Tuesday Watch

Late-Night Headlines
Bloomberg:

- Hewlett-Packard Co.(HPQ) reported personal-computer sales that topped some analysts’ estimates after the company took market share from Dell Inc.(DELL) and benefited from surging demand in China. “The company is seeing momentum on the enterprise side as their peers, mainly Dell, lose steam,” said Bill Kreher, an analyst with Edward Jones & Co. in St. Louis. He rates the shares “buy.” “When you have both the consumer and business categories doing well, particularly in this economy, it bodes well for when things start to improve.” Chief Financial Officer Cathie Lesjak said average selling prices of PCs stabilized in the quarter. “We felt good about imaging and printing as we closed the quarter,” Hurd said in an interview. “We exited the year pretty low on inventory -- we saw higher demand for printers as we went through the end of the year.” Hewlett-Packard increased services revenue 7.8 percent to $8.93 billion, buoyed by the acquisition last year of Electronic Data Systems Corp. The profit margin was 16.2 percent, compared with 11.4 percent a year earlier. Hewlett-Packard signed new services contracts with customers including Coca-Cola Co., Alcatel-Lucent SA and Eli Lilly & Co., Hurd said. “A story within the story with services was the strength of the signings in the quarter,” Hurd said. Hewlett-Packard captured 20.2 percent of the worldwide PC market in the third quarter, up from 18.9 percent a year earlier, according to researcher IDC in Framingham, Massachusetts. Acer Inc. passed Dell to take second place with a 14 percent share. Round Rock, Texas-based Dell, the only one of the three biggest PC makers to see its shipments fall, had a 12.7 percent share of the global market, down from 14.2 percent a year ago, IDC said.

- Irving Picard, the liquidator for Bernard Madoff’s investment advisory business, asked a judge to approve $22.1 million in fees for him and his team with the law firm Baker & Hostetler LLP, for five months of work on the case. The fees, which include a 10 percent “public interest discount” from the firm’s normal rates, cover work performed on the liquidation from May 1 through Sept. 30, according to a filing on Nov. 20 in U.S. Bankruptcy Court in New York. Picard, hired by the Securities Investor Protection Corp. to recover assets and repay victims, in August won his first request for $14.7 million in fees for work from Dec. 15 to April 30. Some victims objected to that request, claiming Picard was burning through cash while approving victims’ claims too slowly.

- New York Attorney General Andrew Cuomo’s campaign fund took tens of thousands of dollars from law firms representing clients his office investigated or accused of wrongdoing, state records show. Boies Schiller & Flexner LLP, a New York law firm led by David Boies, gave Cuomo $35,000 this year, records show. The firm represents former American International Group Inc. Chief Executive Officer Maurice “Hank” Greenberg in a civil fraud case the attorney general is pursuing. Lawyers defending Dell Inc., Deutsche Bank AG and a former state political party chief in Cuomo cases also contributed to him, records show.

- Eight people were charged in an investigation into men who left the Minneapolis area to train with a terrorist organization in Somalia, the Justice Department said. The charges, unsealed today in U.S. District Court in Minneapolis, include providing financial support to those who traveled to Somalia to fight on behalf of al-Shabaab, designated a foreign terrorist organization by the U.S., according to a Justice Department statement.

- Brazilian President Luiz Inacio Lula da Silva plunged into Middle East conflicts today, saying Iran has a “decisive role to play” in the region after a three-hour meeting with its president, Mahmoud Ahmadinejad. With Ahmadinejad seated beside him in the Foreign Affairs Ministry in Brasilia, Lula said Iran can help heal divisions among Palestinians, as he expressed support for a “viable and dignified Palestinian state” to be established alongside a “secure and sovereign Israel.” Ahmadinejad has called for the destruction of Israel and questioned the Holocaust.

- At first it was just an unverifiable assertion. Now it turns out to have been a case of bureaucratic ineptitude and possible fraud. Transparency and accountability aren’t working out the way President Barack Obama had hoped. The administration was already skating on thin ice when it announced on Oct. 30, with great fanfare, that 640,329 jobs had been created or saved as a result of the $787 billion American Recovery and Reinvestment Act. Watchdog.org, a collection of independent journalists covering state and local government, has put together a “Guide to the Stimulus, District by (Phantom) District.” Overall the group found that 440 phantom districts in 50 states, the District of Columbia and four U.S. territories received $6.4 billion and created or saved -- let’s consolidate to “craved” -- 30,000 jobs. That works out to $213,333 per job. Think how much easier, not to mention transparent, it would have been to hand out that kind of real money to real people who will spend it!

Wall Street Journal:

- The Environmental Protection Agency issued a final rule Monday aimed at reducing pollution from construction sites, saying that it will significantly improve the quality of water nationwide. The rule will be phased in over four years, starting in February, and when it is fully in effect, the EPA estimates there will be four billion fewer pounds of sediment discharged from construction sites each year. Nearly 82,000 home builders, commercial and industrial building contractors, and civil-engineering companies are expected to be covered by the rule, which the EPA estimates will impose about $953 million of annual costs. Such costs could raise home prices and cause a small number of builders to go out of business, resulting in some job losses, the EPA said in a draft version of the final rule.

