Today's Headlines

Bloomberg:

• Greek Bonds Tumble as Government Says Tax Revenue Falling Short. Portuguese and Greek bonds led so- called peripheral European markets lower after the failure of Portugal’s budget talks and tax-revenue shortfalls in Greece reignited concerns countries may struggle to cut their deficits. Greek bonds fell by the most in more than four months. Finance Minister George Papaconstantinou said a shortage in tax intake is hampering government efforts to reduce its national debt. German government bonds slid as a report showed consumer prices rose in October, making it more likely the European Central Bank will keep removing stimulus measures even as smaller economies in the region lag behind.
• China Commodities Decline on Concern Regulators to Tighten Trading Rules. Commodities in China snapped a rally, led by rice, zinc, soybean oil and rubber, on growing concerns that security regulators may tighten trading rules to curb excessive speculation. The Zhengzhou Commodity Exchange, China’s first such bourse, yesterday increased the margin requirement for rice, rapeseed oil, wheat and sugar trading to 8 percent from 3 percent or 4 percent, a statement on its website said yesterday. The exchange will track “abnormal” trade and recommend investigation by watchdogs, a separate statement dated Oct. 25 said.
• Gold Futures Decline as Fed Speculation Strengthens Dollar, Curbs Demand.
• Bin Laden Warns France Over Backing of U.S., Ban on Veils. Osama bin Laden, the Saudi-born leader of al-Qaeda, warned France that its security is at risk if it continued to support U.S. policies toward Muslim-majority countries and prevent Muslim women from wearing veils. “The equation is simple and easy: As you kill you shall be killed, as you take hostages you shall be taken hostage, and as you infringe on our security we shall infringe on your security,” said the man who tops a U.S. most wanted list of fugitives, in a recording aired by Al Jazeera television today.
• Petrobras(PBR) Opens New Oil 'Frontier' With Deepwater Find in Northern Brazil. Petroleo Brasileiro SA, Brazil’s state-controlled oil company, said it opened a “new exploration frontier” off the country’s northern coast after finding signs of light oil at a deepwater well. Petrobras found “large accumulations” of oil in its Barra well in the Sergipe-Alagoas Basin, the Rio de Janeiro-based company said in a regulatory filing today. The discovery at a depth of 2,341 meters (7,680 feet) of water has larger volumes of oil than the Guaricema and Dourado fields in shallower waters of the same basin, Petrobras said. “Wherever they’re going, discoveries highlight more potential, especially offshore,” said Robbert Van Batenburg, head of equities research at Louis Capital Markets in New York.

Wall Street Journal:

• SanDisk(SNDK) Poised for Flash Dance. Apple(AAPL) unveiled last week its first complete product line of laptops relying entirely on flash chips for storing data. Lighter and thinner than traditional hard-disk-drive storage, and offering faster start-up times, so-called Nand flash has long been used in digital cameras and portable memory cards. More recently, it has turned up in smartphones, e-readers and tablet computers like Apple's iPad.
• Japan Banks Face Worries Over Lending Turmoil. Tumult in the local consumer-finance industry is putting Japanese banking titans Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. under scrutiny as investors worry over their exposure to other lenders' losses.
• Greek Default Costs Soar. The cost of insuring Greek government debt against the risk of default jumped Wednesday, underscoring investor concerns about the heavily indebted country less than two weeks ahead of a key national election. The annual cost of insuring $10 million of Greek debt for five years jumped $73,000 to $754,000 as investors continued to react to comments made earlier in the week. The cost of insurance, as measured by credit default swaps, had risen $14,000 on Tuesday.
• FBI Arrests Man in D.C. Subway Plot. Federal agents arrested Wednesday a Pakistani-American man who allegedly helped case potential targets for bombings of Washington's Metrorail subway system in an apparent sting operation. The purported plot was set up by the Federal Bureau of Investigation, but the suspect, Farooque Ahmed, 34 years old, of Ashburn, Va., believed it was an al Qaeda bombing conspiracy, according to a grand-jury indictment in Virginia's eastern district.

CNBC:

• Cotton Prices Highest Since Civil War.

Business Insider:

• Meet the 5,355 California State Workers Who Earn More Than $200,000.
• Oh Jeez, The Rare Earth Bubble is About to Go Into Overdrive.
• Step One to Save California: Disincorporate The 90-Person Pseudo-City With a $300 Million Budget.
  

