Friday, October 30, 2009

Market Week in Review

S&P 500 1,036.19 -4.02%*


Click here for the Weekly Wrap by

*5-Day Change

Weekly Scoreboard*

S&P 500 1,036.19 -4.02%
DJIA 9,712.73 -2.60%
NASDAQ 2,045.11 -5.08%
Russell 2000 562.77 -6.34%
Wilshire 5000 10,521.58 -4.42%
Russell 1000 Growth 458.73 -3.77%
Russell 1000 Value 529.16 -4.77%
Morgan Stanley Consumer 634.05 -3.15%
Morgan Stanley Cyclical 708.59 -9.23%
Morgan Stanley Technology 516.50 -4.94%
Transports 3,613.34 -5.04%
Utilities 363.04 -3.81%
MSCI Emerging Markets 38.19 -6.40%

Lyxor L/S Equity Long Bias Index 951.0 -1.63%

Lyxor L/S Equity Variable Bias Index 842.32 -1.60%

Lyxor L/S Equity Short Bias Index 1,015.64 +1.83%

NYSE Cumulative A/D Line +55,985 -8.72%
Bloomberg New Highs-Lows Index -66 -115.35%
Bloomberg Crude Oil % Bulls 29.0 -12.12%
CFTC Oil Net Speculative Position +109,619 +47.37%

CFTC Oil Total Open Interest 1,220,540 +.34%
Total Put/Call 1.19 +40.0%
OEX Put/Call 1.57 -10.80%
ISE Sentiment 84.0 -37.78%
NYSE Arms 2.98 +30.13%
Volatility(VIX) 30.69 +37.81%
G7 Currency Volatility (VXY) 13.32 +4.88%
Smart Money Flow Index 9,350.25 -2.91%

Money Mkt Mutual Fund Assets $3.370 Trillion -.10%
AAII % Bulls 33.65 -16.91%
AAII % Bears 42.31 +18.52%

Futures Spot Prices
CRB Index 270.38 -3.55%

Crude Oil 77.0 -3.31%
Reformulated Gasoline 195.95 -3.91%
Natural Gas 5.04 -7.96%
Heating Oil 200.52 -3.98%
Gold 1,040.40 -1.44%
Bloomberg Base Metals 189.93 -2.29%
Copper 295.55 -2.28%

US No. 1 Heavy Melt Scrap Steel 244.0 USD/Ton -3.05%

China Hot Rolled Domestic Steel Sheet 3,511 Yuan/Ton +1.18%

S&P GSCI Agriculture 318.72 -5.38%

ECRI Weekly Leading Economic Index 128.40 +.39%

Citi US Economic Surprise Index +29.20 -21.08%

Fed Fund Futures imply 56.9% chance of no change, 43.1% chance of 25 basis point cut on 11/04

US Dollar Index 76.30 +1.10%

Yield Curve 249.0 +1 basis point

10-year US Treasury Yield 3.38% -11 basis points

Federal Reserve’s Balance Sheet $2.144 Trillion -1.81%

U.S. Sovereign Debt Credit Default Swap 20.0 unch.

10-year TIPS Spread 2.02% +2 basis points
TED Spread 24.0 +1 basis point
N. Amer. Investment Grade Credit Default Swap Index 106.95 +7.21%

Euro Financial Sector Credit Default Swap Index 68.91 +11.56%
Emerging Markets Credit Default Swap Index 278.53 +5.45%
CMBS Super Senior AAA 10-year Treasury Spread 443.0 -5.14%

M1 Money Supply $1.679 Trillion +.72%

Business Loans 659.40 -.69%
4-Wk MA of Jobless Claims 526,300 -1.10%

Continuing Claims Unemployment Rate 4.40% -10 basis points
Average 30-year Mortgage Rate 5.03% +3 basis points
Weekly Mortgage Applications 562,300 -12.28%

ABC Consumer Confidence -51 -1 point
Weekly Retail Sales +.60% +10 basis points
Nationwide Gas $2.70/gallon +.06/gallon
US Cooling Demand Next 7 Days 19.0% below normal
Baltic Dry Index 3,103 +1.97%

Oil Tanker Rate(Arabian Gulf to US Gulf Coast) 30.0 unch.

