Stocks Finish Slightly Lower, Weighed Down by Semi, Gold, Coal and Homebuilding Shares

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

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Biotech longs and Medical longs. I added to my (ILMN) long and took profits in another long today, thus leaving the Portfolio 100% net long. The tone of the market is mildly negative as the advance/decline line is about even, most sectors are declining and volume is heavy. Investor anxiety is high. Today’s overall market action is neutral. The VIX is rising .17% and is high at 23.74. The ISE Sentiment Index is slightly below average at 136.0 and the total put/call is around average at .79. Finally, the NYSE Arms has been running above average most of the day, hitting 1.36 at its intraday peak, and is currently 1.19. The Euro Financial Sector Credit Default Swap Index is falling .04% today to 70.66 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 1.50% to 101.50 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is unch. at 20 basis points. The TED spread is now down 443 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising .92% to 34.13 basis points. The Libor-OIS spread is falling 1 basis point to 10 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 7 basis points to 1.81%, which is down 86 basis points since July 7th. The 3-month T-Bill is yielding .09%, which is unch. today. Market leading stocks are substantially outperforming the major averages today. The bears have been unable to gain any traction from mid-day profit-taking. Defense, Alt Energy, Steel, Internet, Computer Service, Medical, Biotech, Construction, REIT, Restaurant, Gaming, Education and Airline shares are all higher on the day. It is noteworthy that (C) and (BAC) have been strong throughout the day. Today’s overall action does not indicate to me that this is the beginning of the much anticipated correction. Despite recent gains, AAII Bulls just slightly outnumber bears. The AAII % Bulls rose to 42.0 this week, while the % Bears declined to 40.0. Nikkei futures indicate an unch. open in Japan and DAX futures indicate a -11 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on diminishing economic fear, short-covering, declining healthcare reform worries, lower long-term rates, technical buying and investment manager performance anxiety.

Today's Headlines

Bloomberg:

- Laurence Fink, chairman and chief executive officer of BlackRock Inc.(BLK), said the U.S. dollar remains the preferred currency for investors seeking to protect wealth. “I still believe it is the best place to be if you have a large pool of money,” Fink said today in an interview with Bloomberg Television. Compared with the euro, Japanese yen and U.K. sterling, “I choose the dollar.”

- Company costs and consumer gas and electric prices will increase if Congress imposes higher capital and margin requirements on hedging as part of legislation meant to rein in over-the-counter derivatives, industry leaders said. Cargill Inc. may need to shift $1 billion from other investments to meet higher margin requirements under President Obama’s derivatives plan, said Jon Hixson, the company’s federal government relations director. The legislation may also make this type of hedging too expensive for smaller utilities, forcing them to raise rates, said Glenn English, chief executive officer of the National Rural Electric Cooperative Association. Municipal utilities that keep rates low by hedging risk shouldn’t be penalized by a system meant to address the failure on an insurance company like AIG, said David Schryver, executive vice president of the American Public Gas Association. The group, which represents public and community utilities in 36 states, is pushing to exempt smaller hedgers from the new rules.

- Gold at $1,000 Spurs Sales of Old Jewelry as Scrap Rises 22%.

- Household wealth in the U.S. increased by $2 trillion in the second quarter, bringing an end to the biggest slump on record. Net worth for households and non-profit groups climbed to $53.1 trillion from $51.1 trillion in the first quarter, marking the first gain since the third quarter of 2007, according to the Federal Reserve’s Flow of Funds report today in Washington. The government began keeping quarterly records in 1952. The advance reflected the biggest quarterly jump in stock prices since 1998 and the first increase in home values in more than two years. Together with increased savings and less debt, the gain in wealth is part of the mending process consumers will undergo in coming years before spending can gain speed.

- American Airlines, the world’s second-largest carrier, said it raised $2.9 billion in cash and financing in “a show of strength” and will expand at four U.S. hubs to prepare for a recovery in travel demand. American parent AMR Corp.(AMR) rose the most in 14 months in New York trading. Credit-card partner Citigroup Inc. paid $1 billion in an advance purchase of frequent-flier miles, and GE Capital Aviation Services provided $1.6 billion in jet-financing commitments, American said today.

