Stocks Falling Sharply Into Final Hour On Rising Global Debt Angst, Global Growth Worries, Rising Energy Prices and Financial Sector Pessimism

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  
• Sector Performance: Almost Every Sector Declining
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 30.66 +4.78%
  
• ISE Sentiment Index 72.0 -32.71%
  
• Total Put/Call .97 +2.11%
  
• NYSE Arms 1.35 +93.92%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 128.97 -.67%
  
• European Financial Sector CDS Index 224.63 +1.65%
  
• Western Europe Sovereign Debt CDS Index 340.83 -.28%
  
• Emerging Market CDS Index 307.15 +.96%
  
• 2-Year Swap Spread 38.0 +1 bp
  
• TED Spread 42.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 186.0 -9 bps
  
• China Import Iron Ore Spot $131.70/Metric Tonne -7.19%
  
• Citi US Economic Surprise Index 11.90 -5.1 points
  
• 10-Year TIPS Spread 2.03 unch.
  

Overseas Futures:

• Nikkei Futures: Indicating -72 open in Japan
• DAX Futures: Indicating -32 open in Germany

Portfolio:

• Slightly Lower: On losses in my Medical, Biotech and Tech sector longs
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and added to my (EEM) short and then covered some
  
• Market Exposure: Moved to 50% Net Long

BOTTOM LINE: Today's overall market action is bearish, as the S&P 500 failed to maintain 1,250 on rising financial sector pessimism, global debt angst, rising energy prices, emerging markets inflation worries, earnings outlooks and global growth fears. On the positive side, Hospital and HMO shares are rising on the day. Major Asian equity indices rose .5-1.5% overnight. Weekly retail sales rose +4.5% versus a +4.7% gain the prior week. On the negative side, Coal, Alt Energy, Steel, Internet, Disk Drive, Bank, I-Bank, Biotech, Homebuilding, Gaming and Airline shares are especially weak, falling more than 2.5%. Small-cap and cyclical shares are underperforming. (XLF) has traded poorly throughout the day. Oil is rising +1.5%, Copper is falling -1.0%, Lumber is down -1.4% and Gold is surging +2.89% higher. Despite the recent rally in equities, better economic data and rising inflation expectations, the 10-year yield is lower over the last 2 weeks, which is also a negative. Rice is still close to its multi-year high, rising +34.0% in about 15 weeks. The Spain sovereign cds is jumping +7.5% to 381.33 bps, the Italy sovereign cds is rising +2.12% to 456.0 bps and the Ireland sovereign cds is up +1.27% to 782.33 bps. The TED spread is now at the highest since June 2010. The Libor-OIS spread is at the widest since July 2010. The 2-Year Euro Swap and 2-Year swap spreads are still very close to their recent highs, which is also noteworthy considering the recent strong equity advance. The Western Europe Sovereign CDS Index, the European Financial Sector CDS Index and the Asia-Pacific Sovereign CDS Index are still near their records and trending higher. China Iron Ore Spot continues to pick up downside steam, plunging -31.4% since February 16th and -27.2% since Sept. 7th. Oil is trading very well, which is a large negative for emerging market economies. This is likely mainly the result of US QE3 talk, EFSF leveraging talk, the US pullout from Iraq, Islamist election victories in the Mideast and Turkey's recent incursions into Iraq. A surge back above $100/bbl would be a large negative for the fragile global economy. While short-term traders focus intensely on whether or not Europe will use more debt to "solve" an acute debt crisis, the real question is whether or not the Eurozone will be able to turn around the deteriorating economies of the region with their current actions. I expect US stocks to trade modestly lower into the close from current levels on global debt angst, profit-taking, technical selling, rising energy prices, emerging markets inflation fears, rising financial sector pessimism, earnings outlooks, global growth worries and more shorting.