Rail Freight Carloads 207,041 +.61%

Iraqi 2028 Govt Bonds 75.88 -2.0%

Best Performing Style
Large-Cap Growth -3.77%

Worst Performing Style
Small-Cap Growth -6.51%

Leading Sectors
HMOs +.03%

Telecom -.09%

Computer Services -.65%

Drugs -1.67%
Restaurants -2.60%

Lagging Sectors
Homebuilders -10.53%
Steel -10.66%
Hospitals -10.76%
Gaming -10.85%
Education -13.87%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Finish at Session Lows, Weighed Down by Commodity, Financial, Hospital, Networking, Disk Drive and Insurance Shares

Evening Review
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After-hours Stock Chart

Stocks Sharply Lower into Final Hour on Economic Fear, Financial Sector Pessimism, More Shorting, Profit-Taking

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Technology longs, Retail longs and Financial longs. I added (IWM)/(QQQQ) hedges and added to my (EEM) short this morning, thus leaving the Portfolio 75% net long. The tone of the market is very negative as the advance/decline line is substantially lower, every sector is falling and volume is slightly above average. Investor anxiety is very high. Today’s overall market action is bearish. The VIX is soaring 27.3% and is very high at 31.58. The ISE Sentiment Index is very low at 74.0 and the total put/call is very high at 1.20. Finally, the NYSE Arms has been running very high most of the day, hitting 4.03 at its intraday peak, and is currently 2.35. The Euro Financial Sector Credit Default Swap Index is jumping +6.91% today to 69.66 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising +2.32% to 106.95 basis points. This index is also well below its Dec. 5th record high of 285.99. The TED spread is rising +1 basis point to 24 basis points. The TED spread is now down 440 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising +3.99% to 34.19 basis points. The Libor-OIS spread is unch. at 13 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down -2 basis points to 2.02%, which is down 63 basis points since July 7th. The 3-month T-Bill is yielding .04%, which is down -1 basis point today. Cyclical and Small-Cap shares are under the most pressure today as economic fears rise to the fore once again. As well, (XLF)/(IYR) have traded heavy throughout the day. Bank, Insurance, Hospital, Oil Service, Coal and Disk Drive shares are substantially underperforming, falling 4%+. The market’s severe reaction to today’s news is a big negative. On the positive side, investor angst gauges are soaring with volume only slightly above average. I expect Asia to come under significant pressure Sunday night and negative stories over the weekend, which will likely lead to further US weakness Monday morning. However, I suspect another sharp snapback rally is in the offing early next week. Nikkei futures indicate a -254 open in Japan and DAX futures indicate a -17 open in Germany on Monday. I expect US stocks to trade mixed-to-lower into the close from current levels on rising economic fear, financial sector pessimism, profit-taking and more shorting.

Today's Headlines


- Spending by U.S. consumers fell in September for the first time in five months after the government’s auto-rebate program expired. The 0.5 percent decrease in purchases matched the median estimate of economists surveyed by Bloomberg News and followed a 1.4 percent jump in the prior month, Commerce Department figures showed today in Washington. Incomes were unchanged, while the savings rate climbed. Stagnant wages and concern over mounting unemployment are causing confidence to wane, raising the risk that consumers will retrench in coming months as government assistance programs run out. The report also showed inflation was lower than the Federal Reserve’s long-term projection, indicating the policy makers can keep rates low.

- Goldman-McKinsey-Galleon Ties, CDR Bids: Compliance. Raj Rajaratnam, the billionaire hedge-fund manager accused of insider trading, started an investment firm in 2006 with partners including Rajat Gupta, former head of McKinsey & Co., and Mark Schwartz, ex-chairman of Goldman Sachs Group Inc.’s Asia business, Miles Weiss and Joshua Gallu report. Rajaratnam’s role at Taj Capital, formed to manage hedge funds and private equity focused on South Asia, illustrates the breadth of his global business connections as he ran New York- based Galleon Group LLC.

- Crude oil fell more than $1 a barrel after U.S. consumer spending dropped for the first time in five months, increasing skepticism that economic growth will strengthen. Crude oil may fall next week on speculation the dollar will rebound against the euro and equities may pull back, according to a Bloomberg News survey. Fifteen of 34 analysts and traders, or 44 percent, said futures will drop through Nov. 6. Ten respondents, or 29 percent, predicted the market will rise and nine forecast prices will be little changed.

- The risk is that the biggest government intrusion into the economy since World War II will leave the U.S. saddled with trillions of dollars of debt and not much to show for it.

- Cuts to Health Accounts May Force Patients to Expedite Care. The legislation unveiled in the House yesterday would set for the first time a $2,500 cap on contributions to Flexible Spending Accounts, a benefit offered by employers that allows workers to pay some medical expenses with pretax dollars. Employers currently set their own limits, generally $3,000 to $5,000. The proposal is similar to one adopted by the Senate Finance Committee. An average worker could lose about $625 in tax savings by failing to take the full amount before the limits are set. The “open enrollment” benefit-selection period now under way at 95 percent of employers may be the last opportunity to claim a higher amount. “If you’re a parent and your kid needs braces in the next year or two, you may want to expedite that,” said Joe Jackson, chief executive officer of WageWorks Inc., a San Mateo, California, company that administers 1.5 million flexible spending accounts for some 2,800 employers.

