Stocks Rising into Final Hour on Less Eurozone Debt Angst, Short-Covering, Falling Food Prices, Financial/Homebuilding Sector Strength

Broad Market Tone:

• Advance/Decline Line: Slightly Higher
• Sector Performance: Mixed
• Volume: Light
• Market Leading Stocks: Underperforming

Equity Investor Angst:

• VIX 15.48 -4.09%
• ISE Sentiment Index 91.0 +4.60%
• Total Put/Call .76 -26.21%
• NYSE Arms .95 -45.49%

Credit Investor Angst:

• North American Investment Grade CDS Index 96.42 bps -.89%
• European Financial Sector CDS Index 176.38 bps -1.09%
• Western Europe Sovereign Debt CDS Index 132.58 bps -2.72%
• Emerging Market CDS Index 216.47 bps -1.97%
• 2-Year Swap Spread 10.75 -.5 basis point
• TED Spread 23.25 -.5 basis point
• 3-Month EUR/USD Cross-Currency Basis Swap -25.0 unch.

Economic Gauges:

• 3-Month T-Bill Yield .10% unch.
• Yield Curve 141.0 +1 basis point
• China Import Iron Ore Spot $113.0/Metric Tonne -1.31%
• Citi US Economic Surprise Index 55.50 +6.1 points
• 10-Year TIPS Spread 2.47 unch.

Overseas Futures:

• Nikkei Futures: Indicating +56 open in Japan
• DAX Futures: Indicating +26 open in Germany

Portfolio:

• Slightly Higher: On gains in my Retail, Medical, Biotech and Tech sector longs
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, added them back, then covered some again
• Market Exposure: Moved to 50% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades higher despite rising global growth fears, eurozone debt angst, high food/energy prices, earnings worries, growing Mid-east unrest, China/Japan tensions, rising US election uncertainty and US "fiscal cliff" worries. On the positive side, Semi, Drug, Homebuilding and Tobacco shares are especially strong, rising more than +1.0%. (XLF) has also outperformed throughout the day. Oil is falling -.05%, gold is down -.96% and the UBS-Bloomberg Ag Spot Index is down -1.2%. Major European indices are mostly higher, led by a +.9% gain in France. The Bloomberg European Bank/Financial Services Index is rising +1.0%. Brazil is rising +.75%. The Germany sovereign cds is falling -8.0% to 44.37 bps, the France sovereign cds is down -3.3% to 94.67 bps and the UK sovereign cds is plunging -8.1% to 42.37 bps. The Italian/German 10Y Yld Spread is falling -.8% to 350.91 bps. On the negative side, Coal, Alt Energy, Oil Tanker, Ag, Disk Drive, Networking, Telecom, Road & Rail and Education shares are all lower on the day. Lumber is falling -.1% and Copper is falling -.05%. The 10Y Yld is unch. at 1.6%. The Spain 10Y Yld is rising +3.4% to 5.82%. The UBS/Bloomberg Ag Spot Index is up +18.0% since 6/1. The benchmark China Iron/Ore Spot Index is down -37.6% since 9/7/11. The China Hot Rolled Steel Sheet Spot Index also continues to trend lower despite the recent bounce. As well, copper, oil and lumber continue to trade poorly given equity investor perceptions that the Eurozone has successfully kicked-the-can, housing has hit a major bottom and global central bank stimuli will boost economic growth in the near future. US weekly retail sales have decelerated to a very sluggish rate at +1.6%. The Philly Fed ADS Real-Time Business Conditions Index has shown meaningful deceleration since early July. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite investor perceptions of a big improvement in the nationwide housing market. The Baltic Dry Index has plunged around -60.0% from its Oct. 14th high and is now down around -50.0% ytd. Shanghai Copper Inventories have risen +496.7% ytd. Oil tanker rates have plunged, with the benchmark Middle East-to-US voyage down to 22.50 industry-standard worldscale points, which is very near the lowest since May, 2009. The 10Y T-Note continues to trade too well during the recent equity rally. There still appears to be a fairly high level of complacency among US investors regarding the deteriorating macro backdrop. It remains unclear to me whether or not Germany will destroy its own balance sheet or allow the ECB to monetize debt in a major way in an attempt to "save" the euro even as investors continue to price this outcome into stocks. Massive tax hikes and spending cuts have still yet to hit in several key eurozone countries that are already in recession. A lack of economic competitiveness and growth incentives remain unaddressed problems. The European debt crisis is also really affecting emerging market economies now, which will further pressure exports from the region and further raise the odds of more sovereign/bank downgrades after the US election. I continue to believe that China's problems are much larger than commonly perceived and cannot be solved with another massive stimulus package given their real estate bubble, rising food prices/labor costs, massive overcapacity in certain key parts of the economy and growing bad loans problem. Little being done by global central bankers will actually boost global economic growth to an extent that overcomes the growing macro headwinds over the intermediate-term, in my opinion. As well, over the intermediate-term the Fed's recklessness greatly increases the chances of hard-landings in key emerging markets and of a serious global stock swoon, in my opinion. Moreover, uncertainty surrounding the effects on business of Obamacare, the "US fiscal cliff" and rising election outcome uncertainty will likely become more and more of a focus for US investors into the fourth quarter. The Mid-east continues to unravel at an alarming rate, as well. The quality of the stock rally off the June lows remains poor as breadth, volume, leadership, lack of big volume/gainers and copper/lumber/transports relative weakness all continue to be concerns. Thus, recent market p/e multiple expansion on global central bank stimulus/action hopes, has created an unstable situation for equities, which could become a big problem unless a significant macro catalyst materializes soon. For this year's equity advance to regain traction, I would expect to see further European credit gauge improvement, a subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower food/energy prices, a US "fiscal cliff" solution, a calming in Mid-east and China/Japan tensions, less US election uncertainty and higher-quality stock market leadership. I expect US stocks to trade modestly higher into the close from current levels on less eurozone debt angst, short-covering, lower food/energy prices and bargain-hunting.

