Stocks Slightly Lower into Final Hour on Profit-Taking, Higher Energy Prices

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Biotech longs and Defense longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is heavy. Investor anxiety is very high. Today’s overall market action is mildly bearish. Nikkei futures indicate a -43 open in Japan and DAX futures indicate a -2 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on investment manager performance anxiety, short-covering and bargain-hunting.

Today's Headlines

Bloomberg:

- Mutual-fund investors are mostly sitting out the stock-market rally that lifted share prices 57 percent since March, helping bond manager Pacific Investment Management Co. increase sales while American Funds loses assets. Bond funds attracted net deposits of $209.1 billion in the first eight months of the year while stock funds drew $15.2 billion, according to Morningstar Inc., the Chicago-based research firm that tracks the $10.6 trillion industry. Nine of this year’s 10 best-selling funds buy bonds and only one, Vanguard Total Stock Market Index Fund, focuses on equities. By putting money into bond funds in 2009, investors missed an opportunity to increase their stock fund holdings during a rally that added $3.5 trillion in market value to the Standard & Poor’s 500 Index since it reached a 12-year low on March 9. Michael Kim, an analyst who follows asset-management firms for Sandler O’Neill & Partners LP in New York, said investors are likely to shift money into stocks as they become more comfortable taking on risk. “They will come back into equities in a much bigger way,” he said in a telephone interview. Investors pulled $173.9 billion from stock funds in 2008, Morningstar data show.

- New York Senator Charles Schumer and fellow Democrats vowed to keep fighting for a government- run health-insurance program on the U.S. Senate floor after the finance committee defeated the proposal yesterday. The panel rejected amendments offered by Schumer and West Virginia Senator Jay Rockefeller to create a “public option” that would compete with private insurers such as Indianapolis- based WellPoint Inc. Panel chairman Max Baucus and two other Democrats joined with all of the committee’s Republicans to vote against both amendments. While Baucus said he was voting against the program because it couldn’t pass the Senate “at this point,” Schumer said he sees growing support.

- When it comes to paying for takeovers, stock is the new cash. Some 36 percent of this year’s acquisitions involved at least some stock, the highest proportion in eight years, data compiled by Bloomberg show. Kraft Foods Inc. and Xerox Corp. are using their shares for proposed takeovers. Zappos.com Inc. and Marvel Entertainment Inc. demanded equity instead of cash when they sold themselves.

- A New York man pleaded guilty to facilitating the transfer of $152,000 with the understanding the money would be used to buy night vision goggles and other equipment for a terrorist training camp in Afghanistan. Abdul Tawala Ibn Ali Alishtari, 56, of Ardsley, New York, pleaded guilty yesterday to charges of terrorism financing and conspiracy to commit wire fraud, U.S. Attorney Preet Bharara in New York said in a statement.

- Chicagoans are angry about Mayor Richard M. Daley’s deal to lease the city’s parking meters to Morgan Stanley investment funds. So angry that Daley’s popularity is at a record low, according to a Chicago Tribune/WGN poll. So angry that the 20- year mayor may not have taxpayer support to lease or sell more assets and bolster the city’s budget. That means Daley is under even more pressure to abide by his pledge that residents won’t pay anything for staging the 2016 Summer Olympics, which organizers say will cost $4.8 billion. The winning site is to be announced Oct. 2 in Copenhagen. “When they see the city get it so wrong, voters rightfully get very skeptical,” said Ralph Martire, executive director of the Center for Tax and Budget Accountability, a nonprofit public policy group in Chicago.

- Wyndham Worldwide Corp(WYN), the franchiser of Days Inn hotels and Super 8 motels, plans to buy more brands or acquire the operations of struggling competitors, Chairman and Chief Executive Officer Stephen Holmes said. “There’s quite a bit of distressed real estate,” said Holmes, 52, in a Sept. 28 interview at Wyndham’s Parsippany, New Jersey, headquarters. “It’s an opportunity to add new brands or convert underperforming hotels” to a Wyndham brand.

- Ameriprise Financial Inc.(AMP) agreed to buy the Columbia stock and bond funds from Bank of America Corp. for as much as $1.2 billion in cash, the biggest purchase by the investment and insurance company since its spinoff from American Express Co.

