Today's Headlines

Bloomberg: 

• Draghi Says ECB Won’t Hesitate to Fail Banks in Stress Tests. European Central Bank President Mario Draghi said officials won’t hesitate to fail banks in its stress test next year as the ECB sets out to prove its vigilance in its new role of banking supervisor. “Banks do need to fail” to prove the credibility of the exercise, Draghi said in a Bloomberg Television interview with Francine Lacqua in Frankfurt, after the ECB published plans for its bank-asset check. “If they do have to fail, they have to fail. There’s no question about that.”

• Coutts Cutting Japan Stocks on Concern About Third Arrow. Coutts & Co., the wealth management unit of Royal Bank of Scotland Group Plc, is cutting holdings of Japanese shares on concern Prime Minister Shinzo Abe won’t pass the structural reforms needed to boost the economy.

• ECB's AQR Prompts 'Buy Sub CDS' on Italian Banks at Threadneedle. Investors should buy protection on subordinated debt of Italian and Portuguese banks, as well as on Commerzbank, Paul Smillie, an analyst at Threadneedle, says in an interview. An accurate assessment of European bank balance sheets will find capital shortfalls in Italy, Germany, Portugal and potentially Spain.

• European Stocks Retreat as Orange, STMicro Sales Decline. European stocks declined, following the longest rally for the region’s equities in 40 months, as companies from Orange SA to STMicroelectronics NV (STM) reported lower quarterly sales. Orange retreated the most in more than two years as France’s largest telecommunications company also posted earnings that dropped in the third quarter. STMicroelectronics slid the most in three months after Europe’s biggest semiconductor maker also reported a $142 million quarterly net loss. The Stoxx Europe 600 Index retreated 0.6 percent to 318.99 at the close of trading. 

• Crude Falls to Three-Month Low After Supply Report. WTI for December delivery slid $1.52, or 1.6 percent, to $96.78 a barrel at 12:23 p.m. on the New York Mercantile Exchange after falling to $96.16, the lowest level since July 1. The volume of all futures traded was 38 percent more than the 100-day average for the time of day.

Wall Street Journal:

• China Moves to Help Local Governments Roll Over Debt. Change Will Allow More Short-Term Debt Issues. China took a significant step Wednesday to deal with an explosion of borrowing among local governments by allowing more of them to issue short-term debt to help pay off maturing bonds and loans, according to a person with direct knowledge of the matter. Economists estimate local governments may have borrowed as much as $5 trillion in recent years to fund projects and keep the economy humming as Beijing scaled back the stimulus efforts it had undertaken following the global financial crisis. Concerns are rising that the buildup of debt has been too rapid and that local governments will be unable to pay the money back. Beijing has warned, too, about the potential risks, and is trying to understand and contain any potential problem.

Fox News:

• Boeing(BA) Boosts Outlook Amid 12% Profit Growth. Boeing’s profit jumped 12% in the third quarter, as the aerospace giant’s commercial aircraft unit outweighed softness at its defense business. The company also said Wednesday it raised its per-share earnings guidance to between $6.50 and $6.65, up from a previous estimate of $6.20 to $6.40. Boeing reaffirmed its outlook for revenue.

Zero Hedge: 

• Earnings Reality In One Chart. (graph)

• Home Prices Miss; Rise At Slowest Pace In 11 Months. (graph)

• Troika Wants To Strip Greece Of Defense, Auto Industries, Greece Balks: The Troika-Greece Can-Kicking Toxic Loop. 

• Italian Bank Stocks Tumble On Draghi Threat He "Won't Hesitate To Fail Banks". (graph)

• Greenspan Admits He "Knew There Was A Bubble" In 2008", But Refuses To Apologize. (video)

Business Insider: 

• Wall Street Analyst Crams 700 Years Of Data Into 12 Charts You Can't Ignore.

• Germany: We Think The NSA May Have Tapped Chancellor Angela Merkel's Cell Phone For Years.

• ALBERT EDWARDS: 'The Same Bozos Who Missed The Last Bubble Deny There Is One Now'. 

• RICHARD KOO: I Can't Find Anyone To Refute My Argument That America Is In A 'QE Trap'.