Today's Headlines

Bloomberg: 

• Euro Falls on Growth Outlook, Spanish Aid Uncertainty. The euro fell for the first time in three days versus the dollar as concern growth in the region is faltering overshadowed prospects that leaders meeting this week will agree on new measures to solve the debt crisis. The 17-nation currency dropped against 10 of its 16 major counterparts as investors waited for a decision on whether Spain will seek a bailout and before a report forecast to show investor confidence declined in Germany, the region’s biggest economy. New Zealand’s dollar weakened after a report showed services shrank in September.
• Bread Price Set to Rise Faster Than a Porsche. (video) 
• India’s Inflation Accelerates to 10-Month High. Indian inflation accelerated to a 10-month high in September after an increase in diesel prices, limiting room for an interest-rate cut to revive the economy. The wholesale-price index rose 7.81 percent from a year earlier, after climbing 7.55 percent in August, the Commerce Ministry said in a statement in New Delhi today. The median of 35 estimates in a Bloomberg News survey was 7.7 percent.
• Manufacturing in New York Region Contracts for Third Month. Manufacturing in the New York region contracted for a third straight month in October as shipments and employment declined, indicating the economy will get less support from factories. The Federal Reserve Bank of New York’s general economic index rose to minus 6.2 from minus 10.4 in September, which was the lowest since April 2009. The median forecast of 46 economists in a Bloomberg survey called for minus 4. The gauge of new orders increased to minus 9 this month from minus 14 in September, which was the lowest since November 2010. A measure of shipments dropped to minus 6.4 from 2.8. The employment measure fell to minus 1.1, the worst this year, from 4.3 in September. The index of prices paid declined to 17.2 from 19.2, while prices received fell to 4.3 from 5.3.
• Business Economists Reduce U.S. GDP Growth Forecasts. Business economists cut their U.S. growth outlook for next year to 2.4 percent as companies and consumers restrain spending, a survey released today showed. The growth estimate was lowered from 2.8 percent forecast in May, the survey by the Washington-based National Association for Business Economics showed. The prediction for this year was reduced to 1.9 percent from 2.4 percent.
• Citigroup(C) Sees Economic Slump Tempering Underwriting Rebound. Global debt and equity underwriting will probably remain unchanged next year as sluggish economic growth and an uncertain outlook restrain demand for securities, said Tyler Dickson, who oversees the business at Citigroup Inc.(C).
• Google(GOOG) Rebuked by EU Privacy Watchdogs Over Data Protection. Google Inc. was told by European Union regulators to bolster its privacy policy, in a warning that may trigger a new round of clashes with data protection watchdogs across the bloc. Google’s new privacy policy, introduced in March, “allows Google to combine almost any data from any services for any purposes,” European Union privacy regulators said in a letter today to Chief Executive Officer Larry Page obtained by Bloomberg News.
• BlackRock’s(BLK) Fink Says Fiscal Cliff Threatens U.S. With Recession. BlackRock Inc. (BLK) Chief Executive Officer Laurence D. Fink said the U.S. economy may shrink at the start of 2013 as companies curb hiring ahead of spending cuts and tax increases from the so-called fiscal cliff. Business confidence is waning amid the federal gridlock on paring the deficit to avert more than $600 billion in automatic budget reductions and higher taxes on Jan. 1, Fink said today at a Bloomberg Television roundtable on the U.S. debt. Congress also must act in February to raise the debt ceiling, he said. “We have the threat of going into a recession in the first quarter,” said Fink, who was joined by the CEOs of Nasdaq (NDAQ) OMX Group Inc., Honeywell International Inc. (HON) and United Parcel Service Inc. (UPS) “This is a very uncertain moment.”

