Friday Watch

Evening Headlines
Bloomberg: 

• Draghi Says Next Move Not His as Spain Resists Bailout. European Central Bank President Mario Draghi signaled European governments can’t expect much more help from him until they make the next move. Draghi said nine times during a 54-minute press conference in Slovenia yesterday that the ECB won’t start intervening in bond markets until governments like Spain request a bailout and agree to conditions. He also ruled out allowing the ECB to take losses in any further Greek debt restructuring and damped speculation of another ECB interest-rate cut. “Draghi’s message to governments was that he’s not going to do any more for the time being,” said Jacques Cailloux, chief European economist at Nomura International Plc in London. “The ECB is ready, if needed, but their preference is probably not to have to intervene at all.”
• EU Doubts on Deficit Cutting May Hinder Spain’s Path to Bailout. European officials’ concern over’s Spain’s ability to reach its 2013 deficit-reduction target may obstruct Prime Minister Mariano Rajoy’s path toward a possible bailout. Olli Rehn, the European commissioner in charge of policing budget rules, told Spanish officials their plans to reduce the shortfall to 4.5 percent of gross domestic product next year are based on excessively optimistic assumptions about economic growth, two people familiar with the issue said. Central bank governor Luis Maria Linde, who met Rehn on his Oct. 1 visit to Madrid, echoed that view in comments to lawmakers yesterday. There’s “a potential slowdown in Spain’s application for a European program,” Thomas Costerg, an economist at Standard Chartered Bank in London, said yesterday by e-mail. “There is a rising fear that the 2013 budget and the stress tests may have been some sort of window dressing to get European assistance.”
• Spain Sees Divorce Driving Breakup of Towns as Recession Deepens. At 10 a.m. on a hot Friday, Antonio Rodriguez Alvarez and his brother, Francisco, sit outside a bar in Ecija, Spain, drinking an anise liquor with water. Unemployed laborers, they visit the job center daily at 9 a.m. in search of work. When there is none, they repair to the bar and worry. Antonio, 44, is divorced and living with his mother. He split with his wife partly because of constant fights about money and his lack of a job. He now weighs going to France, where he heard there is work picking fruit. His 22-year-old daughter is planning a move to the Canary Islands to work in the tourism industry. He said he doesn’t blame her. “Young people are leaving this town,” he said. “There’s no hope, no jobs. Days are long. You wake up, it’s the crisis. You go to bed, it’s the crisis. It’s always the same around here.”
• Bullard Says Investors Doubt Fed to Hold Inflation to 2%. Federal Reserve Bank of St. Louis President James Bullard said measures of inflation expectations indicate bond holders have doubts the central bank will hold price increases within its 2 percent goal. “Distant inflation expectations from the TIPS market seem to suggest that investors do not completely trust the Fed to deliver on its 2 percent inflation target,” Bullard said today in a speech in Memphis, Tennessee, referring to Treasury Inflation-Protected Securities. Bullard’s comments echoed Dallas Fed President Richard Fisher’s concern about rising expectations following the Federal Open Market Committee’s decision last month to start an asset purchase program. Policy makers said they could change the size of the central bank’s monthly asset purchases to reduce any risks from the program, including higher inflation or a disruption to financial markets, according to minutes of the Sept. 12-13 meeting released today. The five-year, five-year forward break-even rate, which projects the pace of price increases starting in 2017, rose to 2.88 percent on Sept. 14, the day after the FOMC announced a third round of quantitative easing. That was up half a percentage point from July 26. It dropped to 2.77 percent on Oct. 2. Bullard, who doesn’t vote on monetary policy this year, said inflation “is sometimes seen as a way to partially default on existing nominal debts,” and said that approach would hurt savers, mostly older U.S. households, in his prepared remarks to the Economic Club of Memphis. “A partial default today through higher inflation would be paid for via higher inflation premiums in future borrowing,” he said. “This type of policy would likely impair U.S. credit markets for many years.” 
• Mazda China Sales Tumble to 19-Month Low on Anti-Japan Protests. Mazda Motor Corp. (7261)’s deliveries in China tumbled to the lowest in 19 months as anti-Japan protests flared in the world’s largest vehicle market, fueling concern larger automakers such as Toyota (7203) Motor Corp. will follow suit. Mazda saw deliveries in China drop 35 percent to 13,258 vehicles last month, the automaker said on its website yesterday. That’s the fewest deliveries since February 2011, meaning the company couldn’t even match its sales during the aftermath of last year’s earthquake-triggered tsunami in Japan and floods in Thailand.
• California Refiners Ration Gasoline as Prices Near Record. Exxon Mobil Corp. (XOM) and Valero Energy Corp. (VLO) are rationing fuel deliveries to customers in California as refinery outages cut into the state’s supplies, driving pump prices toward record highs. Valero halted spot sales of gasoline in Southern California and is allocating the rest of deliveries to customers. Exxon is also rationing fuel to customers at West Coast terminals. Retail prices in California jumped to $4.315 a gallon Oct. 3, according to AAA, the nation’s biggest motoring organization. The shortage caused Los Angeles-area gasoline station owners, including Costco Wholesale Corp., to run out of supplies, shut pumps and, in some cases, charge their highest prices ever. Spot gasoline in California, already home to some of the most expensive fuel in the nation because of state blending requirements, has surged $1 a gallon this week to a record. “We’re really sort of shell-shocked,” said Tom Robinson, president of Santa Clara, California-based Robinson Oil Corp., which operates 34 Rotten Robbie convenience stores. “If you’ve been in California long enough, you know how volatile our market can be. But to see prices go up $1 a gallon since Monday -- I’ve never seen that before.”
• Zynga(ZNGA) Cuts Bookings Forecast, Citing Diminished Game Demand. Zynga Inc. cut its forecast for full- year bookings, a predictor of sales, citing lower demand for Web games such as “The Ville” and delayed introduction of other titles. Shares tumbled as much as 22 percent. Bookings this year will be $1.085 billion to $1.1 billion, compared with an earlier forecast for $1.15 billion to $1.225 billion, San Francisco-based Zynga said today in a statement. The company also wrote down the value of its acquisition of OMGPop Inc., maker of the “Draw Something” game, and sliced its forecast for a closely watched measure of profitability.
• Gold Traders More Bullish as Holdings Reach Record: Commodities. Gold traders are the most bullish in three weeks as investors’ bullion holdings expanded to a record after central banks pledged to do more to spur economic growth. Twenty of 32 analysts surveyed by Bloomberg expect prices to rise next week, nine were bearish and three were neutral. Investors are holding the most metal ever through gold-backed exchange-traded products after buying 85.4 metric tons last month, the most since July 2011. Hedge funds’ bets on a rally are the biggest in seven months, U.S. Commodity Futures Trading Commission data show.

