Stocks Higher into Final Hour on Less Economic Fear, Short-Covering, Technical Buying

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Biotech longs, Financial longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly positive as the advance/decline line is slightly higher, most sectors are rising and volume is heavy. Investor anxiety is very high. Today’s overall market action is bullish. The VIX is rising .21% and is high at 23.70. The ISE Sentiment Index is very low at 82.0 and the total put/call is slightly above average at .88. Finally, the NYSE Arms has been running above average most of the day, hitting 1.58 at its intraday peak, and is currently .81. The Euro Financial Sector Credit Default Swap Index is rising 1.37% today to 71.66 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 2.63% to 104.17 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is up 1 basis point to 21 basis points. The TED spread is now down 442 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 4.33% to 36.13 basis points. The Libor-OIS spread is unch. at 10 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 1 basis point to 1.82%, which is down 85 basis points since July 7th. The 3-month T-Bill is yielding .08%, which is down 1 basis point today. The bears were unable to gain any traction from morning profit-taking again today. Restaurant, REIT, Homebuilding I-Banking, Telecom, Semi, Oil Service and Alt Energy shares are all outperforming today. (XLF) had been dragging on the major averages this morning, but has reversed to session highs over the last couple of hours, rising .4%. REITs have been leaders again today, which is a large broad market positive. Today’s gains are more impressive considering Shanghai’s 3.2% drop last night. It is also a positive to see gauges of investor angst rising today, despite another push higher in the averages. Nikkei futures indicate an +100 open in Japan and DAX futures indicate an +21 open in Germany on Monday. I expect US stocks to trade mixed-to-higher into the close from current levels on diminishing economic fear, short-covering, lower energy prices, technical buying and investment manager performance anxiety.

Today's Headlines

Bloomberg:

- Gain in US Household Wealth Will Help East Strain on Spending.

- CME Group Inc.(CME) and Citadel Investment Group LLC, partners in a venture to guarantee credit- default swaps that has yet to process a trade, plan to jumpstart the business by giving stakes to some of the largest asset managers and hedge funds. Pacific Investment Management Co., BlackRock Inc., AllianceBernstein Holding LP, BlueMountain Capital Management LLC and D.E. Shaw & Co. are joining the effort to back trades in the $27 trillion credit-default swap market, CME said today in a statement.

- Crude oil fell for a second day as the dollar strengthened against the euro, dimming investors’ demand for dollar-priced assets to hedge against inflation. Oil dropped as much as 1.7 percent as the U.S. currency climbed for the first time in five days. Inventories of crude oil, gasoline and distillate fuel are higher than average, according to the Energy Department. “The rally in energy is looking a little long in the tooth,” said John Kilduff, senior vice president of energy at MF Global in New York. “It will take a long while, six months or a year, to work off the inventory overhang,” said Adam Sieminski, the chief energy economist at Deutsche Bank AG in Washington. Supplies of distillate fuel, which include heating oil and diesel, climbed 2.24 million barrels to 167.8 million, the highest since January 1983 and 24 percent more than the five- year average.

- Lithuanian Prime Minister Andrius Kubilius sought “reassurance” about U.S. commitment to the nation’s security after President Barack Obama scrapped plans for a missile-defense system in eastern Europe. Lithuania, the largest of the three Baltic states that broke free from the Soviet Union and joined NATO after the Cold War, viewed the missile shield as a symbol of U.S. resolve, Kubilius said. “The United States administration should know that in central Europe, the feelings are very simple, we are waiting for some kind of reassurance,” the premier said in an interview in Brussels late yesterday.

- BlackRock Inc.(BLK) Chairman Laurence Fink said Obama administration programs to help homeowners stave off foreclosure may hinder the recovery of the mortgage market while benefiting banks that own second loans on the properties. “I am just very worried,” Fink said yesterday in an interview in New York. “How do we get a vibrant securitization market back when we are doing these things in the short run that are good for the banking system and good for the homeowner but not as good as it should be?”

- Prime Minister Vladimir Putin called for trade concessions, including an end to restrictions on technology transfers to Russia, following U.S. President Barack Obama’s decision to abandon a missile shield in Europe. “I’m counting on other decisions to follow this correct and brave decision, including the complete elimination of restrictions on cooperation with Russia and on transfers of high technology to Russia as well as an intensification of World Trade Organization expansion to include Russia, Belarus and Kazakhstan,” Putin said at a business forum in Sochi today.