MarketWatch.com: 

• IPhone helped retail sales, but only a touch. Higher cost of gas, food suggests gain less positive than it appears.

CNBC: 

• Swiss Prepare Army for Euro Zone Fallout. With anti-austerity protests across Europe resulting in civil unrest on the streets of Athens and Madrid, the European country famed for its neutrality is taking unusual precautions. Switzerland launched the military exercise “Stabilo Due” in September to respond to the current instability in Europe and to test the speed at which its army can be dispatched. The country is not a member of the union or among the 17 countries that share the euro. Swiss newspaper Der Sonntag reported recently that the exercise centered around a risk map created in 2010, where army staff detailed the threat of internal unrest between warring factions as well as the possibility of refugees from Greece, Spain, Italy, France, and Portugal. The Swiss defense ministry told CNBC that it doesn’t not rule out having to deploy troops in the coming years.

Zero Hedge:

• Chart Of The Day: Hourly Earnings, Or The Lack Thereof. 
• Retail Sales Beat Expectations. (graph) 
• The Future of America Is Japan: Runaway Deficits, Runaway Debts.

Business Insider:

• MIT: The US Really Should Be Freaking Out About Possible Cyber Attacks.  
• One Of The Biggest Housing Bears Around Explains Why The Recent Bump Is Going Nowhere. 
• Bombshell Figures Show Almost Half A Million People Have Left Spain This Year.
• NIGEL FARAGE: My Advice Is To Short Everything French Over The Next Decade.
• US Exports To Iran Are Rising Despite The Sanctions.
• Obama's Economic Policies Are Stuck In The 1960s.
• Don't Get Your Hopes Up About The Next Leader Of China. 

Reuters: 

• Copper hits one-month low on worries on short term demand. Copper dropped to a one-month low on Monday as lingering concerns about poor physical demand in China and uncertainty over Beijing's next moves to support its economy prompted selling ahead of growth data from China this week. 
• ECB's Knot says getting euro debt back in line may take decades. It may be decades before debt levels in the euro zone drop below the EU limit of 60 percent of economic output, but states should still aim to beat that target, European Central Bank policymaker Klaas Knot said on Monday. 
• Canada housing market cools as household debt grows. Canadian home sales fell sharply in September from a year earlier while households pile on debt and business sentiment slumps, according to downbeat data on Monday that suggested a struggle for growth in coming months. Two reports on what policymakers say are the two biggest dangers to the Canadian economy - the hot housing market and high household debt - indicate a fairly sharp decline in house sales at a time when consumers are increasingly vulnerable to a sudden downturn in the value of their homes or a rise in borrowing costs.
• Euro crisis a dangerous 'nightmare,' Soros says. The euro crisis "is a nightmare" that is pushing the European Union into a "lasting depression," fund manager George Soros said on Monday. The crisis "is having tremendous impact in the state of affairs, it is pushing the EU into a lasting depression, and it is entirely self-created," Soros, Chairman of Soros Fund Management, said at a luncheon hosted by the National Association for Business Economics.
• Delinquency rates rise at most major U.S. banks.