Wall Street Journal: 

• FBI Team Reaches Libya Attack Site. Federal Bureau of Investigation agents visited the burned-out U.S. Consulate in Benghazi for the first time on Thursday, more than three weeks after Ambassador to Libya Christopher Stevens and three other Americans were killed in an attack there on Sept. 11. The agents collected evidence for about 12 hours with protection from U.S. military personnel and perimeter security from Libyan personnel, then left the city because of security concerns, officials said; the visit was kept secret to avoid any strike by militants while agents were there.
• Turkey Strikes Syria, Adds War Powers. Syria Accuses Neighbor of Fueling Conflict As Ankara Shells Positions for Second Day. Turkey attacked targets inside Syria for a second day Thursday and its parliament authorized military offensives into foreign countries, deepening the threat of sustained conflict along the neighbors' 565-mile common border. Syria, at the United Nations, castigated its neighbor for policies it said were fueling the conflict. Ankara's military and legislative moves came a day after Syrian shells landed in the Turkish border town of Akcakale, killing five people and spurring Turkish retaliatory strikes.  
• Natural Gas Glut Pushes Exports.
• Investors Jump Off the 'Junk' Pile. The massive "junk"-bond boom is raising alarm bells among some large money managers, who warn the market is showing signs of overheating. So much money has flooded into the junk-bond market from yield-hungry investors that weaker and weaker companies are able to sell bonds, they say. Credit ratings of many borrowers are lower and debt levels are higher, making defaults more likely. And with yields near record lows, they add, investors aren't being compensated for that risk. Also worrying money managers is that some new sales have similar hallmarks to those that preceded the financial crisis in 2008.
• Foreign Firms Flood Into U.S. Debt Market. "Go Yankees" isn't just an October refrain in baseball. Foreign borrowers' U.S. dollar-denominated debt, or "Yankee bonds," are offering investors a chance to pick up higher yields and diversify their portfolios. Banks in Spain and France, plus corporate borrowers in Chile, Russia and the U.K., all brought bonds to market Thursday, selling at least $8.15 billion combined. The internationalization of the U.S. bond market means investors can diversify portfolios without having to take on much currency risk. And often, foreign companies offer higher yields than U.S. counterparts.
• Higgins and Heath: Informed Independents Cool to ObamaCare. Presenting facts about even popular aspects of the health-care law had a side effect: increasing support for Mitt Romney.
• The Obama Matrix. Romney's triumph came from exposing the President's campaign illusions.

Fox News: 

• Exclusive: Credit Suisse probed by U.S. over mortgages - sources. U.S. federal and state authorities are investigating Credit Suisse AG over mortgage-backed securities packaged and sold by the bank, people familiar with the probe said on Thursday. The Justice Department and the New York Attorney General are among those probing Credit Suisse's actions, according to the sources, who spoke on condition of anonymity.

Zero Hedge:

• Who Really Calls The Shots In Europe.  
• Artemis Capital "Modern Financial Markets Are A Game Of Impossible Objects".

Business Insider:

• Two Carrier Groups Are Now Operating In The China Sea.
• China Wants To Wean Itself Off The Dollar, But Risks Destroying Chinese Wealth.
• Obama Administration Offers To Bankroll Legal Fees For Defense Firms. The automatic defense cuts associated with the fiscal cliff, and the notifications that would be required if defense firms plan to lay off employees, has created an election concern for the Obama administration. So, the administration has decided to offer to bankroll the legal fees that these companies may incur if they opt not to notify employees 60 days prior to the layoffs, as the law stipulates.
• CHARTS: Social Media Analysis Reveals Just How Badly Mitt Romney Trounced Obama Last Night.

NY Times: 

• Glut of Solar Panels Poses a New Threat to China. China in recent years established global dominance in renewable energy, its solar panel and wind turbine factories forcing many foreign rivals out of business and its policy makers hailed by environmentalists around the world as visionaries. But now China’s strategy is in disarray. Though worldwide demand for solar panels and wind turbines has grown rapidly over the last five years, China’s manufacturing capacity has soared even faster, creating enormous oversupply and a ferocious price war.

LA Times: 

• LAPD stance on illegal immigration puts Chief Beck in hot seat. Los Angeles Police Chief Charlie Beck stepped into the national immigration debate Thursday, announcing that hundreds of illegal immigrants arrested by his officers each year in low-level crimes would no longer be turned over to federal authorities for deportation. The new rules, which are expected to affect about 400 people arrested each year, mark a dramatic attempt by the nation's second-largest police department to distance itself from federal immigration policies that Beck says are unfair to undocumented immigrants suspected of committing petty offenses.

CNN:

• Work from home soars 41% in 10 years. The number of Americans working from home has soared 41% in the last decade. About 13.4 million people currently work from home in the United States, according to a Census Bureau report out Thursday. That's about four million more Americans since 1999.

Reuters:

• Actress Daryl Hannah arrested in Keystone pipeline protest. Actress Daryl Hannah was arrested in Texas on Thursday after she stood in front of an earth-moving machine clearing ground for the construction of the controversial Keystone XL pipeline, her representative said. The protest took place outside Winnsboro, Texas, about 80 miles (130 km) east of Dallas, said Hannah's agent, Paul Bassis. Hannah, 51, a longtime environmental activist, was arrested last year outside the White House in another protest against the pipeline. The Keystone XL pipeline, a project of TransCanada Corp, would ship more than half a million barrels a day of oil sands-derived crude to the Texas Gulf Coast from Canada. 
• Facebook(FB) IPO lawsuits to be heard in New York. Dozens of lawsuits against Facebook Inc , the NASDAQ exchange and various underwriters will be consolidated before a federal judge in New York, who must sort through the legal aftermath of Facebook's botched initial public offering. 
• Obama-Romney debate draws 67.2 million TV viewers. More than 67 million Americans tuned in to Wednesday's first presidential debate between President Barack Obama and Mitt Romney, ranking the match-up among the top 10 of the past 30 years. Final Nielsen data on Thursday showed that 67.2 million people across 11 TV networks watched Obama and Romney go head to head on the economy - a 28 percent increase on the 52.4 million who saw the first 2008 debate between Obama and Republican John McCain.