- Companies in the U.S. cut 254,000 jobs this month, more than forecast, a private report based on payroll data showed today. The estimated drop, which was the smallest since July 2008, compares with a revised 277,000 decline the prior month, figures from ADP Employer Services showed. The ADP report was forecast to show a decline of 200,000 jobs, according to the median estimate of 33 economists in a Bloomberg survey. Projections ranged from decreases of 300,000 to 133,000.

- The U.S. Environmental Protection Agency is withholding 79 permits to mine coal by removing mountaintops in four Appalachian states, a move that delays projects and may reduce supply.

- Best Buy Co.(BBY), the world’s largest electronics retailer, plans to hire more seasonal holiday workers this year to help meet demand for Internet-connected flat-panel televisions and mobile phones. Best Buy expects to sell more merchandise this holiday season than last, Chief Executive Officer Brian Dunn said at a briefing in New York. The chain sold more flat-panel TVs in July than last December, he said.

- Federal Reserve Vice Chairman Donald Kohn said tight credit, low inflation and slack demand for labor and products mean the central bank can keep interest rates at around zero “for an extended period.” “Exceptionally low interest rates are likely to be warranted for an extended period,” Kohn said today in remarks at a conference sponsored by the Cato Institute and the Shadow Open Market Committee in Washington. “Resource utilization is quite low, inflation is subdued and continuing restraints on credit are likely to constrain the speed of recovery.”

- Crude oil futures topped $70 a barrel and gasoline surged after a U.S. government report showed an unexpected decline in supplies of the motor fuel.

- Steel prices in the U.S. rose 13 percent in September as inventories hit record lows after producers cut output, Purchasing Magazine said. The average price of hot-rolled steel sheet, the benchmark product used in cars and appliances, climbed to $535 a ton from $475 in August, Purchasing said today in a monthly update. Cold- rolled sheet increased 10 percent to $625 a ton from $568. Steel prices began to rebound in July after producers slashed output in response to falling demand from the auto and construction industries. Buyers may begin to resist higher prices by making fewer purchases in November and December, Purchasing said.

Wall Street Journal:

- Senators writing a health-care overhaul bill on Wednesday rejected a bid to strengthen anti-abortion provisions already in the legislation, in a vote that could erode support for the legislation among some Catholics who back its broad goal of expanding insurance coverage. Meanwhile, Senate Majority Leader Harry Reid said Wednesday that he expects the Senate will take up health-care legislation on the week of Oct. 12.

- No state's economy, with the exception of Michigan, has careened into a deeper ditch than California in this recession. The state now has the fourth-highest unemployment rate (12.2%), the third-highest rate of mortgage foreclosures, and for two years has had the biggest budget deficit in the history of the 50 states. So it is very good news that yesterday Governor Arnold Schwarzenegger's bipartisan tax commission recommended a road out of this mess. The heart of the new plan is to broaden the tax base and slash tax rates on personal income, business and sales. California currently ranks at or near the top in all three categories. This has, paradoxically, contributed to the state's inability to pay its bills by driving men and women from the state and leading to revenue boom and bust. We don't agree with everything in this report, but there's no question it would be a huge improvement over the current tax code in its economic incentives, simplicity, revenue stability and fairness.

MarketWatch.com:
- The Federal Reserve Bank of Minneapolis has named economics professor Narayana Kocherlakota as president of the bank, replacing Gary Stern, who retired a month ago after 24 years.

CNBC:

- The holiday season is prime time for HDTV bargain hunters. Retailers, looking to draw people into the stores on "Black Friday," regularly offer impossibly low prices—and the sale of those discounted sets is often a quick barometer of the overall mood of consumers. This year won’t be much different, but as buyers focus on the current models (which analysts say could fall as low as $300 at some stores) manufacturers are looking down the road to the next big thing.

- U.S. President Barack Obama announced a plan Wednesday to spend $5 billion on medical and scientific research, medical supplies and upgrading laboratory capacity, which he said would create tens of thousands of new jobs.