Telegraph:

• Aniquilar (for Spanish readers).

Nikkei:

• EU Bank Supervision Delayed Until 2014. Consolidation of the banking supervisory mechanisms will be delayed a year because of time needed for preparations, citing an interview with ECB executive board member Beniot Coeure.
• Toyota to Cut China October Production by 50%. Toyota may cut production further, depending on sales. Toyota will idle lines at Tianjin plant the week of Oct. 22. Crown, Reiz lines to shut for full week. Vios line to be idled Oct. 22 and Oct. 26. The company is cutting hours at plants in other China regions.

Bear Radar

Style Underperformer:

• Large-Cap Growth +.14%

Sector Underperformer:

• 1) Coal -1.60% 2) Oil Tankers -1.12% 3) Gold & Silver -1.07%
  

Stocks Faling on Unusual Volume:

• SAH, TZOO, SVM, RGLD, HERO, FGP, PCS, INFN, WFC, COF, AGNC, ILMN, MNRO, IMOS, SDT, NPSP, HRS, AMED, SRPT, HAS, CZZ, CNX, TSCO, ATLS, EVER, VRTX, ITRI, RAIL and DLR
  

Stocks With Unusual Put Option Activity:

• 1) CLWR 2) TOL 3) BX 4) NAV 5) EWY
  

Stocks With Most Negative News Mentions:

• 1) CF 2) HAS 3) VLO 4) MDT 5) JPM
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Value +.34%

Sector Outperformers:

• 1) Homebuilders +1.55% 2) Drugs +1.31% 3) Semis +1.15%
  

Stocks Rising on Unusual Volume:

• LLY, C, AEGR, EDU and ISIS

Stocks With Unusual Call Option Activity:

• 1) AEGR 2) CLWR 3) HTZ 4) AUQ 5) RF
  

Stocks With Most Positive News Mentions:

• 1) SNDK 2) WY 3) SCHW 4) BA 5) LNKD

Charts:

• ETFs Rising on Unusual Volume 
• Stocks Rising on Unusual Volume

Monday Watch

Weekend Headlines
Bloomberg:

• EU Girds for Summit as Nobel’s Glow Fades on Crisis Response. European leaders, basking in praise for their rediscovered crisis-fighting skills and the award of a Nobel Peace Prize, meet this week as Greece seeks to justify renewed aid and Spain holds out on tapping a bailout. The European Union’s leaders convene for an Oct. 18-19 summit in Brussels after a weekend in which international finance chiefs expressed some optimism that a firewall is in place to contain the euro’s turmoil and urged further action to quell the main threat to global growth. With German Finance Minister Wolfgang Schaeuble yesterday ruling out a Greek exit, the 17-nation euro area faces the challenge of harnessing positive sentiment by resolving differences on aid for Greece and Spain before investors pounce again. Also contentious is how to knit euro nations more closely together amid spats over the timing and depth of a banking union. “The summit will highlight how much remains to be done,” said Alex White, an economist at JPMorgan Chase & Co. in London. “Our concern is that the removal of acute financial market stimuli may reduce the political incentive to deliver.” 
• Greece May Be Forced to Leave Euro Area Within 6 Months. Sweden's Finance Minister Anders Borg told reporters on a conference call. A Greek debt write-down is not a good way forward, he said. Spain needs to recapitalize its banks, Borg said.  
• German Finance Minister Wolfgang Schaeuble says "it's impossible for Germany to pay everybody's bills" in the euro region and "every member state has to fight the problems" it faces. "We would be destroyed" if Germany were to overstretch its resources, Schaeuble said in Singapore.  
• RBS May Seek More Time to Sell Branches as Santander Walks Away. Banco Santander (SAN) SA’s decision to abandon its 1.7 billion-pound ($2.7 billion) purchase of 316 Royal Bank of Scotland Group Plc branches may prompt the U.K. lender to keep them or seek more time to find a new buyer. RBS, Britain’s biggest government-owned bank, had been required to sell the outlets by 2014 to comply with a European Union state-aid rules after receiving the biggest banking bailout in the world in 2008. 
• German Saving Banks Chief Rejects Core Reasons for Banking Union. Georg Fahrenschon, president of the German DSGV savings banks group, said he doesn't want to give Europe the "keys to the safe" for deport protection funds, according to a speech he gave at the IMF conference in Tokyo. The money that German savings banks hold ready to protect the deposits of clients shouldn't be used to insure big banks and investment banks, he said.
• Global Economy Distress 3.0 Looms as Emerging Markets Falter. The global economy is facing its third major brake on expansion in five years as emerging markets slow from China to Brazil, provoking debate about how much policy makers should respond. Three years after industrializing nations led the world out of the U.S. mortgage meltdown-induced recession, the reliability of the power source is waning as Europe’s debt crisis persists. The International Monetary Fund sees them growing an average 5.8 percent in the half-decade through 2016, almost two percentage points less than the five years before the 2009 slump. Finance chiefs at the IMF and World Bank annual meetings left Tokyo this weekend at odds over how to address the issue, with South Korea’s central bank chief urging Asia to add stimulus as Russia and Brazil called on rich nations to fix their own challenges.
• Fischer Says World Is 'Awfully Close' to Recession. Fischer’s take on global growth added to concern raised at annual meetings of the International Monetary Fund, with the IMF cutting its forecasts on Oct. 9 and warning of more weakness unless the U.S. and Europe address threats to their economies. As the euro crisis drags on, fiscal tightening and muted demand in wealthy nations hurts emerging countries from China to Brazil. “We’re awfully close” to a global recession, said Fischer, 69, who served as the IMF’s No. 2 official from 1994 to 2001 and was thesis adviser to Fed Chairman Ben S. Bernanke at the Massachusetts Institute of Technology. “It’s pretty slow right now. Europe is technically in a recession, the U.S. is predicting less than 2 percent growth for the next few months.”
• IMF Board Sees Biggest Power Shift Reshuffle in Two Decades. The International Monetary Fund’s executive board is undergoing the biggest reshuffle in two decades in a shift emerging markets including Brazil say remains insufficient to reflect their rising economic power. Starting next month, some western European countries are realigning to give nations such as Turkey and Hungary more say under a 2010 pledge to give up two seats on the 24-seat board. Changes are also taking place among emerging markets, with Colombia leaving Brazil’s group to join Mexico’s. The overhaul reflects “significant economic realignments at the global as well as regional levels,” said Eswar Prasad, a Cornell University professor and a former IMF official. “Small countries are jockeying for position to make sure their voices are heard while some of the larger but less dynamic economies are trying hard to preserve their clout despite their diminishing economic significance.”
• China’s Stocks Fall on Slump in Producer Prices, Profit Concerns. China’s stocks fell to the lowest level in a week after producer prices declined the most since 2009 and companies from ZTE (000063) Corp. and Yunnan Copper Industry Co. estimated third-quarter losses. ZTE, China’s second-biggest phone-equipment maker, plunged 10 percent and Yunnan Copper, the nation’s fourth-biggest producer of the metal, retreated 2.5 percent. A report showed producer prices dropped 3.6 percent last month, compared with a 3.5 percent decline in the previous month. Concerns about deflation and lending overshadowed reports showing China’s exports and money supply rose more than estimated in September. “Forthcoming third-quarter earnings will be a major factor weighing on the market and the numbers aren’t great,” said Wu Kan, a fund manager at Dazhong Insurance Co. in Shanghai, which oversees $285 million. “The weak PPI number casts a question mark over the economic recovery. There’s no rationale for aggressive buying.” The Shanghai Composite Index (SHCOMP) fell 0.4 percent to 2,096.21 as of 10:28 a.m. local time.
• IMF Tokyo Meetings Show World Leadership Gap, Korea’s Bahk Says. Financial chiefs failed to agree on how to address global economic challenges at International Monetary Fund meetings in Tokyo, showing the world lacks leadership, South Korea’s finance minister said. “Ministers discussed a short-term response for the global economy, but their opinions weren’t harmonized in one direction,” Bahk Jae Wan said in remarks to reporters yesterday embargoed for today, the last day of the IMF gathering. “The world has a leadership problem.” Participants in the IMF meetings discussed major risks to the global economy posed by Europe, the looming U.S. fiscal cliff and China’s slowing economy, Bahk said. “The gap remains between the euro zone and other regions over solutions for Europe’s crisis and on how quickly they need to be addressed,” Bahk said. “The euro zone itself is far from a full agreement and the outcome from this IMF meeting is unlikely to help boost market confidence significantly.”
• China Tells IMF of Concern at Effects of Unconventional Easing. China is concerned at possible effects such as volatile capital flows, erratic exchange-rate and asset-price movements, commodity price surges, central bank Deputy Governor Yi Gang said in a statement in Tokyo. Unconventional monetary measures by major advanced economies appear to have had diminishing returns, Yi said. Monetary policy should not be a substitute for fiscal consolidation and structural reforms, Yi said.