Mish's Global Economic Trend Analysis:

• New Rules for Italy Banks "I'll Guarantee Your Derivatives If You Guarantee Mine". The leverage of European banks to their own sovereign debt is enormous. This mutual guarantee agreement encourages banks to continue the leverage party. Another opportunity to rein in moral hazards just flew out the window. Every bank in Europe will do the same.

CBS:

• HealthCare.gov pricing feature can be off the mark. CBS News has uncovered a serious pricing problem with HealthCare.gov. It stems from the Obama administration's efforts to improve its health care website. A new online feature can dramatically underestimate the cost of insurance. The administration announced it would provide a new "shop and browse" feature Sunday, but it's not giving consumers the real picture. In some cases, people could end up paying double of what they see on the website, CBS News' Jan Crawford reported Wednesday on "CBS This Morning."

NY Post:

• ObamaCare's Other Tech Disaster. Dr. Nicholas DiNubile, a Philadelphia orthopedic surgeon, has a timely reminder for everyone encountering the federal health-care-exchange meltdown: “If you think signing up for ObamaCare is a nightmare, ask your doctor how the EMR [electronic medical records] mandate is going.”

Reuters: 

• Caterpillar(CAT) posts lower results, cuts outlook again. Caterpillar Inc posted a lower-than-expected quarterly profit on Wednesday and cut its full-year forecast for the third time as weak demand from mining customers continued to bedevil the heavy equipment maker. The Peoria, Illinois-based company also provided its first forecast for 2014 sales, saying it expects essentially flat results to up or down 5 percent compared with 2013. Caterpillar said it had eliminated 3,000 jobs during the third quarter and warned that further workforce reductions were possible.

• EMERGING MARKETS-Latam currencies drop on concern about Chinese rates.

• U.S. chip stocks drop as widespread weak demand worries investors. Shares of semiconductor companies slumped on Wednesday after a host of underwhelming quarterly revenue forecasts left Wall Street concerned about lackluster demand in markets from industrial to smartphones.
  The Philadelphia Semiconductor Index was down 3.3 percent, with PC chipmaker Intel Corp falling 1.7 percent and mobile heavyweight Qualcomm Inc down 2.1 percent. 

• METALS-Copper falls on worries over China tightening. Copper slid more than 2 percent on Wednesday as fears of tighter monetary policy in top metals user China outweighed speculation that tepid U.S. jobs data will deter the Federal Reserve from tapering its stimulus this year. 

• U.S. mutual fund investors flee bonds, return to stocks -ICI.

Bear Radar

Style Underperformer:

• Mid-Cap Growth -1.10%

Sector Underperformers:

• 1) Semis -3.16% 2) Oil Service -2.20% 3) Gaming -2.0%

Stocks Falling on Unusual Volume:

• GIMO, GWRE, DTLK, ABAX, LAD, RPRX, PNRA, IRBT, CREE, FTI, ALTR, BRCM, ABG, EAT, COH, CAT, UIS, OCR, FFIV, PDCE, CXO, DNR, ARG, TPLM, CRUS, CBST, ARW, XEC, TUP, BCEI, FANG, JNPR, BLOX, OAS, SWKS, REXX, CAVM, XOOM and ABG

Stocks With Unusual Put Option Activity:

• 1) VWO 2) HUN 3) JNPR 4) XLB 5) SIRI
  

Stocks With Most Negative News Mentions:

• 1) CREE 2) TEX 3) DDD 4) MCD 5) MCD
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Value -.14%

Sector Outperformers:

• 1) Homebuilding +1.30% 2) Road & Rail +.80% 3) Medical Equipment +.74%
  

Stocks Rising on Unusual Volume:

• APOL, COLE, GLW, FBC, MDVN, BCR, GNTX, FDML, LL, SWY, CP, BA, MTH, NSC, STRA, BBCN, ESI, BPI, HXL, LXP and DPS

Stocks With Unusual Call Option Activity:

• 1) NSC 2) COLE 3) GLW 4) RPRX 5) HRB

Stocks With Most Positive News Mentions:

• 1) NOC 2) ECA 3) BA 4) AAPL 5) GLW
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Wednesday Watch

Evening Headlines 
Bloomberg:

• Biggest China Banks Triple Debt Write-Offs to Brace for Defaults. China’s biggest banks tripled the amount of bad loans written off in the first half, cleaning up their books ahead of what may be a fresh wave of defaults. Industrial & Commercial Bank of China Ltd., the world’s most profitable lender, and its four largest rivals expunged in the first six months 22.1 billion yuan ($3.65 billion) of debt that couldn’t be collected, up from 7.65 billion yuan a year earlier, filings showed. 