NYPost:
- SO, is this how Goldman Sachs(GS) does it? "It," of course, is making gobs of money even when nobody else on Wall Street can. And those profits then go into outrageous bonuses to employees, which cause rancor on Capitol Hill and on Main Street. You've heard the old saying, "it's not what you know, but who you know." Goldman Sachs knows lots of important people. That fact is indisputable, mainly because former Goldman employees are scattered around the country, and the globe, in important, decision-making financial positions. But I'd like to make an addendum to that old saying, which I'll explore for you today: Who you know is only important if you can get them on the phone anytime you want. Today's column is about Thursday, Sept. 18, 2008. It's also about the unparalleled access that Goldman Sachs had to Treasury Secretary Hank Paulson. No matter how you slice, dice or excuse it, Blankfein by 9 a.m. would have had information that was not available to anyone else who makes their money trading securities. And, as you can imagine, there is a whole lot of value in that kind of inside access.

Washington Post:

- Senate Democrats introduced legislation Wednesday establishing mandatory, nationwide limits on greenhouse gases, hoping to spur political momentum on the issue before negotiators meet in Copenhagen in December to try to forge a new international climate pact. The bill would cut the nation's greenhouse gas emissions 20 percent compared to 2005 levels by 2020 and cover roughly 7,500 coal-fired plants, oil refineries and other facilities across the country.

Vanity Fair:

- The government secretly tried to orchestrate a deal involving Goldman Sachs in the week following Lehman Brothers’ collapse and considered using the Federal Reserve to help support such a transaction, Andrew Ross Sorkin reports in the new issue of Vanity Fair. In an excerpt from his forthcoming book, Too Big To Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves, Sorkin reports that the deal, which was nearly consummated, would have merged Goldman Sachs and Wachovia. Henry M. Paulson, the Treasury secretary and former C.E.O. of Goldman, was deeply involved in the process, contacting both Lloyd Blankfein, Goldman's current C.E.O., and a Wachovia board member, and strongly urged both to consider it. Wachovia’s C.E.O., Robert Steel, was a former vice-chairman at Goldman Sachs and Paulson’s former number two at the Treasury Department. Sorkin reports that Warren Buffett was also contacted about investing in the merged company, but told a banker at Goldman that it would never happen. “By tonight the government will realize they can’t provide capital to a deal that’s being done by the former firm of the Treasury secretary with the company of a former vice-chairman of Goldman Sachs and former deputy Treasury secretary,” Buffett said. “There is no way. They’ll all wake up and realize, even if it was the best deal in the world, they can’t do it.”

Rassmussen:

- Eighty-three percent (83%) of U.S. voters say legislation should be posted online in final form and available for everyone to read before Congress votes on it.

- The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 28% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Thirty-nine percent (39%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -11 (see trends).

- While majority Democrats in Congress struggle to put together a final health care reform plan, just 22% of U.S. voters believe that most members of Congress will understand what is in the plan before they vote on it.

Politico:

- Congress is on the verge of giving itself a bump in its annual budget — even as local governments, families and businesses across the country are tightening their belts in the worst recession in decades. Under a House-Senate conference measure, approved by the House last week and poised for passage in the Senate on Wednesday, spending for the legislative branch will increase 5.8 percent this year, boosting Capitol Hill’s annual budget to $4.7 billion.

The Detroit News:

- Bob Kruse, who recently led a critical Chevrolet Volt team and devised the automaker's long-term electric vehicle strategy, has resigned months before the vehicle's debut, The Detroit News has learned. Kruse's resignation, effective today, comes at a crucial time for General Motors Co., which is banking on the Volt to change public perceptions of the company and also help meet stringent new fuel rules.

- House Majority Leader Steny Hoyer this afternoon kicked off a day-long series of meetings aimed at resolving the long-simmering controversy over plans to close more than 2,000 auto dealers. The Maryland Democrat is meeting with about 20 dealers and officials from four groups representing dealers, including the National Automobile Dealers Association and the top lobbyists for General Motors Co. and Chrysler Group LLC. He is seeking "an equitable solution" for both sides.

