BETWEEN THE HEDGES

Wednesday, October 17, 2012

Wednesday Watch

Posted by Gary .....at 12:56 AM

Evening Headlines
Bloomberg:

Retirement No Option for Older Workers in Europe’s Crisis. Jean-Luc Guillaume always presumed he’d retire at about 60, just like his civil-servant father. One year from reaching that age, the biology researcher has no plans to stop working. Cutbacks to France’s retirement benefits, the European financial crisis and the cost of a recent separation have stretched out his horizons. “Financially, retirement just isn’t an option,” said Guillaume at a street demonstration against job cuts at his employer, Sanofi SA (SAN), that he had traveled to Paris from his home in Toulouse to attend. “I’m looking at 66 at the earliest.”
Shipping Mess Prompts Fuel Contango Amid Go-Slow: Energy Markets. For the first time in 21 months, fuel oil markets are indicating that it's cheaper to buy supplies sooner rather than later as China's imports slump and shippers reduce vessel speeds to cut costs. Swaps for November were 50 cents a metric ton less than December in Singapore on Oct. 12, the first time since January 2011 that the market has gone into a state of so-called contango, according to data from PVM Oil Associates Ltd. Chinese demand is shrinking just as vessels operated on behalf of commodities companies including Cargill Inc., the biggest charter of dry-bulk ships, travel at the slowest speeds possible to cut fuel expenses. That's depressing prices in Singapore, the world's largest market for so-called bunkers, where sales have slid to the lowest market for so-called bunkers, where sales have slid to the lowest level in seven months.
Chinese Show Deepening Concern at Officials’ Corruption. Chinese people are increasingly worried about growing income inequality and official corruption, according to a Pew Research Center survey released weeks before a once-a-decade leadership transition. Forty-eight percent of 3,177 adults surveyed said the gap between rich and poor in China is a “very big problem,” up seven percentage points from a 2008 survey, the Pew Global Attitudes Project found. Fifty percent said official corruption was a very big problem, compared with 39 percent four years ago. The poll had a margin of error of plus or minus 4.3 percentage points.
IBM(IBM) Revenue Falls Short With Weaker Euro, Hardware Sales. International Business Machines Corp. (IBM), the biggest computer-services company, fell as much as 3.8 percent in extended trading after reporting third-quarter revenue that fell short of estimates as clients delayed orders. The shares (IBM) dropped 3.5 percent to $203.72 at 6:48 p.m. in New York after trading as low as $203. IBM cited an economic slowdown, especially in North America, that caused software deals to be pushed back and kept customers from signing up for business technology services packages. “The actual macro environment must be weaker than we thought,” said Josh Olson, an analyst with Edward Jones & Co. in Des Peres, Missouri. With biggest competitor Hewlett-Packard Co. (HPQ) restructuring, “you’d think there would be opportunity there for some gains. The revenue was disappointing.” “It was really a falloff that we saw in our GBS business, number one, and in our software business, number two,” Loughridge said, referring to Global Business Services. He attributed the software slowdown to a handful of deals that didn’t take place. “We thought we had those through the end of the quarter,” he said.
Citigroup(C) Outlook Cut to Negative by Moody's as Pandit Departs. Citigroup Inc. had its credit-rating outlook cut to negative by Moody’s Investors Service, which cited the resignations today of Chief Executive Officer Vikram Pandit and Chief Operating Officer John P. Havens. “The negative outlook reflects the risk that this unexpected management change will negatively affect Citigroup’s ongoing efforts to install improved risk-management practices throughout the firm,” the ratings firm said in a statement on the New York-based lender.
Jefferies(JEF) Downgraded by Moody’s to One Level Above Junk. Jefferies Group Inc. (JEF) had its credit rating cut to one level above junk by Moody’s Investors Service, which cited concern that the New York-based investment bank may struggle to manage risk after its expansion. Jefferies was reduced to Baa3, the lowest investment grade, from Baa2, the ratings firm said today in a statement.