- Manufacturing in the Philadelphia region expanded more than forecast in September as sales advanced at the fastest pace since the recession began. The Federal Reserve Bank of Philadelphia’s general economic index jumped to 14.1 this month from 4.2 in August, the bank said today. While shipments gained, orders slowed and employment and inventories decreased, the report showed, indicating manufacturing may take time to rebound. “Manufacturing activity is still at a very low but it has bottomed and even begun a modest recovery,” said Steven Wood, president of Insight Economics LLC in Danville, California. “However, a vigorous recovery is unlikely.” The Philadelphia Fed’s shipments index jumped to 8.2, the highest level since December 2007, the month the world’s largest economy slumped in the recession. The new orders index fell to 3.3 from 4.2 in August. The measure of inventories slumped to minus 18.1 from 0.3. Today’s report showed the employment index fell to minus 14.3 from minus 12.9 in August, which was an 11-month high. The gauge of prices paid climbed to 14.9 from 10, while an index of prices received slumped to minus 10.6 from minus 1.5. Manufacturers were less optimistic about the future, today’s report showed. Expectations for the next six months fell to 47.8 from 56.8.

Wall Street Journal:

- House Speaker Nancy Pelosi Thursday questioned whether a Senate health-care proposal was affordable for the middle class and expressed concerns about its effect on the elderly. The California Democrat, at her weekly news conference, welcomed health-care legislation released by Senate Finance Chairman Max Baucus as a step forward. But she also drew distinction between that bill and House legislation and reiterated her own preference for a government-run insurance program that would be available alongside private insurance plans, the so-called public option.

- The White House is scrapping a Bush-era plan for an Eastern European missile-defense shield, saying a redesigned defensive system would be cheaper, quicker and more effective against the threat from Iranian missiles. "After an extensive process, I have approved the unanimous recommendations of my secretary of defense and my joint chiefs of staff to strengthen America's defenses against ballistic-missile attack," President Barack Obama said in an announcement Thursday morning. The previous administration's plans will be changed, moving away from the installation of a missile-defense shield in the Czech Republic and Poland in the near future. A second phase to begin in 2015 could result in missiles being placed on land in Eastern Europe.

- FedEx Corp.(FDX) said the global economy is beginning to stabilize but warned that its earnings in the near term will continue to lag prior years' gains, as first-quarter profit dropped 53%. The package-delivery giant's optimism, brighter than its June forecast, portends a stronger quarter for many major transportation companies due to upturns in the retail, automotive and housing sectors—the three biggest drivers of manufactured goods shipped to the U.S. by barge or aircraft, and then moved by rail and truck. FedEx, because it handles an average of six million packages a day world-wide.

- Hundreds of federal health officials are earning more than cabinet secretaries, according to federal salary data, as part of a program originally intended to recruit and retain a handful of top-level scientists who might otherwise defect to private-sector jobs. The salary program, known as Title 42 after a provision in federal salary regulations, was originally set up for "rare" cases to attract and keep "extraordinary individuals" in the health sciences, according to an October 2000 memo within the Department of Health and Human Services that sought permission to pay these individuals outside of normal civil-service rules. About 2,000 officials are considered "special consultants" under Title 42. Of these, 378 earned more than $191,000 last year, the salary of a cabinet secretary in 2008.

CNBC:

- Congress has lost its momentum for financial regulatory reform and may not pass a bill before next spring, if at all, the chairman of the House Agriculture Committee said Thursday. "We're not moving on this," Collin Peterson told reporters while his committee listened to witnesses on regulation of over-the-counter derivatives. "I don't think it's acceptable not to deal with this issue this year."

- The economic recovery may be sharper than many forecasters, including the International Monetary Fund, have predicted, precisely because the recession was so deep, Michael Mussa, senior fellow, Peterson Institute for International Economics, told CNBC.com. "My observation is that when you have a deep recession you usually get a steep recovery," Mussa, who was also chief economist and director of the Department of Research at the IMF, said in a telephone interview. "What I'm forecasting is not a recovery that exceeds what we've seen in the past coming out of recessions."