Reuters:
- OPEC's spare capacity would lessen the impact on oil prices of any disruption to Iran's oil supply if the dispute over Tehran's nuclear program escalates, a Kuwaiti OPEC delegate said in a newspaper column. The nuclear dispute is supporting oil prices [O/R]. The potential for escalation is among factors that could affect the market in the near future, Mohammed al-Shatti said in a column for Kuwait's al-Rai newspaper on Wednesday. "But the presence of OPEC spare capacity of above 5 million barrels per day (bpd) would lessen the negative effect on the prices if any cut happened to oil supplies from Iran," Shatti wrote. A combination of a sharp fall in demand due to recession and the completion by top OPEC exporter Saudi Arabia of crude capacity expansion has left the producer group with the largest supply cushion in years. Saudi Arabia alone has around 4 million barrels per day of capacity idle, more than enough to cover for any disruption of Iran's exports of around 2.1 million bpd.

- The Obama administration's pay czar joked Wednesday that he might have to move to Pluto to escape the fallout from his first batch of compensation decisions, which are expected in October. Feinberg, a Washington lawyer appointed by President Barack Obama in June to decide on pay for the highest-paid employees of companies that received extraordinary government assistance, told a Chicago Bar Association event that he does not expect his rulings to be universally applauded. "I'm not sure there will be any type of result here that is going to be praised ...," said Feinberg, who appeared via teleconference. "Likely, I'll be criticized from both ends."

- Environmental activists said on Wednesday they canoed into Suncor Energy Inc's (SU) Alberta oil sands operation, blocking equipment in a second protest action in as many weeks aimed at disrupting crude production. Greenpeace said 23 of its activists entered Canada's second-largest oil sands operation, stopping conveyor belts that carry bitumen from the mine to an upgrading plant that processes the tar-like crude into light oil.

Financial Times:
- The confidence of US finance chiefs in their companies' near-term fortunes surged this past quarter, even as many of them forecast that a full-scale economic recovery might not begin until 2010, a survey has shown. US companies were expected to show an 11 per cent increase in net earnings in the next 12 months, according to a poll of 262 chief financial officers conducted by Financial Executives International, a corporate finance lobby group, and Baruch College. Those surveyed also expected that revenue would increase 5.8 per cent in the next year. For the first time in more than a year, CFOs forecast that capital budgets would rise in the next 12 months, as would hiring.

- London’s position as the world’s number two city for hedge funds is beginning to slip after almost a decade of gaining ground. New York, meanwhile, is reasserting itself in spite of the Madoff scandal, the fall of Lehman Brothers and a series of high-profile fund liquidations. According to a report from International Financial Services London – a promotional body run in conjunction with the City of London and the UK government – London’s share of the world’s hedge fund assets fell by 2 percentage points in 2008, while New York’s portion grew by the same amount.

- The US and its allies are at odds over tactics for high-profile talks with Iran on Thursday, with Washington adopting a more cautious approach than London and Paris and Europeans expressing concern that the administration of President Barack Obama may be moving too slowly and asking too little. In particular, Washington has downplayed longstanding calls for Iran to suspend uranium enrichment – as Tehran is required to do by a series of United Nations resolutions – focusing instead on calls for the Islamic Republic to “come clean” about the secret nuclear facility revealed last week at a Revolutionary Guards base near the city of Qom.

Globe and Mail:

- A deal to exempt Canada from Washington's controversial “Buy American” stimulus package clause is imminent, as Canadian and American officials continue to negotiate the details, the CBC reported Tuesday evening. If an agreement is reached, it would come as a relief to Canadian manufacturers who have been shut out of lucrative American procurement contracts that are funded by American federal stimulus dollars and, as such, are restricted to American suppliers.

Les Echos:

- France’s budget, which will be presented today, predicts deficits of 8.2% of GDP this year and in 2010. The budget forecasts that debt will reach 84% of GDP next year.