- Abortion to Be New Flashpoint in Senate Bill. Abortion-rights groups, acknowledging they were caught off guard by a last-minute amendment toughening abortion restrictions in the House health-care bill, are mobilizing to ensure that doesn't happen in the Senate. Activists hope to flood Washington to rally and lobby on Dec. 2, during the week that Senate floor debate begins. The Center for Reproductive Rights has aired television ads criticizing the restrictions. On Tuesday, activists will announce the creation of the Coalition to Pass Health Care Reform and Stop Stupak, a network of more than 30 groups. Planned Parenthood -- which says it will oppose the final bill if it contains the restrictions -- has started a petition drive that has been promoted by Cosmopolitan magazine. "At least it will be a fully engaged debate on both sides," said Nancy Northup, president of the Center for Reproductive Rights. "It really wasn't, the first time around. It was a midnight deal."

- Since becoming a ward of the state, giant insurer American International Group Inc.(AIG) has had a powerful ally: the U.S. government. In the latest example, some federal officials are pressing the U.S. pay czar to ease up on compensation restrictions at AIG for 2010, arguing that the firm, and ultimately the taxpayer, would suffer if the curbs are too severe, according to people familiar with the matter. The relationship between AIG and the government is proving to be a political headache for the Obama administration. Earlier this year, the Treasury and the Federal Reserve Bank of New York failed to stop controversial bonuses at the firm. Last fall, in an effort to staunch a cash bleed at AIG, they agreed to fully compensate big banks that bought AIG's insurance on risky assets. The bailout of AIG, owned 80% by taxpayers, is one of the most controversial of the government's unpopular bailouts. Yet with so much taxpayer money at stake, the government is asserting its ownership. "AIG is the best example of why the government should never get itself in the position of even having to make these tradeoffs," said Anil Kashyap, an economics professor at the University of Chicago Booth School of Business. "It's why you don't want the government involved in the private sector in the first place."

- Global Warming With the Lid Off. The emails that reveal an effort to hide the truth about climate science.

- For anyone who wondered if last winter's federal seizure of the financial services industry would have adverse economic consequences, an answer is now available. The credit market has been tilted to favor a single borrower with a huge appetite for money, Washington. Private borrowers, particularly small businesses, have been sent to the end of the queue. The Federal Reserve, which supervises some 7,000 banks, has been telling bankers that they must cut risk. The most spectacular step in that effort was the Fed announcement last month that it will evaluate the salaries of bank officers on how carefully they manage risk.

CNBC.com:

- Cramer: What Monday’s Housing Number Really Means.

Business Week:
- Citi lifted its 2010 growth domestic product outlook for the U.S., Japan, Britain, Australia, New Zealand, Hong Kong, Korea, Argentina, Hungary, Poland, Czech Republic and Turkey. However, it said credit availability will likely be limited for at least another year or two as banks seek to raise extra capital.

Reuters:

- Microchip maker Analog Devices Inc (ADI) on Monday reported higher-than-expected quarterly sales buoyed by consumer demand and forecast higher profit margins and busier factories by the end of fiscal 2010. Consumer sales, which include chips for audio and video equipment for home entertainment systems, were especially strong, rising 7 percent over the previous year. Zinsner said he expects first quarter revenue to remain roughly flat sequentially from the fourth quarter, which he said was atypical for a seasonally down quarter.

- Lehman Brothers International (Europe), where more than $35 billion of hedge fund assets have been frozen since the bank's collapse last September, could return about $11 billion to fund managers by March if enough firms approve a new plan.

- Financier Carl Icahn has offered $156.5 million to acquire the partially built Fontainebleau Las Vegas resort, which has been stalled in bankruptcy court since June, according to the resort's chief operating officer.

- Network equipment maker Brocade Communications Systems Inc (BRCD) on Monday reported a higher-than-expected quarterly profit, despite concerns about competition amid a series of mergers and acquisitions among rivals. The results come as an improving credit environment is helping businesses step up capital investment after holding back for the past year. "Our planning assumption is that IT spending will continue to recover during the first half of 2010 and approach normalcy in the second half of 2010," Brocade said in a statement.

Financial Times:

- In stark contrast to the slow pace of reform in derivatives markets in the US and Europe, China’s regulators have in recent months shut down the main route by which foreign banks sold derivatives from offshore operations and have banished speculative deals – moves that have important implications not only for Chinese companies and foreign banks, but also for the evolution of China’s capital markets and the internationalization of the renminbi. As a result of the sweeping regulatory overhaul, trading volumes have plunged and foreign banks are scrambling to adapt to doing business in the new environment. “If you compare the business we are doing today with the business we were doing two years ago, it’s completely different,” says Mr Castel. “You have to forget about [the old] market. It’s gone.” Previously, dozens of western banks such as Goldman Sachs and Morgan Stanley were striking huge deals with mainland companies that wanted to manage their exposure to swings in commodity prices, interest rates and currencies. Chinese regulators suspect that in some instances companies used derivatives as a way to speculate, rather than hedge, while banks frequently sold overly complex products – the most profitable – without fully explaining the potential downside.