- The 30-year U.S. home loan rate has dipped to a 3-1/2-month low to flirt again with breaking below the psychologically important 5 percent level. Average 30-year mortgages, the most widely used loan product, declined 0.03 percentage point to 5.04 percent in the week ended Sept. 17, Freddie Mac(FRE) said Thursday. The rate was the lowest since 4.91 percent in the week to May 28 and about 7/8 percentage point below the 5.78 percent a year ago, according to Freddie Mac, the second-largest U.S. home funding company.

- The debate over a tax on sugary soft drinks — billed as a way to fight obesity and provide billions for health care reform — is starting to fizz over. The tax would apply to soft drinks, energy drinks, sports beverages and many juices and ice teas, but not sugar-free diet drinks.

NY Times:

- Hedge Funds Challenged Over Fees.

FINalternatives:
- The hedge fund industry is still shrinking, but more are opening and fewer are closing, according to Hedge Fund Research.Some 292 hedge funds, including 123 funds of hedge funds, closed their doors in the second quarter, the data provider said. That’s just over 3% of all hedge funds, and is down 22% from the first quarter, when 376 funds went under, although the casualties included some of the bigger names in the hedge fund universe, including Pequot Capital Management, Cantillon Capital Management and Satellite Asset Management.New hedge funds are still opening at a slower pace than liquidating hedge funds, but they are opening faster than in the first quarter. In the second three months of the year, 182 funds went into business, up 24% from the January to March period.The news is not all good for hedge funds: Performance fees are continuing to drop, falling for the third straight quarter. The average incentive fee charged by hedge funds is no 19.18%, down 19.34% from the beginning of last year.

Washington Times:

- They're spending hundreds of billions of dollars to stimulate the economy, so Senate Democrats said Wednesday they might as well spend millions putting up signs to highlight where the money is being spent. The road signs, which let motorists know the paving and construction projects they see are being paid for by the $787 billion economic stimulus program, have popped up across the country. In a 52-45 vote, the Senate decided the signs should stay. "These are self-congratulatory signs; they're political signs. They're so that lawmakers can pat themselves on the back," he said. "But these signs cost money. Actually, when you add them all up, they cost a lot of money." Some localities have objected to the signs, arguing that they would rather spend the money on more projects. But Mr. Gregg said one community in New Hampshire was told no sign, no money for their original project. "We do enough self-congratulating around here. They shouldn't make the taxpayers pay for it," he said. Also Wednesday, senators voted against allowing states to determine their own transportation funding priorities, such as repairing deficient bridges. A day earlier, the Senate voted against an effort by Sen. John McCain, Arizona Republican, to drop all of the pork-barrel earmark projects from the $67.7 billion transportation and housing spending bill and use the $1.7 billion slated for earmarks to modernize the nation's air traffic control system instead. Five Democrats -- Sens. Kirsten Gillibrand of New York, Amy Klobuchar of Minnesota, Blanche Lincoln of Arkansas, Jeanne Shaheen of New Hampshire and Charles E. Schumer of New York -- voted with all 40 Republicans to try to strip the money, but their support was not enough. The stimulus bill included nearly $50 billion for the Transportation Department. So far, $28.3 billion has been obligated, but only $2.6 billion has been paid out for projects.

Vanity Fair:

- 100 to Blame: Alan Greenspan, Ernest Hemingway, and More.

Cargosystems.net:

- For the fourth year running, Singapore has retained its position as the world's number one box port. Industry predictions that Shanghai would steal the top spot came to nothing with Singapore outdoing its Chinese rival by a margin of over 2m teu.

GIGaom:

- Jajah is privately launching in beta today a voice-over-IP solution that lets people make calls for free via micromessaging site Twitter and other Twitter-related desktop and mobile applications. This is another effort by Jajah to get its VoIP service onto a popular application; last year, the company forged a partnership with Yahoo to offer its voice services to Yahoo IM users.