DigiTimes:

- Worldwide semiconductor equipment sales are forecast to reach US$21 billion in 2010, up 50% from US$14.1 billion in 2009, according to SEMI speaking during the SEMICON Taiwan 2009 (September 30-October 2) pre-show press conference. The growth was previously estimated at 47%. Manufacturing capacity utilization has improved, paving the way for a market recovery in 2010, said SEMI. Industry-wide wafer fab capacity utilization climbed to 77% in the second quarter, up from 56% in the first. Citing continued improvement in equipment bookings, the association suggested that many indicators imply better conditions for both semiconductor and equipment companies. SEMI expects chip fab spending, which already hit bottom in the second quarter of 2009, will manage sequential growth over the next few quarters. In the fourth quarter of 2010, the spending is expected to surpass the level seen in third-quarter 2008. SEMI earlier this month revised upward its fab spending forecast to 64% for 2010, following a 50.7% decline this year.

Bear Radar

Style Underperformer:
Large-Cap Value (-.57%)

Sector Underperformers:
HMOs (-1.81%), Tobacco (-1.42%) and Utilities (-.83%)

Stocks Falling on Unusual Volume:
WLP, CETV, GLBC, GNW, CHBT, ICON, ONXX, WINN, SSS, MOG/A, DRI and WOR

Stocks With Unusual Put Option Activity:
1) CIT 2) XRX 3) SD 4) LLY 5) DTV

Bull Radar

Style Outperformer:
Large-Cap Growth (-.78%)

Sector Outperformers:
Semis (+.15%), I-Banks (-.13%) and Computer Hardware (-.26%)

Stocks Rising on Unusual Volume:
NKE, IBN, IRE, AEM, EGO, NVDA, PZE, TEO, TKC, AMSC, RINO, BRCM, AMP, TDG, JBL and RDY

Stocks With Unusual Call Option Activity:
1) JBL 2) DRI 3) CIT 4) NKE 5) RRI

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Today's Headlines

Late-Night Headlines
Bloomberg:

- Kleiner Perkins Caufield & Byers, the venture-capital firm that committed $100 million last year to back iPhone startups, said it plans to add money to the fund because of the “stunning” popularity of Apple Inc.’s device. “All we see is more innovation going on in mobile, more people doing more on mobile,” Matt Murphy, who manages the iFund in Menlo Park, California, said in an interview. “It’s pretty clear that we’ll go beyond” $100 million, he said.

- Nike Inc.(NKE), the world’s largest athletic-shoe maker, posted first-quarter profit that exceeded analysts’ estimates as it cut marketing and personnel costs. The shares gained 4.5% after the close of regular U.S. trading.

- Micron Technology Inc.(MU), the biggest U.S. producer of computer-memory chips, reported a narrower loss after an industry glut eased and product prices rebounded.

- Toyota Motor Corp. plans its biggest U.S. recall because of a defect that may cause floor mats to jam down the accelerator pedal on vehicles including the top-selling Camry and certain Lexus models. The floor coverings shouldn’t be replaced with other mats, according to a Transportation Department statement yesterday. The issue is “critical” and affects about 3.8 million Toyota and Lexus vehicles, according to Toyota City, Japan-based Toyota.

- French President Nicolas Sarkozy says even with a record budget deficit, France needs to spend more borrowed money to kick start economic growth. As the government prepares to unveil its latest tax and spending plans today, Sarkozy is promising a “grand loan” to finance spending on everything from Paris’s rail system to new supercomputers. That will swell a budget shortfall that already is the highest since 1959, the year after France’s post-war government collapsed and Charles de Gaulle took power. Sarkozy’s borrowing proposal puts him at odds with German Chancellor Angela Merkel and British Prime Minister Gordon Brown, who say they intend to rein in deficits swollen by the recession. The risk is that Sarkozy’s penchant for “investing” may spook bond investors even as they improve earnings prospects for companies such as Bouygues SA and Electricite de France SA. It may even undermine France’s top credit rating. “France is in a dreadful debt dynamic,” said Guillaume Sciard, who oversees 3 billion euros ($4.4 billion) of bonds at Barclays Wealth Managers France in Paris. “France will lose its AAA rating by 2012. In Europe, Germany may be the last to potentially keep its AAA.”

- Gordon Brown’s attack yesterday on bankers and the rich won praise from traditional supporters of Britain’s ruling Labour Party and risked alienating business leaders who helped his party win the last three elections. The prime minister’s plan to make banks “the servant of the people” and to create a 1 billion-pound ($1.6 billion) fund protecting industry was aimed at securing the support of unions and working-class voters. His speech to the Labour conference in Brighton followed a poll showing Brown behind the two main opposition parties for the first time since 1982.