Wall Street Journal:

GOP Presses Hard Over Libya Attack. The issue of the Sept. 11 assault on the U.S. consulate in Benghazi is expected to be pressed by GOP presidential candidate Mitt Romney through the duration of the campaign. The two men clashed over Libya Tuesday night at their debate in Long Island, N.Y., with Mr. Obama accepting responsibility for the first time for security lapses that led to the deaths. Meanwhile, leading Republican lawmakers, while offering Mrs. Clinton some praise for her forthrightness, are still pushing for an independent commission, which was established by her office to investigate the attack, to complete its work before the Nov. 6 presidential vote. That appears unlikely.
Romney, Obama Trade Barbs Over Libya Attack. (video)
Obama, Romney Fight Over Oil Drilling. (video)
Interactive: Grade the candidates on their performance and more.
Spain's Rajoy Says Don't Believe Credit-Line Speculation. Spanish prime minister told German Chancellor Angela Merkel on telephone call "not to believe everything you hear" about Spain requesting line of credit from Europe's bailout mechanism, citing a person in the room when Merkel told German lawmakers about the call.
Spain Aid Faces Diplomatic Tangle. A potential Spanish request for financial aid is becoming caught up in tangled diplomacy between euro-zone capitals, despite Madrid's new willingness to push ahead. A day after a senior Spanish official told reporters that German concerns were preventing Madrid from seeking assistance, German officials insisted Spain hadn't indicated it wants aid. Italy, meanwhile, continued to urge Spain to apply for help in the hope that the step would ease market pressure on its own bonds. Germany worries that a request may have the opposite effect, by fanning investor fears that Italy will be next in line to need a bailout.
Postal Service Hits Borrowing Limit. The U.S. Postal Service in September hit its $15 billion borrowing limit from the U.S. Treasury for the first time in its history, leaving the agency with only the revenue it takes in from selling stamps, shipping and other services to cover its enormous operating costs. The Postal Service has added $2.4 billion to its debt since June 30, pushing the agency to its borrowing cap, a spokesman said Tuesday.
Electric Car Crash. Obama's green energy industrial policy turns up in Chapter 11. Mitt Romney quipped in the first Presidential debate that the problem with the Obama Administration's green energy investing isn't that it tried to pick winners and losers, but that "you pick the losers." He was being generous. Another big green Administration favorite went belly-up on Tuesday with the Chapter 11 filing by battery-maker A123 Systems Inc(AONE).

Fox News:

Benghazi Timeline - Fox News Special Report with Bret Baier - October. (video)

MarketWatch.com:

Vote: Who won the presidential debate?

CNBC:

Details of Greg Smith's Goldman Sachs Book Are Leaked.

Zero Hedge:

Business Insider:

C BS Instant Poll, 65% says Rom ney won on the issue of the economy . 34% say Obam a won on the econo my.
The Recent Collapse In Business Confidence Is Stunning. Businesses are becoming increasingly cautious as the fiscal cliff looms. Morgan Stanley just published its October read on its proprietary Business Conditions Index and it collapsed to 41% from 55% in September.
The Most Ridiculous Government Expenses Of The Year.
HOISINGTON: Quantitative Easing Has Been Devastating For American Households.

Reuters:

INSIGHT-Brazen Islamic militants showed strength before Benghazi attack. In the months before the deadly attack in Benghazi, Libya, U.S. and allied intelligence agencies warned the White House and State Department repeatedly that the region was becoming an increasingly dangerous vortex for jihadist groups loosely linked or sympathetic to al Qaeda, according to U.S. officials. Despite those warnings , and bold public displays by Islamist militants around Benghazi, embassies in the region were advised to project a sense of calm and normalcy in the run-up to the anniversary of the Sept. 11 attacks in the United States. So brazen was the Islamist presence in the Benghazi area that militants convened what they billed as the "First Annual Conference of Supporters of Shariah (Islamic law)" in the city in early June, promoting the event on Islamist websites. Pictures from the conference posted on various Internet forums featured convoys flying al Qaeda banners, said Josh Lefkowitz of Flashpoint-Intel.com, a firm that monitors militant websites. Video clips showed vehicles with mounted artillery pieces, he added. A research report prepared for a Pentagon counter-terrorism unit in August said the Benghazi conference brought together representatives of at least 15 Islamist militias. Among the paper's conclusions: these groups "probably make up the bulk of al Qaeda's network in Libya."
Environmentalists sue California to stop fracking. Environmental groups sued the state of California on Tuesday in an effort to stop hydraulic fracturing as regulators attempt to devise new rules for the controversial oil and gas extraction practice. The lawsuit accuses the regulator, the California Department of Conservation, Division of Oil, Gas, and Geothermal Resources, with failing to evaluate the risks, even though fracking was used for more than 600 wells in the state last year.
Intuitive Surgical(ISRG) procedure growth disappoints. Intuitive Surgical Inc on Tuesday lowered its full-year forecast for procedure growth after posting a disappointing growth rate of 22 percent for surgeries using its high-priced da Vinci robots in the third quarter. Intuitive's shares dropped more than 4 percent after it reported its third quarter results. The company said it now expects 2012 procedure growth of 24 percent, down from its prior view of 25 percent to 27 percent.
Fortinet(FTNT) cuts full-year forecast; shares sink. Network security products maker Fortinet Inc cut its full-year forecast, hurt by weak demand in southern Europe and slow growth in China, sending its shares down 18 percent.