Rassmussen:

- The health care reform legislation working its way through Congress faces many obstacles primarily because it touches so many aspects of life. The abortion issue is one more with the potential to create a lose-lose situation for advocates of the plan. The latest Rasmussen Reports national telephone survey finds that 48% believe any government-subsidized health care plan should be prohibited from covering abortion procedures. Thirteen percent (13%) believe such plans should be required to cover abortions, and 32% favor a more neutral approach with no requirements in either direction.

The Daily Beast:

- Are two measly Bear Stearns hedge-fund managers the only “culprits” likely to go to jail over the financial meltdown? Charlie Gasparino on the strange lack of interest in prosecuting Wall Street.

Reuters:
- The California lawmaker who spearheaded a high-profile anti-obesity effort across the country's most populous state is now training his sights on sugar-sweetened drinks. Sen. Alex Padilla, who led a campaign requiring big restaurant chains to disclose calories in meals, said on Thursday he planned to hold hearings in November on the link between soda consumption and obesity.

- Genetic analysis products maker Sequenom Inc (SQNM) said on Thursday it launched its cystic fibrosis carrier screening test, sending its shares up 12 percent. Earlier this year, Sequenom delayed the launch of its much-awaited Down Syndrome test due to mishandling of data by employees, shaking investor confidence in the company. "A lot of people were sceptical if the company would be able to launch its tests in a timely manner," said Hapoalim Securities analyst Raghuram Selvaraju. "The fact that they have launched this one indicates that they were serious about what they said in their last earnings call about rolling out these tests," he said.

- The U.S. commercial paper market expanded for the fifth straight week for the first time since December, bolstering indications of an economic rebound as the global financial crisis fades, Federal Reserve data showed on Thursday. Analysts point to the incipient recovery of this market as a sign companies are restocking shelves to meet an upturn in demand and even increasing payroll costs to hire workers in some cases, confirming the economy is likely growing again after the most brutal recession in decades.

- The biggest change in U.S. higher education finance in 35 years was approved on Thursday by the House of Representatives, handing a defeat to major banks and student loan giant Sallie Mae (SLM). Lawmakers voted 253-171 in favor of legislation that would cut the banks and Sallie Mae out of a large slice of the $92 billion college student loan business, shifting most lending into a program run by the U.S. Education Department. The bill, supported by the White House, will go next to the Senate for further consideration.

Financial Times:
- The chief executive of the Australian Securities Exchange has criticized the Obama administration’s planned regulatory reforms of the US financial system, arguing they are “draconian” and out of touch with market developments. Robert Elstone, head of the ASX, said the reforms were too broad, bringing in parts of the securities markets – such as the over-the-counter swaps market – that had not been big contributors to the global financial crisis.

Xinhua:

- A Chinese official vows on Thursday to curb the country's production overcapacity and avoid repetitious construction of projects that are less environmental-friendly.

TheMarker:

- Tower Semiconductor Ltd. will return to a full work week after a period of working shortened weeks because of the financial crisis.

Bear Radar

Style Underperformer:
Small-cap Value (-1.13%)

Sector Underperformers:
Gold (-2.61%), Coal (-2.52%) and Semis (-1.97%)

Stocks Falling on Unusual Volume:
STEC, MXIM, FMBI, ZION, MBT, PSEC, ABB, FFIC, MLHR, DBRN, TNDM, WRLD, GMXR, ATPG, PAAS, SSRI and USG

Stocks With Unusual Put Option Activity:
1) EK 2) CNX 3) XL 4) GCI 5) VLO

Bull Radar

Style Outperformer:
Small-Cap Growth (+.45%)

Sector Outperformers:
Airlines (+3.75%), Gaming (+2.01%) and Steel (+1.80%)

Stocks Rising on Unusual Volume:
SQNM, ADS, YHOO, DB, MFC, LFC, CLMT, AAPL, SNCR, FSLR, ITRI, CSIQ, APSG, PTI, PT, SBAC, XNPT, CFSG, APOG, DNDN, SNCR, RBCN, FWLT, AMSC, WATG, ENER, SMTS, THOR, GTIV, CLDN, EBIX, JST, BUCY, ITRI, GTXI, VLO, MDP, HSP, IRE and OEH

Stocks With Unusual Call Option Activity:
1) ALL 2) VLO 3) VRSN 4) STEC 5) HANS

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