Today's Headlines

Bloomberg:

• German, French Notes Advance on Debt-Crisis Concerns; Greek Bonds Slide. German and French two-year notes rose, with Germany’s yields dropping the most in seven weeks, amid speculation European leaders will fail to agree on a solution to the region’s debt crisis and avoid a Greek default. The securities extended gains after the U.K. government said a meeting of European Union finance ministers scheduled for tomorrow had been canceled. The EU leaders’ summit will still take place as scheduled, the statement said. Greek notes fell, sending two-year yields toward a euro-era record. Spain sold 3.48 billion euros ($4.83 billion) of bills, and the Netherlands auctioned 2 billion euros of notes. “If there’s any stumbling block or any sign of significant disunity, then without a doubt that will hurt the periphery and support German bonds,” said Orlando Green, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “We have that divergence in terms of spread -- that seems to be the obvious way it will go.”
• Bigger Bailout Fund for Europe Needs Work as Germany Faces Parliament Vote. Boosting the effectiveness of Europe’s bailout fund will require further talks with investors as German lawmakers prepare to vote on its new powers tomorrow, a European Union document showed. While the European Financial Stability Facility can be bolstered under two models that may be combined and implemented “quickly,” the extent to which the fund is leveraged can only be ascertained after discussions with investors and rating companies, the document provided to German lawmakers said. The draft underscores the gaps remaining in European Union efforts to address the debt crisis as Chancellor Angela Merkel and fellow leaders prepare to return to Brussels tomorrow for a second summit in four days. EU leaders are still jousting with banks over the size of losses they take on Greek bonds while deliberating over leveraging the fund after ruling out tapping the European Central Bank’s balance sheet. “A lot of people will wait to see the detail” of how the EFSF capacity is increased, Kit Juckes, head of foreign-exchange research at Societe Generale SA in London, said in an interview on Bloomberg Television’s “Surveillance Midday” with Tom Keene. “It’s hard to see that the ECB isn’t going to have to print some of this.”
• Bank Bond Risk Increases as Finance Ministers' Meeting Canceled. The cost of insuring against default on European bank debt rose as a meeting of European Union finance ministers scheduled for tomorrow was canceled and U.S. consumer confidence unexpectedly fell. The Markit iTraxx Financial Index of credit-default swaps linked to senior debt of 25 banks and insurers increased 7.5 basis points to 242 and the subordinated gauge was six basis points higher at 474, according to JPMorgan Chase & Co. at 4 p.m. in London. “A complete blow up of the summit will be taken as a disaster from the market,” said Alessandro Giansanti, a senior interest-rates strategist at ING Groep NV in Amsterdam. “I think the full package will not be ready for tomorrow. There are too many details to define.” The Markit iTraxx Crossover Index of swaps on 50 companies with mostly high-yield credit ratings climbed six basis points to 714, according to JPMorgan. An increase signals a deterioration in perceptions of credit quality. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 2.5 basis points to 175 basis points. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose 4.5 basis points to 335.
• Italy Pressured by EU to Boost Economy. European leaders increased pressure on Italian Prime Minister Silvio Berlusconi to say how he will reach budget-reduction targets as German lawmakers prepared to vote on a revamped euro-area bailout package that officials raced to complete before a summit tomorrow. Italy needs to back up commitments with “specific actions” and come up with “clear timing,” European Commission spokesman Amadeu Altafaj said in Brussels today after a crisis Cabinet meeting yesterday failed to announce steps to spur growth. Berlusconi is writing a letter describing initiatives he’s planning to fight the crisis, two Italian officials said, adding that the proposals will be presented at the summit. The focus on Italy underscored a push by leaders to prevent the Greece-fueled debt crisis from swamping the third-biggest euro economy and piling risks onto France and Germany. Policy makers, pressed by politicians and investors around the world, are struggling to devise a plan that persuades markets they can stamp out the contagion.
• Consumer Confidence Falls to 2-Year Low. The New York-based Conference Board’s household sentiment index slumped to 39.8 in October, the lowest level since March 2009 and less than the most pessimistic forecast in a Bloomberg News survey, the group’s data showed today. Estimates for the confidence index in a Bloomberg News survey of 76 economists ranged from 42.5 to 52. This month’s reading was even lower than the 53.7 average during the 18-month recession that ended in June 2009. The report showed American’s outlooks for employment and incomes soured. The share of consumers who said jobs were plentiful dropped to the lowest level since December 2009, while the proportion expecting their incomes to rise over the next six months decreased to smallest in a year.
• U.S. Corporate Credit Risk Benchmark Rises as Confidence Sinks. A benchmark gauge of U.S. corporate credit risk rose from the lowest level in more than a month as consumer confidence unexpectedly sank and home prices fell. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, added 1.9 basis points to 128.1 basis points at 12:18 p.m. in New York, according to index administrator Markit Group Ltd.
  
