Thursday Watch

Late-Night Headlines
Bloomberg:
- The cost of protecting Asia-Pacific bonds from default tumbled, according to traders of credit- default swaps. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan, including Thailand and Hong Kong's Hutchison Whampoa Ltd., fell 70 basis points to 490 and earlier traded at 480, according to ICAP Plc data as of 8:19 a.m. in Hong Kong. The iTraxx Australia index was quoted 30 basis points lower at 280 in Sydney, Citigroup Inc. data show. The Markit iTraxx Japan index fell 20 basis points to 270 at 9:38 a.m. in Tokyo, according to prices from Morgan Stanley.

- The Federal Reserve agreed to provide $30 billion each to the central banks of Brazil, Mexico, South Korea and Singapore, expanding its effort to unfreeze money markets to emerging nations for the first time. The Fed set up ``liquidity swap facilities with the central banks of these four large systemically important economies'' effective until April 30, the central bank said yesterday in a statement. The arrangements aim ``to mitigate the spread of difficulties in obtaining U.S. dollar funding.''

- The US dollar and the yen fell as a wave of global interest rate cuts sparked a rally in Asian stocks, bolstering demand for higher-yielding assets. The greenback slid to a one-week low against the euro after the Federal Reserve cut its target lending rate to the lowest in a half-century. The yen slumped for a third day versus the euro on speculation the Bank of Japan will lower borrowing costs when it meets tomorrow. South Korea's won jumped the most in a decade after the Fed extended swap lines to the nation's central bank to help ease a shortage of the U.S. currency.

- Nike Inc.(NKE) Chairman Philip Knight has pledged $100 million for cancer research to the Oregon Health & Science University. The donation from Knight and his wife, Penny, is the largest gift in the Portland, Oregon, school's history, the university said in a statement today.

- Delta Air Lines Inc.(DAL) and Northwest Airlines Corp. won U.S. approval to combine, clearing the last regulatory hurdle to becoming the world's largest carrier.

Wall Street Journal:
- India's employment boom in its flagship industries -- one of the most visible signs of the vast nation's rapid development -- could be set to burst in dramatic fashion. Many Indian companies in sectors including technology, financial services and construction are likely to cut one quarter or more of their employees in coming weeks, warned the Associated Chambers of Commerce and Industry of India, a trade group, on Wednesday.

CNBC.com:

- Kenneth Heebner, manager of last year’s top US equity fund, said stocks will rise with a “buying panic” by investors who put cash to work. The market will rise “appreciably” from current levels, Heebner said. Asset managers who are holding “massive” amounts of cash will need to resume investing in stocks to produce positive returns, he said. “As the market starts up, there is going to be the same buying panic as the selling panic we have had in the last month,” Heebner said. (video)

- US regulators are working on a new federal program that could provide government guarantees for up to $600 billion of home mortgages to help prevent foreclosures, a source familiar with the discussions told Reuters on Wednesday. The plan, being hammered out by the Federal Deposit Insurance Corp and the U.S. Treasury, could provide guarantees for up to 3 million at-risk mortgages, said the source, who spoke on condition of anonymity because the program is still being discussed.

MarketWatch.com:
- How will Apple(AAPL) put cash hoard to work?

Schaeffers Research.com:
- Hedge Fund Trauma. Examining the heavy selling suffered by the hedge-fund community.

Reuters:

- Dow Jones news service corrected a report that had quoted General Electric Co's(GE) top executive about 2009 earnings after the report battered GE shares and sparked a late stock-market sell-off. The report had helped push the Dow Jones industrial average and Standard & Poor's 500 Index down from near session highs at 3:30 p.m. into negative territory 2 minutes before the close. The correction made clear that GE Chief Executive Jeff Immelt had not forecast 2009 profit to be flat. The news service said Immelt had been speaking hypothetically when he told a business group in Spain that he would ask his managers to maintain profits even if revenues at their businesses fell as much as 10 percent to 15 percent.

- Coffee chain Starbucks Corp (SBUX) may have weathered the worst of a sales slowdown as growth improved somewhat this month, its top executive said on Wednesday, and its share rose 8 percent. "The downturn continued in the fourth quarter, and we did see a slight improvement in the first weeks of Q1 ... which might suggest that Starbucks may have hit bottom in terms of negative transactions in our fourth quarter," Starbucks Chief Executive Howard Schultz told reporters at a company leadership conference in New Orleans.

- The United States and China kicked off what is likely to be a global round of interest rate cuts, part of a barrage of measures deployed around the world to fight a deep economic slowdown.

- General Motors Corp(GM) and Cerberus Capital Management have resolved the major issues in a proposed GM-Chrysler merger, but the final form of any deal would depend on the financing and government support available, sources familiar with the talks said on Wednesday.