Wall Street Journal:

- A bipartisan Senate vote swept aside demands by liberal Democrats for a government-run health insurance plan, delivering a potentially lethal blow to the most controversial measure of the proposed U.S. health-care overhaul. Dramatizing Democratic divisions on the issue, five Democrats joined with all Republicans on the Senate Finance Committee to defeat 15-8 a proposal by Sen. Jay Rockefeller for a government plan to help those who couldn't get affordable insurance through their employers. A similar proposal fell by a 13-10 vote. The two votes suggested that the "public option" is all but dead in the Senate, though it clings to life in the House, where Speaker Nancy Pelosi has said it will be included in a bill to be brought to the House floor. The idea could still revive if the White House weighs in strongly on its behalf. Another possibility is the "trigger" option, where the public plan takes effect only if other steps fail to expand coverage and lower costs. "I want a bill that can become law," said Sen. Max Baucus, the Finance Committee chairman, who voted with the Republicans against the public option. Mr. Baucus said the public option can't win 60 votes in the Senate. Tuesday's votes set up the big drama for the next two months: whether Democrats can put aside intraparty divisions and craft a bill that will win a filibuster-proof 60 votes in the Senate and a majority in the House.

- A federal judge Tuesday sentenced Democratic fund-raiser Norman Hsu to more than 24 years in prison for illegally funneling money to U.S. political candidates and for defrauding investors in a multimillion-dollar Ponzi scheme. The sentence of 292 months, handed down in a U.S. District Court in Manhattan by Judge Victor Marrero, was less than the 30 years that the prosecution had requested. Mr. Hsu rose from being a relatively unknown businessman in California to a prominent fund-raiser who pulled in hundreds of thousands of dollars for Hillary Clinton and some other Democratic politicians. A Wall Street Journal article in August 2007 raised questions about the legality of some of those donations. Later that year, Mrs. Clinton's presidential campaign agreed to return $850,000 in funds raised through Mr. Hsu.

- A liberal think tank with close ties to President Barack Obama says the administration and Congress should consider raising taxes on Americans to help close federal budget deficits, an opening salvo in what is likely to be a protracted debate on tax policy. In a draft report, the Center for American Progress says the size of projected budget gaps requires considering options including tax increases as well as curbs on annual spending and entitlement programs supported by Democrats.Such ideas could pose problems for Mr. Obama, who pledged during the campaign to not increase taxes on families making less than $250,000. The report, which will be released on Wednesday, said the administration can't rely on taxing richer Americans and companies to reduce the deficit to sustainable levels by 2014 because those groups would see 40% tax increases."In all seriousness, responsible people know that additional revenue has to be part of the mix even if they believe in lower taxes in general," the report concludes.The center's president and chief executive, John Podesta, who is an Obama adviser, said the administration should consider a tax on consumption, such as a value-added tax system similar to that in use in the European Union. Mr. Podesta suggested that its impact should be limited to protect lower-income people, who otherwise might be hit particularly hard.

- The public is not as dumb as it's made out to be, and Mr. Obama's public option died a bipartisan death yesterday in the Senate Finance Committee. What's left is a package of "reforms" that are mere trite extensions of what we've been doing for decades. That is, piling up mandates on private insurers and then lying that this somehow isn't driving up the cost of health insurance; piling up subsidies for health consumption and then lying that this somehow isn't responsible for runaway health-care spending.

- A recent shift in merchandising strategy by the world's largest retailer spells more trouble for DVD sales and the entertainment industry that depends on them for profits. As part of a larger effort to clean up its aisles and appeal to higher-end shoppers, Wal-Mart Stores Inc. (WMT) is doing away with display cases it has used in its stores to promote the latest hot movie titles. The move comes as major film studios are already reeling from sharp declines in revenue from DVD sales as cash-strapped consumers turn to low-cost rental services and digital downloads.

- In Boston's biggest office deal this year, Credit Suisse Group has acquired Independence Wharf, a waterfront office building, for $106 million. The seller, GE Real Estate, a unit of General Electric Co., purchased the 340,000-square-foot building for $82 million in 2002.