• Reserve Bank of India Raises Rates, Signals End to Cycle on Growth Concern. India raised interest rates for a 13th time since the start of 2010 and signaled it’s nearing the end of its record cycle of increases as the economy cools. Bonds rose and the stock index climbed to near a three-month high. “The likelihood of a rate action in the December mid- quarter review is relatively low,” the Reserve Bank of India said in a statement in Mumbai today after it boosted the repurchase rate to 8.5 percent from 8.25 percent. The Reserve Bank today cut India’s growth estimate, predicting the second-slowest expansion in nine years, and blamed the government’s “expansionary” budget for stoking inflation. “The damage that rate increases are starting to inflict on the economy is getting larger,” said Sanjay Mathur, Singapore- based head of research and strategy for Asia excluding Japan at Royal Bank of Scotland Group Plc. India’s benchmark wholesale-price inflation was 9.72 percent in September, staying above 9 percent since the start of December. By comparison, consumer prices rose 7.3 percent in Brazil, 6.1 percent in China and 7.2 percent in Russia.
• Oil Rises to 12-Week High. Crude oil for December delivery increased $2.50, or 2.7 percent, to $93.77 a barrel at 1:14 p.m. on the New York Mercantile Exchange. The contract touched $94.65, the highest level since Aug. 2. Futures have rallied 24 percent since Oct. 4.
• Copper Futures Decline on Concern Europe Struggles to Resolve Debt Crisis. Copper fell for the first time in three sessions as concerns escalated that European leaders are struggling to resolve debt woes. Copper futures for December delivery fell 0.8 percent to settle at $3.4205 a pound at 1:23 p.m. on the Comex in New York.
• Hong Kong's September Exports Decline for First Time in Almost 2 Years. Hong Kong’s exports declined in September for the first time in almost two years and the government warned the outlook is “bleak,” adding to the risks the city will enter a recession. Overseas shipments fell 3 percent from a year earlier to HK$271.8 billion ($35 billion), the government said on its website today. That compared with a 6.8 percent gain in August. Exports last dropped in October 2009. Elevated unemployment in the U.S. and Europe’s debt crisis are damping economic expansion in the city by weakening overseas demand, Financial Secretary John Tsang said Oct. 16. Trade through Hong Kong is also being hurt by moderating growth in China, the world’s biggest exporting nation. “A prolonged period of low growth in the West, together with a soft landing in China, could mean further downside risk to export growth in the coming months,” Kelvin Lau, an economist at Standard Chartered Plc in Hong Kong, said before today’s report. “This should translate into a bigger drag on overall economic growth.”
• UPS(UPS) Shares Fall as Overseas Growth Cools. United Parcel Service Inc. (UPS), whose deliveries make it a proxy for the economy, fell in New York trading after declining shipments from Asia to the U.S. curbed growth in the company’s international business. UPS cut its airlift capacity for Asia as shipments to the U.S. decreased, the Atlanta-based company said on a conference call after announcing third-quarter earnings. International deliveries overall increased 4.6 percent, trailing the 6.2 percent gain in the previous three months. UPS fell 1.8 percent to $69.58 at 12:06 p.m. after dropping as much as 3.7 percent, the biggest intraday decline since Sept. 22.
• 3M(MMM) Declines After Cutting Forecast. 3M Co. (MMM) fell the most in almost a year after the maker of LCD television parts and Scotch-Brite sponges cut its 2011 forecast and posted profit that trailed analysts’ estimates for the first time in 10 quarters. Earnings will be $5.85 to $5.95 a share this year, the St. Paul, Minnesota-based company said today in a statement. 3M had predicted $6.10 to $6.25, including a 22-cent cost related to pension benefits. Electronics sales are slowing after several quarters of what 3M called “very good growth.” The company, whose stock rallied 14 percent this month before today, is seeing the effect of a slowdown in developed countries earlier than other manufacturers because some of its products, such as components for liquid-crystal-display TVs, are tied to consumer demand.