- Hedge funds and other investors now stand to make billions of dollars from their holdings in bankrupt US mall owner General Growth Properties, underscoring the extent of the recent rebound in financial markets, people familiar with the matter say. Among the biggest potential winners is William Ackman’s Pershing Square Capital Management, which is sitting on a paper profit of more than $800m on investments in the debt and equity of GGP, according to people familiar with Mr Ackman’s fund. Other investors that stand to make big profits on holdings in the high-profile retail property owner include Centerbridge Partners, Elliott Associates, Goldman Sachs, John Paulson’s Paulson & Co and York Capital, the people said. “General Growth is a fantastic example of the speed with which real-estate finance is coming back,” said Bob Steers, co-chairman of real estate investment firm Cohen & Steers, which has not invested in General Growth.

- Climate change skeptics have been emboldened to press their case in the countdown to the Copenhagen talks after seizing on a clutch of private e-mails sent to and from climate change experts which they allege show scientists plotting to manipulate data and hurling abuse at their skeptical peers. The exchanges, written by British and US scientists at the UK’s University of East Anglia, debate data and whether details should be released and allegedly include abusive language aimed at climate change skeptics. One e-mail from Professor Phil Jones at UEA to several climate scientists spoke of using a “trick” to hide “the decline” of temperatures. It is not clear from the context what he means exactly but skeptics claimed that it showed scientists were concealing temperature data that appeared to run contrary to the idea of global warming. In other e-mails, one scientist expressed anger at a journal that had questioned his work, and another threatened to “beat the crap out of” a prominent ­scientist who takes a ­skeptical view of global warming. Skeptics hailed the e-mails as the “smoking gun” they had been looking for, proving that climate change scientists were engaged in dubious practices and personal attacks on their opponents, as well as failing to give out certain data on request. Myron Ebell, director of global warming and international environmental policy at the Competitive Enterprise Institute, a US free-market think-tank, said the e-mail exchanges were a “scandal that has knocked down the global warming house of cards”. Bob Ward, policy director at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science, called for a thorough investigation into the matters raised by the e-mails.

TimesOnline:

- The public will not bail out the financial services sector for a second time if another global crisis blows up four or five years from now, the managing director of the International Monetary Fund (IMF) warned business leaders yesterday. Addressing a conference held in London by the CBI, the business leaders’ organization, Dominique Strauss-Kahn said that another huge call on public finances by the financial services sector would not be tolerated by the man in the street and may even threaten democracy. “Most advanced economies will not accept any more [bailouts] . . . the political reaction will be very strong, putting some democracies at risk,” he told delegates.

- There is only one trade in town at the moment — sell the ailing dollar and buy gold — but investors could fare well by going against the grain.

Der Spiegel:

- When he entered office, US President Barack Obama promised to inject US foreign policy with a new tone of respect and diplomacy. His recent trip to Asia, however, showed that it's not working. A shift to Bush-style bluntness may be coming.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (TECD), target $56.

Janney Capital Markets:

- Reiterated Buy on (GMCR), target $102.

Keybanc:

- Rated (TIF) Buy, target $50.

Night Trading
Asian Indices are -.75% to +.25% on average.

Asia Ex-Japan Inv Grade CDS Index 105.5 -4.5 basis points.
S&P 500 futures -.21%.
NASDAQ 100 futures -.29%.

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

Briefing.com In Play

SeekingAlpha Market Currents

Briefing.com 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?
Upgrades/Downgrades

Politico Headlines
Rasmussen Reports Polling

Earnings of Note
Company/EPS Estimate
- (BKS)/1.52

- (DLTR)/.66

- (CBRL)/.62

- (WMG)/.04

- (HNZ)/.70

- (MDT)/.74

- (AEO)/.21

- (EV)/.33

- (TIVO)/-.05

- (BCSI)/.26

- (JCG)/.59

- (CRI)/.67

Economic Releases

8:30 am EST

- 3Q GDP is estimated at +2.8% versus a prior estimate of a +3.5% gain.

- 3Q Personal Consumption is estimated to rise +3.2% versus a prior estimate of a +3.4% gain.

- 3Q GDP Price Index is estimated to rise +.8% versus a prior estimate of a +.8% increase.

- 3Q Core PCE is estimated to rise +1.4% versus a prior estimate of a +1.4% gain.

10:00 am EST

- Consumer Confidence for November is estimated to fall to 47.5 versus a reading of 47.7 in October.

- The House Price Index for September is estimated to rise +.1% versus a -.3% decline in August.

2:00 pm EST

- FOMC Nov. 4 Meeting Minutes.

Upcoming Splits
- None of Note

Other Potential Market Movers
- The weekly retail sales reports, ABC consumer confidence reading, API energy inventory report, Treasury’s 5-Year Note Auction, Richmond Fed Manufacturing Index, S&P/CaseShiller Home Prices Index and the (JEC) analyst meeting could also impact trading today.

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