• Junk Rally Sparks Sales by Nikko Amid Bubble Risk: China Credit. Nikko Asset Management Ltd. and GAM Holding AG are trimming holdings of Chinese dollar-denominated junk bonds amid their strongest rally in almost a year, concerned over a surge in issuance and a possible asset bubble. Speculative-grade securities in China gained 3 percent in September, the most since November, beating the 1 percent advance for U.S. counterparts, according to Bank of America Merrill Lynch indexes. Nikko and GAM decreased holdings earlier this month, while Morgan Stanley favors investment-grade Hong Kong-based corporates as leverage among Chinese companies soars.

• Li’s Hong Kong Sales Signal Peak as European Growth Beckons. Hong Kong billionaire Li Ka-shing made his fortune over a half-century of well-timed bets on everything from property to power generation. His latest deals suggest he’s wagering the city’s era of fast growth may be drawing to an end. Asia’s richest man may raise as much as $18 billion selling stakes in his retail unit and Hong Kong’s second-largest power supplier.

• China’s Stocks Fall as Small Companies Tumble on Money Rates. China’s stocks fell for a second day, with the benchmark index for smaller companies tumbling the most in three months, after money-market rates surged. Leshi Internet Information & Technology (Beijing) Co. (300104), the operator of online-video portal LeTV.com, plunged by the 10 percent daily limit for a second day. Dairy producer Inner Mongolia Yili Industrial Group Co. (600887) declined by the most in three months. Huaneng Power International Inc., the listed unit of China’s largest power group, slumped 4.8 percent after earnings missed analysts’ estimates. The Shanghai Composite Index slid 1.2 percent to 2,183.45 at 11:25 a.m., heading for the lowest level since Sept. 30. The ChiNext index of small companies plunged 3.8 percent, after a 3.6 percent loss yesterday when trading volumes surged to a record. “The valuations of small-caps are too high and it looks like the bubble has started to burst,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “Even if some companies fall by 50 percent, their valuations are still very high as their earnings growth isn’t fast enough to catch up with share-price gains.”

• Asian Stocks Climb as Won to Aussie Jump; Copper Retreats. Asia’s benchmark stock index headed for the highest close in five years and emerging-market currencies rose on bets the U.S. Federal Reserve will hold off cutting stimulus until next year. Australia’s dollar jumped after inflation data. The MSCI Asia Pacific Index added 0.5 percent by 11 a.m. in Tokyo, on course for the highest close since June 2008.

• Rubber Falls as Yen Rebounds on Weaker-Than-Expected Jobs Data. Rubber dropped for the first time in three days as Japan’s currency gained against the dollar after U.S. employers added fewer jobs than estimated. A stronger yen weakens the appeal of yen-based futures. The contract for March delivery lost as much as 0.8 percent to 266.4 yen a kilogram ($2,716 a metric ton) on the Tokyo Commodity Exchange and was at 267.8 yen by 10:53 a.m. local time. The most-active contract fell 11 percent this year.

• Banking Balkanization Prevails in Europe on Eve of Review. As the European Central Bank prepares to take its first big step toward a banking union, the financial industry in the region remains as fragmented as ever. Access to credit is choked off in the economies that need it most, banks are more dependent on government bonds of their home countries, and European Central Bank reviews of the region’s biggest lenders, intended to restore investor confidence, may backfire. ECB supervision alone probably won’t reverse the fracturing of lending along national lines that has driven up borrowing costs in some countries and worsened the co-dependence between indebted governments and their banks. As long as the bill for rescuing or shuttering failing lenders rests with individual states, regulators will be loath to relax their grip, according to current and former banking supervisors and economists. 

• All the New iPad Specs in 50 Seconds. (video)

Wall Street Journal: 

• Weak Jobs Report Blurs Fed's Policy Path. Easy-Money Pullback Looks Less Likely Before Year-End as U.S. Businesses Remain Skittish on Hiring. 