- The passing of the one-year mark since the collapse of Lehman Brothers Holdings Inc. may lower measures of risk exposure at securities firms and help support demand for riskier assets, according to JPMorgan Chase & Co. “Dealer VAR levels could decline significantly in the coming weeks potentially falling 20 percent by mid-October. While a lower risk measure doesn’t necessarily lead directly or immediately to a greater capital allocation, it does imply that on the margin market trading capacity and risk taking appetite will increase.”

- The total return on high-yield, high-risk loans rose to a record high this week as companies including Blockbuster Inc. and hospital operator Select Medical Corp. sold shares or bonds to reduce their bank debt. The S&P/LSTA U.S. Leveraged Loan 100 Index, which tracks the most actively traded loans, recorded a year-to-date total return of 46.54 percent as of yesterday, an all-time high since the inception of the index in January 2002, according to data provided by Standard & Poor’s. Leveraged loans are rising as thawing credit markets and Fed Chairman Ben S. Bernanke’s view that the worst recession in seven decades “very likely” has ended spur companies to pay down debt, attracting investors to junk-rated borrowers.

- The Central Intelligence Agency is setting up more bases in Afghanistan to help the U.S. military counter the Taliban’s expanding control over the country, the agency’s director said. The extra CIA operatives will support the 17,000 additional troops President Barack Obama authorized soon after taking office this year and the civilian government employees helping to rebuild the country after years of war, CIA Director Leon Panetta said in an interview.

Wall Street Journal:

- Policies that set the pay for tens of thousands of bank employees nationwide would require approval from the Federal Reserve as part of a far-reaching proposal to rein in risk-taking at financial institutions. The Fed's plan would, for the first time, inject government regulators deep into compensation decisions traditionally reserved for the banks' corporate boards and executives. Under the proposal, the Fed could reject any compensation policies it believes encourage bank employees -- from chief executives, to traders, to loan officers -- to take too much risk. Bureaucrats wouldn't set the pay of individuals, but would review and, if necessary, amend each bank's salary and bonus policies to make sure they don't create harmful incentives. The Fed's latest move marks another striking exertion of power by the nation's central bank since the financial crisis struck with ferocity two years ago. It has bailed out firms such as American International Group Inc. and has flooded the financial system with money. Some congressional critics, especially Republicans, argue the Fed is exerting itself too aggressively, a complaint that will surely be amplified by its move to oversee bank pay practices. The proposal will likely please congressional Democrats, for whom corporate compensation has become a rallying cry, at a time when the Fed is defending itself from moves by Congress to restrain its independence. The Fed itself believes it has the legal authority to take such action through its existing supervisory powers, which are designed to oversee a bank's soundness. Its strategy appears to go further than what some in the industry were expecting, given that it would apply to many employees, not just top earners. "Given the changes the industry has already done, if the restrictions on income-producers or salespeople are too draconian, it will actually undermine the strength of the institution," said Scott Talbott of the Financial Services Roundtable, a trade group of financial companies.

- Intel Corp.(INTC) will soon introduce chips based on a new manufacturing technology it hopes will help the company attack potentially tough new markets as well as boost computer performance.

- Amazon.com Inc.(AMZN) is quietly expanding its private-label business in a bid to diversify away from its online bookstore roots and become more like a general retailer.

- Jack Dorsey, the creator of Twitter, said Friday that his next venture would be based on themes similar to the microblogging service’s and may focus on health care and financial services.

- The Federal Reserve’s plan to give much more scrutiny to the compensation packages offered at thousands of U.S. banks met immediate criticism from some Republicans. Rep. Tom Price of Georgia, chairman of the Republican Study Committee, called the announcement “outrageous” and said it “goes against every principle that has created American prosperity.” Price said in a statement that the Fed lacks the authority to review bank compensation, and added that “Markets should set salaries, not bureaucrats. By even considering such a proposal, the U.S. government has announced to the world that we have given up on a market-based economy.” The Fed’s proposal for a say over compensation decisions, he continued, is a slippery slope. “Once a beachhead is established in controlling the pay of private individuals, there’s little left for Americans to control in our economy… Such overreach is precisely why proper regulatory reforms are needed to rein in the Fed and refocus it on its core mission of monetary policy. “ Rep. Scott Garrett (R., N.J.), a senior Republican on the House Financial Services Committee, also took aim at the Fed. “This action should finally dispel the myth of the political independence of the Fed,” he said in an interview. “We have never seen this action before.” The Fed, he said, is encroaching on Congress’s authority.