Wall Street Journal:

• NY Health Firm Will Disclose Data. New York's largest health insurance company has agreed to publicly disclose more data used to justify premium increases. The agreement is part of an effort by state Financial Services Superintendent Benjamin Lawsky to make rate increase filings public, which could result in reducing the number of requested hikes. Lawsky says Tuesday that UnitedHealth Group(UNH) has agreed to end the secrecy now. A law passed in 2010 requires insurers to seek the prior approval of the Department of Financial Services for certain health insurance rate increases. The insurers must use data to support the request. Until now, those detailed filings were kept confidential.
• China's Shadow Banking System: The Next Subprime?
  

MarketWatch:

• Cummins(CMI) Shares Tumble on Weaker Outlook.

CNBC.com:

• Meeting The Hedge Fund Demon. He is eagerly anticipating an expansion of the European Financial Stability Facility and a recapitalization of European banks. Because he thinks both will ultimately fail. "Turning the EFSF into a monoline insurance company for European sovereigns will not prevent default, and will only temporarily stem fear," he explains. He expects the EFSF expansion to temporarily calm markets, leading to tighter spreads on credit default sw span#ExplainsLink a, span#ExplainsLink a img, span#ExplainsLink a:visited img, span#ExplainsLink a:visited {border:none;} aps. But this effect will be fleeting. Eventually spreads will blow out again.
• Will US Taxpayers Be Drawn Into Euro Bailout Fund? Here’s your quick translation of the report that the International Monetary Fund is “considering” a plan to back a special investment vehicle being proposed as part of the expansion of the European Financial Stability Facility. Translation: The US taxpayer may wind up funding the EFSF bailout fund.
• Greenspan: Why European Union Is Doomed to Fail.
• EU Summit Unlikely to Reach Deal: Official. A European official says there is now serious doubt that EU heads of government will agree on a broad package of financial measures at a summit meeting in Brussels on Wednesday.

Business Insider:

• IMF Is 'Considering' Participating In EU Bailout Fund. This means a bailout from the U.S. The IMF is "considering" a plan to back a special purpose investment vehicle (SPIV) that would leverage the European Financial Stability Facility, according to Reuters. Analysts have been chattering about the size of IMF involvement in the eurozone bailout, but this is the first confirmation that the fund is actively thinking about playing an even bigger role than it is now. That would equate with a substantial contribution from the U.S., by far the largest IMF subscriber, with a quota of 17.72%.
• Citi's(C) Steven Englander: European Leaders Are Ignoring One Thing, And It Will Come Back To Haunt Them. The one area that the European leaders are ignoring, and which will come back to haunt the euro, is growth.

Zero Hedge:

• FT Reports Italian Government On Brink Of Collapse.
• Annotated European Union Document on EFSF Status.
• Charting The Impact of Eurozone Meetings on the Most Critical European Security.
  

Insider Monkey:

• Hedge Funds Lose Big on AK Steel(AKS) 3rd Quarter Report.

PIMCO:

• Gross: EU is a dysfunctional family. Recession ahead even if agreement is reached. Greek default certain, Portugal/Ireland loom.

LA Times:

• California's Unemployment Insurance Fund Debt Grows. The state has borrowed $11 billion from the federal government in recent years to pay jobless benefits, requiring hundreds of millions of dollars in interest payments to service its debt.

Open Secrets:

• Obama's New Adviser Is A Former Lobbyist, Once Represented Bank of America(BAC), Chase(JPM), Fannie Mae. Ex-Lobbying Becomes Top Obama Surrogate, Who Are the 99.95%? and More in Capital Eye Opener: Oct. 25.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 18% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty percent (40%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -22 (see trends).