Wall Street Journal:

• Softbank Nears Sprint Nextel Deal. Japanese company Softbank Corp. is close to a $20 billion deal to buy a majority stake in Sprint Nextel Corp., people familiar with the matter said. Such a deal would give the third-largest U.S. wireless operator more financial firepower to compete with its bigger rivals.
• Weak Drilling Curbs Oil-Field Services Firms.
• To the Winner: Good Luck—You'll Need It. The presidential election is heading down to the wire. With three weeks to go, the polls show Mitt Romney and Barack Obama within a few points. The swing states are in play. Somewhere close to $2 billion will be spent in total on the final outcome.
• Iron-Ore Prices Could Lose Bounce. Recent Spurt in Demand From China Mills Isn't Expected to Be Sustained.
• Schumer to Tax Reform: Drop Dead. A Senate Democratic leader lays down a partisan 2013 marker.
• Obama's Record in the Americas. Friendly countries have been stiff-armed while those who would do the U.S. harm have been given a pass, and sometimes even encouraged.

Marketwatch.com: 

• UBS(UBS) may cut thousands of IT jobs, says report. UBS AG UBS +0.24% is planning further cost cutting measures which could threaten thousands of jobs worldwide, particularly in its information technology operation, the TagesAnzeiger reported Saturday.

Business Insider: 

• STRATFOR: Egypt Is Prepared To Bomb All Of Ethiopia's Nile Dams.  
• China's Huge September Export Number Looks Like A 'One-Time Blip'.
• Morgan Stanley(MS) Found Two Red Flags In This Week's Trade Report, And Now Its Forecast For Next Quarter Is Not Pretty.
• Romney's Tax Plan Actually Makes A Lot Of Sense by Mark Cuban.
• Green Energy Investing Has Become A Nightmare.
• China Will Grow Old Before Growing Rich, And It Will Bring Down The Rest Of Asia.
•  SUMMERS: The World Is Stuck In A Vicious Cycle.
  

Zero Hedge: 

• The US Fiscal 'Moment': Cliff, Slope, Or Wile E. Coyote?
• John Taylor On Poor Policy And This Recovery's Broken 'Plucking' Model.
• Out Of The 'Liquidity Trap' Frying Pan And Into The 'Liquidity Lure' Fire.
• All The Charts That's Fit To Print.
• More Middle East Escalation: Turkey, Syria Bar Flights Over Each Other's Airspace.

CNBC:

• Thousands march in Spain to protest austerity.
• Romney to Take China 'to the Mat' on First Day in Office.
• Chinese Exporters Fear Grim Outlook. China’s exports rose almost 10 percent year-on-year in September, according to data released at the weekend. But speak to Chinese exporters and they say the economic doldrums in Europe mean many are facing more daunting challenges than they were during the 2008 heights of the global financial crisis. To Zhou Dewen, head of an industry lobbying group in Wenzhou, the famously entrepreneurial city in eastern China, the situation is “already worse than 2008”. “The difficulties are bigger and they are far more widespread.”