- The Bank of Japan said deflation will linger for a third year, indicating the central bank is unlikely to raise interest rates from near zero. Consumer prices excluding fresh food, the bank’s preferred gauge of inflation, will tumble 0.4 percent in the year starting April 1, 2011, while economic growth will accelerate to 2.1 percent, the central bank’s policy board members said in their semiannual outlook in Tokyo today. Core prices will fall 1.5 percent in the year ending March 2010 and slide 0.8 percent in the following 12 months, they said.

- Panasonic Raises Full-Year Operating Profit Forecast 60%. Panasonic Corp., the world’s largest maker of plasma televisions, raised its full-year earnings forecasts. Operating profit for the year ending March 31 will probably be 120 billion yen ($1.3 billion), compared with an earlier projection of 75 billion yen, the Osaka-based company said in a statement today.

- Bank of America Corp.(BAC) and Goldman Sachs Group Inc.(GS) led lenders in arranging $2.26 billion of leveraged buyout financing in October, the most this year and more than eight times the amount raised in the first quarter.

- Mexico’s dollar bonds are posting their biggest monthly declines since January on speculation President Felipe Calderon will fail to cut the budget gap enough to avoid a credit-rating downgrade.

- Ford Motor Co.(F) hourly employees at three more factories rejected union contract concessions, dimming the automaker’s prospects for winning the givebacks granted to U.S. competitors. “This never happens. It’s a vote of no confidence in the bargaining committee and a vote of no confidence in Ford,” said Gary Chaison, a labor professor at Clark University in Worcester, Massachusetts. “To reject a collective agreement at a time of economic difficulty is really a sign of desperation and anger.”

- Americans are using less water than they did when consumption peaked in 1980, even as the population has increased, thanks to more efficient power plants and irrigation techniques, the U.S. Geological Survey said. The U.S. consumed 410 billion gallons of water a day in 2005, the last year for which data is available, a 5 percent decline from 1980, according to a report released yesterday. The U.S. population grew 31 percent in that time, the USGS said.

- Boeing Co.(BA) “blew a wonderful opportunity” for a no-strike guarantee of more than 10 years when it chose South Carolina over its Washington manufacturing hub for a new Dreamliner assembly line, the lead negotiator for the machinists union said. The union was willing to extend its current four-year contract by another eight years, ensuring no strikes through at least 2020, to secure the 787 work, Rich Michalski said. Instead, Boeing shut down talks two days before its Oct. 26 board meeting and announced Oct. 28 that it would open a plant in the southeastern U.S. state, the first time it’s built a commercial-aircraft assembly line outside the Seattle area. “They won’t ever get us to commit like that again,” Michalski said in an interview last night. “That’s over.”

- Amgen Inc.(AMGN), the world’s largest biotechnology company, was sued by New York and 14 other states following an investigation into a nationwide kickback scheme to boost drug sales, New York Attorney General Andrew Cuomo said.

Wall Street Journal:

- More states lowered their standards for academic proficiency in recent years than raised them, and nearly all used exams that fell short of federal testing benchmarks, according to a new study. The research, issued by the U.S. Department of Education, called into question the rigor of tests that states select to comply with student-improvement mandates of the federal No Child Left Behind law. It also cast doubt on claims of educational progress made by many states.

- Intel Corp.(INTC) Chief Financial Officer Stacy Smith said evidence is beginning to emerge that corporations are returning to technology spending, although such spending is driven more by the savings offered than by any spending increases.

- China is planning to impose antidumping tariffs on imports from the U.S., Europe and other countries of a chemical used to make nylon, a person familiar with the situation said Friday, in the latest sign of trade tension amid the global economic slump. China's Ministry of Commerce is expected to announce soon a final ruling on an investigation into imports of the chemical, adipic acid. The ruling, to take effect Monday, will say that foreign companies are guilty of dumping the organic compound -- or selling it below market prices -- in China and will order antidumping duties of 5% to 35% for five years, the knowledgeable person said. "Our sales guys are picking up more interest at corporations," Mr. Smith said in an interview Thursday.

- Staff at the Securities and Exchange Commission Friday issued new guidance on how the agency interprets oil and natural gas companies' reserves accounting rules.