MarketWatch.com:
- Biotech stocks seem to have finally recovered from their harrowing fall off the market cliff earlier this year, though some may wonder if the gains will hold.

NY Times:

- Google(GOOG) is pushing for a second act. The company has built its fortune almost entirely on the back of small text ads, which appear alongside its search results and on sites across the Web. Now it is stepping up efforts to make inroads into graphical display ads, a business long dominated by Yahoo. On Friday, the company plans to introduce a long-awaited new version of an ad exchange, like a stock market, where advertisers and publishers can buy and sell advertising space, filling spots in Web pages on the fly.

Washington Times:
- President Obama said this week that his health care plan won't cover illegal immigrants, but argued that's all the more reason to legalize them and ensure they eventually do get coverage. "It is ironic that the president told the American people that illegal immigrants should not be covered by the health care bill, but now just days later he's talking about letting them in the back door," said Rep. Lamar Smith of Texas, the top Republican on the Judiciary Committee. "If the American people do not want to provide government health care for illegal immigrants, why would they support giving them citizenship, the highest honor America can bestow?" Mr. Smith said.

Washington Post:

- The Federal Housing Administration has been hit so hard by the mortgage crisis that for the first time, the agency's cash reserves will drop below the minimum level set by Congress, FHA officials said. Until now, government officials have warned that the agency could be forced to ask Congress for billions of dollars in emergency aid or charge borrowers more for taking out FHA-insured loans if the reserves fell below the required level, equal to 2 percent of all loans guaranteed by the agency. Both options are politically unpalatable.

- The proposition was outrageous, outlandish, and right up James E. O'Keefe III's alley. Hannah Giles was on the phone from the District, and she was asking him to dress like her pimp, walk into the offices of the ACORN community activist group, openly admit to wanting to buy a house to run as a brothel, and see what happened. It was serendipity, O'Keefe said Thursday. On that day in May, he was still burning mad after watching a YouTube video of ACORN workers breaking padlocks off foreclosed homes and barging in. "I was upset," he said. O'Keefe, 25, packed his grandfather's old wide-brimmed derby hat from his swing-dancing days, his grandmother's ratty chinchilla shoulder throw, and a cane he bought at a dollar store, then drove from his parents' home in northern New Jersey to the District to execute the idea with Giles, 20. What happened next was a scandal that has shaken ACORN to its core.

NYDailyNews.com:

- Iran experts at the U.N.'s nuclear monitoring agency believe that Tehran has the ability to make a nuclear bomb and worked on developing a missile system that can carry an atomic warhead, according to a confidential report seen by The Associated Press. The document drafted by senior officials at the International Atomic Energy Agency is the clearest indication yet that those officials share Washington's views on Iran's weapon-making capabilities and missile technology — even if they have not made those views public. The document, titled "Possible Military Dimension of Iran's Nuclear Program," appeared to be the so-called IAEA "secret annex" on Iran's alleged nuclear arms program that the U.S., France, Israel and other IAEA members say is being withheld by agency chief Mohamed ElBaradei — claims the nuclear watchdog denies.

Vanity Fair:

- 100 to Blame: Infectious Greed, The International Monetary Fund, and More.

Statesman.com:

- Advanced Micro Devices Inc.(AMD) told workers this week that it will restore pay rates in December that were reduced early this year in the face of the economic downturn. CEO Dirk Meyer told workers in an e-mail message this week that the pay reinstatement is coming. AMD announced in January that it was cutting jobs and temporarily reducing pay for workers. The pay cuts ranged from 5 percent for hourly workers to as high as 20 percent for a few top executives, including Meyer. With promising new products being introduced and the economy gaining strength, Meyer said the company remains "optimistic (about) ending the year on a profitable note."

WNBC:

- A Denver man who sparked anti-terror raids in Queens and has been identified by law enforcement as having a possible link to al-Qaida has been asked to return for a third day of questioning by the FBI. Najibullah Zazi is expected to return to FBI headquarters in Denver this morning. His attorney, Arthur Folsom, said he was allowed to leave last night after eight hours of questioning but said that the FBI had further questions.