Wall Street All-Stars: 

• Indicator Update: Earnings Disppointments on the Way?

Rasmussen Reports:

• Swing State Tracking: Romney 49%, Obama 47%.

Gallup: 

• Election 2012 Likely Voters: Obama 47%, Romney 49%. (graph)

Reuters: 

• German Bundestag president calls for temporary stop to EU expansion. The European Union cannot take on new member states for the time being as existing members still have a lot of work to do on consolidation, the president of Germany's Bundestag lower house of parliament was quoted as saying on Saturday. His comments are likely to disappoint countries like Croatia, which is hoping to join the EU in 2013, and others in the Balkans seeking membership.  
• Portugal faces suffocating 2013 budget. Portugal's centre-right government presents its 2013 budget on Monday, which will outline the harshest measures yet under Lisbon's 78-billion-euro bailout and is likely to mark the end of the country's so far reluctant acceptance of austerity. The budget will face immediate opposition from angry Portuguese, who plan to march on parliament to demand the resignation of the government and an end to austerity, which has sent Portugal into its worst recession since the 1970s. The 2013 budget is set to introduce sharp income tax hikes, which could amount to up to two or three months' wages for middle income workers, to ensure the country meets its budget goals under the bailout. Finance Minister Vitor Gaspar has described the planned tax increases as "enormous." Economists fear that the tough measures, which will also include pension cuts, a financial transaction tax and higher property taxes, could push Portugal into a recessive spiral like Greece, further undermining Europe's German-inspired austerity drive for the euro's highly-indebted countries.  
• U.S. home owners file class action suit vs banks over Libor -FT. U.S. home owners have filed a class action suit in New York against 12 of the world's major banks, claiming that Libor manipulation made mortgage repayments more expensive than they should have been, the Financial Times reported on Monday.  
• US meningitis outbreak rises to 205 cases - CDC. Seven more people have been diagnosed with fungal meningitis linked to possibly tainted vials of a steroid medication, the U.S. Centers for Disease Control and Prevention said on Sunday, bringing the total number of cases to 205 in 14 states.  
• Republicans hammer Obama over Libya attacks. Republicans on Sunday kept the heat on President Barack Obama over the Sept. 11 killing of four Americans in Libya, with a senior senator saying the attack supported the Romney campaign's claim that Obama's foreign policy is "unraveling." Questions about what happened at the Benghazi mission surfaced in Thursday's vice presidential debate, where Romney's running mate Paul Ryan decried the "unraveling of the Obama foreign policy." They look set to intensify at the next presidential debate, on Tuesday in New York. "Either they are misleading the American people, or they are incredibly incompetent," Lindsey Graham, a senior Republican on the Senate Armed Services Committee, told CBS' "Face the Nation." The White House initially said the violence was an impromptu reaction by Muslims upset at a video made in California that insulted the Prophet Mohammed. Days later, the administration publicly called it a terrorist attack on the 11th anniversary of the Sept. 11, 2001, attacks. Graham said the Obama administration's early statements on the attack, in which U.S. Ambassador Christopher Stevens and three other Americans were killed, were aimed at hiding inconvenient facts in order to uphold a rosy "narrative" of success in Libya and in the wider fight against al Qaeda. "To admit that the embassy was attacked by al Qaeda operatives, and Libya - leading from behind - didn't work I think undercuts that narrative," he said. "Bin Laden may be dead. Al Qaeda is alive and they're counter-attacking throughout the entire region," said Graham. "And the truth is the foreign policy choices of President Obama is allowing the region to become unraveled."

AFP: 

• China IMF boycott 'sign of things to come': analysts. China's top level boycott of global financial meetings in Japan this week is a sign of things to come, analysts say, as an economically emboldened Beijing shows struggling Western nations it doesn't need to play by their rules. With global growth slowing, many in the developed world are looking to Beijing to pick up the slack, and the annual meetings of the International Monetary Fund and World Bank seemed a good place to press the point. But while Tokyo was graced with global financial luminaries such as Timothy Geithner from the US and Wolfgang Schaeuble from Germany, China's finance minister and central bank chief both stayed at home.