Financial Times:   

• Morgan Stanley(MS) chief warns on Wall St pay. Morgan Stanley is preparing to wield its axe again with more job cuts and smaller bonuses planned for next year as the investment bank attempts to boost shareholder returns. In the latest sign of the pressure Wall Street is under to cut costs and address high pay levels, James Gorman, chief executive, said that staff and remuneration would have to be sacrificed as banks cope with lower profits.

Telegraph:

• QE3 could lead to excessive risk taking, Fed minutes show. America could become addicted to loose monetary policy, with an extended period of QE3 leading to excessive risk-taking by some investors, policymakers at the Federal Reserve have warned.

Les Echos:

• France's INSEE Sees No Pickup in Economy Through Year End. Institut de la Statistique et des Etudes Economiques said 2H growth will be +.2% GDP, down from +.4% forecast in June. INSEE forecasts unemployment will reach 10.2% by year end, 10.6% including overseas territories. French purchasing power will drop -.5%, the most since 1984, according to INSEE.

Yomiuri:

• Toyota Sept. China Sales Dropped 50% From Previous Month. China sales in September plunged 50% compared with August. Toyota plans to reduce China production this month. The co.'s August China sales declined 15% from a year earlier.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 129.50 -2.5 basis points.
• Asia Pacific Sovereign CDS Index 110.0 -4.25 basis points.
• FTSE-100 futures +.43%.
• S&P 500 futures +.10%.
• NASDAQ 100 futures +.14%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (STZ)/.54

Economic Releases
8:30 am EST

• The Change in Non-farm Payrolls for September is estimated at 115K versus 96K in August.
• The Unemployment Rate for September is estimated to rise to 8.2% versus 8.1% in August.
• Average Hourly Earnings for September is estimated to rise +.2% versus unch. in August.

3:00 pm EST

• Consumer Credit for August is estimated to rise to $7.250B versus -$3.276B in July.

Upcoming Splits

• (VXX) 1-for-4
  

Other Potential Market Movers

• The Fed's Duke speaking, Eurozone Factory Orders report and the BoJ rate decision 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 50% net long heading into the day.

Stocks Rising into Final Hour on Euro Bounce, Presidential Debate, Short-Covering, Financial/Commodity Sector Strength

Broad Market Tone:

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

Equity Investor Angst:

• VIX 15.04 -2.53%
• ISE Sentiment Index 126.0 +14.55%
• Total Put/Call .89 -4.30%
• NYSE Arms .80 -1.66%

Credit Investor Angst:

• North American Investment Grade CDS Index 95.11 bps -.86%
• European Financial Sector CDS Index 185.86 bps -.63%
• Western Europe Sovereign Debt CDS Index 143.78 bps -1.05%
• Emerging Market CDS Index 217.55 bps +1.02%
• 2-Year Swap Spread 13.25 -.25 basis point
• TED Spread 25.5 -1.0 basis point
• 3-Month EUR/USD Cross-Currency Basis Swap -23.0 +3.0 basis point

Economic Gauges:

• 3-Month T-Bill Yield .10% +1 basis point
• Yield Curve 142.0+4 basis points
• China Import Iron Ore Spot $104.20/Metric Tonne unch.
• Citi US Economic Surprise Index 17.70 +.3 point
• 10-Year TIPS Spread 2.55 +7 basis points

Overseas Futures:

• Nikkei Futures: Indicating +27 open in Japan
• DAX Futures: Indicating +17 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades higher despite rising global growth fears, rising food/energy prices, earnings worries, growing Mid-east unrest, China/Japan tensions and US "fiscal cliff" worries. On the positive side, Coal, Steel, Bank, I-Banking and Education shares are especially strong, rising more than +1.25%. (XLF) has traded well throughout the day. Cyclicals are outperforming. The 10Y Yld is rising +5 bps to 1.67%. Major Asian indices were mostly higher overnight, led by a +1.0% gain in India. The Germany sovereign cds is falling -3.0% to 52.92 bps, the Portugal sovereign cds is down -3.9% to 475.90 bps, the Ireland sovereign cds is falling -4.9% to 301.20 bps and the UK sovereign cds is down -2.9% to 51.35 bps. On the negative side, Computer, Defense, Networking, Computer Service, Hospital, REIT, Gaming and Airline shares are lower on the day. Lumber is falling -.54%, Oil is surging +4.1% and Gold is up +.74%. Major European indices are mostly lower, led down by a -.23% decline in Germany. The Bloomberg European Bank/Financial Services Index is up +.44% today. Brazil is -.3% today and down -2.7% over the last 5 days. The Spain 10Y Yld is rising +1.6% to 5.90% and the Italian/German 10Y Yld Spread is gaining +2.6% to 368.75 bps. The US sovereign cds is gaining +3.1% to 40.67 bps(+25.0% in 5 days) and the Israel sovereign cds is gaining +1.9% to 149.33 bps. The UBS/Bloomberg Ag Spot Index is up +22.7% since 6/1. The benchmark China Iron/Ore Spot Index is down -42.4% since 9/7/11. The China Hot Rolled Steel Sheet Spot Index also continues to trend lower despite the recent bounce. As well, copper, oil and lumber continue to trade poorly given equity investor perceptions that the Eurozone has successfully kicked-the-can, housing has hit a major bottom and global central bank stimuli will boost economic growth in the near future. US weekly retail sales have decelerated to a sluggish rate at +2.4%. The Philly Fed ADS Real-Time Business Conditions Index has shown meaningful deceleration since early July. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite investor perceptions of a big improvement in the nationwide housing market. The Baltic Dry Index has plunged around -65.0% from its Oct. 14th high and is now down around -55.0% ytd. Shanghai Copper Inventories have risen +336.0% ytd. Oil tanker rates have plunged, with the benchmark Middle East-to-US voyage down to 22.50 industry-standard worldscale points, which is very near the lowest since May, 2009. The 10Y T-Note continues to trade too well despite today's pullback. There still appears to be a fairly high level of complacency among US investors regarding the deteriorating macro backdrop. It remains unclear to me whether or not Germany will destroy its own balance sheet or allow the ECB to monetize debt in a major way in an attempt to "save" the euro even as investors continue to price this outcome into stocks. Massive tax hikes and spending cuts have still yet to hit in several key eurozone countries that are already in recession. A lack of economic competitiveness and growth incentives remain unaddressed problems. The European debt crisis is also really affecting emerging market economies now, which will further pressure exports from the region and further raise the odds of more sovereign/bank downgrades after the US election. I continue to believe that China's problems are much larger than commonly perceived and cannot be solved with another massive stimulus package given their real estate bubble, rising food prices/labor costs, massive overcapacity in certain key parts of the economy and growing bad loans problem. Little being done by global central bankers will actually boost global economic growth to an extent that overcomes the growing macro headwinds over the intermediate-term, in my opinion. Over the intermediate-term the Fed's recklessness greatly increases the chances of hard-landings in key emerging markets and of a serious global stock swoon, in my opinion. Moreover, uncertainty surrounding the effects on business of Obamacare, the "US fiscal cliff" and rising election outcome uncertainty will likely become more and more of a focus for US investors into the fourth quarter. The Mid-east continues to unravel at an alarming rate, as well. The quality of the stock rally off the June lows remains poor as breadth, volume, leadership, lack of big volume/gainers and copper/lumber/transports relative weakness all continue to be concerns. Thus, recent market p/e multiple expansion on global central bank stimulus/action hopes, is creating an unstable situation for equities, which could become a big problem unless a significant macro catalyst materializes soon. For this year's equity advance to regain traction, I would expect to see further European credit gauge improvement, a subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower food/energy prices, a US "fiscal cliff" solution, a calming in Mid-east and China/Japan tensions and higher-quality stock market leadership. I expect US stocks to trade modestly lower into the close from current levels on rising global growth fears, earnings worries, Japan/China/Mideast tensions, more shorting, profit-taking and US "fiscal cliff" concerns.