Financial Times:
- GM calls bottom of downturn. General Motors(GM) on Wednesday said it had continued to feel the impact of the financial crisis in its third quarter sales but that the US had reached the bottom of its economic downturn.

Telegraph:

- Porsche and VW share row: how Germany got revenge on the hedge fund ‘locusts’. Many fund managers believe they are victims of a stitch-up orchestrated by the German government and Porsche. The German establishment has never tried to hide its contempt for them, with a leading politician referring to hedge fund managers as "locusts". One trader went as far as describing this week's events as "payback".

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (NLC), target $17.

- Reiterated Buy on (BWA), target $32.

- Upgraded (SLAB) to Buy, target $33.

Night Trading
Asian Indices are +1.5% to +6.5% on average.
S&P 500 futures +2.3%.
NASDAQ 100 futures +2.41%.

Morning Preview
US AM Market Call
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Earnings of Note
Company/EPS Estimate
- (MYL)/.11

- (CVS)/.60

- (CBS)/.41

- (ATK)/1.81

- (LEA)/-.10

- (EXPE)/.40

- (ABC)/.70

- (TBL)/.46

- (ENR)/1.18

- (IP)/.77

- (ICE)/1.04

- (CI)/1.06

- (EK)/.24

- (MOT)/.01

- (APA)/3.72

- (IGT)/.31

- (MCRS)/.33

- (SGMS)/.31

- (CHK)/.88

- (OSG)/3.56

- (BMC)/.51

- (MEE)/.74

- (ERTS)/-.06

- (ESRX)/.78

- (MNST)/.34

- (SQNM)/-.17

- (AKAM)/.39

- (CL)/.98

- (SGR)/.71

- (KLAC)/.34

- (WYNN)/.59

- (JAVA)/-.06

- (MRO)/2.33

- (MFE)/.49

- (BJS)/.55

- (AVP)/.50

- (MORN)/.51

- (XOM)/2.40

Economic Releases
8:30 am EST

- Advance 3Q GDP is estimated to fall .5% versus a 2.8% gain in 2Q.

- Advance 3Q Personal Consumption is estimated to fall 2.4% versus a 1.2% increase in 2Q.

- Advance 3Q GDP Price Index is estimated to rise 4.04% versus a 1.1% gain in 2Q.

- Advance 3Q Core PCE is estimated to rise 2.5% versus a 2.2% increase in 2Q.

- Initial Jobless Claims are estimated to fall to 475K versus 4478K the prior week.

- Continuing Claims are estimated to rise to 3735K versus 3720K prior.

Upcoming Splits
- None of note

Other Potential Market Movers
- The weekly EIA natural gas inventory report, BIO Investor Forum, (SPLS) analyst conference and (WAG) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are sharply higher, boosted by technology and commodity stocks in the region. I expect US equities to open higher and to maintain gains into the afternoon. The Portfolio is 100% net long heading into the day.

Stocks Finish Mostly Lower, Weighed Down by HMO, REIT, Airline and Bank Shares

Evening Review
Market Summary
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GuruFocus.com
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In Play

Stocks Rising into Final Hour on Bargain-Hunting, Fed Rate Cut and Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Computer longs, Biotech longs, Retail longs and Internet longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is above average. Investor anxiety is high. Today’s overall market action is bullish. The VIX is rising .64% and is historically elevated at 67.82. The ISE Sentiment Index is low at 103.0 and the total put/call is below average at .78. Finally, the NYSE Arms has been running high most of the day, hitting 2.02 at its intraday peak, and is currently 1.28. The Euro Financial Sector Credit Default Swap Index is falling 5.25% today to 103.33 basis points. This index is up from a low of 52.66 on May 5^th, but down from 157.81 on Sept. 16^th. The North American Investment Grade Credit Default Swap Index is falling 2.37% to 210.66 basis points. The TED spread is rising 5.1% to 285 basis points. The TED spread is now down 179 basis points in about three weeks. The 2-year swap spread is down 6.0% to 113.25 basis points. The Libor-OIS spread is rising 1.28% to 265 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 5 basis points to .85%, which is down 178 basis points in about four months and at the lowest level since February 1999. Market leading stocks are posting another day of massive gains. While we are getting extended very short-term, I fully expect the DJIA to test 10,000 within the next 10 days. Nikkei futures indicate an +500 open in Japan and DAX futures indicate an +20 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, less financial sector pessimism, diminishing forced selling and bargain-hunting.

Today's Headlines

Bloomberg:
- The Federal Reserve cut its benchmark interest rate by half a percentage point to 1 percent, matching a half-century low, in an effort to avert the worst U.S. economic downturn in the postwar era. ``Downside risks to growth remain,'' the Federal Open Market Committee said today in a statement in Washington. ``Recent policy actions, including today's rate reduction, coordinated interest-rate cuts by central banks, extraordinary liquidity measures, and official steps to strengthen financial systems, should help over time to improve credit conditions and promote a return to moderate economic growth.''