Rassmussen:

- Fifty-one percent (51%) of U.S. voters now say Congress should end all federal funding of the controversial community organizing group ACORN. A new Rasmussen Reports national telephone survey finds that just 17% favor continued taxpayer support of the Association for Community Organizations for Reform Now.

- A new government report concludes that taxpayers are unlikely ever to be repaid for much of the bailout money already given to General Motors, but 57% of Americans believe it’s likely the government will have to provide even more bailout funding to keep GM in business. That figure includes 23% who say an additional funding request is very likely.

Reuters:
- A weekly gauge of future U.S. economic growth rose to a level last seen one year ago, while its annual growth rate hit a fresh record high, feeding hopes of a recovery immune to looming economic threats. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index rose to 126.2 in the week to Sept. 11 from an upwardly revised 126.0 the prior week, a figure ECRI originally reported as 125.4. It was the group's highest index reading since Aug. 29, 2008, when it was 126.3. The index's annualized growth rate ticked up to a fresh record high of 22.9 percent from an upwardly revised high of 22.5 percent, which was originally reported as 21.3 . Such a concerted move among all of the index's components suggest an "unstoppable" recovery ECRI Managing Director Lakshman Achuthan told Reuters. Achuthan has recently said that a double-dip recession is highly unlikely, and that an economic turnaround will be stronger than many analysts project. "We have never wavered on our call precisely because at this stage of the cycle there are no relevant roadblocks," Achuthan said, adding that concerns over mounting unemployment, debt-laden consumers, and dips in a recovery are typical of recessionary times. "Variations of these fears have existed at this stage of the last 20 business cycle recoveries spanning over a century." Such a rise in ECRI's WLI growth to a record high "confirms that in the coming months, the economic recovery will surprise a cautious consensus," Achuthan said.

- The head of HSBC's (HBC) North American operations said on Friday he saw "green shoots" emerging in the U.S. economy but it was unclear if it was a permanent phenomenon. "We're starting to see what a lot of the journalists and economists call green shoots," Brendan McDonagh, chief executive of HSBC North America, said on the sidelines of the Global Irish Economic Forum. "It's very hard to distinguish between what is the impact of the financial stimuli the U.S. government has put in place and whether that's had a permanent effect on consumer confidence," McDonagh said.

- The Internet and advances in technology are transforming fashion, making it easier for designers to create collections and less expensive for the them to show and sell their work, experts say. Instead of spending tens of thousands of dollars on a runway show at New York Fashion Week, some designers presented collections for spring and summer 2010 online, while others are expanding the reach of their brand by making it easier for shoppers to buy their clothes online.

Financial Times:
- The Obama administration’s drive to revive the Arab-Israeli peace process suffered a severe setback on Friday when George Mitchell, top US envoy to the Middle East, failed in his latest attempt to persuade Israel to halt settlement construction. The setback clouded prospects for a summit, on the sidelines of next week’s UN General Assembly in New York, between Benjamin Netanyahu, the Israeli premier, Barack Obama, the US president, and Mahmoud Abbas, the president of the western-backed Palestinian Authority.

TimesOnline:

- Afghanistan Is Hard All The Time, But It’s Doable by General David Petraeus. As in Iraq in 2007, attacks are frequent and challenges significant. But success is vital for the security of all nations.

Bear Radar

Style Underperformer:
Mid-Cap Growth (+.25%)

Sector Underperformers:
Coal (-1.60%), Airlines (-1.01%) and Gold (-.83%)

Stocks Falling on Unusual Volume:
STEC, CNH, VQ, KWK, PALM, TRAK, NVTL and FUQI

Stocks With Unusual Put Option Activity:
1) ARNA 2) SWY 3) EK 4) FUQI 5) IOC

Bull Radar

Style Outperformer:
Large-Cap Value (+.31%)

Sector Outperformers:
Semis (+.88%), Drugs (+.86%) and Homebuilders (+.79%)

Stocks Rising on Unusual Volume:
VVUS, MNKD, PG, EL, PFE, STD, HBC, IOC, BHI, WG, ALJ, SWIR, BDC, KALU, HEAT, SXCI, MDRX, MCRI, ZUMZ, CISG, DGIT, SCOR, EPAY, DDRX, ILMN, CHBT, AAPL, CMED, BCSI, SNDK, TEVA and SBUX