Today's Headlines

Bloomberg:

• EU Said to Doubt Viability of Spain’s 2013 Deficit-Cut Target. Spain was told by Europe’s economic overseers that its 2013 plan to cut the deficit to 4.5 percent of gross domestic product relies on excessively optimistic assumptions, two people familiar with the issue said. Olli Rehn, the European commissioner in charge of policing budget rules, delivered the preliminary assessment to Spanish Economy Minister Luis de Guindos at a meeting in Madrid on Oct. 1, said the people, who declined to be named because the talks weren’t public. Spain’s 2013 budget assumes the economy will shrink 0.5 percent, less than the 1.3 percent contraction predicted by 21 analysts surveyed by Bloomberg. Spanish central bank chief Luis Maria Linde also questioned the government’s math today, calling it “optimistic.” Weaker economic performance would widen the deficit, forecast at 6.3 percent of GDP in 2012, forcing the government to impose more austerity or plead for a looser target. 
• Spanish Bonds Fall Second Day as Nation Resists Seeking Bailout. Spain’s government bonds fell for a second day as the nation resists seeking a bailout and European Central Bank President Mario Draghi said the country still faces significant challenges. Spanish securities declined after the country sold 3.99 billion euros ($5.17 billion) of two-, three- and five-year notes, while holding back from seeking financial aid that would trigger ECB purchases of its debt. German two-year notes fell after Draghi said policy makers didn’t discuss an interest-rate cut at their policy meeting today, where they kept the refinancing rate at a record-low 0.75 percent. Top-rated Finnish bonds also slipped as the ECB chief said the euro is “irreversible.” “The market wants to see a request for aid and this is pressuring Spanish bonds,” said Alessandro Giansanti, a senior strategist at ING Groep NV in Amsterdam. “The auction went quite well in terms of the demand because the bonds were sold in the area where the ECB may buy, if Spain asks for help.” Spanish two-year yields climbed six basis points, or 0.06 percentage points, to 3.29 percent at 4:25 p.m. London time. The 4.75 percent security due July 2014 fell 0.115, or 1.15 euros per 1,000-euro face amount, to 102.515. The 10-year yield rose nine basis points to 5.90 percent.
• Orphanides Says ECB Would Struggle to End Government-Bond Buying. Former European Central Bank Governing Council member Athanasios Orphanides said the central bank would face fierce political opposition on any decision to stop purchasing government bonds if a government fell behind on conditionality. “The real concern for the ECB is not how to kickstart the program, it’s the exit,” Orphanides, who now teaches at the MIT Sloan School of Management in Cambridge, Massachusetts, said in a telephone interview. If an agreement is reached “with a government and it reneges on it in six months time, the ECB will face tremendous pressure not to stop its bond purchases,” he said.
• IMF Won’t Disburse Greek Loan If Debt Not Sustainable. The International Monetary Fund won’t disburse its share of the Greek bailout if the country’s debt is not deemed sustainable or if other creditors don’t pledge to fill a financing gap in the aid package, a fund spokesman said. IMF Managing Director Christine Lagarde last week warned that the level of Greek debt would have “to be addressed,” pushing European policy makers to consider writing off some of the aid to the country. While the fund is sticking to a target of 120 percent of gross domestic product by 2020, the Greek government forecast this week that public debt will climb to 179.3 percent of GDP in 2013.
• China Shoppers Curb Luxury Spending in Hong Kong. Shoppers from China’s mainland curbed spending at Hong Kong luxury stores during the Golden Week holiday, reflecting growing pressure on the city’s economy from faltering tourist demand. Purchase of luxury goods by mainland visitors in Hong Kong is set to fall at least 10 percent from a year ago during this week’s holiday, said Joseph Tung, executive director of the Travel Industry Council. Lower spending in Hong Kong hurts consumer companies from U.K.’s Burberry Group Plc. (BRBY) to luxury watchseller Hengdeli Holdings Ltd. (3389) that have invested in stores to profit from Chinese visitors to the city. The weaker retail sales add to the risk of a recession in Hong Kong, where the economy shrank 0.1 percent in the second quarter from the previous three months on declining exports.
• Fed Saw Manageable Risks of New Bond Buying, Minutes Show. Federal Reserve policy makers said they could change the size of the central bank’s monthly asset purchases to reduce the risks associated with the program, such as disrupting financial markets and spurring inflation.
• Initial Jobless Claims Rise. The number of Americans filing first- time claims for unemployment insurance payments rose last week, highlighting an uneven improvement in the labor market. Applications for jobless benefits increased 4,000 to 367,000 in the week ended Sept. 29, Labor Department figures showed today. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg survey. 
• US Unemployment Drop Masking Labor Market Weakness: Chart of the Day. While unemployment has fallen to 8.l1% from 10% in 2009, the percentage of people working, know as the employment-population ratio, has remained near its lows of the recession, suggesting limited progress toward a recovery in jobs.
• Food Prices Jump to Six-Month High as Dairy Costs Rise. World food prices rose in September to the highest in six months as dairy and meat producers passed on higher feed costs to consumers, the United Nations’ Food & Agriculture Organization said. An index of 55 food items tracked by the FAO rose to 215.8 points from a restated 212.8 points in August, the Rome-based agency reported on its website today. Dairy costs jumped the most in more than two years. Livestock breeders and dairy farmers are passing on the higher cost of feed, after grain prices jumped in June and July, according to Abdolreza Abbassian, an economist at the FAO in the Italian capital. 
• California Gas Stations Begin to Shut on Record-High Spot Prices. Gasoline station owners in the Los Angeles area including Costco Wholesale Corp. (COST) are beginning to shut pumps because of supply shortages that have driven wholesale fuel prices to record highs. Costco’s outlet in Simi Valley, 40 miles (64 kilometers) northwest of Los Angeles, ran out of regular gasoline yesterday and was selling premium fuel at the price of regular, Jeff Cole, Costco’s vice president of gasoline, said by telephone. The company hasn’t been able to find enough unbranded summer-grade gasoline to keep its stations supplied, he said. The gasoline shortage “feels like a hurricane to me, but it’s the West Coast,” Cole said yesterday. “We’re obviously extremely disheartened that we are unable to do this, and we’re pulling fuel from all corners of California to fix this.”
• Oil Rises on Euro Strength. Crude for November delivery gained $1.55, or 1.8 percent, to $89.69 a barrel at 11:46 a.m. on the New York Mercantile Exchange. Brent oil for November settlement advanced $1.91, or 1.8 percent, to $110.08 a barrel on the London-based ICE Futures Europe exchange.
• Gold Jumps to Highest Since November on ECB’s Bond Plan. Gold futures jumped to the highest in almost 11 months as the European Central Bank said it is ready to start buying government bonds, boosting demand for the precious metal as a store of value. Gold futures for December delivery climbed 0.5 percent to $1,788.60 an ounce at 9:44 a.m. on the Comex in New York. Earlier, the price reached $1,797.20, the highest for a most- active contract since Nov. 14.
• Cantor Cut to Junk by Moody’s on Capital Markets Pressure. Cantor Fitzgerald LP, the investment bank planning to add 800 people in coming years, was cut to junk by Moody’s Investors Service on weakened profitability. The credit grade was lowered to Ba1 as the ratings firm expects “the capital markets operating environment to be challenging for all participants for the medium term,” Moody’s said today in a statement on the New York-based firm.