- The U.S. Treasury and the Federal Deposit Insurance Corp. are developing a program to provide at least $500 billion in government guarantees for troubled mortgages, according to people familiar with the matter.

- The cost of protecting against a default by GMAC LLC fell to the lowest in more than a month as the auto finance and mortgage lender sought a new bank status that may give it access to cash from the U.S. Treasury's $700 billion rescue plan.

- Middle East banks may face losses from hedge-fund investments as the industry is squeezed by the global credit crunch, said Citigroup Inc. “Most of the banks in the Middle East have been the target of hedge fund managers,” said Kaveh Samie, managing director of Citigroup in the Middle East and North America. “That exposure has not been felt yet.”

- Crude oil climbed more than $4 a barrel, the biggest gain in a month, amid signs that central bank interest-rate cuts may help revive fuel demand. Oil advanced as much as 9.9 percent on forecasts that the U.S. Federal Reserve rate cut will help spur a recovery in the world's biggest fuel-consuming country. China also lowered rates today and the European Central Bank may reduce them next week. Prices also rose because the dollar fell the most against the currencies of six major U.S. trading partners since 1985.

- Las Vegas Sands Corp.(LVS) doubled in New York trading after the Singapore government said it was in talks with the casino company to help finish a $4 billion casino project.

- Apple Inc.(AAPL), the maker of Macintosh computers and the iPhone, rose to the highest in two weeks in New York trading after Sanford C. Bernstein & Co. said a ``significant'' share repurchase may boost earnings. A depressed price-to-earnings ratio, low interest rates and a growing cash balance ``make a strong case for Apple to initiate a substantial share repurchase program,'' analyst Toni Sacconaghi, based in New York, said in a note to clients today. Sacconaghi estimates that a $20 billion stock buyback would boost earnings by 9 percent above his estimate of $5.50 a share next year.

- Money-market rates in London dropped as cash injections by central banks and the prospect of deeper reductions in borrowing costs worldwide showed signs of revitalizing confidence in lending. The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars fell 5 basis points today to 3.42 percent, its 13th straight decline, according to the British Bankers' Association.

- Legg Mason Inc.(LM), burdened for a year with subpar returns and the cost of bailing out money funds, rose the most since it went public 25 years ago after reporting quarterly profit that exceeded analysts' estimates.

Wall Street Journal:

- Greenlight Capital, SAC Said Caught in Volkswagen Short Squeeze.

Washington Post:
- Sen. Barack Obama's presidential campaign is allowing donors to use largely untraceable prepaid credit cards that could potentially be used to evade limits on how much an individual is legally allowed to give or to mask a contributor's identity, campaign officials confirmed. Faced with a huge influx of donations over the Internet, the campaign has also chosen not to use basic security measures to prevent potentially illegal or anonymous contributions from flowing into its accounts, aides acknowledged. The Obama campaign has shattered presidential fundraising records, in part by capitalizing on the ease of online giving. Of the $150 million the senator from Illinois raised in September, nearly $100 million came in over the Internet.

Charlotte Observer:

- Some factories stable amid downturn.

Interfax:

- Russia’s inflation rate in the year through Oct. 27 reached 11.5% as poultry and beef prices rose, citing a government official.

recast to "

Globe and Mail:

- A great many Canadian hedge funds were leveraged commodity plays. Many of these funds don't have a second act to roll out when the resource story is no longer a crowd pleaser.

Bear Radar

Style Underperformer:
Large-cap Growth (+.18%)

Sector Underperformers:
HMOs (-3.23%), Airlines (-2.23%) and REITs (-2.07%)

Stocks Falling on Unusual Volume:
APL, BXP, CI, AET, VPRT, ULTI, VOCS, ADVS, DRIV, APL, WXS and NYM

Stocks With Unusual Put Option Activity:
1) RYL 2) FDRY 3) KGC 4) WSM 5) LAMR

Bull Radar

Style Outperformer:
Small-cap Growth (+.93%)

Sector Outperformers:
Gaming (+7.2%), Oil Service (+6.3%) and Energy (+3.3%)

Stocks Rising on Unusual Volume:
NXY, TSRA, APOL, ICLR, STRA, WYNN, BBOX, XRAY, AVAV, KNDL, VPHM, CPSI, CETV, CMED, BMRN, PLXS, WBSN, CRDN, RCII, CEPH, GRMN, IEO, PEZ, IBA, PCP, PTE, LUX, LM, SXL and KDN

Stocks With Unusual Call Option Activity:
1) DHI 2) TLM 3) HBC 4) LM 5) WYNN