• U.S. Shale Producers Drilling Bigger, Faster Wells. Boom in Oil and Natural Gas Far From Over, Federal Data Show. 

• J.P. Morgan Faces Another Potential Huge Payout. Investors Are Seeking at Least $5.75 Billion Tied to Mortgage-Backed Securities.

• Carl Icahn Sells Half of His Netflix(NFLX) Stake, Thanks Reed, Kevin. Like some blockbuster movies, Netflix flew out of the gates only to bomb when the reviews rolled in on Tuesday, and even hedge-fund titan Carl Icahn took some profits, selling roughly half his stake in the company. Netflix’s more than $66 a share price swing on Tuesday snapped a four-day winning streak for the high-flying video distributor and knocked it from its perch as the best performing stock in the S&P 500. The stock ended the day down 9.2%, losing $32.47 to $322.52, its biggest dollar drop in two years and biggest percentage fall in one year, according to data from WSJ’s Market’s group.

• ObamaCare 2016: Happy Yet? The website problems were finally solved. But the doctor shortage is a nightmare. Three years after the disastrous launch of the Affordable Care Act, most of the website troubles finally have been ironed out. People are now able to log on to the government's ACA website and to most of the state health-insurance exchanges. The public has grudgingly come to accept higher insurance premiums, new taxes and increases in part-time workers who were formerly full-time. But Americans are irate anyway—because now they're seeing the health-care law's destructive effect on the fundamental nature of the way their care is delivered. Even before the ACA's launch in 2013, many physicians—seeing the changes in their profession that lay ahead—had begun talking their children out of going to medical school. After the launch, compensation fell, while nothing in the ACA stopped lawsuits and malpractice premiums from rising. Doctors must now see many more patients each day to meet expenses, all while dealing with the mountains of paperwork mandated by the health-care law.

CNBC:

• Cerberus, others explore deal for Safeway(SWY) -sources. A handful of buyout firms, including Cerberus Capital Management, are exploring a deal for all or part of supermarket chain Safeway, according to people familiar with the matter, in what could potentially shape up to be one of the largest leveraged buyouts since the financial crisis. 

• China's factory sector may contract in October. China's manufacturing sector may have slipped into a contractionary phase in October following two months of expansion, according to Nomura. The bank forecasts HSBC's flash Purchasing Managers' Index (PMI), which is due out on Thursday, slipped to 49.8 in October, below the key 50-mark which separates expansion from contraction.

Zero Hedge:

• You Won't Believe What The French Are Taxing Now...

• Scotiabank Asks The Most Important Question.

• Things That Make You Go Hmmm... Like Moral Hazard. (graph)

• Another One Trillion Dollars ($1,000,000,000,000) In Debt.

• Brosurance: A Keg Standing Ovation For ObamaCare's Greatest Hit.

Business Insider:

• CITI: Keep An Eye On This Jobs Chart Because It Could Get Ugly.

• The Door Between Terrorists And Secret Launch Codes Reportedly Left Ajar During Nap Time.

Washington Post:  

• Health co-ops, created to foster competition and lower insurance costs, are in danger.
  When the new health-care law was being cobbled together, Congress decided to establish a network of nonprofit insurance companies aimed at bringing competition to the marketplace, long dominated by major insurers. But these co-ops, started as a great hope for lowering insurance costs, are already in danger.

NY Times:

• Apple(AAPL) Targets Microsoft Office With Free Apps. At an event meant to feature its latest iPad tablet computing devices, Apple on Tuesday took aim at one of the biggest and seemingly unassailable businesses of its rival Microsoft, its Office software for tasks like word processing and spreadsheets.

The Detroit News: 

• Obamacare's middle-class sticker shock. Last week I got news that my health insurance costs are going up. A lot. In 2014 my monthly premium for a family of four will increase 15 percent to $575, my deductible will double to $3,000 and I will lose my drug coverage, adding another $100 a month to my expenses. My story is typical for employees of Gannett, the Detroit News’ parent company, and other businesses across the country. Obamacare is not just creating havoc in state exchanges, it is roiling the larger private health insurance market. Costs are skyrocketing thanks to the expensive mandates, regulations and taxes buried in the Affordable Car Act. Call it the Unaffordable Care Act.