Stocks With Unusual Call Option Activity:
1) ODP 2) WNR 3) ARNA 4) IOC 5) HBAN

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Friday Watch

Late-Night Headlines
Bloomberg:

- The U.S. Securities and Exchange Commission proposed banning flash orders after lawmakers said the practice may give hedge funds an advantage over other investors. SEC commissioners unanimously voted today to seek public comment on a rule barring exchanges and trading platforms from giving clients access to information about stock orders a fraction of a second before the market. The proposal requires a second vote at a later public meeting to become binding. “Investors that have access only to information displayed as public quotes may be harmed if market participants are able to flash orders and avoid the need to make the orders publicly available,” Chairman Mary Schapiro said.

- The Federal Reserve’s balance sheet expanded for a sixth straight week as the central bank purchased housing debt in a program aimed at reducing mortgage rates. The Fed’s assets rose $51.9 billion, or 2.5 percent, to $2.14 trillion, the highest since May, in the week ended yesterday, the central bank said today in Washington. Mortgage- backed securities increased by $59.8 billion to $685.1 billion. One year after Lehman Brothers Holdings Inc.’s bankruptcy prompted the Fed to begin doubling its balance sheet with emergency credit programs, U.S. central bankers are trying to determine when to withdraw that stimulus. The Fed’s policy- setting Open Market Committee meets in Washington Sept. 22-23.

- The U.S. House of Representatives voted today to cut off all federal funding for the Association of Community Organizations for Reform Now after reports that some of the group’s employees gave tax and housing advice to people who said they ran a prostitution business. The motion passed 345-75 during debate on legislation to end federally subsidized private student loans. The bill now goes to the Senate. “Acorn’s abuse of the public trust and disregard for the responsibilities that come with receiving taxpayer funding are disturbing,” said Representative Roy Blunt, a Missouri Republican. Acorn, a nonprofit organization that provides housing and other assistance for low- and moderate-income families, has received more than $53 million in federal funds since 1994, according to a report by House Oversight and Government Reform Committee Republicans. Jerry Schmetterer, a spokesman for Brooklyn District Attorney Charles Hynes, said his office is conducting a criminal investigation of Acorn. He declined to elaborate. New York Attorney General Andrew Cuomo is monitoring that probe and will ensure any taxpayer money related to Acorn was used correctly, according to his spokesman, Richard Bamberger. California Attorney General Jerry Brown told reporters that he is “looking into” the allegations against Acorn. In addition, the Internal Revenue Service said Sept. 15 that it was conducting a “thorough review” of its agreements with Acorn, which helps low-income people prepare their tax returns. The group said it has helped prepare about 150,000 free tax returns since 2004 that have generated $190 million in tax refunds. “The IRS has partnered with hundreds of community and volunteer organizations, including Acorn, to provide free tax assistance to low- and moderate-income Americans,” IRS spokesman Frank Keith said in a statement released by the agency. “We are aware of recent events, and we are conducting a thorough review of our relationship with Acorn.” Johanns has asked Attorney General Eric Holder to investigate Acorn, and Representative Lamar Smith of Texas, the top Republican on the House Judiciary Committee, has made a similar request of the Federal Bureau of Investigation. “It is clear there exists significant justification for federal law-enforcement officials to conclude that Acorn should be investigated for potential criminal conduct, including the question of whether the organization itself is a criminal enterprise,” Smith wrote in a letter. Smith also asked the Justice Department’s inspector general whether Acorn has received money from the agency. Smith hasn’t yet received responses, said Kim Smith, a spokeswoman.

- Australian Prime Minister Kevin Rudd warned against complacency in the fight against terrorism after Indonesian police killed militant leader Noordin Mohammad Top, the alleged mastermind of bombings in Bali and Jakarta. Al-Qaeda and its Southeast Asian affiliate Jemaah Islamiyah remain “alive and well,” Rudd told Australian Broadcasting Corp. radio today. “We cannot afford to be complacent.”

- Copper fell in New York and London after two days of gains as swelling inventories fueled concern that this year’s rally lifted prices too high to reflect demand. Stockpiles tallied by the London Metal Exchange expanded for a 15th day to 324,375 metric tons, the most since May 26. Inventories have increased 8.5 percent this month after rising 6.4 percent in August and 5.6 percent in July. In Shanghai, stockpiles rose 12 percent last week to 97,396 tons, the highest level since June 2007. “The price should adjust to the high inventories and a looming oversupply,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said by phone. “We have had huge increases in stocks on the LME and in Shanghai, and there are probably undisclosed inventories in China as well.”