Zero Hedge:

• Goldman(GS) is Ratcheting Up Off Balance Sheet Risk to Record Levels!!! More So Than the Top of the Bubble! Many Thought the Enronesque Days of Off Balance Sheet "Hide the Sausage" Accounting Games Were Over.
• QE2 Trashing Trifecta: Peter Orszag Joins Gross and Grantham. The president's own former advisor, and now very much outspoken critic, Peter Orszag has joined the cool kids by releasing the following scathing oped in the NYT, whose topic is, drumroll, QE2: "by perpetuating an artificially low 10-year government bond rate, the Fed may be delaying the very fiscal policy action that the nation most needs, while doing little to boost an economy whose principal problem is not high long-term interest rates."

New York Times:

• Democrats Retain Edge in Campaign Spending. Lost in all of the attention paid to the heavy spending by Republican-oriented independent groups in this year’s midterm elections is that Democratic candidates have generally wielded a significant head-to-head financial advantage over their Republican opponents in individual competitive races.

Washington Post:

• U.S. Afghan Campaign Judge to Be Failing. An intense military campaign aimed at crippling the Taliban has so far failed to inflict more than fleeting setbacks on the insurgency or put meaningful pressure on its leaders to seek peace, according to U.S. military and intelligence officials citing the latest assessments of the war in Afghanistan. Escalated airstrikes and special operations raids have disrupted Taliban movements and damaged local cells. But officials said that insurgents have been adept at absorbing the blows and that they appear confident that they can outlast an American troop buildup set to subside beginning next July.

VentureBeat:

• Angel Investors Flee as Seed and Startup Bubble Begins to Deflate. New data released today by the University of New Hampshire’s Center for Venture Research found that angel investors put much less money into startup deals during the first half of 2010 than they did in 2009, a direct refutation of the widely held notion in Silicon Valley that seed valuations have been rising.

Politico:

• White House: No Regrets on Health Care, Climate Strategy. The White House doesn't regret simultaneously pushing health care and climate change legislation, despite the ultimate failure to pass cap and trade, President Barack Obama's domestic policy adviser said Wednesday. Barnes said the White House believes the country can still tackle climate change without Congress passing legislation that caps greenhouse gas emissions, noting the push for executive agencies to curb emissions, coupled with efforts at the state and local government levels.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 27% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-five percent (45%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -18 (see trends).

Dow Jones:

• Acer Inc. fourth quarter revenue may rise from 5 to 10% from the previous quarter, CEO Gianfranco Lanci said. Revenue may increase by 10-15% next year, he said.

Telegraph:

• The Fed's Impending Blunder by Ambrose Evans-Pritchard.

Kathimerini:

• Greek real estate prices dropped 11% in the second quarter of 2010 compared with the same time last year, citing figures from a Bank of Greece survey of realtors.

Star:

• Turkey's oil and gas exploration agency has discovered shale beds in the country that could hold between 2.6 billion and 8.3 billion barrels of extractable oil. the shale-oil beds near the central cities of Konya and Nigde are similar in geological composition to those in Wyoming, the world's largest.

Bear Radar

Style Underperformer:

• Small-Cap Value (-1.15%)

Sector Underperformers:

• 1) Gold -2.31% 2) Road & Rail -2.21% 3) Restaurants -2.14%

Stocks Falling on Unusual Volume:

• TKC, CBG, BJRI, BWLD, MOLX, PFCB, PNRA, CENX, MOXLA, TNP and JNY
  

Stocks With Unusual Put Option Activity:

• 1) SYMC 2) BRCD 3) MCK 4) S 5) VVUS
  

Stocks With Most Negative News Mentions:

• 1) XEL 2) WWE 3) TSLA 4) SLAB 5) MSO
  

Bull Radar

Style Outperformer:

• Mid-Cap Growth (-.69%)

Sector Outperformers:

• 1) Education +1.36% 2) Semis +1.04% 3) Banks +.51%

Stocks Rising on Unusual Volume:

• FFIV, BRCM, DV, MCK, MRVL, IP, MWV, ASIA, AVP, TEO, EQIX, CGAL, JDAS, CRESY, MRCY, NTGR, DWA, SVVS, LIFE, ILMN, AMLN, VPHM, EQIX, ATHR, CSGS, IACI, ODFL, WTFC, CTV, TEO, NTL, PLD, PZE, IRS, BMA, BCA, BFR, OII and KRO
  

Stocks With Unusual Call Option Activity:

• 1) CTV 2) CML 3) M 4) BRCM 5) CMCSA
  

Stocks With Most Positive News Mentions:

• 1) S 2) AAPL 3) GD 4) IP 5) PG

Wednesday Watch

Evening Headlines
Bloomberg:

• Cash Hoard Shows Borrowers' Angst Over Economic Growth. U.S. corporations are hoarding almost $1 trillion of cash, an amount that Moody’s Investors Service says shows borrowers are still concerned that the economy may tip back into recession. Cisco Systems Inc., Microsoft Corp. and Google Inc. have socked away the biggest portion of the $943 billion stockpile, Moody’s said today in a report. That’s up from $937 billion at the end of 2009 and $775 billion in the prior year. Companies have a ratio of cash to capital expenditures of 1.64 times, possibly an all-time high, the New York-based ratings firm said, and compares with 1.1 times in December 2008. Borrowers have bolstered their finances by slashing spending and raising cash, selling $945.8 billion of U.S. corporate bonds this year, following a record $1.23 trillion in 2009, according to data compiled by Bloomberg. While that’s helped corporate credit quality improve, a reluctance to use the money for hiring and investing until more signs of growth emerge isn’t helping shorten a “jobless recovery,” Moody’s said. “The mantra is better safe than sorry,” said Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which has $50 billion of assets under management. “Companies have been very aggressive in finding ways to do business without having to hire.”
• Arizona Voter Law Requiring Citizenship Proof Invalidated by Appeals Court. Arizona’s requirement that people show proof of citizenship to register to vote was struck down by a federal appeals court, which said the law conflicts with the National Voter Registration Act. The U.S. Court of Appeals in San Francisco today invalidated parts of Arizona’s Proposition 200, a 2004 voter- approved initiative on registration for state and federal elections.
• California Borrows $6.7 Billion Cash From JPMorgan(JPM)-Led Group. California borrowed $6.7 billion from JPMorgan Chase & Co. and five other banks to pay delinquent bills that piled up during the state’s record-length budget impasse, Treasurer Bill Lockyer said.
• Irish Bondholders Suffer Pain Again as Budget Cuts Take Toll: Euro Credit. Bond investors are losing faith in Ireland’s plan to lower the deficit as spending cuts threaten to undermine economic growth, reducing government revenue. Irish 10-year bond yields climbed within 50 basis points of the 454 basis-point record spread, set Sept. 29, relative to similar-maturity German bunds. Portugal’s spread fell about 1 percentage point against the German benchmark in the past month, the Greek-German yield gap narrowed 102 basis points and the Spanish spread was close to the lowest level since Aug. 10.
• Wall Street Proprietary Trading Under Cover: Michael Lewis. A few weeks ago we asked a simple question: Why are the same Wall Street banks that lobbied so hard to dilute the passages in the Dodd-Frank financial overhaul bill banning proprietary trading now jettisoning their proprietary trading groups, without so much as a whimper? The law directs regulators to study the prop trading ban for another 15 months before deciding how to enforce it: why is Wall Street caving now? The many answers offered by Wall Street insiders in response boil down to a simple sentence: The banks have no intention of ceasing their prop trading. They are merely disguising the activity, by giving it some other name.
• Apple(AAPL) Starts Online Store in China to Increase Sales of iPhones, iPads.
  

Wall Street Journal:

• Fed Gears Up for Stimulus. Eyes Gradual Bond Buying of Several Hundred Billion Dollars; Doubts Linger. The Federal Reserve is close to embarking on another round of monetary stimulus next week, against the backdrop of a weak economy and low inflation—and despite doubts about the wisdom and efficacy of the policy among economists and some of the Fed's own decision makers. The central bank is likely to unveil a program of U.S. Treasury bond purchases worth a few hundred billion dollars over several months, a measured approach in contrast to purchases of nearly $2 trillion it unveiled during the financial crisis. The announcement is expected to be made at the conclusion of a two-day meeting of its policy-making committee next Wednesday. Officials want to avoid the "shock and awe" style used during the crisis in favor of an approach that allows them to adjust their policy, and possibly add to their purchases, over time as the recovery unfolds. Fed Chairman Ben Bernanke's push to restart the bond-buying program—a form of monetary stimulus known as quantitative easing—has been greeted with deep skepticism among some of his colleagues. In some of his strongest words yet, Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, said Monday that more expansive monetary policy was a "bargain with the devil." In the next few months, internal opposition to Mr. Bernanke's approach could intensify as presidents of three regional Fed banks who have expressed skepticism about the plan—Narayana Kocherlakota of Minneapolis, Richard Fisher of Dallas and Charles Plosser of Philadelphia—take voting positions on the Fed's policy-making body. Some Fed officials argue the economy is going through long-term changes that the central bank can't rush, and worry a large bond-buying program might only stoke future inflation or a new asset bubble. The Fed could leave open the possibility of more purchases in the future, particularly if inflation is projected to remain below 2% and the unemployment outlook remains high, which is currently the expectation of many officials. Or it could halt the program if the economy or inflation surprisingly take off, officials have said. Fed officials will update their forecasts for growth, unemployment and inflation through 2013 at the upcoming meeting.
• Steelmakers Brace for Weak Demand. Strength From Early 2010 Is Sapped by Weak Demand, High Costs. After a strong start to the year, the world's biggest steelmakers lost ground in the third quarter and raised caution flags for the rest of the year, expecting to be hit by uneven demand, falling prices and high raw-material costs.
• U.S. Military Sees Additional Document Leaks Ahead.
• EU Pushes China to Open Bidding. Seeking Access to Public Contracts, Bloc Urges Beijing to Sign 1996 Treaty.
• Act Now, CFTC is Urged. A Commodity Futures Trading Commission regulator is putting pressure on the agency to take action in a high-profile, two-year-old investigation of the silver market. At a CFTC hearing Tuesday to consider new rules to strengthen its commodity-enforcement powers, commissioner Bart Chilton said market players have made "repeated" and "fraudulent efforts to persuade and deviously control" silver prices. Mr. Chilton said he believed there have been violations of CFTC rules that should be prosecuted, though he couldn't publicly disclose trader names.
• U.S. Lost Communications With 50 Nukes. Communications with some 50 nuclear missiles were disrupted for 45 minutes on Saturday, making it more difficult to launch them and sending the military scrambling to determine the cause of the incident, according to defense officials. The incident was significant enough that President Barack Obama was briefed on it this week.
• The Unseen Carbon Agenda. The EPA wants to take away 7% of U.S. power generation. Anyone who cares about the U.S. economy is breathing easier now that cap and tax appears to be on the political garbage barge, but don't be so sure. The White House is still pursuing its carbon agenda through regulation, albeit with almost no public attention, and a new study shows the damage that is already being done.

Business Insider:

• Obama Administration Wants to Fill Holes in the Gulf of Mexico for the Sake of Filling Holes.
• Weird: China Sharply Weakened its Currency Tonight.
  

NY Times:

• India's Currency Attracts Investors, but Damages Exports.

IBD:

• Fed Zombies Hungry for Quantitative Easing. The easy-money policies of Federal Reserve chairmen Ben Bernanke and Alan Greenspan rarely impress veteran fund manager Jeremy Grantham, but now the chief investment strategist at GMO, a Boston investment firm, is likening Fed actions to an economic horror show. “Adhering to a policy of low rates, employing quantitative easing, deliberately stimulating asset prices, ignoring the consequences of bubbles breaking, and displaying a complete refusal to learn from experience has left Fed policy as a large net negative to the production of a healthy, stable economy with strong employment,” Grantham wrote in his latest quarterly commentary, “Night of the Living Fed.” In a scathing indictment of the Fed, he casts Bernanke as a desperate zombie whose manipulation of asset prices through lower interest rates — exacerbated by a widely expected second round of quantitative easing beginning next month — weakens not just the U.S. economy but also destabilizes currency and commodity markets.

Forbes:

• Now is the Time to Buy Stocks, Argues a Bullish Merrill Lynch. Contrarian report says earnings yield gap, upcoming buybacks to boost equities. Investors have been pouring tens of billions of dollars into bonds and bond mutual funds in recent months, and many are sitting on nice gains to show for it. But like a college party, all good things have to come to an end, and now is the time for savvy investors to move into stocks. That's according to a new report published by Bank of America Merrill Lynch Global Research. A key argument behind the bank's analysis: That corporations have raised so much money issuing bonds that they're going to begin using an increasing share of it to buy back their own stock--boosting the value of the remaining shares outstanding in the process.

CNN Money:

• Throwing Darts at Takeover Targets. Many big companies are sitting on wads of cash and showing a willingness to use it on acquisitions. That's led investors to essentially start throwing darts to find takeover targets.