Wall Street Journal: 

• Political Wisdom: A Big Night for Romney. 
• Romney Plans Foreign-Policy Speech at VMI. 
• Web Profiles Haunt Students. A growing number of top-ranked U.S. colleges say they are finding objectionable material online that hurts the chances of prospective freshmen.
• Reports Show Small Businesses Are Reluctant to Hire. Small businesses cut back on hiring over the summer and small-to-medium sized firms have lowered their staffing plans for the future, according to two reports released Thursday. The National Federation of Independent Business, a small-business trade group, said the net change in employment per firm over the three months ended in September was -0.23, worse than the July and August readings. The negative result indicates slightly more firms cut workers than the share of firms who added staff. The outlook for hiring among smaller firms is also very muted. A survey of companies with annual revenues between $100,000 to $250 million, done by PNC Financial Services Group, shows 23% of companies expect to add new employees over the next six months, down from the 28% saying that in the spring survey. Worries about the economy’s future helps to explain some of the reluctance toward future hiring. The PNC survey found 57% of business owners or senior managers are pessimistic about the national economy’s path over the next six months, up sharply from 43% saying that in the spring. 
• Henninger: The Romney Reboot Arrives. In a role reversal, Mitt Romney went on offense and put Barack Obama on defense for 90 minutes. 

MarketWatch.com: 

• Retailers’ September sales raise holidays concern. Industry watchers say retailers selling basics may be safer bet. U.S. retailers’ September comparable store sales slowed from the summer trend, heightening the stakes for how the upcoming holiday season will play out. Overall, the September sales results released Thursday edged up 0.8%, short of the 1.6% average estimate of analysts surveyed by Thomson Reuters. About 53% of the retailers reporting sales missed Wall Street’s expectations. 

CNBC: 

• 'Discouraged' Workers Face Tough Road Back to Employment. Carver doubts she'll ever land full-time work and now focuses on just making enough money to pay the bills. Millions of other Americans have come to the same conclusion as the worst economic recovery since World War II has left them sidelined and unable to replace the job they lost to the Great Recession. Many have given up altogether, left behind by the economy and left out of the government’s employment statistics. In fact, so many people have given up looking for work that the official jobless rate fell to 8.1 percent last month from 8.3 percent, even though the economy is not adding nearly enough jobs to absorb the growth in working-age population.   
• Planned Layoffs Up in September: Challenger. The number of planned layoffs at U.S. firms in September rose 4.9 percent. Employers announced planned job cuts of 33,816 last month, up from 32,239 in August, according to the report from consultants Challenger, Gray & Christmas, Inc.  
• A Huge Victory for a Principled Mitt Romney. Mitt Romney politely cleaned Barack Obama’s clock tonight. A lethargic and at times tired looking President Obama was out-hustled, out-facted, out-energized, and out-informed by Former Governor Mitt Romney. Completely unlike Romney’s convention speech, tonight he focused on strong economic issues, developed his philosophy of limited government, and convinced me beyond a shadow of a doubt that he is in fact a pro-growth tax reformer who wants to lower the rate, and broaden the base in a revenue-neutral fashion that will actually create jobs and spur the economy. 
• Romney's Strong Debate Showing Puts Europe on Edge. President Barack Obama's lackluster performance in the first debate provoked uneasiness in European capitals on Thursday, where hopes are mostly, if unofficially, pinned on his securing a second term. In Europe, where leaders and finance officials have worked closely with the Obama administration over the past 2½ years trying to resolve the euro area debt crisis, there was particular consternation at Romney's singling out of deficit-ridden Spain as a poorly administered economy. "Romney is making analogies that aren't based on reality," Foreign Affairs Minister Jose Manuel Garcia-Margallo told reporters after a meeting of his center-right party. Leading Spanish daily El Pais highlighted the fact that Spain was the only European country mentioned, and contrasted Romney's negative depiction of it with Obama's praise for Spain's renewable energy policies during the 2008 campaign. "Spain has never been mentioned in a presidential debate as a symbol of failure," the left-leaning newspaper lamented. "What happened last night makes history. And not in a good way." Political commentators in France and Germany registered surprise at Obama's underwhelming performance, saying the election could be much tighter as a result. "Obama showed a lack of desire to be president, which could put him on shaky ground as a presidential candidate," said liberal German news magazine Der Spiegel. "It's now clear that to get back into the White House the U.S. president needs running shoes, not flip-flops." France's Le Monde appeared equally surprised by Obama's sub-par performance. "Where did the favorite go?" it asked on its front page, with a headline below saying: "Obama fails his first televised debate against an incisive Romney."