- Cisco Systems Inc. (CSCO), EMC Corp. (EMC) and VMWare Inc. (VMW) are planning to unveil early next week the formation of a joint venture to sell a new integrated data center product, part of a broader trend by technology companies to offer end-to-end IT infrastructure.
- The stock market is certainly showing that it has faith in itself: It roared back during Thursday's sessions with a 200-point gain in the Dow Jones Industrial Average. But the market has little company: Few of the stock market timers tracked by the Hulbert Financial Digest are themselves showing much faith in the rally continuing. Though that may strike you as surprising, it is precisely what contrarian theory would suggest: The bull market is climbing a wall of worry. Consider the average recommended stock market exposure among a subset of the shortest-term stock market timers. As of Thursday night, this average was just 19.4%, which means that these timers on average are recommending that their clients have more than 80% of their equity portfolios out of the market. This statistic alone suggests that there is plenty of skepticism out there towards this rally. But there's more.


- Citigroup(C) may have to write down about $10 billion in deferred tax assets in the fourth-quarter, according to CLSA banking analyst Michael Mayo, sending the shares down over 5 percent.

- Troubled lender CIT Group agreed to a deal with Carl Icahn Friday that will give the company a $1 billion line of credit, but the company is still likely to file a prepackaged bankruptcy Sunday night, CNBC has learned.

- Aiming to dramatically slash costs, Time Inc. will lay off roughly 540 employees starting next week, company insiders say. The cuts will be staggered over two weeks and wrap up right before Thanksgiving so that the magazine publisher can take a charge against earnings in the fourth quarter. Layoffs are expected to be 6 percent of the workforce, which is now estimated to have shrunk to 9,000 employees worldwide. But even that number is not finalized and could end up bigger. Last year, the company cut 600 people (or 6 percent) from its 10,000 employees and took a charge against earnings of $176 million.

- US lawmakers and financial regulators split yesterday on key portions of the Obama administration's proposal to monitor and avert crises, highlighting the thorny issues that could slow progress on regulatory overhaul efforts. A draft proposal to deal with "too big to fail" firms unveiled by the Treasury Department and Rep. Barney Frank (D-Mass.) received a sharp response at the Capitol Hill hearing. The Federal Reserve gave the measure a vote of confidence, but Sheila Bair's Federal Deposit Insurance Corp. and lawmakers on both sides of the aisle on the House Financial Services Committee expressed unease or outright opposition to the proposed changes. Treasury Secretary Tim Geithner pushed back at claims that the new plan would create a permanent version of the $700 billion Troubled Asset Relief Program.

Washington Times

- VIP Democratic donors have big federal interests. UBS chief has Obama access. When UBS Americas CEO Robert Wolf stepped out on the golf links at Martha's Vineyard this past summer as part of President Obama's foursome, his firm had plenty to celebrate. A few days earlier, the Swiss parent of his company had resolved a long-running dispute with the IRS over undeclared offshore accounts. The sticky legal case was one of several matters involving the financial giant where huge sums of money could hinge on the action taken by the federal government. But as they strolled the fairways, the topic never came up. Mr. Wolf, like many of the influential Americans who raised more than $500,000 to help get Mr. Obama elected in 2008, has adamantly maintained that he has never let the interests of his company creep into his relationship with the president.

Business Insider:

- Apparently there's a loophole in the law that allows barred foreign citizens to enter the United States. They just need to have a meeting with Goldman Sachs (GS). At least that's our interpretation of this story.

Absolute Return+Alpha:

- Co-location lets hedge funds trade next to exchanges. What happens in these data centers is at once mundane and mysterious.


- Republican Chris Christie continues to hold a three-point advantage over incumbent Democrat Jon Corzine in New Jersey's down-to-the-wire race for governor. The latest Rasmussen Reports telephone survey in the state, conducted Thursday night, shows Christie with 46% of the vote and Corzine with 43%.


- For the past few days, the story line on the House health care bill has been simple: Nancy Pelosi couldn’t deliver for the liberals. Not enough votes for the “robust” public option. That’s true — as far as the public option goes. But in reality, the bill she unveiled Thursday includes big pieces of what the most liberal members of her party wanted — most likely setting up a serious battle when negotiators try to merge it with the far more moderate Senate legislation.


- President Barack Obama said Friday the U.S. will overturn a 20-year-old U.S. travel ban against people with HIV early next year. The U.S. has been one of about a dozen countries that bar entry to travelers based on their HIV status.


- Defaults by small and medium-sized U.S. businesses on the loans, leases and lines of credit they use to finance capital equipment investment rose in September as lenders remained reluctant to extend fresh financing, PayNet Inc reported on Friday. But accounts in moderate and severe delinquency decreased during the month, a potentially encouraging sign that some businesses borrowers are finding it easier to meet their obligations. Accounts in moderate delinquency, or those behind by 30 days or more, fell to 4.22 in September from 4.35 percent in August, according to PayNet, which provides risk-management tools to the commercial lending industry. That is the lowest level since January.