TheAge.com:

Rio(RIO) to Cut 30% of Workforce in Europe, Union Official Says.

China Business News:

China Regulators Consider 10% Income Tax for QFII. Tax rate of 10% may be applied to income earned inside China by qualified foreign institutional investors.

Evening Recommendations

None of note

Night Trading

Asian equity indices are +.25% to +1.0% on average.
Asia Ex-Japan Investment Grade CDS Index 121.50 -3.5 basis points.
Asia Pacific Sovereign CDS Index 99.25 -10.25 basis points.
FTSE-100 futures -.09%.
S&P 500 futures -.16%.
NASDAQ 100 futures -.29%.

Morning Preview Links

Earnings of Note
Company/Estimate

(CMA)/.66
(NTRS)/.74
(USB)/.73
(DGX)/1.18
(HAL)/.67
(SWK)/1.45
(MTB)/1.86
(BLK)/3.32
(ABT)/1.28
(BK)/.54
(BAC)/.16
(PEP)/1.16
(STJ)/.81
(PJC)/.30
(SYK)/.98
(XLNX)/.41
(EBAY)/.54
(AXP)/1.09
(LRCX)/.41
(ETH)/.29
(STLD)/.12

Economic Releases
8:30 am EST

Housing Starts for September are estimated to rise to 770K versus 750K in August.
Building Permits for September are estimated to rise to 810K versus 803K in August.

10:30 am EST

Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,500,000 barrels versus a +1,672,000 barrel gain the prior week. Distillate supplies are expected to fall by -1,500,000 barrels versus a -3,177,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +500,000 barrels versus a -534,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.25% versus a -1.5% decline the prior week.

Upcoming Splits

None of note

Other Potential Market Movers

The China Retail Sales/Production/GDP data, China Home Price data and the weekly MBA mortgage applications report could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and commodity shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Tuesday, October 16, 2012

Stocks Rising into Final Hour on Less Eurozone Debt Angst, Short-Covering, Less Economic Pessimism, Tech/Commodity Sector Strength

Posted by Gary .....at 3:51 PM

Broad Market Tone:

Advance/Decline Line: Higher
Sector Performance: Most Sectors Rising
Volume: Below Average
Market Leading Stocks: Underperforming

Equity Investor Angst:

VIX 15.17 -.65%
ISE Sentiment Index 154.0 +79.07%
Total Put/Call .82 +9.33%
NYSE Arms .86 +9.44%

Credit Investor Angst:

North American Investment Grade CDS Index 93.19 bps -2.59%
European Financial Sector CDS Index 170.03 bps -3.57%
Western Europe Sovereign Debt CDS Index 121.62 bps -8.2%
Emerging Market CDS Index 212.99 bps -1.28%
2-Year Swap Spread 9.25 -1.5 basis points
TED Spread 23.25 unch.
3-Month EUR/USD Cross-Currency Basis Swap -24.50 +.5 basis point

Economic Gauges:

3-Month T-Bill Yield .09% -1 basis point
Yield Curve 145.0 +4 basis points
China Import Iron Ore Spot $112.60/Metric Tonne -.35%
Citi US Economic Surprise Index 52.40 -3.1 points
10-Year TIPS Spread 2.46 -1 basis point

Overseas Futures:

Nikkei Futures: Indicating +89 open in Japan
DAX Futures: Indicating +4 open in Germany

Portfolio:

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

Today's Headlines

Posted by Gary .....at 3:27 PM

Bloomberg:

Germany Open to Spanish Precautionary Credit, Lawmakers Say. Germany is open to Spain seeking a precautionary credit line from Europe’s rescue fund, two senior coalition lawmakers said, signaling a reversal of Finance Minister Wolfgang Schaeuble’s public position. The comments by Michael Meister, a deputy caucus leader of Chancellor Angela Merkel’s Christian Democratic bloc, and Norbert Barthle, her party’s budget spokesman, indicate a rolling back of German resistance to a full sovereign bailout for Spain. Schaeuble cautioned Spain against seeking aid on top of its bank bailout as recently as last month.
Schaeuble Risks U.K. Ire With EU Treaty Change Push for Euro. German Finance Minister Wolfgang Schaeuble said he wants legal changes to European Union treaties as early as next year to strengthen the euro area’s ability to enforce budgetary discipline, threatening to stoke tensions with the U.K. and France. Schaeuble said the proposals, which he discussed with Chancellor Angela Merkel, would give the EU’s monetary affairs commissioner powers to reject national budgets and keep European Parliament lawmakers from non-euro states such as the U.K. from blocking decisions that only affect the euro region. “We must take bigger steps toward fiscal union now,” Schaeuble told reporters today on his return flight from a meeting of finance chiefs in Asia. “We could be ready by December to call a convention” to prepare the treaty changes.
Europe Auto Market Headed for Biggest Plunge in 19 Years. European car deliveries headed for their biggest annual plunge in 19 years after the region’s deliveries tumbled 11 percent in September. Registrations last month dropped to 1.13 million vehicles from 1.27 million a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today. Nine-month sales fell 7.2 percent. The market is now on track to decrease as much as 10 percent in 2012, the worst sales slump since the aftermath in 1993 of the region’s currency crisis, the ACEA said. Renault SA (RNO) posted a European sales drop in September of 29 percent, while Fiat SpA (F) decreased 19 percent. Tiremaker Nokian Renkaat Oyj (NRE1V) forecast second-half operating profit will fall on weak demand. “We have seen the European market deteriorate, from an already weak level, rather than recover,” said Marc-Rene Tonn, a Hamburg-based Warburg Research analyst. “That is something that is weighing on the shares.”
Citigroup(C) Board Said to Oust Pandit After Multiple Setbacks. Citigroup Inc. (C) directors ousted Chief Executive Officer Vikram Pandit after concluding his mismanagement of operations caused setbacks with regulators and cost credibility with investors, a person with knowledge of the discussions said. Episodes that led the board to replace Pandit with Michael Corbat included the rejection by regulators in March of a plan to boost shareholder payouts, said the person, who requested anonymity because board deliberations are private. Citigroup’s $2.9 billion writedown on the Smith Barney brokerage unit and a two-level cut of its credit rating by Moody’s Investors Service also contributed, the person said.
U.S. Consumer Prices Rose in September on Cost of Fuel. The cost of living in the U.S. rose in September for a second month, reflecting a jump in energy expenses that failed to trickle through to other goods and services. The consumer-price index increased 0.6 percent for a second month, the Labor Department reported today in Washington. Economists surveyed by Bloomberg had forecast a 0.5 percent advance.
Oil-Tanker Glut at Six-Week High Before November Cargoes Arrive. A glut of the largest oil tankers available in the Persian Gulf is poised to reach a six-week high, a Bloomberg News survey showed, as owners await an influx of cargoes to load for November. There are 21% more VLCCs for hire over the next 30 days than there are likely cargoes, according to the median estimate in a survey of six shipbrokers and owners today. That's a 1.5 percentage-point gain from last week and the biggest excess since Sept. 5. There are about 14 cargoes remaining for October, according to an e-mailed report from Marex Spectron Group. Still, the global supertanker fleet will expand 6.7% this year, about double forecast demand growth of 3.4%, according to Clarkson Research Services Ltd.

Wall Street Journal:

Fox News:

Rio Tinto(RIO) Iron Ore Output Unabated Despite China Concern. Rio Tinto PLC (RIO) continues to deliver record volumes of iron ore undeterred by price volatility and concerns over China's appetite for the steelmaking raw ingredient. The Anglo-Australian company, the world's second-largest producer of iron ore after Brazil's Vale SA (VALE), Tuesday maintained a production target of 250 million metric tons this year after its mines lifted output 5% on the year in the third quarter. Production outpaced sales of the commodity as the company prepared itself for the next stage in capacity growth, Rio Tinto said in its latest quarterly operations report.

CNBC:

Credit Clips Homebuilder Confidence. After a summer of significant monthly jumps in confidence among the nation’s home builders, fall appears to be bringing in a chill.
US Industrial Production Rises 0.4%. The Federal Reserve said U.S. industrial production rose 0.4 percent in September after a 1.4 percent decline in August. The August decline partly reflected precautionary shutdowns before Hurricane Isaac hit the Gulf Coast. Manufacturing output, the most important component of industrial production, edged up only 0.2 percent in September. For the July-September quarter, factory output fell at an annual rate of 0.9 percent, its first quarterly decline since the spring of 2009.
Iran Plotting to Spill Oil in Strait of Hormuz, Magazine Claims. Iran is secretly planning to spill oil into the Strait of Hormuz as revenge for Western sanctions, according to Der Spiegel.