- The fate of CIT Group Inc. was hanging in the balance Tuesday as the large commercial lender readied a plan that would likely hand control of the company to its bondholders. CIT is preparing a sweeping exchange offer that would eliminate 30% to 40% of its more than $30 billion in debt outstanding, said people familiar with the matter. The plan would offer bondholders new debt secured by CIT assets, as well as nearly all of the equity in a restructured firm.

- Tsunami waves ripped across islands of the South Pacific, wiping out several villages and killing at least 34 people in Samoa and American Samoa, with the number of dead expected to escalate as more bodies are found. The tsunami followed a massive earthquake, with a magnitude of 8.0, according to the U.S. Geological Survey, that struck about 120 miles off the Samoan coast at 6:48 a.m. local time Tuesday.

CNBC.com:
- If carbon cap-and-trade becomes a reality, get ready for a potential multi-trillion dollar commodities market that could sprout up quickly, but not without growing pains. “I’m estimating carbon markets could be worth $2 trillion in transaction value – money changing hands – within five years of trading (starting),” says Bart Chilton, a Commodity Futures Trading Commission (CFTC) commissioner, who's also chairman of its energy and environmental markets advisory committee. “That would make it the largest physically traded commodity in the US, surpassing even oil.” The OTC market once dominated this voluntary carbon trading, but as tracking and trading infrastructure has grown, the Chicago Climate Exchange (CCX) took off. In 2008, it handled more transactions than the OTC for the first time ever, according to the New Carbon Finance report.

IBD:

- Hi-Tech Pharmacal (HITK) knows how to pick its markets, says Kevin Kedra, an analyst at Gabelli & Co. Picking the right drug gave the firm a blowout quarter. Hi-Tech, a maker of generic and over-the-counter pharmaceuticals, doesn't pursue high-profile drugs where competition is fierce, Kedra says. It aims at making and selling products that bigger generic manufacturers ignore.

The Deal.com:

- A survey by think tank Open Europe has concluded that a European Union's Alternative Investment Fund Managers directive, which proposes a sweeping regulatory overhaul, could lead to ongoing costs of between $1 billion and $1.44 billion as firms act to comply with the new rules. The directive, now in draft form, would do everything from limiting managers' ability to use leverage to requiring extensive disclosure to determining to where funds are sold.

Politico:

- The Senate Finance Committee spent more than five hours debating the public health insurance option Tuesday before voting down two Democratic amendments to add it to the bill. But the one person who will effectively decide its fate wasn’t even in the room. President Barack Obama got an early look at the depth of the Democratic divide on the government insurance option Tuesday — with Democratic Sen. Kent Conrad saying it would bankrupt North Dakota’s hospitals and Sen. John Rockefeller (D-W.Va.) saying it’s the only way to rein in ravenous, profit-hungry private insurers. Not long from now, Obama’s going to have to referee the whole thing.

Denverpost.com:

- Pet-food industry enjoys strong sales in weak economy.

Reuters:

- Electronics maker Jabil Circuit Inc (JBL) posted better-than-expected quarterly results helped by cost cuts and market share gains, and said it would cut a total of 4,500 jobs as part of its ongoing restructuring plan. Jabil, which makes products for other companies including handsets for Nokia (NOK) and computer hardware for Hewlett-Packard Co (HPQ), also forecast first-quarter results above Wall Street estimates, sending its shares up 8 percent in after-hours trade. "2010 should be a much better year than 2009 and our November quarter is a good start," Chief Executive Timothy Main said on a conference call.

- Coca-Cola Co and its largest independent bottler, Coca-Cola Enterprises Inc, are mounting a campaign against a possible U.S. tax on soft drinks. In addition to a print and digital ad campaign in seven key U.S. markets including Washington, D.C., New York and Los Angeles, the effort will include public relations, speaking engagements and education designed to emphasize to consumers the benefits of a balanced diet and lifestyle that includes exercise. "Clearly, the threat of a soft drink tax demonstrates the need to better educate our consumers on what we're doing to be part of the solution to the obesity problem in the United States," said Coke spokeswoman Diana Garza, adding that its efforts to fight obesity are ongoing. There have been increasingly vocal calls for taxes on sugary drinks and junk food to help fight the problem of obesity in the United States.