- A weekly measure of future U.S. economic growth rose in the latest week while its yearly growth rate edged lower, indicating that the economic recovery, while easing, is still poised to strengthen in the near term, a research group said on Friday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index ticked up to 128.4 in the week to Oct. 23 from 127.9 the

previous week. The index's yearly growth rate fell to 26.9 percent from 27.2 percent last week. ECRI has recently reported annualized economic growth at all-time highs. "Despite coming off its early-October record high, WLI growth remains robust, suggesting that the U.S. economic recovery will continue to gather strength in the coming months," said ECRI Managing Director Lakshman Achuthan.

Financial Times:

- Jacques Chirac, former French president, is to stand trial for abuse of public funds during his time as mayor of Paris, it was announced on Friday.

The Telegraph:

- Goldman Sachs(GS) has distanced itself from any suggestion of wrongdoing in the insider trading scandal surrounding the Galleon hedge fund. The US investment bank was a leading prime broker to Galleon but on Thursday denied playing any part in passing on insider information to the hedge fund. The denial follows reports suggesting that Galleon paid hundreds of millions of dollars a year to major banks for access to information the general public did not receive. Galleon - headed by Raj Rajaratnam, who has been indicted on alleged insider trading charges – was reported to have received regular hints or market colorr. Lucas van Praag, head of public relations at Goldman, said: "Any suggestion that we provided inside information to Galleon is completely untrue." However, Morgan Stanley is understood to feel that no direct allegations were made against it. Former analyst Henry Blodget's Business Insider website said the allegations were "so explosive that both firms are going to have to start talking."

- The European Union is drawing up plans to charter its own flights to return illegal immigrants to their home countries.

Bear Radar

Style Underperformer:
Small-Cap Value (-3.77%)

Sector Underperformers:
Gold (-5.78%), Hospitals (-5.51%) and Coal (-5.04%)

Stocks Falling on Unusual Volume:

Stocks With Unusual Put Option Activity:
1) EXPE 2) NRG 3) CB 4) PXP 5) UPL

Bull Radar

Style Outperformer:
Large-Cap Growth (-.32%)

Sector Outperformers:
Gaming (+2.37%), Biotech (+.46%) and Road & Rail (+.39%)

Stocks Rising on Unusual Volume:

Stocks With Unusual Call Option Activity:
1) NVTL 2) OVTI 3) PLL 4) CMI 5) NAV

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Thursday, October 29, 2009

Friday Watch

Late-Night Headlines

- Samsung Electronics Co., Asia’s biggest maker of chips, flat screens and mobile phones, said profit tripled to a quarterly record as the global economic recovery spurred a rebound in prices. “The company will continue posting solid earnings next year, and the semiconductor business will be the key driver,” said Lee Jin Woo, a fund manager at KTB Asset Management Co. in Seoul, which oversees $8.4 billion in assets. “As Intel and other chipmakers forecast, I see strong PC demand.” The stock rose 1.7 percent to 730,000 won at 10:42 a.m. on the Korea Exchange, while the benchmark Kospi stock index gained 0.6 percent.

- The housing industry contributed to U.S. economic growth for the first time in four years last quarter as federal tax credits sparked demand for homes and energy-efficient renovations. Residential investment accounted for 0.53 percent of growth, a bigger chunk than national defense, at 0.45 percent, and spending on non-durable goods, such as food and clothing, which accounted for 0.31 percent. Samsung forecast a “solid” fourth quarter, echoing comments by No. 1 chipmaker Intel Corp., and said it plans to boost capital spending on semiconductors and displays next year to more than 8.5 trillion won.

- Exxon Mobil Corp.(XOM), PetroChina Co. and Royal Dutch Shell Plc are battling slumping fuel demand as oil majors seek to rebuild profits battered by the global fallout from the worst U.S. downturn since the Great Depression. Exxon Mobil’s U.S. refineries lost about $2.3 million a day last quarter as gasoline and diesel prices fell. Shell, whose refining earnings declined 47 percent, said the plunge in demand will keep profit margins narrow in “the short and medium term” and a quick recovery in energy usage and prices is unlikely.

- In Washington and on Main Street, politicians and voters are railing against Wall Street’s multi- million-dollar pay packages. In the financial world, most executives expect their bonuses to match or exceed last year’s, with 1 in 10 predicting their best-ever payout. Having shaken off the biggest economic decline since the 1930s, almost three in five traders, analysts and fund managers believe their 2009 bonuses will either increase or won’t change, according to a quarterly poll of Bloomberg customers. Only one in four see a decline.