The Atlantic:

• Samsung and Starbucks(SBUX) Are 'Bullying' Chinese Customers, Says China's State TV. Chinese state media just took aim at another foreign company: Samsung, which happens to make the most popular smartphones in the country. Late on Oct. 21, China Central Television (CCTV) ran a segment lambasting the South Korean company for charging Chinese customers for repairs of defective phones. The aim is to “protect domestic consumers from the bullying of foreign brands,” according to a government consultant interviewed. CCTV said software in Samsung Note and S series smartphones causes them to crash.

Reuters:

• Broadcom(BRCM), other U.S. chipmakers, leave investors wanting more. A host of U.S. chipmakers gave quarterly revenue forecasts that disappointed Wall Street and hurt their shares on Tuesday, including Broadcom Corp , which said it would lay off over a thousand workers as it struggles with slow demand for its cellphone chips. 

• Nabors(NBR) results hit by tough U.S. oil service market. Nabors Industries Ltd posted a quarterly loss on Tuesday and a decline in adjusted profit as the oilfield services and drilling company grappled with an over-supplied North American market for certain services and older rigs. 

• Altera(ALTR) forecasts tepid demand for telecom products. Programmable-chip maker Altera Corp forecast current-quarter revenue below Wall Street estimates, citing fewer orders for its telecom and wireless products, sending its shares down 5 percent after the bell. 

• Panera Bread(PNRA) sees fewer visits in third-quarter, stock falls. Panera Bread Co reported quarterly profit that matched Wall Street's view on Tuesday, but shares fell more than 3 percent after sales at established company-owned restaurants grew less than expected because of fewer visits by diners. 

• Juniper(JNPR) quarterly profit rises nearly six-fold. Juniper Networks Inc reported a nearly six-fold rise in quarterly profit due to a rebound in demand for network equipment from telecom service providers.

Obama takes on coal with first-ever carbon limits
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.99

Financial Times:

• Boom-era credit deals raise fears of overheating. Eight years since the Pik-toggle entered the market, companies are again using the esoteric structures, along with a host of riskier borrowing practices associated with the buyout boom that helped inflate the 2006-07 credit bubble.

China Securities Journal:

• China May Seek New Property Curbs in 4Q. The central government may release new property curbs in 4Q and "hot-spot" cities may intensively announce finetune policies, citing an analyst familiar with the matter.

China Information News:

• China Local Govts Should Set Practical 2014 Goals. Local governments should set practical 2014 growth targets and leave room for economic transformation, according to a report posted on the statistics bureau's website.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -1.0% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 132.0 -1.5 basis points.

• Asia Pacific Sovereign CDS Index 100.75 -2.25 basis points. 

• FTSE-100 futures -.20%.

• S&P 500 futures -.28%.

• NASDAQ 100 futures -.31%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BEAV)/.88

• (DPS)/.83

• (MTH)/.83

• (EAT)/.45

• (WLP)/1.82

• (LLY)/1.04

• (WYN)/1.36

• (GD)/1.68

• (NOC)/1.82

• (CAT)/1.67

• (BA)/1.51

• (BMY)/.44

• (NSC)/1.39

• (T)/.65

• (AKAM)/.46

• (TSCO)/.41

• (CTXS)/.69

• (RJF)/.63

• (ORLY)/1.65

• (CAKE)/.52

• (LRCX)/.70

• (ETFC)/.16

• (VAR)/1.11

• (KNX)/.19

• (SWFT)/.29

• (ETH)/.31

• (TEX)/.59

• (AVB)/1.17

• (SLG)/1.28

• (SYMC)/.44

• (FFIV)/1.19

• (HBI)/1.13

Economic Releases
8:30 am EST

• Import Price Index for September is estimated to rise +.2% versus unch. in August.

9:00 am EST

• House Price Index for August to rise +.8% versus a +1.0% gain in July.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,855,00 barrels versus a +3,999,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -695,000 barrels versus a -2,570,000 barrel decline the prior week. Distillate inventories are estimated to fall by -1,540,000 barrels versus a -1,801,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.2% versus a +.2% gain the prior week.

Upcoming Splits

• None of note

Other Potential Market Movers

• The HSBC China Manufacturing PMI, Bank of Canada rate decision and the weekly MBA mortgage applications report could also impact trading today.