- US oil refiners, which lost almost two-thirds of their market value since the recession began in December 2007, won’t emerge from the “Dark Ages” of falling demand and disappearing profit margins until they shut their oldest plants, Credit Suisse Group AG analysts said. When margins began to fall along with demand at the end of 2007, refining capacity continued rising because of expansion projects that were already in the works. Any rebound in refining stocks based on expectations an economic recovery will lift fuel demand probably will be short-lived because of the overhang in production capacity, CSFB analysts Mark Flannery and Rakesh Advani said in a note to clients. “The real issue in US refining is overcapacity, and even the biggest of demand bounces will not be able to overcome this,” Flannery and Advani wrote. “The only lasting way out of the Dark Ages is for US refiners to start to shutter their weaker plants, and that part of the cycle has yet to begin.”

- Bank of America Corp.(BAC) knew about Merrill Lynch & Co.’s impending losses and plan to award bonuses when the lender made its takeover bid last year, said John Thain, the brokerage’s former chief executive officer.

- Aiful Corp., the Japanese consumer lender whose shares have lost 36 percent in the past month, plans to reschedule debt payments after being shut out of credit markets by the financial crisis. Aiful, which hasn’t sold bonds since March 2007 according to Bloomberg data, is seeking to delay repayments on 280 billion ($3 billion) of its 915 billion yen of debt, said spokesman Hirofumi Haruguchi. The company’s stock was poised to fall the most since its 1998 stock market listing on the Tokyo exchange.

Wall Street Journal:

- Penn National Gaming Inc.(PENN) is negotiating with the bankrupt Fontainebleau Las Vegas to buy the troubled casino and resort, according to a source with knowledge of the negotiations. The two parties have been in talks for three months and have not reached a deal, the source said. Talks could still fall apart at any moment. The $3 billion, 4,000-room hotel and casino development on the remote northern end of the Las Vegas Strip halted construction last spring when banks cut off around $800 million in funding. Around 3,000 construction workers were laid off when the funding dried up. The project is about 70% complete.

- Shoppers soon will be able to buy everything from meat to moccasins based on a number that purports to tell them the products' environmental impact. Manufacturers and retailers across the globe are working to measure their products' carbon footprints for a variety of reasons, and all of the efforts have one thing in common: The results have the appearance of precision. But all the decimal points in the world can't hide the fact that measuring carbon footprints is inexact. It is clouded by varying methodologies and definitions -- not to mention guesses. "There are no clear rules for the time being," says Klaus Radunsky, who co-chairs a group within the Geneva-based International Organization for Standardization that is producing a guideline for measuring products' environmental impacts. "It depends very much on how you do the calculations."

- Senate Finance Committee Chairman Max Baucus unveiled his long-awaited health-care compromise this week to the sound of one hand clapping. You wouldn't know it from the White House, which soothingly spun the Baucus bill as a breakthrough on the forced march to reform. We were told it was a good thing that the only person in Washington who liked Max Baucus's bill was . . . Max Baucus. That everybody was unhappy meant we were getting somewhere. What matters is that the Senate now has a "common sense" product to serve as a "building block" for bipartisan legislation. Uh-huh. Mr. Obama has the same problem he's had since the start, only magnified. That would be the left wing of his party, which is about to rip up the Baucus bill, making an ugly product grotesque.

MarketWatch.com:
- A proposed regulatory change in how companies recognize revenue of certain products could provide a boost for several tech firms, and Apple Inc. in particular. Several leading tech companies, including Hewlett-Packard Co.(HPQ) , IBM Corp.(IBM) and Cisco Systems Inc.(CSCO) had lobbied for the change. However, the most high-profile beneficiary could be Apple(AAPL) . In particular, the change is expected to improve how the company accounts for the sales of its wildly popular iPhone as well as products such as its Apple TV set-top box. For Apple, the impact of the accounting change can be seen in how the company reported its fiscal third-quarter results in July. Apple said it earned $1.23 billion, or $1.35 a share, on sales of $8.34 billion. However, when sales and costs of good sold for iPhones and Apple TV were, as Apple put it, "adjusted over their economic lives," the company's adjusted earnings for the quarter would have been $1.94 billion and sales would have climbed to $9.74 billion.