- New York has withstood the worst economic crisis in seven decades and remains the leading global financial center, followed by Singapore, which topped London as investors’ preferred place for doing business, according to Bloomberg Global Poll. Twenty-nine percent of respondents in the quarterly poll of investors, traders and analysts who subscribe to the Bloomberg terminal say New York will be the best place for financial services two years from now. Singapore is chosen by 17 percent of respondents and London is the pick of 16 percent. Shanghai has 11 percent, while Tokyo, once considered a global hub, gets the nod from only 1 percent.

Wall Street Journal:

- The idea of talking to the Taliban -- a strategy advocated by Afghan officials -- has become increasingly seductive as the Western death toll in the conflict mounts. Obama administration officials openly ponder an outreach to the leadership of Islamist militants, something that has been long advocated by European allies.

- The biggest threat to America right now is not government spending, huge deficits, foreign ownership of our debt, world terrorism, two wars, potential epidemics or nuts with nukes. The biggest long-term threat is that people are becoming and have become disheartened, that this condition is reaching critical mass, and that it afflicts most broadly and deeply those members of the American leadership class who are not in Washington, most especially those in business.

- The Earth Cools, and Fight Over Warming Heats Up. Two years ago, a United Nations scientific panel won the Nobel Peace Prize after concluding that global warming is "unequivocal" and is "very likely" caused by man.Then came a development unforeseen by the U.N.'s Intergovernmental Panel on Climate Change, or IPCC: Data suggested that Earth's temperature was beginning to drop. The renewed discussion of inherent shortcomings in climate models comes on the cusp of potentially big financial commitments. In five weeks, diplomats from around the world will meet in Copenhagen to try to hash out a new agreement to curb global greenhouse-gas emissions. The science continues to evolve. Though often overlooked in the debate about man-made warming, natural factors have contributed to record high temperatures. The year 1998, for example, was widely noted as the hottest year on record, intensifying concerns about global warming and people's role in it. But one reason that 1998 set a record is that a strong shift in ocean temperature known as El Niño occurred that year. "1998 was a very hot year because it was an El Niño year," says Mr. Dessler. Scientists who have long questioned man-made global warming cite the temperature drop that began in 2006 as more evidence the models are wrong. "They were predicting warming," says Richard Lindzen, a climate scientist at the Massachusetts Institute of Technology. Mr. Lindzen's work, regarded as leading the research challenging man-made warming, suggests that natural factors such as clouds generally inhibit, rather than intensify, greenhouse-gas warming. He wrote in a recent article that the study from the U.K. admits that the kind of climate model cited in the U.N.'s IPCC report "did not appropriately deal with natural internal variability, thus demolishing the basis for the IPCC's iconic attribution" linking greenhouse-gas emissions to climate change. He added that "even when all models agree, they can all be wrong."

- And if it doesn't fly, well, is that so bad? Mr. Reid can still say he gave it the varsity try. He'll get it to the floor and let those swing-state Democrats amend the public option away. Not his fault! What he also knows, even if the press doesn't, is that for all the big talk of his liberal members, they are the more likely to give way. Even without a public option, this bill is a big step toward a single-payer system. And it isn't as if any of them risk losing their seats by voting "only" for a $1 trillion health expansion. Better yet, by turning the public option into the big, bad bogeyman, he makes it more likely he'll snag those swing-state votes in the end. Nebraska's Mr. Nelson, Arkansas's Blanche Lincoln, Indiana's Evan Bayh—they can all claim victory for stripping the bill of a national insurance plan, then feel comfortable voting for all the tax hikes and Medicare cuts that remain. Speaking of tax hikes, premium jumps and Medicare cuts, notice how nobody is today talking about them? Mr. Reid surely has. The public option might be controversial in D.C., but the majority leader knows most of the country doesn't understand it, or assumes it doesn't apply to them. Most Americans already have health care that they like, and polls show their real fear is that this experiment will leave them paying more for less. This, not the public option, is ObamaCare's exposed jugular.

- Comcast(CMCSA) and General Electric(GE) are struggling to iron out a few critical issues that are holding up a joint venture deal for NBC Universal, people familiar with the matter said.

- Japanese core consumer prices fell 2.3 percent in the year to September, with increasing signs that weak demand is weighing on prices.

NY Times:

- Plan to Drill on Colorado Plateau Meets Resistance.

Business Week:
- MBAs Confront a Savage Job Market.

- Clunkers: Taxpayers paid $24,000 per car. Auto sales analysts at say the pricey program resulted in relatively few additional car sales. A total of 690,000 new vehicles were sold under the Cash for Clunkers program last summer, but only 125,000 of those were vehicles that would not have been sold anyway, according to an analysis released Wednesday by the automotive Web site A total of $3 billion was allotted for those rebates. The average rebate was $4,000. But the overwhelming majority of sales would have taken place anyway at some time in the last half of 2009, according to That means the government ended up spending about $24,000 each for those 125,000 additional vehicle sales.