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

Stocks Higher into Final Hour on Central Bank Hopes, Short-Covering, Investor Performance Angst, Homebuilding/Metals & Mining Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 13.13 -.23%

• Euro/Yen Carry Return Index 141.05 +.68%

• Emerging Markets Currency Volatility(VXY) 8.27 -2.59%

• S&P 500 Implied Correlation 37.40 +2.89%

• ISE Sentiment Index 115.0 -7.3%

• Total Put/Call .83 +2.47%

• NYSE Arms 1.11 -15.28% 

Credit Investor Angst:

• North American Investment Grade CDS Index 70.06 -3.31%

• European Financial Sector CDS Index 119.20 -2.35%

• Western Europe Sovereign Debt CDS Index 73.0 +2.83%

• Emerging Market CDS Index 259.08 -1.23%

• 2-Year Swap Spread 13.25 unch.

• TED Spread 21.25 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -4.75 +1.75 basis points

Economic Gauges:

• 3-Month T-Bill Yield .03% unch.

• Yield Curve 222.0 -7 basis points

• China Import Iron Ore Spot $133.30/Metric Tonne -.82%

• Citi US Economic Surprise Index 19.40 -.2 point

• Citi Emerging Markets Economic Surprise Index -10.20 +.1 point

• 10-Year TIPS Spread 2.18 -1 basis point

Overseas Futures:

• Nikkei Futures: Indicating +138 open in Japan

• DAX Futures: Indicating +5 open in Germany

Portfolio: 

• Higher: On gains in my medical/biotech/retail sector longs

• Disclosed Trades: Added to my (IWM), (QQQ) hedges and added to my (EEM) short

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg: 

• Foreigners Sold U.S. Assets as China Reduces Treasuries. Foreign investors were net sellers of U.S. long-term portfolio assets in August as China reduced its holdings of Treasuries to a six-month low. The net long-term portfolio investment outflow was $8.9 billion after a revised $31 billion inflow in July, the Treasury Department said in a statement today in Washington. Net sales of U.S. equities by official holders abroad were a record $3.1 billion, and China lowered its holdings of U.S. government debt for the second time in three months, the department said.

• European Stocks Climb for Ninth Day on Earnings Optimism. European stocks rallied for a ninth day, their longest winning streak since June 2010, as companies from Novartis AG to Reckitt Benckiser (RB/) Group Plc raised forecasts and the U.S. unemployment rate fell to an almost five-year low. Novartis rose 2 percent, making the biggest contribution to the Stoxx Europe 600 Index’s gains. Reckitt Benckiser jumped the most since February 2009. Tele2 AB tumbled to a four-year low after Sweden’s second-largest phone company posted an unexpected loss and lowered its 2015 forecast for sales and profit. Telekom Austria AG slid 5.7 percent after buying frequency blocks at a spectrum auction. The Stoxx 600 advanced 0.5 percent to 320.97, extending a five-year high.  

• Treasury Yields Fall to 3-Month Lows After U.S. Adds Fewer Jobs. Treasury 10-year note yields fell to a three-month low after a report showed payrolls climbed less than projected in September, indicating the U.S. economy had little momentum leading up to the federal government shutdown. European, Canadian and emerging-markets debt also rallied as the payrolls report added to speculation that the Federal Reserve will maintains its U.S. bond-buying program into next year, which has helped to keep borrowing costs low worldwide. The Treasury’s auction of $35 billion of one-month bills attracted demand at close to the pre-government shutdown average seen for the securities this year as investor concern that the U.S. may default ebbed.

• WTI Crude Falls Below $98 for First Time Since July. “The fundamentals of the market aren’t that supportive,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “We’re looking for another sizable build in tomorrow’s report, adding to what are already ample supplies. We should see the builds continue for the next several weeks.” WTI crude for November delivery, which expires today, decreased $1.67, or 1.7 percent, to $97.55 a barrel at 1:52 p.m. on the New York Mercantile Exchange. Prices touched $97.50, the lowest level since July 1. The more-active December contract slid $1.34, or 1.3 percent, to $98.34. The volume of all futures traded was 32 percent higher than the 100-day average. 