Zero Hedge:

Business Insider:

Romney Hit A Huge Milestone In Two Separate Polls Today. One, the left-leaning Daily Kos and the other, Gallup, both put Mitt Romney at 50%. The PPP/Daily Kos poll has Romney at 50 points and Obama at 46, a major leap from last week. The Gallup daily tracking poll has Romney at his largest lead yet, again at 50 points to Obama's 46.
Companies Are Losing Pricing Power And That's Bad News For Profits.
These Are The Huge Problems That Keep China Awake At Night.

New York Times:

Obama-Backed Green Electric Battery Maker Files for Bankruptcy. An electric car battery maker that President Obama touted as part of a vanguard of a new American electric car industry has filed for bankruptcy and is selling its major assets, the company announced on Tuesday. A123 Systems(AONE), which produces lithium ion batteries for the electric car maker Fisker and the truck manufacturer Navistar, received a $249 million Department of Energy grant that was financed by Mr. Obama’s stimulus program. The company has been struggling as electric vehicles have failed to gain a foothold in the American domestic car market. Another battery maker that received federal support, Ener1, filed for bankruptcy earlier this year. The company’s troubles could provide new ammunition for Mitt Romney, the Republican presidential nominee, who has criticized the Obama administration’s green energy grant and loan programs as a distortion of the marketplace and rife with political favoritism. Mr. Obama called A123’s chief executive, David Vieau, and Jennifer Granholm, then Michigan’s governor, in September 2010 to celebrate the opening of a battery manufacturing plant in Livonia, Mich., that was built partly with federal funds.

Washington Times:

Crowley Says She Will 'Cull' Town-Hall Questi ons. CNN's Candy Crowley, moderator for the second presidential debate, said Monday that she and a small team of assistants will "cull" questions from a town-hall audience in advance to decide which queries are posed to President Obama and Republican nominee Mitt Romney.

9to5Mac:

Apple(AAPL) to launch 24 new iPad models, comprised of iPad minis and perhaps Lightning iPad 3.

Reuters:

Bin Laden driver's conviction reversed by court. A U.S. appeals court on Tuesday overturned the conviction of Osama bin Laden's former driver and bodyguard, Salim Hamdan, on charges of supporting terrorism, in a long-running case emerging from the American military trials at Guantanamo Bay, Cuba. The U.S. Court of Appeals for the District of Columbia Circuit concluded that providing support for terrorism was not a war crime at the time of Hamdan's alleged conduct from 1996 to 2001 and therefore could not support a conviction. Human rights activists hailed the ruling as a blow to the legitimacy of the military commission system.
US gasoline demand dips as prices rise. Gasoline demand last week fell 3.9 percent from a year earlier, on top of its 2.4 percent decline, year-over-year, in the previous week, MasterCard's report showed. On average, demand over the two weeks ending Oct. 12 fell 3.1 percent lower than a year ago. The average price of a gallon rose 4.00 cents-a-gallon to $3.82, 11.7 percent higher than in the same week last year.
Overcapacity to edge out 180 solar panel makers by 2015 - report. Overcapacity in the solar industry is likely to result in at least 180 panel makers either going bust or being acquired by 2015, according to a research report released on Tuesday. GTM Research estimates that global solar products supply will exceed demand by 35 gigawatts on average annually over the next three years. The largest number of casualties will occur in high-cost manufacturing markets such as the United States, Europe and Canada, GTM said.
Greek leftist party leader says doesn't accept troika demands. "The troika demands feed recession and galloping unemployment," said Fotis Kouvelis, leader of the Democratic Left party, after a meeting among party leaders. He said Greece needed more time to impose a new austerity package demanded by the so-called troika of International Monetary Fund, European Commission and European Central Bank lenders in exchange for funds to keep Athens afloat.
Omnicom cautious on looming fiscal cliff, China transition. Omnicom Group Inc, the largest U.S. advertising company, said the looming "fiscal cliff" in the United States and the leadership transition in China are creating uncertainty among clients, making it difficult to forecast the next few quarters. However, the company said it was benefiting as customers spread their advertising budgets among fewer agencies. "With China being off a little bit, Europe not solved yet and the uncertainty with the fiscal cliff as people await the election, there's conservatism," Chief Executive John Wren said on a conference call with analysts. "We're not certain yet what the outcome is going to be in the fourth quarter or into the first quarter of next year."
China's Cui warns of risks from U.S. stimulus. The U.S. Federal Reserve's latest round of quantitative easing is adding to financial market instability and inflationary pressure in emerging markets, China's Vice Foreign Minister Cui Tiankai warned on Tuesday. The frank remarks, directed at the U.S. central bank's announcement of a fresh round of bond-buying to stimulate the economy, dubbed QE3, is the latest in a round of increasingly pointed criticism between China and the U.S of the other's economic policy. Speaking to reporters at a briefing in Brussels, Cui spelt out his concerns about the programme that will see $40 billion of mortgage debt purchased each month until the outlook for jobs improves substantially. "We are affected by the external environment," Cui said. "We are feeling the pain brought about by the situation in the United States and in Europe." "For instance, the recent so-called QE3, I think, is adding to the instability on the international financial markets, is adding to the imported inflationary pressure for developing economies, including China, and is adding to the uncertainty in the commodity market and this would in turn affect food security for many countries.