- Venezuela's President Hugo Chavez announced that China will invest $16 billion in an oil exploration project in the Orinoco River region, according to media reports. The news comes only a few days after Venezuela signed a $20 billion joint venture agreement with a group of Russian oil companies to develop the Junin 6 deposit in the Orinoco basin, reports said. Chavez reportedly said the two deals will increase Venezuela's oil production by about 900,000 barrels a day.

IBD:

- "In good times, people get sick. In bad times, people get sicker." Bill Sanger, chief executive officer of Emergency Medical Services (EMS), figures there's a lot of truth in that old saw. And he should know. His firm provides ambulance service and also staffs and manages emergency rooms. Business during these stressed times is flourishing.

CNNMoney.com:

- Afghan President Hamid Karzai on Thursday warned Western observers not to "delegitimize" the results of his country's presidential election, which has been marred by allegations of fraud.

NY Post:

- The Obama administration secretly estimated that its cap-and-trade plan to fight pollution would cost Americans up to $200 billion a year -- or $1,761 per family. The stark assessment of the administration's top environmental priority was made in an unreleased Treasury Department analysis that contradicts much lower figures cited by Democratic supporters. The House passed the bill by a narrow 219-212 vote in June. Cap-and-trade would be a government program designed to combat global warming by setting an annual cap on the amount of pollution companies can emit. To stay under their cap, firms could buy extra allowances in a government auction. Economists say that cost would be passed on to consumers. How much cost? An internal Treasury Department memo said, "Given the administration's proposal to auction all emission allowances, a cap-and-trade program could generate federal receipts on the order of $100 to $200 billion." Translation: $100 billion to $200 billion in what amounts to a "carbon tax," which could fall on everyone who uses energy. The higher figure amounts to $1,761 per US household.

Forbes:

- At Stagg Capital, investor money may have drifted off into an outside business and/or romantic relationships.

Politico:

- The Senate has rejected an amendment that would have killed funding for the John Murtha Airport in Johnstown, Pa., turning back an effort by fiscal conservatives to yank earmarks from a largely deserted airport named after a controversial lawmaker. The vote was 43-53, as Democrats decided to retain funding for an airport that has only three flights a day and is named after Rep. John Murtha (D-Pa.), a powerful appropriator who has come under increasing scrutiny for earmarks and his relationships with defense contractors in his district. The Murtha airport has received a total of $150 million in funding and currently receives about $1.5 million a year. The three daily flights — all to Washington — leave the Johnstown airport, and quite often the airplanes are half-empty.

- In the war on the czars, Glenn Beck and the GOP are picking up reinforcements from an unlikely source: the Democratic Party. The Fox News host and leading Republican lawmakers have been hammering President Barack Obama for weeks over a proliferation of policy “czars” — presidential appointees who don’t have to be confirmed by the Senate and aren’t easily held to account by Senate oversight committees. Democratic Sen. Russ Feingold of Wisconsin joined the anti-czar chorus Wednesday, asking Obama to detail the roles and responsibilities of all of the czars in his administration and to explain why he believes the use of czars is consistent with the Senate’s constitutional power to offer advice and consent on top-level executive branch officials. “To the extent that this undercuts that role and people are put in the place of Cabinet people and really are the key authorities and you can’t question them, that’s something worth talking about,” Feingold said. “I think it’s a fair point.” Feingold says he doesn’t know if there are any constitutional violations, but he suggested that he may hold an oversight hearing on the matter. Although the czar charge has come mostly from the right, Feingold isn’t the only Democrat to voice concerns about the issue.

Reuters:

- Robust sales of the Pre smartphone helped Palm Inc post a smaller-than-expected loss, but a tepid second-quarter sales forecast and a plan to sell more shares helped snuff out a rally and sent its shares down nearly 2 percent on Thursday.

- A U.S. energy information company has brought a James Bond approach to the otherwise bland job of gathering oil inventory data, hoping high-tech detective work will attract the business of petroleum traders hungry for accurate supply figures. Kentucky-based Genscape Inc, which has been selling power supply data since it was founded in 1999, has been flying a helicopter over the nation's top oil storage hub in Cushing, Oklahoma, every Friday since January, snapping photos to see how full the tanks are.