• Gold Futures Climb to Highest in Three Weeks on U.S. Jobs Data. “The payrolls data is pushing gold higher as investors think the economy needs more support to gain momentum,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. Gold futures for December delivery climbed 0.9 percent to $1,327.70 an ounce at 9 a.m. on the Comex in New York, after reaching $1,337.90, the highest for a most-active contract since Sept. 30. The price fell as much as 0.5 percent before the jobs data was released. 

• Soybeans, Corn Fall as Dry Weather to Speed Up U.S. Harvesting. Soybean futures for delivery in January slid 0.2 percent to $12.975 a bushel at 10:40 a.m. on the Chicago Board of Trade. Prices reached $13.0125 yesterday, the highest since Oct. 8. U.S. soybean production may rise 4.4 percent to the highest in three years, the USDA said Sept. 12. Corn futures for delivery in December slumped 1.1 percent to $4.3925 a bushel in Chicago, heading for the biggest drop since Oct. 11.

• JPMorgan Guilty Plea Sought by Holder Shows Harder Stance. JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon went to Washington almost a month ago to see if U.S. Attorney General Eric Holder would settle a criminal probe of mortgage fraud at the bank if it paid more money to resolve related civil investigations. 

• EBay(EBAY) Probed by Regulator Over Loans Pioneered by Payday Lenders. EBay Inc. (EBAY) is facing a probe by the Consumer Financial Protection Bureau over a loan program that mimics a structure used by high-interest lenders to evade state rules before the practice was stamped out by regulators. 

Wall Street Journal: 

• Wall Street Profits May Halve in Second Half. Washington Wrangling Takes Toll, Comptroller Says.

Fox News:

• US rift with allies grows as Saudi Arabia, France voice concerns. While the White House battles Congress over everything from the budget to ObamaCare, a potentially seismic shake-up is happening in America's relationship with some of its most-longstanding allies.

MarketWatch:

• Coach’s(COH) shares drop; weak sales fuel concern.

CNBC:

• Watch Art Cashin: Why high-momentum stocks got hit. (video)

• CEO pay skyrockets on soaring stock market. CEOs' wallets are turning into one of the biggest winners from the rising stock market, with the top 10 payouts hitting a record $4.7 billion, and they're likely to get even fatter next year.

Zero Hedge: 

• September Nonfarm Payrolls Miss 148K vs Exp. 180K; Unemployment Rate Drops to 7.2%. (graph)

• If You Believe In The Recovery, Do Not Look At This Chart. (graph)

• Dan Loeb's Third Point Returns 10% Of Capital Amid "Concerns About The Global Economy". (graph) 

• Some Thoughts On Debts, Deficits & Economic Growth. (graph)

Business Insider: 

• LIVE: Apple(AAPL) Reveals New iPads.

• Almost No Risk Is Priced Into Financial Markets, And There's Virtually Nothing On Investors' Radar.

• Netflix(NFLX) Shares Collapsing. (graph)

• THE SCARIEST JOBS CHART EVER.

• There's A Big Slowdown At Malls Across America.

CNN:

• Polls: Early reviews for HealthCare.gov aren't pretty. Just 12% of people questioned in a CBS News poll released Tuesday say they think the process is going well, with nearly half saying it's not going well and nearly four in 10 saying they can't evaluate the signup process at HealthCare.gov.

Reuters: 

• China central bank may tighten cash supply as home prices fuel inflation fears. China signaled concern on Tuesday that ample credit could fuel inflation as a report showed house prices jumped the most in nearly three years, with double-digit gains in major cities. A policy adviser to the People's Bank of China told Reuters the authority may tighten cash conditions in the financial system to address the inflation risks, while the central bank refrained from supplying cash to money markets for the second day running. If it also avoids injecting cash at its next money market operation on Thursday, the effect will be a net weekly drain of 58 billion yuan - the second biggest since February. "(Policy) will only be tightened slightly as inflation is rising. There are some concerns on bank lending," said Song Guoqing, an academic member of the central bank's monetary policy committee.

• Bankers prep first ever US home-rental cashflow ABS -sources. The first-ever bond backed by home-rental cashflows, a US$300 million asset-backed security from private equity giant Blackstone, will begin pre-marketing within the next two weeks, sources close to the deal said on Tuesday. The security is expected to have credit ratings from Kroll, Morningstar, and Moody's, the sources said.