Zero Hedge: 

• Chart Of The Day: The Rise Of Global Central Planning. 
• The 5 Most Ridiculous Charts In US Equity Markets.
• Goldman(GS): "Neither Democrats Nor Republicans Look Inclined To Budge On The Fiscal Cliff".
• More Credit Suisse Employees Learn They Are About To Be Laid Off Via Department Of Labor Website. 
• Uncle Sam's FICO Score.

Business Insider:

• Here's The Angry 'Class Warfare' Letter That Hedge Fund Manager Leon Cooperman Sent To Obama.  
• The Next Gigantic Housing Bubble That Everyone Expects To Burst. 

St. Louis Fed:

• Commercial Paper Outstanding. (graph)

Reuters:

• Informatica(INFA) profit warning hits tech sector shares. Software maker Informatica Corp (INFA.O) rattled investors with a warning on Thursday about worsening business conditions in Europe, sending its shares down over 25 percent and weighing on other U.S. tech stocks. Informatica's software, which helps companies pull together data so they can analyze business trends, is used alongside that made by bigger software companies so its weakness often drags down peers. But analysts said Informatica's problems may be company specific, citing an internal sales reorganization, and said overall tech spending would likely be stable. Nevertheless, the warning hit shares in other software firms, particularly Qlik Technologies (QLIK.O), which was down 8.7 percent in late morning trade on Nasdaq. Qlik generates almost 60 percent of its revenue in Europe. Other such as Teradata Corp (TDC.N) dropped 3.4 percent, Tibco Software (TIBX.O) fell 1 percent, Citrix Systems (CTXS.O) was down 0.9 percent while Red Hat Inc (RHT.N) and VMware Inc (VMW.N) lost 0.7 percent and 0.5 percent respectively. Smaller software companies have taken a hit in the last few months as customers scrutinize deals more closely, signaling a pullback in tech spending.  
• Factory orders post largest fall since recession. Demand for U.S. factory goods in August fell by the most since January 2009, but the second straight month of gains in orders outside transportation hinted at a less rapid loss of momentum in manufacturing activity. The Commerce Department said new orders for manufactured goods tumbled 5.2 percent - the biggest drop since the recession - dragged down by a slump in demand for transportation equipment that was telegraphed in last week's report on orders for long-lasting manufactured goods. 
• Russia proposes diluted UN text on Syria attack in Turkey. Russia on Thursday blocked adoption of a draft U.N. statement condemning a deadly Syrian mortar attack on a Turkish town and proposed a weaker text calling for "restraint" on the border, without referring to breaches of international law. Western diplomats complained that Russia's proposed Security Council statement, if accepted by the 15-members, would weaken the message to an unacceptable degree. Negotiations on the non-binding statement were continuing, they said. 
• US authorities charge 91 in $430 mln Medicare fraud. Ninety-one people including doctors, nurses and other medical professionals have been charged with committing $430 million in Medicare fraud in seven U.S. cities, authorities said on Thursday. An investigation coordinated by the U.S. Justice Department and the Department of Health and Human Services uprooted alleged false billing schemes involving $230 million in home health services, over $100 million in mental health services and $49 million from ambulance transportation. Charges range from healthcare fraud and conspiracy to wire fraud, kickback violations, identity theft and money laundering.
• Fitch: Brazilian banks face volatility, uncertainty, economic slowdown.

Telegraph: 

• QE3 could push gold up to $2,400/oz. 
• Gloom for UK construction as Hanson plans to cut capacity by 10pc. Job losses are set to be announced by a leading building products firm in response to the "dreadful" UK construction market.

Handelsblatt:

• European parliament lawmakers from Germany's Christian Democratic Union and Christian Social Union want euro-area countries to be able to leave the common currency temporarily if they can't reduce debt levels, citing a paper drafted by the politicians. The 42 lawmakers said the euro area needs a process for states to declare insolvency in an orderly fashion and the common currency won't break up if that happens. The declaration marks a break with Germany's CDU Chancellor Angela Merkel, who wants to keep Greece in the euro. The lawmakers want ECB bond-buying to be limited in its duration and volume, on the ground that it could stoke inflation in the "mid-term".

Focus:

• Bavaria's Soeder Says ECB Bond Buying Is No Cure. The ECB weakens concept of ESM, fiscal pact, Markus Soeder, Germany's Bavarian state finance minister. ECB president Draghi generates mistrust regarding currency stability, he said. The ECB is not allowed to play active political role in saving the euro. If Germany has to pay for debtor nations, German citizens must agree in referendum, Soeder said.
  

IMK Economic Institute:

• ECB Bond-Buying Conditionality May Damp Region's Recovery: IMK. The conditionality under which the ECB would agree to buy troubled euro member states' bonds may damp the area's economy recovery, Germany's labor union-affiliated IMK economic institute says. The Euro's decline against he dollar, and German consumer spending help bolster the region's economy, IMK said. The Euro region economy will shrink -.5% in 2012 and -.7% in 2013, IMK said.

El Pais:

• Catalan President Artur Mas said the budget-deficit targets set for Spanish regions next year are "unreal" and likely won't be met. Mas called for the central government to deliver larger share of austerity measures. "The current distribution of the deficit is unreal and very dangerous because it could destabilize social cohesion," he said. Mas's comments break the agreement Prime Minister Mariano Rajoy brokered with regional leaders Oct. 2.