Financial Times:

- After five years of scanning books electronically, Google(GOOG) is finally entering the print publishing business for the first time. Through an arrangement with a printing company unveiled on Thursday, Google will offer 2m out-of-copyright books that can be picked up or shipped from libraries, universities and other spots around the world. It has struck the deal with On Demand Books, makers of the Espresso Book Machine that can print a 300-page book in less than five minutes, complete with a cover and a bound edge. The editions are likely to cost about $8, with Google keeping a dollar, On Demand Books keeping a dollar and the retailer keeping $3. The remaining $3 should cover the cost of materials and labor. “Google’s mission is to make the world’s books more available,” said Jennie Johnson, spokeswoman for the internet search leader. The alliance is timed to help Google demonstrate the public benefit to its broader initiative in books, which includes text searches and a proposed legal settlement of a class-action copyright case.

- Barack Obama’s decision to scrap Bush-era plans for a missile defence shield on Thursday triggered dismay in central Europe and among Republicans on Capitol Hill, amid claims that it amounted to a major security concession to Russia. Unveiling one of the biggest reversals on national security since coming to office, the US president said that he would abandon predecessor George W. Bush’s plans for ground-based interceptors in Poland and a related radar site in the Czech Republic, deploying instead a new system that could hit shorter-range Iranian missiles. US officials deny the move is a quid pro quo for Russian support for tougher UN sanctions on Iran – an idea previously floated by Mr Obama’s advisers. Russia’s foreign ministry on Thursday denied that there was any private deal behind the US decision. The Polish and Czech governments voiced no immediate concern, amid US reassurances that it would later deploy land-based defence systems in eastern Europe. But politicians in warned that the move would undermine US relations with Nato allies who fear a resurgent Russia. Mirek Topolanek, a former Czech prime minister, said: “This is bad news. After 20 years of our path into Euro-Atlantic structures and our very active involvement there, the process is being halted.”On the 70th anniversary of the Soviet invasion of Poland, Lech Walesa, former president, said: “I can see what kind of policy the Obama administration is pursuing towards this part of Europe. The way we are being approached needs to change.’’ “It would be a defeat for the long-term thinking of the American administration regarding this part of Europe,” Aleksander Szczyglo, head of the Polish national security bureau, told Poland’s TVN television.

Telegraph:

- Lloyds Banking Group has been forced to abandon its plan to withdraw from the Government's toxic debt insurance scheme after failing to raise enough capital to meet the Financial Services Authority's strict requirements.

Economic Daily News:
- Nanya Technology Corp. raised the prices of DDR2 dynamic random memory chips to $2 because of shortage for the semiconductors, citing Pei-lin Pai, vice-president at Nanya.

The Economic Times:

- Infosys Technologies, Wipro and HCL Technologies are among the software service providers that are laying foundation for the next round of multi-million dollar orders from the big US corporations, by pitching for low-value, but politically important US state governments’ orders. Infosys, which counts JP Morgan and Morgan Stanley as clients for its services, bids for Arizona Public Service’s (APS) 400 positions, who work in its information-services department, and another 400 or so contractors to raise the staff strength for undisclosed amount. Nine other US states, some from where politicians opposed offshoring work, are looking to outsource their healthcare operations worth over $2 billion, said Wipro chief strategy officer KR Lakshminarayana, and the company hopes to get a slice of these.

Late Buy/Sell Recommendations
Citigroup:

- Upgraded (PG) to Buy, target $66.

- Reiterated Buy on (LMT), target $90.

SunTrust Robinson:

- Rated (GCO) Buy, target $28.

CSFB:

- Reiterated Outperform on (CKR), target raised to $13.

William Blair:

- Rated (MFE) Outperform.

- Rated (ARST) Outperform.

Oppenheimer:

- Rated (AMT) Outperform, target $41.

- Rated (CCI) Outperform, target $35.

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

Asia Ex-Japan Inv Grade CDS Index 113.50 +3.50 basis points.
S&P 500 futures -.32%.
NASDAQ 100 futures -.19%.

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
- None of note

Economic Releases

- None of note

Upcoming Splits
- None of note

Other Potential Market Movers
- The Morgan Keegan Industrial/Transport Conference, DA Davidson Engineering/Construction Conference and the (AGP) Investor Day could also impact trading today.

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