Rasmussen Reports:

• Very Unfavorable Ratings for Reid, Pelosi Hit New High. With midterm congressional elections just a week away, the number of voters who view Speaker of the House Nancy Pelosi and Senate Majority Leader Harry Reid Very Unfavorably have reached their highest levels yet. The latest Rasmussen Reports national telephone survey finds that 60% of Likely Voters have an unfavorable impression of Pelosi, including 52% who hold a Very Unfavorable opinion of her. That’s her highest Very Unfavorable rating since regular tracking began in early February 2009. Only 33% share a favorable impression of the California Democrat, including 16% who view her Very Favorably. Fifty-four percent (54%) view Reid unfavorably, including 41% with a Very Unfavorable opinion, also the highest finding since February of last year. Twenty-nine percent (29%) hold a favorable view of Reid, who is struggling for reelection in Nevada. That includes just seven percent (7%) with a Very Favorable regard for him.

Politico:

• Independents Turn to GOP in Senate Races. Independent voters are tuning into Senate races and settling on candidates in the final week before the election, clarifying some of the hardest-fought contests of the campaign. And with many of these unaffiliated voters unhappy with President Obama and the country’s direction, they’re showing signs of breaking to Republicans.

Reuters:

• Commercial Property Sales Rebound in Third Quarter. Two of the world's largest commercial real estate services companies reported sharply improved earnings on Tuesday, fueled chiefly by a pickup in building sales and leasing, particularly in the United States. After more than a year of nearly no activity, U.S property sales have begun to pick up as buyers and sellers agreed on prices.
• Broadcom(BRCM) Outlook Beats Street, Shares Up. Broadcom Inc's (BRCM) surprise forecast of a potential rise in fourth quarter revenue from strong sales of chips used in gadgets such as Apple Inc's (AAPL) iPhone sent its share price up 12 percent.
• F5 Networks(FFIV) Gives Upbeat Q1 View on Market Share Gains. Network equipment maker F5 Networks (FFIV) forecast an upbeat first quarter as it expects strong demand for its products to carry through to fiscal 2011, sending its shares up 5 percent in extended trade.
• Illumina(ILMN) Q3 Profit Beats Expectations, Shares Rise. Illumina Inc (ILMN), which makes tools for genetic analysis, posted a higher-than-expected quarterly profit helped by higher product sales. The San Diego-based company's shares were up about 3 percent at $53 in after-hours trade.

Evening Recommendations
Citigroup:

• Reiterated Buy on (CSGS), raised estimates, target $27.50.
• Reiterated Buy on (CMI), target $107.

Night Trading

• Asian equity indices are -1.0% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 103.0 +2.0 basis points.
  
• Asia Pacific Sovereign CDS Index 95.75 +.75 basis point.
  
• S&P 500 futures -.36%.
  
• NASDAQ 100 futures -.18%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (EAT)/.15
• (WHR)/2.22
• (PX)/1.20
• (PG)/1.00
• (PFCB)/.45
• (S)/-.28
• (IP)/.79
• (CMCSA)/.30
• (ODP)/.03
• (OC)/.37
• (HES)/1.03
• (GD)/1.65
• (SE)/.43
• (IACI)/.27
• (ADP)/.53
• (BWA)/.63
• (NOC)/1.46
• (COP)/1.45
• (NSC)/1.09
• (ESRX)/.64
• (AKAM)/.33
• (OI)/.86
• (V)/.95
• (ALL)/.95
• (SYMC)/.28
• (FLS)/1.83
• (RYL)/-.27
• (LVS)/.23

Economic Releases
8:30 am EST

• Durable Goods Orders for September are estimated to rise +2.0% versus a -1.3% decline in August.
• Durables Ex Transports for September are estimated to rise +.5% versus a +2.0% gain in August.

10:00 am EST

• New Home Sales for September are estimated to rise to 300K versus 288K in August.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil build of +1,000,000 barrels versus a +667,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +652,000 barrels versus a +1,155,000 barrel gain the prior week. Distillate inventories are expected to fall by -1,500,000 barrels versus a -2,155,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.3% versus a +.6% gain the prior week.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Dudley speaking, $35 Billion 5-Year T-Note Auction, weekly MBA mortgage applications report, (ADBE) analyst meeting, (SCHW) business update, (MAR) analyst meeting and the (PCAR) analyst meeting could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.