Bear Radar

Style Underperformer:

• Small-Cap Growth +.15%

Sector Underperformer:

• 1) Hospitals -.63% 2) Networking -.61% 3) Gaming -.40%
  

Stocks Faling on Unusual Volume:

• INFA, QLIK, MPEL, MXWL, THC, LPNT, ASIA, NTAP, UAL, NUVA, BWP, STWD, HMSY, SRPT, GMED, OPTR, MSCI, ISCA, BAH, TDC, MAKO, ICFI, ENDP, MCRS, KSS, TMH, ROST, BPL, ELLI, ENS, AVY and MANT
  

Stocks With Unusual Put Option Activity:

• 1) EWA 2) MBI 3) MRO 4) MAR 5) KBE
  

Stocks With Most Negative News Mentions:

• 1) NUVA 2) APA 3) YUM 4) TSLA 5) RKT
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value +.69%

Sector Outperformers:

• 1) Coal +4.79% 2) Gold & Silver +2.15% 3) Banks +1.68%
  

Stocks Rising on Unusual Volume:

• TTWO, MFRM, OCN, NFLX and BKS

Stocks With Unusual Call Option Activity:

• 1) PCS 2) TJX 3) RENN 4) MDRX 5) VWO
  

Stocks With Most Positive News Mentions:

• 1) COST 2) ROST 3) TJX 4) CRM 5)PCS

Charts:

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

Thursday Watch

Evening Headlines
Bloomberg:

• Romney in Debate Says Obama Favors ‘Trickle-Down Government’. Republican presidential nominee Mitt Romney said President Barack Obama favors a form of “trickle- down government” that will result in more taxes and regulations, as the two met in their first debate in the race for the White House. “That’s not the right answer for America,” Romney, 65, said tonight at the University of Denver.
• Draghi Stares at Spain as Bond Brinkmanship Keeps ECB Waiting. Mario Draghi is waiting for Spain to get back to him on whether his plan to save the euro is needed. One month after the European Central Bank president unveiled an unprecedented bond purchase program to rescue Europe’s embattled southern fringe, Spanish Prime Minister Mariano Rajoy is showing reluctance to ask for the aid he pushed for with Italy on concern about the terms attached to it. As ECB policy makers meet in Slovenia today, Spanish 2-year note yields are more than 50 basis points higher than the five-month low touched on Sept. 7, the day following their last decision. “We’re back at this game of brinkmanship between the ECB and governments again, and it’s a case of who makes some concessions first,” said Nick Matthews, senior European economist at Nomura International Plc in London. “The markets will continue to play a significant role here and Draghi needs them to turn up the pressure.” Spain will face a test of that pressure today as it sells as much as 4 billion euros ($5.2 billion) of bonds after Finance Minister Luis De Guindos said that officials are still considering whether they actually need ECB help.
• Spain Off Balance-Sheet Debt Worsens Rajoy's Battle: Euro Credit. Liabilities that the Spanish government has held off its balance sheet are winding up on the taxpayers' tab , threatening Prime Minister Mariano Rajoy's efforts to haul the economy out of a five-year slump. Government debt will leap 17 percentage points to 85% of gdp this year as the state absorbs the cost of bailing out banks, the power system and public contractors.
• France’s LBO Firms Predict ‘Death’ From Hollande’s 75% Carry Tax. French private-equity fund managers are predicting their own exile if lawmakers back President Francois Hollande’s proposed tax increases on the profit the industry makes from investments. Hollande, who released his first annual budget on Sept. 28, plans to tax fund managers’ share of the profit from their investments, known as carried interest, at a rate of as much as 75 percent, part of a wider effort to increase taxes on the wealthy and narrow the country’s deficit. France also plans to as much as double taxes on capital gains and restrict the amount of debt interest payments a company can deduct from its taxable income, a measure that will reduce returns on leveraged buyouts. Lower levies in the U.K. will lure professionals across the English Channel from where they can still try to buy French companies, Parisian dealmakers say. 
• European Banks Told to Hold On to $258 Billion of Fresh Capital. The European Union’s top banking regulator told the bloc’s lenders to hold on to more than 200 billion euros ($258 billion) in capital raised to pave the way for tougher global standards. The 27 banks that were required by the European Banking Authority to submit plans for their capital raising attained a total of 116 billion euros, the London-based EBA said yesterday. Including aid to Greek and Spanish banks, European lenders increased their capital reserves by more than 200 billion euros since 2011, according to an EBA report published on its website.
• No Use in Competitive QE, Intervention, Japan's Sakakibara Says. Japan and other advanced economies are reaching the limit of what they can do to stimulate growth through monetary easing, said Eisuke Sakakibara, a former Ministry of Financial officials. 
• India Slowdown Thwarts Carmakers’ Sales Search Beyond U.S. With sales crashing in Europe and slowing in China, carmakers are looking for signs of growth beyond the U.S. market. In India, it’s not looking good. The holiday season, just under way there, typically accounts for about a quarter of new auto purchases. This year, the market is uncharacteristically moribund as the economy is projected to grow at its slowest pace in a decade. That’s especially tough for Hyundai Motor Co. (005380) and Tata Motors Ltd. (TTMT), the second- and third-biggest carmakers by volume in India. “Everyone is counting on India to deliver future growth,” said Deepesh Rathore, the New Delhi-based India managing director of IHS Automotive, an industry-research company. “The festive season is a trigger for sales in the second half.”
• Applied Materials(AMAT) to Cut Up to 9 Percent of Staff Amid Slump. Applied Materials Inc. (AMAT), the largest producer of chipmaking equipment, plans to eliminate as much as 9 percent of its workforce as lackluster personal-computer demand leads customers to slow orders for manufacturing tools. The company will cut 900 to 1,300 jobs, resulting in pretax costs of $180 million to $230 million, through a voluntary retirement program and other actions. The restructuring will save $140 million to $190 million a year, Santa Clara, California-based Applied Materials said in a statement today.
• Chemical Bond Risk at Record on China Slowdown: Japan Credit. The bond risk of Japanese manufacturers that rely on China as a market for chemicals used in plastics, resins and adhesives jumped to records on faltering domestic output and signs of continued cooling in the world's second-biggest economy. Credit-default swaps on Mitsui Chemicals Inc. increased 183 basis points last quarter, reaching a record of 390 on Sept. 26, CMA data show. Contracts on Sumitomo Chemical Co., Japan's second-largest maker of the products, climbed 161 in the period, reaching their highest level ever at 284 on the same day. 
• Precious Metals Are 'Standout Exposures', Morgan Stanley Says. Gold, silver and platinum are "standout exposures" in current environment, bank says. Precious metals to provide absolute positive performance. Silver to provide relative outperformance. Aluminum, nickel, lead, zinc in oversupply, vulnerable to renewed growth concerns.