Business Pundit:

- 10 Fatcats Who Profiteered from the Credit Crunch.

- One of the last people you’d expect to be a catalyst for the near collapse of history’s most advanced financial system is the secretary of Housing and Urban Development. Though not the masterminds of the nation’s economic woes, Andrew Cuomo and Mel Martinez were willing musclemen for the Congressional and White House driven mandates that housing be made more affordable to all through government subsidy. Those mandates, policy stemming back to the 1960s, were driven by compassion, but have turned out to be the chief cause for the current rampant rates of default, foreclosure, and economic pain striking particularly hard at low-income families. Such is the story Charlie Gasparino tells in his new book, The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System.

Crain’s NY Business:

- The New York state pension fund is plowing money back into hedge funds, with plans to invest more than $1 billion by year's end. This after the hedge fund industry experienced its worst year in recent memory, with most funds losing an average of 28% over 2008. The state workers fund just closed a $50 million investment in Stamford, Conn.-based Diamondback Capital, and has several more hedge-fund deals expected to close by 2010, a spokesman for state Comptroller Thomas DiNapoli said Thursday. The New York Common Retirement fund took a beating in 2008, dropping to about $110 billion from more than $150 billion.


- It runs more pages than War and Peace, has nearly five times as many words as the Torah, and its tables of contents alone run far longer than this story. The House health care bill unveiled Thursday clocks in at 1,990 pages and about 400,000 words. With an estimated 10-year cost of $894 billion, that comes out to about $2.24 million per word. And for some members, that may not be enough. A “robust” public option can’t be found in the bill. Neither can the word “doctor” – save for a few references to degrees. No “cost curve” is bent. No “blue pill” is dispensed. “Death” and “taxes” are both in there, but “death panel” is not. The text defines dozens of words and phrases, including “family” (“an individual and . . . the individual’s dependents”), “health insurance coverage,” “exchange-eligible individual” and “Indian.” And for those who cry “read the bill,” beware. There are plenty of paragraphs like this one: “(a) Outpatient Hospitals – (1) In General – Section 1833(t)(3)(C)(iv) of the Social Security Act (42 U.S.C. 1395(t)(3)(C)(iv)) is amended – (A) in the first sentence – (i) by inserting “(which is subject to the productivity adjustment described in subclause (II) of such section)” after “1886(b)(3)(B)(iii); and (ii) by inserting “(but not below 0)” after “reduced”; and (B) in the second sentence, by inserting “and which is subject, beginning with 2010 to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II)”. The section deals with “incorporating productivity improvements into market basket updates that do not already incorporate such improvements,” if that helps.

Washington Post:

- House ethics investigators have scrutinized the activities of more than 30 lawmakers and several aides in inquiries about issues including defense lobbying and corporate influence peddling, according to a confidential House ethics committee report prepared in July. The report, disclosed on a publicly accessible computer network, was made available to The Washington Post by a source familiar with such networks. The ethics committee is one of the most secretive panels in Congress, and its members and staff members sign oaths not to disclose any activities related to its past or present investigations. Watchdog groups have accused the committee of not actively pursuing inquiries; the newly disclosed document indicates the panel is conducting far more investigations than it had revealed.


- A turnaround in business spending is offering the first hint that the private sector may be prepared to drive economic growth when the government winds down its efforts to spur consumption. After six consecutive quarters in retreat, businesses in the third quarter increased spending on new computers and software at an annual rate of 1.1%. That marked an about-face from the first quarter's annualized 36.4% plunge.


- The Obama administration's new proposal for tackling financial risk in the U.S. economy, unveiled just two days ago, came under attack on Thursday from Congress and regulators, with questions raised about its funding and scope. U.S. Treasury Secretary Timothy Geithner scrambled in a congressional hearing to defend the plan against critics who said it would give too much power to regulators and enshrine government bailouts for troubled financial firms in law.

- The global cellphone market is set to grow in the holiday sales-fuelled October-to-December quarter, after four quarters of falls, research firm Strategy Analytics said on Friday. "We forecast handset shipments to grow 3 percent annually in Q4 2009, signaling an end to the recession," analyst Neil Mawston said in a statement.

- Investor appetite for U.S. junk bond mutual funds hit fresh record highs this week as a recovering economy and easy monetary policy kept investors comfortable with risk. Cashing in on a relentless rally, investors poured a net $207 million into junk bond funds in the week ended Wednesday, pushing year-to-date inflows to $27.8 billion, the most ever, AMG Data Services reported on Thursday. The previous inflow record was $26.96 billion for the full year 2003, according to AMG. The avalanche of money pouring into junk funds is creating a virtuous cycle: As cash pours in, shaky companies are able to refinance debt by selling new bonds, heading off defaults and adding fuel to the junk bond rally.