Bild:

Germany to Lower Economic Growth Forecast for 2013. GDP growth next year forecast to be 1%, down from forecast earlier this year of 1.6%, government officials say. The German Economy Minister Philipp Roesler will present new forecasts tomorrow.

Expansion:

Deputy Bank of Spain Governor Fernando Restoy says there's "very limited" scope for a solution for retail investors who lost money buying preferred shares in banks. The European Commission is imposing "very rigorous demands" for the recapitalization of banks, and haircuts demanded will be "very substantial."

La Vanguardia:

The contraction of Spain's economy will be similar in 3Q as in 2Q, citing comments by Economy Minister Luis de Guindos.

DigiTimes:

Apple(AAPL) Supply Chain Looking to Raise Pr ices. Apple's upstream supply chain partners including Foxconn Electronics (Hon Hai Precision Industry) and Foxlink, have reportedly demanded the brand vendor accept a price rise, as their labor costs in China have been rising, according to sources from the upstream supply chain.

ShanghaiDaily.com:

Investment Slows. Fixed-asset investment in Shanghai expanded 5.2 percent from a year earlier to 337.9 billion yuan (US$53.6 billion) in the first three quarters, with the growth pace slowing 0.3 percentage point from the first eight months, the Shanghai Statistics Bureau said. Investment in urban infrastructure construction dropped 6.9 percent during the period, but investment in property jumped 12.2 percent, buoying the total volume together with investment in the manufacturing sector which rose 1.2 percent.

Bear Radar

Posted by Gary .....at 1:41 PM

Style Underperformer:

Mid-Cap Growth +.65%

Sector Underperformer:

1) Oil Tankers -1.61% 2) HMOs -.75% 3) Banks -.30%

Stocks Faling on Unusual Volume:

BPI, NRP, TVL, ANR, DISH, VIP, PNC, CBSH, CMRE, RATE, GOV, ISIS, WAC, SDT, SPLK, DBD, BRO, GWW, CASY, ALR, BPT, FRX, CQP, GEVA, RDEN, ENSG, DGX, OMC, CYN, TUMI and ADES

Stocks With Unusual Put Option Activity:

1) HUM 2) NRG 3) OSG 4) ECA 5) JNPR

Stocks With Most Negative News Mentions:

1) F 2) FRX 3) PVH 4) UTIW 5) SBUX

Charts:

Bull Radar

Posted by Gary .....at 11:23 AM

Style Outperformer:

Mid-Cap Value +.95%

Sector Outperformers:

1) Steel +2.95% 2) Oil Service +1.82% 3) Coal +1.39%

Stocks Rising on Unusual Volume:

ACI, MUR, CLMT, STT, DB, DPZ, MSCI, VALE, FOSL, CLF, AEGR and QCOR

Stocks With Unusual Call Option Activity:

1) A 2) MAT 3) ASNA 4) ITB 5) PSX

Stocks With Most Positive News Mentions:

1) JEC 2) GPS 3) YHOO 4) HPQ 5) HCA

Charts:

Tuesday Watch

Posted by Gary .....at 12:58 AM

Evening Headlines
Bloomberg:

Rajoy Delay Marks Bet Renewed Turmoil Makes Bailout Terms Easier. Spanish Prime Minister Mariano Rajoy’s equivocation on seeking a European bailout amounts to a bet that another bout of market turmoil will enable him to broker better terms over German resistance. In Rajoy’s thinking, “the worse it gets, the better for Spain,” said Jose Garcia-Montalvo, a former Harvard University economist who teaches at Pompeu Fabra University in Barcelona. “That would make the Germans think more deeply about the cost of letting the southern countries sink. But it’s a very risky strategy.”
Libor Rate Conspiracy Seen in Home-Loan Borrowers’ Suit. JPMorgan Chase & Co. (JPM), Bank of America Corp. and 10 other lenders were sued by a group of U.S. homeowners who claim the banks conspired to manipulate the benchmark Libor rate, driving up the cost of mortgage loans. Libor, or the London interbank offered rate, is based on a British Bankers’ Association-commissioned daily survey that asks lenders to estimate how much it would cost to borrow money from each other for various periods in 10 different currencies. The figures are used to set interest rates for more than $300 trillion of securities and loans worldwide.
Vivendi, STMicro Revamp Poised to Face French Scrutiny Over Jobs. Vivendi SA (VIV) and STMicroelectronics SA (STM), each considering a reorganization to boost their competitiveness, face a hurdle as French President Francois Hollande struggles to keep an election pledge on job creation. Industry Minister Arnaud Montebourg will today host Vivendi Chairman Jean-Rene Fourtou and STMicroelectronics’s Didier Lombard separately at Bercy, the sprawling 1980’s government complex in eastern Paris. The meetings will emphasize strategic discussions as Europe’s biggest media-to-telecommunications group and chipmaker evaluate options ranging from divestments to a break-up, people with knowledge of the matter said, asking not to be named because the gatherings are private. The meetings highlight the challenges for French companies under Hollande, who campaigned on the promise of “social justice” and whose government has opposed job cuts from drugmaker Sanofi to auto manufacturer PSA Peugeot Citroen.
Yuan Forwards Fall as Slowing GDP Growth Damps Appreciation Bets. China’s yuan forwards declined, halting a three-day gain, before a government report that may show economic growth slowed for a seventh straight quarter. Economic fundamentals and capital flows don’t support yuan appreciation, the China Securities Journal reported in a commentary today. Opponents of President Barack Obama contend that China keeps its currency undervalued to boost exports, putting counterparts in the U.S. at a disadvantage.
Soros Says China Growth Slowing on Consumption Share Drop. Billionaire investor George Soros said China’s growth is slowing because household spending as a percentage of the world’s second largest economy is waning. “The growth model which has worked is running out of steam because consumption as a percentage of GDP has fallen” to one- third of output from half, Soros said at a National Association for Business Economics conference in New York today. Central bankers “will have to modify the growth model and somehow allow the household sector to have a bigger share of the total.”

Wall Street Journal:

Clinton Accepts Blame for Benghazi. U.S. Secretary of State Hillary Clinton said she takes responsibility for security at the American diplomatic outpost in Benghazi, Libya, where Ambassador Chris Stevens and three other Americans died in an attack last month. "I take responsibility," Mrs. Clinton said in a recent interview in her office. "I'm the Secretary of State with 60,000-plus employees around the world. This is like a big family…It's painful, absolutely painful." On Monday, in Lima, Peru, she also told television interviewers that she accepts the blame, adding that security at America's diplomatic missions overseas is her job, not that of the White House. Her comments come as Republicans, including presidential candidate Mitt Romney, criticize the Obama administration for its handling of the security before the attack by extremists and its explanations afterward.
Romney, Obama Hone Their Debate Messages. President Barack Obama and his Republican rival, Mitt Romney, enter their debate Tuesday night with different goals than the last time they met: Mr. Romney will try to build on growing strength among centrist voters that arose from his performance in the first debate, while Mr. Obama will aim to portray Mr. Romney as more conservative than his opponent has recently suggested. Mr. Obama, who was preparing here Monday, has said he knows he has to do better in the second debate.
Home Loans May Get Shield. Proposal Would Give Banks Protection in Cases Involving Top-Quality Mortgages. Federal regulators are considering giving mortgage lenders protection from certain lawsuits, according to people familiar with the matter, a move designed to encourage lending to well-qualified borrowers. The potential move, which would be a partial victory for mortgage lenders, is part of a broader effort to write new rules for the U.S. housing market in the wake of the mortgage meltdown. The proposal for the first time would establish a basic national standard for loans, known as a "qualified mortgage."
In Reversal, Cash Leaks Out of China. China, once a catch basin for the world's money, is now watching cash stream out. Wealthy Chinese citizens are buying beachfront condos in Cyprus, paying big U.S. tuition bills for their children and stocking up on luxury goods in Singapore, frequently moving cash secretly through a flourishing network of money-transfer agents. Chinese companies, for their part, are making big-ticket foreign acquisitions, buying up natural resources and letting foreign profits accumulate overseas.
Once a Darling, Australian Dollar Loses Favor. China's economic slowdown is creating a new hierarchy in the currency market. The Australian dollar, once sought after because of the country's big iron-ore and coal exports to China, is falling out of favor with some investors. Instead, they are turning to the Canadian and New Zealand dollars, two currencies they say still stand to benefit from steady demand for their commodity exports even as China slows.
The Solyndra Memorial Tax Break. How Energy passed out tax-loss credits that mean taxpayers will pay twice for failure. Perhaps you thought the Solyndra scandal amounted to a $535 million government loan that will never be repaid. No such luck. In the latest twist, Solyndra's investors could be rewarded for their failure, thanks to a tax benefit the Administration handed out in a bid to evade political accountability.

