Stocks Finish at Session Lows, Weighed Down by Financial, Commodity, Gaming, Insurance and HMO Shares

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Stocks Lower into Final Hour on Global Growth Worries, Rising Credit Market Angst, More Shorting

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Biotech longs and Medical longs. I added to my (IWM)/(QQQQ) hedges and added to my (EEM)/commodity shorts this morning and then added to my (IWM)/(QQQQ) hedges this afternoon, thus leaving the Portfolio 50% net long. The tone of the market is very negative as the advance/decline line is substantially lower, every sector is declining and volume is heavy. Investor anxiety is very elevated. Today’s overall market action is very bearish. The VIX is rising 8.52% and is hitting a new record high of 62.69. The ISE Sentiment Index is below average at 121.0 and the total put/call is very high at 1.32. Finally, the NYSE Arms has been running high most of the day, hitting 2.08 a few minutes ago. The Euro Financial Sector Credit Default Swap Index is rising .04% today to 108.67 basis points. This index is up from a low of 52.66 on May 5^th, but down from 157.81 on Sept. 16^th. The North American Investment Grade Credit Default Swap Index is rising 5.22% to 187.10 basis points. The TED spread is rising 8.1% to 4.23 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 7 basis points to 1.05%, which is down 158 basis points in about three months and at the lowest level since January 1999. The action in (MS) is weighing heavily on the (XLF) and (GM)/(F) are also a huge broad market negative. As well, gauges of credit market angst are surging again. Today’s action will likely lead to further serious losses in Asia tonight, which could pressure US stocks further on the open tomorrow. I wouldn’t be surprised to see more coordinated global central bank action by Monday at the latest. The AAII % Bulls fell to 31.47% this week, while the % Bears rose to 60.84%. The % Bears is now at the third highest level on record and the highest since October 1990. Nikkei futures indicate a -557 open in Japan and DAX futures indicate a -137 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, global growth worries, rising credit market angst, forced selling and financial sector pessimism.

Today's Headlines

Bloomberg:
- The government is planning to buy stakes in a wide range of banks within weeks as the credit freeze increasingly threatens to tip the U.S. economy into a deep recession. Treasury Secretary Henry Paulson and top aides are still considering options on how the purchases would work, including having the government acquire preferred stock, two officials informed of the matter said.

- Overnight borrowing costs for companies fell a day after six central banks lowered interest rates to unlock credit markets and prevent a prolonged global recession.

- Crude oil fell more than $1 a barrel in New York on concern that the coordinated cut of interest rates by central banks yesterday may be insufficient to prevent a prolonged global recession. ``We held at important support around $86 yesterday,'' said Tom Bentz, senior energy analyst at BNP Paribas in New York. ``If we are able to break through, prices are going to fall to the lower $80s and maybe the high $70s.'' The Organization of Petroleum Exporting Countries will hold an emergency meeting in Vienna on Nov. 18 to tackle the drop in prices. ``Some OPEC members would like to cut production, but I think it would be suicide,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``I don't think they will make a cut unless things improve dramatically on the economic front.'' U.S. fuel demand averaged about 18.7 million barrels a day during the past four weeks, the lowest since June 1999, according to an Energy Department report yesterday. The figure is down 8.6 percent from the year-earlier period, the department said.

- Nickel production may outpace demand by 110,000 tons in 2009 as usage by stainless steel makers is slow to recover, the International Nickel Study Group said.

- Goldman Sachs(GS) cut its 2009 steel price forecast 29% and reduced recommendations on some steelmakers as stalling US and European economic growth and a slowdown in emerging markets curbs demand. “We have heard from the majority of steel traders and service centers that steel buying globally has almost ground to a halt and prices are coming down hard and fast,” Tharani wrote. “Demand is the weakest we have observed in a long time.”

- U.K. house prices fell by the most in 25 years as the global financial crisis discouraged buyers and prompted banks to stop lending, HBOS Plc said.

- Morgan Stanley(MS) declined as much as 25 percent in New York Stock Exchange composite trading as a ban on short selling expired and concern escalated that the company may be unable to weather the credit crisis. The stock fell $2.73 to $14.07 at 12:46 p.m. after dropping as low as $12.59 earlier today. The New York-based company has lost 73 percent of its value this year.