Wall Street Journal: 

• Candidates Spar Over Taxes. Obama, Romney Lay Out Differing Views of Government, Regulation, Deficit Cuts. Cutting to the heart of their differences, President Barack Obama and Republican Mitt Romney laid out contrasting visions for the federal government in their first debate in Denver, sparring over tax-cut proposals, regulations and deficit-reduction plans. Mr. Romney cast Mr. Obama as a champion of big government and spending who would raise taxes on job-creating small businesses, calling his approach "trickle-down government." 
• Small Businesses Fear Fiscal Cliff Awaits at Year-End. Many small-business executives said they have little confidence that lawmakers and the president will be able to avoid a fiscal cliff by December 31. A survey of 833 business owners released Wednesday found that 47% of small-business owners and chief executives said they don't expect the country will avoid the tax increases and deep spending cuts that are set to take effect at year-end unless Congress and President Barack Obama agree on a new deficit-reduction plan. In comparison, 38% of respondents said they thought lawmakers would be able to reach an agreement. Another 14% weren't sure. 
• Henninger: 2012's Sure Losers—Young People. Hi, I'm Marty and I'll be your waiter for the next 40 years. 
• Can We Believe the Presidential Polls? Last week's CBS/New York Times poll had Obama ahead by nine points in Florida. That's not very likely.

MarketWatch.com: 

• Who won the first presidential debate?

 CNBC: 

• Poll: Who Do You Think Won the Presidential Debate?

Zero Hedge: 

• 4 Years After TARP - Winners, Losers, Bubbles, And Troubles.
• Fed Confused Reality Doesn't Conform To Its Economic Models, Shocked Its Models Predict "Explosive Inflation".
• NATO Issues Statement On Syrian-Turkish Hostilities.

Business Insider:

• Mitt Romney Absolutely Destroyed Obama In Tonight's Presidential Debate.   
• A Rare Occurrence In The Saudi Currency Market Tells You That Trouble Is Brewing In The Middle East.  
• Liberals Are Saying Obama Could Have Lost The Election Tonight.  
• The New Matt Damon Movie That Blasts Fracking Was Partly Funded By The Government Of Abu Dhabi.  
• 'Evidence QE3 Is Working'... And Other Lies.

Forbes: 

• New Poll: 55% Of Small Biz Owners Would Not Start Companies Today--69% Say Regulation Has Harmed Their Businesses.

CNN:  

• CNN Poll: Romney wins debate by big margin. Sixty-seven percent of registered voters who watched the debate said GOP nominee Mitt Romney won the debate, while 25% said President Barack Obama came out as the winner, according to a CNN/ORC International Poll released late Wednesday night.

Reuters: 

• Tennessee fungal meningitis outbreak spreads to other states. State and federal health officials said on Wednesday that they expected more cases to be reported in a deadly outbreak of fungal meningitis they believe is linked to steroid injections given for pain at two clinics in Tennessee. So far two people have died and 18 others have been sickened in Tennessee from meningitis linked to the outbreak. Four other states have reported cases, with a total of 26 illnesses and four deaths, said Centers for Disease Control and Prevention spokesman Curtis Allen. In addition to the 18 who are sick in Tennessee, one case has been reported in North Carolina, two in Florida, three in Virginia and two in Maryland. The other deaths include one each in Virginia and in Maryland, Allen said. 
• U.S. strip mall recovery stalls in the third quarter. The nascent recovery at U.S. strip malls stalled in the third quarter as retail sales struggled. But large regional malls continued to rebound, driven by top-quality malls with high-end department and specialty stores, real estate research firm Reis Inc said Thursday. The retail real estate sector has been among the hardest hit in commercial property. At the mercy of consumer spending, the sector has reflected the diverse pressures and changes since the housing crisis began in 2007. 
• Island plans by Tokyo's nationalist governor may stoke fresh China tensions. Tokyo Governor Shintaro Ishihara, a fiery nationalist whose failed bid to buy a group of disputed islands ignited a crisis with China, is pushing ahead with a plan to build structures there to hammer home Japan's claim, officials involved told Reuters. Although such a move is not imminent, it would be certain to strain Japan's already shaky relations with China and could prompt a rebuke from the Obama administration, which has urged both sides to ease tensions by setting aside the dispute. Ishihara's gambit appears aimed at forcing a new showdown in the island dispute with China.
• Morgan Stanley(MS) in talks to sell majority of commodity business - FT. Morgan Stanley is in talks to sell a majority stake in its commodities business to the Qatar Investment Authority, the Financial Times said, quoting people familiar with the deal. 
• World Bank lowers Latin American growth forecast to 3 pct. Economic growth in Latin America will be lower than previously estimated due to the continuing worldwide slowdown, the World Bank said in a report on Wednesday. It forecast growth at 3 percent this year, below its previous projection of 3.5 to 4 percent.

Telegraph: 

• Spain fears harsh rescue terms from AAA Nordic parliaments. Senior officials from Germany and other parts of the eurozone's AAA core have warned Spain privately that angry parliaments are likely to impose stringent conditions on any further rescue loans.

Ming Pao Daily:

• Hong Kong's number of visitors from mainland China fell 10% from a year earlier to 456,000 in the first four days of the week-long Golden Week holidays, citing figures from the city's Immigration Department. Michael Tien, founder of clothing retailer G2000 Group, said sales from mainland China visitors dropped 30% in the first two days of the holiday, according to the report.

Wen Wei Po:

• Mainland China Buyers of Hong Kong Homes Fall 20%. Buyers from China account for 10-20% of property in Hong Kong at present, compared with more than 30% previously, citing Fung Lam, Centaline's associate director of project development and investment. Interest from mainland buyers has declined because of rising prices, a slowing Chinese economy and a booming property market in Shenzhen, Lam said.

Evening Recommendations 
Piper Jaffray:

• Rated (QDEL) Overweight, target $26.

Night Trading

• Asian equity indices are -.25% to +1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 132.0 -1.5 basis points.
• Asia Pacific Sovereign CDS Index 114.25 -2.5 basis points.
• FTSE-100 futures +.23%.
• S&P 500 futures +.44%.
• NASDAQ 100 futures +.51%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ISCA)/.08

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to rise to 370K versus 359K the prior week.
• Continuing Claims are estimated to rise to 3275K versus 3271K prior.

10:00 am EST

• Factory Orders for August are estimated to fall -5.9% versus a +2.8% gain in July.

2:00 pm EST

• Minutes of FOMC Meeting.

Upcoming Splits

• (VXX) 1-for-4
  

Other Potential Market Movers

• The ECB rate decision, BoE rate decision, ECB's Draghi speaking, Fed's Bullard speaking, Challenger Jobs Cuts report for September, RBC Consumer Outlook Index for October, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (ORCL) analyst meeting could also impact trading today.

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