Financial Times:

- Britain’s intelligence services say that Iran has been secretly designing a nuclear warhead “since late 2004 or early 2005”, an assessment that suggests Tehran has embarked on the final steps towards acquiring nuclear weapons capability. As world powers prepare to confront Iran on Thursday on its nuclear ambitions, the Financial Times has learnt that the UK now judges that Ayatollah Ali Khamenei, Iran’s supreme leader, ordered the resumption of the country’s weapons program four years ago. Britain has always privately expressed skepticism about the US assessment on Iran but is only now firmly asserting that the weapons program. restarted in 2004-05. Iran’s chief nuclear official on Tuesday ruled out any discussions in Thursday’s talks with world powers over the country’s nuclear program. The comments by Ali-Akbar Salehi add to the pessimism that the talks in Geneva with the US, Britain, Germany, France, Russia and China will bear any fruit and will further fuel international suspicions about the link between Iran’s nuclear and missile plans.

- Venture capitalists have warned they risk suffering collateral damage as a result of the European Commission’s campaign to regulate the alternative investment industry. VC groups – providers of early-stage financing to start-ups, often before they make any revenue – say they have been inadvertently caught up in the hunt by Brussels regulators to pin the blame for the credit crunch on hedge funds and buyout groups. “We are very much caught in the crossfire of a directive that wasn’t intended for us,” says Les Gabb, finance partner at Advent Venture Partners, one of the UK’s biggest venture capital groups. “It was initially meant for hedge funds, with private equity added as an afterthought.” “Venture capital has no bearing on systemic risk. We use no debt at the fund level or at the portfolio company level,” says Alastair Breward, operating chief at Amadeus Capital, the UK venture capital group. “We are not hedge funds.”

- The internet has overtaken television to become the UK’s largest advertising medium, according to a report by PwC for the Internet Advertising Bureau. The UK is the first large media market to see such a shift. Spending on online advertising grew 4.6 per cent in the first half of 2009 compared with the same period last year to reach £1.75bn, driven largely by search engine advertising. By contrast, overall advertising spending fell 16.6 per cent. As a result, online’s share of the total grew from 18.7 per cent in the first half of last year to 23.5 per cent, ahead of TV’s 21.9 per cent.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (RIG), target $100.

- Reiterated Buy on (AMZN), target $100.

- Reiterated Buy on (MCK), raised target to $72.

Oppenheimer:

- Rated (DFT) Outperform, target $18.

Needham:

- Rated (MXIM) Buy, target $21.

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

Asia Ex-Japan Inv Grade CDS Index 115.50 unch.
S&P 500 futures +.12%.
NASDAQ 100 futures +.14%.

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
- (ATU)/.16

- (MIC)/-.12

- (LWSN)/.05

Economic Releases

8:15 am EST

- The Sept. ADP Employment Change is estimated at -200K versus -298K in August.

8:30 am EST

- Final 2Q GDP is estimated to fall-1.2% versus a prior estimate of a -1.0% decline.

- Final 2Q Personal Consumption is estimated to fall -1.0% versus a prior estimate of a 1-1.0% decline.

- Final 2Q GDP Price Index is estimated unch. versus a prior estimate of unch.

- Final 2Q Core PCE is estimated to rise +2.0% versus a prior estimate of a +2.0% gain.

9:45 am EST

- Chicago Purchasing Manager for September is estimated to rise to 52.0 versus 50.0 in August.

10:30 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,000,000 barrels versus a +2,855,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +1,000,000 barrels versus a +5,409,000 barrel gain the prior week. Distillate inventories are expected to rise by +1,200,000 barrels versus a +2,961,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.50% versus a -1.36% decline the prior week.

Upcoming Splits
- None of note

Other Potential Market Movers
- The NAPM-Milwaukee report, weekly MBA mortgage applications report, Fed’s Lockhart speaking, Fed’s Kohn speaking, Jeffries Consumer Summit, Deutsche Bank Leveraged Finance Conference, (ONXX) investor briefing and the (PDCO) investor meeting could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and automaker 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.