 -1.0 basis point

Economic Gauges:

• 3-Month T-Bill Yield .08% -1 basis point
• Yield Curve 138.0 -1 basis point
• China Import Iron Ore Spot $104.20/Metric Tonne unch.
• Citi US Economic Surprise Index 11.0 +5.2 points
• 10-Year TIPS Spread 2.42 unch.

Overseas Futures:

• Nikkei Futures: Indicating +21 open in Japan
• DAX Futures: Indicating -44 open in Germany

Portfolio:

• Slightly Higher: On gains in my Biotech/Medical/Retail sector longs
• Disclosed Trades: None
• Market Exposure: 25% Net Long

Today's Headlines

Bloomberg:

• Greek Budget Predicts Economy Will Shrink for Sixth Year. Greece’s economy will contract for a sixth year in 2013 as the government prepares further cuts to pensions, wages and social benefits to meet the terms of its bailout packages. Gross domestic product will shrink 3.8 percent next year after contracting 6.5 percent in 2012, according to the 2013 draft budget, e-mailed by the Finance Ministry in Athens and submitted to parliament today. This compares with a prediction in Greece’s March rescue agreement with the European Union and the International Monetary Fund that the economy would contract 4.8 percent this year before stabilizing in 2013.
• Analysts Cut Profit 52% as Europe Valuations Hit 2-Year High. Analysts are lowering estimates for European earnings growth by 52 percent, clashing with investors whose confidence in the European Central Bank helped send equity valuations to a 2 1/2-year high.  
• Global Factory Weakness Spreads as Debt Crisis Persists. Manufacturing from Europe to China contracted in September as the euro region’s fiscal crisis eroded investor confidence and clouded global growth prospects. A gauge of manufacturing in the 17-nation euro region was at 46.1, above an initial estimate of 46 on Sept. 20, Markit Economics in London said today. A reading below 50 indicates contraction. A Chinese factory index was at 49.8 for September, a statistics bureau report showed.  
• U.S. Households Face Tax Increase From 2013 Fiscal Cliff. U.S. households are facing an average tax increase of $3,446 in 2013 if Congress doesn’t avert the so- called fiscal cliff, the nonpartisan Tax Policy Center said in a study released today. The top 1 percent of households face some of the largest tax increases in 2013 and would see their after-tax incomes fall by 10.5 percent if Congress does nothing. That would translate to an average tax increase of $120,537 for that group. A typical middle-income household earning between about $40,000 and $60,000 would face a tax increase of about $2,000. “This is a very large tax increase,” Donald Marron, the center’s director, told reporters in Washington today. If Congress does nothing, tax rates on income, capital gains, dividends and estates would increase, and the alternative minimum tax would spread to 21.7 million households, up from 4 million this year. The top statutory tax rate on ordinary income would reach 39.6 percent, up from 35 percent, and the top rate on capital gains would be 23.8 percent, up from 15 percent. A 2 percentage point payroll tax cut is set to expire at the end of 2012.
• Jobs Outlook Seen Weak as U.S. Companies Reporting Cost Cuts. Weakening demand is forcing new and accelerated cost reductions at companies from Bank of America Corp. and Hewlett-Packard Co. (HPQ) to Staples Inc. (SPLS) and Eastman Kodak Co. (EKDKQ), dimming the outlook for an already struggling U.S. labor market. Sales for businesses in the Standard & Poor’s 500 Index fell 0.9 percent from a year earlier in July through September, the second consecutive quarterly drop and biggest decline since 2009, according to analyst forecasts compiled by Bloomberg. A 1.2 percent gain projected for October-December still is smaller than the 5.4 percent rise in this year’s first three months.   
• Manufacturing in U.S. Expands Unexpectedly as Orders Rise. The Institute for Supply Management’s factory index rose to 51.5 last month from 49.6 in August, the Tempe, Arizona-based group said today. Readings above 50 show expansion, and the September measure exceeded the most optimistic forecast in a Bloomberg survey.  
• Bernanke Says Fed to Keep Rates Low Even as Growth Rises. “We expect that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economy strengthens,” Bernanke said today in a speech in Indianapolis. Policy makers’ forecast to hold the main interest rate near zero until at least mid-2015 “doesn’t mean that we expect the economy to be weak through” that year. 
• Google(GOOG) Passes Microsoft’s(MSFT) Market Value as PC Loses to Web. Google Inc. has surpassed Microsoft Corp. to become the world’s second-largest technology company as computing over the Internet reduces demand for software installed on desktop machines. 

Wall St. Journal:

• Is France Really Spain in Disguise? Having taken over from Greece, Spain’s economic trauma has had most of the airplay over the past few months. Is it France’s turn next?  
• SAC Portfolio Manager Placed On Leave.

CNBC: 

• Euro Zone Factory Data Flag ‘New Recession’. Euro zone manufacturing put in its worst performance in the three months to September since the depths of the Great Recession, with factories hit by falling demand despite cutting prices, a business survey showed on Monday — pointing to a new recession. Factories helped lift the 17-nation bloc out of its last recession, but the survey suggests a downturn that began in smaller periphery countries has taken root in core members Germany and France. "Despite seeing some easing in the rate of decline last month, manufacturers across the euro area suffered the worst quarter for three years in the three months to September," said Chris Williamson, chief economist at data collator Markit. "The sector will act as a severe drag on economic growth. It therefore seems inevitable that the region will have fallen back into a new recession in the third quarter."   
• 'Disappointing Earnings' Season Ahead: Pro.

Zero Hedge:

• Presenting Einstein's Definition Of Insanity In A Taxpayer Funded Suit. 
• European Car Sales Datapoints.   
• Euro-Zone 'Misery' Has Never Been Higher.  
• Goldman(GS) Lowers Q3 GDP Forecast Again, From 1.9% To 1.8%. 
• Santelli On QEternity: "Deflation Vacation Or Inflation Gestation". (video)

Business Insider:

• Experts Believe Russia Is Bankrolling A Plan To End Shale Gas.  
• This Is The Devastating Ad Republicans Are Using To Hammer Obama On Libya. (video) 
• Some Time Soon Earth Will Enter A New Ice Age.  
• And Now Let Us Gasp In Horror At The Dismal Economic Situation In Spain.  
• We're Getting Close To A Real Freakout About France... (graph) 
• Car Sales Collapse In Spain And France. 
• Iran Reported To Have Given Syrian Regime Up To $10 Billion.
• CHART OF THE DAY: The Divergence Between Stocks And Earnings Guidance Is Driving The Bears Absolutely Crazy.

Reuters:

• Greece says troika wants more detail on austerity cuts. 
• Germany says banking union won't happen by start of 2013.

Telegraph:

• Spanish banks will need up to €105bn, warns Moody's. Fears for Spain escalated after rating agency Moody’s warned that the country’s stricken banks may need almost twice as much capital as the official estimate and Catalan’s separatists stepped up their rhetoric against Madrid. 
• G7: Europe will tell US to deal with 'fiscal cliff'. Europe will tell the US, Japan and Canada next week that it is acting to resolve its sovereign debt crisis, but that US fiscal policy and slowing growth in Japan and China also pose risks to the global economy, according to reports. 

El Mundo:

• Spain Considers Tax on Stock Market Trades, Energy. Spain's Budget Minister Cristobal Montoro considers in 2013 introduction of tax on stock market trades, new "green" taxes on energy and reform of corporate tax.