- Global car sales are expected to grow about 6 percent to 65 million vehicles in 2010 as a financial crisis ends, helping demand revive, Hyundai Motor Group's research body said on Friday.

Financial Times:

- US financial groups with operations in London are increasingly concerned that British regulators’ tough stance on pay could create a two-tier system in which UK bankers’ bonuses are smaller and spread over a longer period than those of American colleagues. Wall Street executives say the line taken by the UK’s Financial Services Authority contrasts with the more flexible approach of the Federal Reserve and could lead to uneven pay scales for bankers in similar jobs on opposite sides of the Atlantic.

- Concerns about the business practices of Galleon hedge fund founder Raj Rajaratnam and his associates were raised inside JPMorgan Chase(JPM) as far back as 2001, according to an internal company document seen by the Financial Times. Mr Rajaratnam and five others – including former employees of Bear Stearns, now part of JPMorgan – were charged this month in an alleged insider trading scheme that US prosecutors called the biggest ever involving hedge funds. The JPMorgan note alleges that the principals of Galleon “liked to operate in the ‘grey areas’” of the markets. “If these allegations are true, there are some serious issues about business conduct,” the memo said.

- Iran on Thursday night indicated it wanted to make significant changes to a draft agreement with the US and other world powers over its nuclear program, in a move that may scupper the chances of any final accord being reached. Almost two weeks after starting negotiations with the US, France and Russia over the draft, Iran finally delivered its response to the International Atomic Energy Agency in Vienna. The agency said last night it was negotiating with Iran and other parties over the accord, but western diplomats suggested Tehran’s demands were unacceptable. “They are trying to turn this into a negotiation,” said a European diplomat with knowledge of Iran’s response to the agency. “But it makes no sense to do it in this way. Their response is unacceptable.” However, Washington responded cautiously to Tehran’s move, noting that it awaited ”clarification of Iran’s response” rather than threatening sanctions or condemning the Islamic Republic for its failure to sign up to the draft deal.

Shanghai Securities News:

- China will probably raise retail fuel prices by 300 yuan a ton in the first few days of November. Diesel price may rise by .25 yuan a liter and gasoline by .22 yuan a liter, citing CBI China Co.

- China’s gold production gained 14.5% in the first nine months to 228.199 metric tons, citing Ministry of Finance statistics.

Late Buy/Sell Recommendations

- Upgraded (TOL) to Buy, target $23.

- Reiterated Buy on (AGN), raised estimates, boosted target to $66.

- Reiterated Buy on (MXIM), target $25.

Crowell, Weedon:

- Reiterated Buy on (AAPL), raised estimates, boosted target to $240.

Night Trading
Asian Indices are +.75% to +2.25% on average.

Asia Ex-Japan Inv Grade CDS Index 107.0 -14.50 basis points.
S&P 500 futures -.03%.
NASDAQ 100 futures -.03%.

Morning Preview

BNO Breaking Global News of Note

Google Top Stories

Bloomberg Breaking News

Yahoo Most Popular Biz Stories

MarketWatch News Viewer

Asian Financial News

European Financial News

Latin American Financial News

MarketWatch Pre-market Commentary

U.S. Equity Preview

TradeTheNews Morning Report In Play

SeekingAlpha Market Currents Bond Ticker

US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Stock Quote/Chart
WSJ Intl Markets Performance
Commodity Futures
IBD New America
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?

Politico Headlines
Rasmussen Reports Polling

Earnings of Note
Company/EPS Estimate
- (NYX)/.46

- (WY)/-.44

- (HMSY)/.28

- (CPN)/.34

- (B)/.21

- (CVX)/1.47

- (CMI)/.37

- (D)/.90

- (EL)/.34

- (SNE)/-.37

- (SPG)/1.33

- (QSII)/.41

Economic Releases

8:30 am EST

- Personal Income for September is estimated unch. versus a +.2% gain in August.

- Personal Spending for September is estimated to fall -.5% versus a -.5% decline in August.

- The PCE Core for September is estimated to rise +.2% versus a +.1% gain in August.

- The 3Q Employment Cost Index is estimated to rise +.4% versus a +.4% gain in 2Q.

9:45 am EST

- Chicago Purchasing Manager for October is estimated to rise to 49.0 versus a reading of 46.1 in September.

10:00 am EST

- Final Univ. of Mich. Consumer Confidence for October is estimated to rise to 70.0 versus 69.4 in September.

Upcoming Splits
- None of Note

Other Potential Market Movers
The NAPM-Milwaukee report, (JCP) analyst meeting and the (CPN) investor update could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by financial and commodity shares in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.