Telegraph:

• Euroland's debt strategy is an economic and moral disgrace. The International Monetary Fund has demolished the intellectual foundations of Europe's debt crisis strategy. Drastic fiscal tightening in a string of interlinked countries does two to three times more damage than assumed, especially if there is no offsetting monetary stimulus. Pushed beyond the therapeutic dose, it is self-defeating. At a certain point it becomes pain for pain's sake. The error has long been obvious in Greece.
• Monetary easing policy causes rift at IMF meeting. A clash over the knock-on effects of monetary easing policies in the US, Britain and other European countries led to sharp exchanges in Tokyo among bankers and finance ministers.

Der Sonntag:

• Swiss-Greek Chamber of Commerce sees increase in enquiries from Greek companies interested in moving headquarters to Switzerland, chamber's president Nikolaos Aggelidakis said in an interview.

Frankfurter Allgemeine Zeitung:

• Merkel Government Rejects Greek Bond Buyback Proposal. German Chancellor Angel Merkel's government rejects a proposal for Greece to use loans to buy back its own sovereign debt at a discount to help it reach its target of reducing debt to 120% of gdp by 2020, citing officials. The German government plans no new instruments for the bailout funds EFSF and ESM.

El Mundo:

• Spain's Economy Minister Luis de Guindos is in talks with European authorities to extend the deadline to meet the deficit target. The government has started to acknowledge that the goal of cutting the deficit to 6.3% of GDP this year and to 4.5% next year is becoming more difficult.

Aftenposten:

• The negative economic spiral in Southern Europe is getting worse, Norges Bank Governor Oeystein Olsen was cited as saying in an interview conducted in Tokyo.

South China Morning Post:

• Housing Chief Says Risk of Hong Kong Property Bubble Rises. Anthony Cheung Bing-Leung, secretary for transport and housing, says it's unusual for property prices to keep rising while the economy is not booming and warned that the risk of a bubble was increasing, citing an RTHK interview with Cheung. The market is "strange and worrying," he said. Cheung warned against rushing to buy property.

Economic Daily News:

• iPhone 5 Suppliers May Raise Component Prices. iPhone 5 suppliers including Hon Hai Precision Industry, Cheng Uei Precision Industry, Largan Precision and Genius Electronic Optical may attempt to raise prices they charge Apple(AAPL) by 5 to 10%.

Weekend Recommendations

Barron's:

• Made positive comments on (BLK), (LAYN) and (KMX).
• Made negative comments on (RLGY).

Night Trading

• Asian indices are -.50% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 128.0 -2.0 basis points.
• Asia Pacific Sovereign CDS Index 106.5 -3.0 basis points.
• FTSE-100 futures -.27%.
• S&P 500 futures unch.
• NASDAQ 100 futures +.11%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (SCHW)/.17
• (GCI)/.53
• (C)/.97
• (BRO)/.35
• (PKG)/.56
• (VMI)/2.05

Economic Releases
8:30 am EST

• Empire Manufacturing for October is estimated to rise to -4.0 versus -10.41 in September. 
• Advance Retail Sales for September are estimated to rise +.8% versus a +.9% gain in August.
• Retail Sales Less Autos for September are estimated to rise +.6% versus a +.8% gain in August.
• Retail Sales Ex Auto & Gas for September are estimated to rise +.4% versus a +.1% gain in August.

10:00 am EST

• Business Inventories for August are estimated to rise +.5% versus a +.8% gain in July.

Upcoming Splits

• (MMP) 2-for-1
• (SHG) 2-for-1

Other Potential Market Movers

• The Fed's Dudley speaking, Fed's Lacker speaking, Fed's Bullard speaking and the Fed's Williams speaking could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the week.

Weekly Outlook

U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on rising global growth fears, Eurozone debt angst, rising US "fiscal cliff" concerns, Mid-east unrest, rising US election uncertainty, high food/energy prices, more shorting, technical selling and earnings worries. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 25% net long heading into the week.