Wall Street Journal:

- Sharp Declines in Commodities Hammer Funds. Until earlier this year, commodity-focused mutual funds were red hot. Now, they're burning through the value of investors' portfolios. Over the past three months through Tuesday, these funds and other commodity-linked investments such as exchange-traded notes, are down on average 26% to 44%, according to Lipper Inc., thanks to a broad selloff in several commodities since mid-July.

- As if hedge-fund managers haven't felt enough pain lately, now Uncle Sam is cracking down on them. Tucked away inside the recent $700 billion U.S. plan to buy toxic mortgage assets are unrelated changes to the tax code -- effectively eliminating a favorite tax-deferral dodge of hedgies.

Crain’s NY Business:

- New York state ranked nearly worst for business taxes. An annual report from the Tax Foundation's 2009 Business Tax Climate Index put New York state at No. 49 for its hardly business-friendly tax policies. Only New Jersey was beneath New York in the latest ranking by the nonprofit and nonpartisan foundation. California, Ohio and Rhode Island rounded out the bottom five. Wyoming ranked first, followed by South Dakota, Nevada, Alaska and Florida.

Economist:

- Hedge funds. Collateral damage. An industry suffers, and regulators have not helped.

Lloyd’s List:

- Container ships will be idled because there are too many of them and US demand is slowing, citing a spokesman for Mitsui OSK Lines Ltd. and other shipowner officials that it didn’t identify. It will be the first time ships have been idled since the downturn in the industry began.

International Herald Tribune:
- The technical term for it is "negative feedback loop." The rest of us just call it a panic. How else to explain yet another plunge this week in global stock markets - particularly in the absence of another nasty surprise? If the market is indeed close to the bottom, history suggests that any rally in the next few weeks will probably be big. Stovall, the S&P strategist, estimates that since World War II, stocks have recouped about a third of their bear market losses in the first 40 days after the market hits bottom.

Il Sole 24 Ore:
- European Central Bank Board member Lorenzo Bini Smaghi said the bank’s forecasts for European growth of 1.2% in 2009 will be “reviewed downwards” because of the turmoil in financial markets.

Cinco Dias:

- Spain will pass a ruling obliging automobile fuels to include a minimum content of 3.4% biofuel by 2009 and 3.9% by 2010, citing Energy Secretary Pedro Marin. Marin hopes to surpass the government’s goal of having 5.8% of automobile fuel produced from renewable sources such as plants by 2010.

O Estado de S. Paulo:

- Honda Motor Co., Elgin SA and other home appliance and motorcycle manufacturers will cut production in northern Brazil and send employees on vacation after the Brazilian real’s decline. Manufacturers with factories in the so-called Zona Franca region in the Amazon city of Manaus have been hit by the falling currency because they use imported parts and have dollar-denominated debt.

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Xinhua:

- China's business climate index, a key gauge of corporate performance, slid year on year in the third quarter, said the National Bureau of Statistics (NBS) on Thursday. The index, based on a survey of 19,500 Chinese firms, fell to 128.6 points in the third quarter, down 16.1 points from the same period last year. In the second quarter the index dropped 8.8 points from 137.4 points. It was the first time China's business climate index fell below130 points since the outbreak of the Severe Acute Respiratory Syndrome (SARS) epidemic in early 2003. The 100-point mark is seen as a definition between depression and prosperity.

Bear Radar

Style Underperformer:
Small-cap Value (-3.56%)

Sector Underperformers:
Banks (-4.27%), Insurance (-4.13%) and HMOs (-4.18%)

Stocks Falling on Unusual Volume:
LNC, PL, WFC, NVS, OMRI, SBAC, MDVN, FTEK, PRU, MS, STU and SOR

Stocks With Unusual Put Option Activity:
1) MGA 2) MYL 3) CMA 4) AET 5) ICO

Bull Radar

Style Outperformer:
Large-cap Growth (+.49%)

Sector Outperformers:
Airlines (+3.73%), Construction (+2.75%) and Oil Service (+1.76%)

Stocks Rising on Unusual Volume:
QSFT, MOS, MWE, MON, SY, CIB, PUK, LGCY, JPM, PBR, IVGN, SPTN, TSCO, AAWW, AAPL, SIAL, RIMM, GOOG, GEOY, NIHD, DECK, CME, FSLR, GMXR, NNDS, AAUK, GYMB, ISRG, ITRI, BCA, MET, HEP, MTR, KMR, HGT, WPC and KMP

Stocks With Unusual Call Option Activity:
1) AGN 2) STJ 3) MYL 4) BAX 5) NSM

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