Stocks Slightly Lower into Final Hour on Profit-Taking, More Shorting

Broad Market Tone:

• Advance/Decline Line: Slightly Higher
  
• Sector Performance: Most Rising
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 20.73 +4.43%
  
• ISE Sentiment Index 80.0 -28.57%
  
• Total Put/Call .90 -2.17%
  
• NYSE Arms .86 +4.23%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 93.52 bps +.20%
  
• European Financial Sector CDS Index 90.50 bps -3.35%
  
• Western Europe Sovereign Debt CDS Index 138.50 bps -.30%
  
• Emerging Market CDS Index 204.54 bps +.66%
  
• 2-Year Swap Spread 17.0 unch.
  
• TED Spread 17.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .12% +1 bp
  
• Yield Curve 225.0 +5 bps
  
• China Import Iron Ore Spot $149.90/Metric Tonne +.33%
  
• Citi US Economic Surprise Index -3.70 +.2 point
  
• 10-Year TIPS Spread 2.19% +2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +53 open in Japan
• DAX Futures: Indicating +16 open in Germany

Portfolio:

• Higher: On gains in my Tech, Ag and Retail long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades near session highs despite recent sharp gains, mixed economic data and US dollar strength. On the positive side, Airline, Gaming, Disk Drive, Software and Oil Service shares are especially strong, rising 1.0%+. "Growth" shares are also outperforming "value" shares again. Copper is rising +.3% and the S&P GSCI Ag Spot Index is rising +.88%. Weekly retail sales rose +2.7% this week versus a +2.6% gain the prior week. The 10-year yield is rising +8 bps to 2.64%. The ongoing trend lower in key credit default swap indices remains a large positive. On the negative side, Education, HMO and Computer Hardware shares are under pressure, falling more than 1.0%. The Greece sovereign cds is rising +1.87% to 689.75 bps and the Russia sovereign cds is rising +2.15% to 142.56 bps. The broad market is consolidating recent gains again on below average volume, which is healthy. Select stocks continue to massively outperform the major averages on good volume, as well. One of my longs, (MOS), is hitting another 52-week high today on above-average volume. I still see meaningful upside in the shares from current levels. I expect US stocks to trade mixed-to-higher into the close from current levels on tax policy/election optimism, diminishing sovereign debt angst, less economic fear, short-covering, buyout speculation, investment manager performance angst, less financial sector pessimism and earnings optimism.

Today's Headlines

Bloomberg:

• Hedge Funds Buying Bearish Options is Bullish Signal: Technical Analysis. Hedge funds are buying bearish options on exchange-traded funds to protect their positions, a signal that stocks may rally, said Todd Salamone at Schaeffer’s Investment Research. Since mid-September, the ratio of bought-to-open puts versus bought-to-open calls has been increasing on major ETFs, such as the SPDR S&P 500 ETF Trust, the PowerShares QQQ and the iShares Russell 2000 Index Fund, Salamone said.
• Transport Companies May Reach Level Bullish for Stocks: Technical Analysis. Transportation companies are close to a level that may help drive more gains for U.S. stocks, said Christopher Verrone, at Strategas Research Partners. “Those are economically sensitive groups leading the push in the markets,” Verrone, lead technical analyst at Strategas, said in a telephone interview from New York. “It’s a pretty constructive backdrop. With the transports leading the push higher, the market’s advance may have the potential to extend into the first quarter.”
• PayPal Taps Developers to Spread Its Software, Vying With Visa(V). PayPal Inc., the online-payments processor owned by EBay Inc.(EBAY), plans to introduce a mobile version of its checkout software today as it tries to capitalize on surging smartphone use. The company, holding a conference in San Francisco to promote its service to mobile-phone and Web developers, also said it will introduce a cheaper way for businesses to handle transactions of less than $12, such as a 99-cent digital song or a single newspaper article. As more commerce moves to phones and social networks, PayPal is racing against Visa Inc. and MasterCard Inc. to earn the loyalty of programmers.
• Race to Replace China in Rare Earth Supplies May Take Decade, Germany Says. China’s decision to curb exports of rare earths is set to spark a global race for alternative sources that may still take a decade to secure sufficient supplies, the head of the German commodities agency said.
• Ford(F) Posts $1.69 Billion Third-Quarter Profit on Gains in U.S. Ford Motor Co., the world’s most profitable automaker, reported record third-quarter net income of $1.69 billion and said it is paying down debt faster than planned as new models boost its U.S. market share.
• Citigroup(C) Cuts Euro View Against Dollar, Pound, Franc. Citigroup Inc. technical analysts scrapped recommendations to bet the euro will appreciate against the Swiss franc, British pound and U.S. dollar, citing “price action in the past 48 hours.” The euro’s drop against the pound and franc and its failure to close near the intraday high versus the dollar yesterday shows Europe’s single currency lost momentum, Tom Fitzpatrick, chief technical strategist in New York, said in a telephone interview after publishing a research note.
• Schools May Lose Funding for Ignoring Bullying of Gay Students, U.S. Says. Schools that fail to address the bullying of gay students may lose U.S. funds for not enforcing gender-discrimination laws, the federal Department of Education said.
• IBM(IBM) Board Approves $10 Billion for Stock Repurchases. International Business Machines Corp., the world’s biggest computer-services provider, added $10 billion to its stock-buyback plan to return cash to investors and help increase its per-share earnings. The move brings the amount authorized for repurchases by the board to $12.3 billion, Armonk, New York-based IBM said in a statement today. In April, it authorized $8 billion in buybacks.
• Coach's(COH) Profit Increases 34%, Beating Analysts' Estimates. Coach Inc., the largest U.S. maker of luxury leather handbags, reported a 34 percent increase in first-quarter profit after luring more shoppers to its stores. The stock climbed the most in more than a year. Net income rose to $188.9 million, or 63 cents a share, the New York-based company said today. That compared with the 55- cent average of estimates compiled by Bloomberg. Sales gained 20 percent to $911.7 million, also topping projections. Chief Executive Officer Lew Frankfort cited "resiliency" in handbags and accessories in North America for the gains. Some U.S. consumers are spending more on discretionary goods such as Coach’s Poppy bags, which typically sell for $200 to $400.