Zero Hedge:

NYSE Short Interest Drops To 5 Month Low. (graph)
US Households Are Not "Deleveraging" - They Are Simply Defaulting In Bulk. (graph)
A Reminder Of Why A Fiscal-Cliff Compromise Is Not Coming Any Time Soon. (graph)
On Nationalism And Extremism In A Nobel-Peace-Prize-Winning Europe. (graphs)
US CEOs Opine On America's Debt And The Fiscal Cliff.

Business Insider:

USA Today:

Likely Swing State Voters: Romney 50%, Obama 46%. Women push Romney into lead.
Mitt Romney leads President Obama by four percentage points among likely voters in the nation's top battlegrounds, a USA TODAY/Gallup Poll finds, and he has growing enthusiasm among women to thank.

Reuters:

TEXT-S&P Takes Various Rtg Action On Spanish Banks On Sov Downgrade.
Microchip Technology(MCHP) warns on revenue. Chipmaker Microchip Technology Inc said second-quarter revenue was likely below its earlier estimates due to soft demand in the chipmaking industry. "The overall global economic outlook continues to be poor and is adversely impacting our business as well as the rest of the semiconductor industry," Chief Executive Steve Sanghi said in a statement. The company estimates second-quarter adjusted revenue of $407 million to $408 million, down from its earlier forecast of between $412 million and $430 million.
Bankrate(RATE) issues profit warning, shares slide. Bankrate Inc (RATE.N), which operates personal finance websites, warned its quarterly earnings would fall well short of Wall Street expectations due to declining insurance referrals, sending its shares tumbling 25 percent.

Financial Times:

Fears over US mortgages dominance. Dominance of the mortgage market by a few big banks is undermining monetary policy, said a senior policy maker at the US Federal Reserve, in comments that may herald greater scrutiny of lenders such as Wells Fargo and JPMorgan Chase.

Telegraph:

French business erupts in fury against "disastrous" Hollande. France is sliding into a grave economic crisis and risks a full-blown “hurricane” as investors flee rocketing tax rates, the country’s business federation has warned. “The situation is very serious. Some business leaders are in a state of quasi-panic,” said Laurence Parisot, head of employers’ group MEDEF. “The pace of bankruptcies has accelerated over the summer. We are seeing a general loss of confidence by investors. Large foreign investors are shunning France altogether. It’s becoming really dramatic.” MEDEF, France’s equivalent of the CBI, said the threat has risen from “a storm warning to a hurricane warning”, adding that the Socialist government of François Hollande has yet to understand the “extreme gravity” of the crisis. The immediate bone of contention is Article 6 of the new tax law, which raises the top rate of capital gains tax from 34.5pc to 62.2pc. This compares with 21pc in Spain, 26.4pc in Germany and 28pc in Britain. “Let’s be clear, Article 6 is not acceptable, even if modified. We will not be complicit in a disastrous economic mistake,” Mrs Parisot told Le Figaro.

NHK:

Seven Chinese navy vessels were seen near Yonaguni Island in the western edge of Japan's Okinawa prefecture, citing Japan's Defense Ministry. The ships were about 200 kilometers south from the disputed islands in the East China Sea and were heading north.

China Securities Journal:

State Economist Says No China RRR Cut Needed. Fan Jianping, chief economist at the State Information Center, says it's not necessary nor possible for China to cut interest rates or the reserve requirement for commercial banks. Fan cites pace of M2 and M1 money supply growth as reasons for why rate and reserve ratio cuts not needed. Rushed monetary loosening may lead to inflation in the future, he said. Current economic policy is focusing on stabilizing growth and controlling property prices and adjusting economic structure, Fan is cited as saying.
China 4Q economic growth may see a "technical" rebound because last year's 4Q growth was relatively lower and there may be a restocking of inventory, according to a front-page commentary by Cao Shuishui, a researcher for the newspaper.

Evening Recommendations
Barclays:

Rated (AUY) Overweight, target $25.
Rated (NEM) Overweight, target $73.
Rated (GG) Overweight, target $62.