Wall Street Journal:

• Autotrader.com Buys Kelley Blue Book. Autotrader.com is expected to announce Tuesday the $500 million-plus acquisition of venerable Kelley Blue Book Co., the best-known provider of information about the value of new and used cars.
• Misleading Claims on 'Green' Labeling. Confused by all the "green" claims of products on store shelves out there? There's good reason to be. According to a study due out Tuesday, more than 95% of consumer products examined committed at least one offense of "greenwashing," a term used to describe unproven environmental claims, according TerraChoice, a North American environmental-marketing company that issued the report.

CNBC:

• The Best of Times For Stocks May Be Ahead. The midterm election may be setting the stage for a political power struggle in Washington, as Democrats and Republicans jockey for control of Congress, but it’s also stacking the deck for a much-anticipated Wall Street rally.

Business Insider:

• MAP OF THE DAY: These Are The Most Corrupt Countries In The World.
• JPMorgan(JPM), BofA(BAC), Citi(C), And More Plead With Supreme Court To Keep THEIR Bailout Details Secret, Too.
  

Zero Hedge:

• Is An LBO of Cardinal Health(CAH) Imminent? The below chart which compares CAH CDS and stock, shows that something may be afoot in Cardinal Health, and that someone knows something, but is hiding their knowledge from the stock very well.

New York Times:

• Treasury Hid AIG Loss, Report Says. The United States Treasury concealed $40 billion in likely taxpayer losses on the bailout of the American International Group earlier this month, when it abandoned its usual method for valuing investments, according to a report by the special inspector general for the Troubled Asset Relief Program.

LA Times:

• Former Bell Police Chief Accused of Quashing an Internal Investigation. Shortly after taking office last year, former Bell Police Chief Randy Adams quashed an investigation by one of his sergeants into possible corruption involving city officials, charges that became the subject of criminal probes by other agencies, the since-retired officer said.
  

Philadelphia Inquirer:

• Vitamin D Sales Soar as Studies Link a Deficiency to a Host of Conditions.
• Drug Abuse Booming With Baby Boomers. A new federal report shows a boom in hospital admissions for medication misuse and illicit drug abuse as Baby Boomers approach old age.

ABC News:

• Public Optimism in U.S. System of Government Hits a 36-Year Low. Optimism in the country's system of government has dropped to a new low when measured against polls going back 36 years, and the public's belief that America is the greatest nation on earth, while still high, has fallen significantly from its level a generation ago.

Google Blog:

• Advertise Your Local Business With Google(GOOG) Boost. Today, we’re announcing the availability of a new online advertising solution to help local businesses connect with potential customers in their area. Boost enables business owners to easily create online search ads from directly within their Google Places account.

Politico:

• Dems' 2010 Crisis Has Roots in 2009. The political forces currently aligned against Democrats — apathy in the liberal base, flight among independents and Republican rage — trace back to early 2009, and the White House either miscalculated their risks or intensified them through its actions. That’s the way it appears on the eve of midterm elections that are shaping up as a referendum on President Barack Obama’s first two years, a period notable for its ambitious agenda but also for the administration’s missteps in the face of evidence ranging from eroding public opinion to town hall meetings gone wrong to unfavorable outcomes in three bellwether elections last fall and winter.

Rasmussen Reports:

• Only 14% Prefer Government-Regulated Economy Over Free Market. Voters overwhelmingly prefer a free market economy to an economy managed by the government and think government economic control helps big businesses at the expense of small ones.

USA Today:

• Small Businesses Losing Out to Red Tape. In an economic climate with few jobs and cutbacks on basic city services such as police protection and firefighting, you would think cities and states would be overjoyed when someone was willing to open up a new business, bringing with him jobs, economic vitality and tax revenues. You might think that, but you'd be wrong. Instead, cities and states stifle new small businesses at every turn, burying them in mounds of paperwork; lengthy, expensive and arbitrary permitting processes; pointless educational requirements for occupations; or even just outright bans. Today, the Institute for Justice released a series of studies documenting government-imposed barriers to entrepreneurship in eight cities. In every city studied, overwhelming regulations destroyed or crippled would-be businesses at a time when they are most needed.

Reuters:

• China Minister Says Dollar Printing "Out of Control". Dollar issuance by the United States is "out of control", leading to an inflation assault on China, the Chinese commerce minister said in comments reported on Tuesday. Chen Deming, speaking at a trade fair in southern China, said that exporters had done a good job of preparing themselves for exchange rate changes as well as rising labour costs, but were suddenly confronted with new challenges. "Because the United States' issuance of dollars is out of control and international commodity prices are continuing to rise, China is being attacked by imported inflation. The uncertainties of this are causing firms big problems," Chen was quoted as saying by the official Xinhua news agency.
• Compellent(CML) Mull Options, Including Sale-Sources.
  
• II-VI(IIVI) Beats Estimates, Sees Q2 Above Street View. II-VI Inc posted higher-than-expected quarterly results, helped by a rise in sales of its infrared and near-infrared optical products, and forecast second-quarter results above analyst estimates on increased orders, sending its shares up to their highest in two years.

Telegraph:

• Greece Reignites Europe Debt Woes. Europe's debt woes have returned to the fore after Greek premier George Papandreou threw open the door to fresh elections and vowed to liberate the nation from "slavery and surveillance".

The Globe and Mail:

• Debt, The Public's Burden.

Les Echos:

• The euro area is suffering from a weak dollar and from the lack of a freely floating Chinese currency, French finance minister Christine Lagarde said. Priorities for the next meeting of G20 finance ministers in France in February will include financial regulation and the reform of commodity markets and related derivatives, Lagarde said.

Diario Economico:

• International Energy Agency Executive Director Nobuo Tanaka said countries that are part of the OECD now have historically high levels of oil stocks and that scenario should continue in 2011.
• Fitch Ratings analyst Douglas Renwick said there is a "strong risk" that the Portuguese economy enters a recession in 2011.
  

China Daily:

• Apple's(AAPL) iPhone 4 Still in High Demand in China. It has been a month since US-based Apple Company launched its iPhone 4 series in the Chinese mainland market, yet demand shows no sign of abating. The smart phone's popularity has even given rise to scalpers (grey marketers) looking to make a quick profit. The scalpers lurk outside stores ready to pounce on anyone who walks out without Apple merchandise. One scalper offered the 16-gigabyte version of the device for 5,400 yuan ($795) -- a 10-percent mark-up over the official retail price of 4,999 yuan.

DigiTimes:

• Hard Drive Shortage May Persist Through 1Q11. As notebook brand vendors are starting to prepare their shipments for the end-of-year holidays, hard drive makers, which had conservative production plans for the fourth quarter due to a weaker-than-expected third-quarter performance, have recently started seeing short supply of hard drives and the problem is likely to persist through the first quarter of 2011, according to sources from hard drive makers.

Globes:

• The Brilliant Private Future of SanDisk(SNDK). Most analysts are totally missing the potential at SanDisk, based on developments which CEO Harari has been discussing quite clearly.