Reuters:

• Heavy Weapons Lying Around Unsecured in Libya - HRW. Large numbers of weapons, including surface-to-air missiles that could down commercial airliners, are still strewn around unguarded in Libya more than two months after Muammar Gaddafi was toppled in a civil war, Human Rights Watch said on Tuesday.The New York-based group said it had seen two sites near Sirte, hometown of the late Gaddafi, containing surface-to-air missiles, tank and mortar rounds, munitions and thousands of guided and unguided aerial weapons. "Surface-to-air missiles can take down civilian aircraft, and the explosive weapons can be converted easily into car bombs and IEDs (improvised explosive devices or bombs) that have killed thousands in Iraq and Afghanistan," Peter Bouckaert, the group's emergencies director, said in a statement. He said Human Rights Watch had been warning the leaders of Libya's National Transitional Council (NTC) and its NATO supporters for months about stockpiles of unsecured weapons that had been regularly raided.
• Gold Surges as U.S. Consumer Turn Gloomy. Gold rallied sharply on Tuesday after data showed U.S. consumers were at their gloomiest in 2-1/2 years this month, which undermined the dollar and fed safe-haven demand for bullion. Earlier, a European Union spokesman said a meeting of finance ministers on Wednesday had been canceled, while euro zone officials said leaders from the single currency bloc would be unlikely to provide many hard numbers to flesh out their response to the debt crisis. EU leaders are to meet on Wednesday to discuss tentative plans for Greece's debt to be reduced, European banks to be recapitalized and the euro zone's EFSF rescue fund to be increased to provide partial insurance for sovereign bonds. Spot gold was last up 2 percent on the day at $1,685.70 an ounce, having risen by 4.0 percent over the last three trading days, its best three-day performance in two months.

Telegraph:

• Debt Crisis: Live.

Handelsblatt:

• Plans to increase the euro rescue fund's firepower are aimed at supporting Italy and should be rejected, citing German Free Democratic Party lawmaker Frank Schaeffler. The euro region's sovereign debt crisis would take a "new dimension" if Italy would require access to the European Financial Stability Facility, citing Schaeffler. Even a leveraged EFSF won't be big enough to support Italy, Schaeffler said.

Bear Radar

Style Underperformer:

• Mid-Cap Growth (-1.92%)

Sector Underperformers:

• 1) Coal -3.30% 2) Homebuilders -2.30% 3) Steel -2.21%

Stocks Falling on Unusual Volume:

• HBHC, ZION, NVS, ININ, NFLX, IIVI, HUBG, VLTR, HSTM, DMND, VRUS, CIEN, GMCR, PCH, VECO, UNFI, USTR, SFLY, JDSU, HANS, UBSI, PLCM, RMD, IGN, TNC, RZG, PJP, MMM, SCO, CMI, VLO, MPC and SLM
  

Stocks With Unusual Put Option Activity:

• 1) ASML 2) NFX 3) NTAP 4) KRE 5) KLAC
  

Stocks With Most Negative News Mentions:

• 1) NFLX 2) HUBG 3) MMM 4) RMD 5) DOW
  

Charts:

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

Tuesday Watch

Evening Headlines

Bloomberg:

• Itlay, Spain May Be Biggest Losers in European Bank Capital Plan. Italian, Portuguese and Spanish lenders will bear the brunt of a 100 billion-euro ($139 billion) plan to recapitalize European banks, while their counterparts in the U.K., Germany and France may avoid raising additional funds. European policy makers, trying to reach agreement before a meeting in Brussels tomorrow on how to tackle the euro zone crisis, may force banks to boost core Tier 1 capital to 9 percent of risk-weighted assets by the end of June, two people with knowledge of the talks said. UniCredit SpA, Italy's largest bank, Banco Comercial Portugues SA, Portugal's second-biggest, and Banco Bilbao Vizcaya Argentaria SA, Spain's No. 2, are among companies analysts say may have to raise the most capital. Lenders may be able to mark up the value of bonds that are trading above face value, allowing them to mitigate the cost of writing down their southern European sovereign debt, the people said. That may benefit U.K. and German lenders such as Royal Bank of Scotland Group Plc and Deutsche Bank AG, whose biggest holdings of bonds are those issued by their own governments. It may also allow French banks to avoid further fundraisings. “The mark-ups will definitely help German, northern European and British banks while hurting the peripheral countries,” said Christopher Wheeler, a London-based analyst with Mediobanca SpA. “If we really allow banks to offset sovereign haircuts with gains on other bonds, then I'm not sure that's going to calm the markets.”
• Spain Slipping on Deficit Means Possible Contagion: Euro Credit. Spain will struggle to meet its deficit-reduction target this year as economic growth slows, threatening further debt-crisis contagion as Europe fails to erect a fail-proof firewall. “They will never make it,” said Ludovic Subran, chief economist at credit insurer Euler Hermes SA in Paris. “Our September forecast sees Spain’s deficit at 7 percent” of gross domestic product this year, he said, adding that the prediction was made before the nation’s credit rating was cut this month. Spain’s benchmark 10-year bond climbed seven basis points to 5.54 percent yesterday after European leaders ruled out tapping the European Central Bank’s balance sheet to boost the region’s rescue fund. The government has aimed for a deficit equal to 6 percent of GDP this year, down from 9.2 percent in 2010. Data on the deficit for the first nine months of 2011 will be published sometime this week. European leaders’ failure to end the debt crisis risks “a vicious circle” in which “deficit reduction weighs on growth, rendering targets unachievable and triggering more downgrades, eventually leading” to default, said Angel Laborda, chief economist at savings-bank foundation Funcas in Madrid. Policy makers must ensure that euro-area nations’ debt will be repaid even without growth, he said. While the European Union said yesterday that Spain is on track to meet its deficit goal for 2011, economists are revising their forecasts to reflect dwindling Spanish tax revenue, rising borrowing costs, and fiscal slippage in the semi-autonomous regions and in the social-security system.
  
• Euro Area Debt Quality Worsens at Record Pace. The euro area's credit quality is fading at an unprecedented pace, posing a risk to the region's main tool against the debt crisis as leaders struggle to convince investors they have the situation under control. The average rating for the bloc, calculated by Bloomberg from the assessments of the three main evaluators, has worsened to 3.14, representing the third-best grade, from 2.12 in May 2010 when the European Financial Stability Facility was designed. The measure fell .25 point in the previous 15 months.
• Banks Clash With Lawmakers on Greek Rescue. Banks are pushing back against European leaders on the size of losses they are ready to accept on Greek bonds as officials struggle to rescue the debt-laden country while avoiding a default. There are limits “to what could be considered as voluntary to the investor base and to broader market participants,” Charles Dallara, managing director of the Institute of International Finance, an industry group that’s participating in the talks on Greek debt, said in an e-mailed statement yesterday. “Any approach that is not based on cooperative discussions and involves unilateral actions would be tantamount to default.”
• China Boom-to-Bust Concerns Revealed in Agricultural Bank Slide. Kerry Stokes made his first billion dollars operating television stations and selling dump trucks in his native Australia. Now, he's betting a chunk of that fortune on a bank that operates in the backwaters of rural China. Stokes became one of the cornerstone investors in Agricultural Bank of China Ltd., whose July 2010 initial public offering was the world's largest, raising $22 billion. Investors such as Hong Kong billionaire Li Ka-shing and the sovereign wealth funds of Kuwait, Qatar and Singapore joined Stokes, 70, in wagering that the bank will benefit from the rapid development of China's agrarian inland areas, where growth is already outstripping that of the wealthy coastal cities, Bloomberg Markets magazine reports in its December issue. They agreed to maintain a stake for at least one year. The payoff is far from assured. Global investors increasingly have doubts about the future of Chinese banks, which in 2009 and 2010 went on a 17.6 trillion yuan ($2.8 trillion) lending spree, according to People's Bank of China data. Fitch Ratings estimated in a report issued in April that as much as 30 percent of all loans in China's banking system -- or $2.46 trillion -- could become nonperforming. Hedge-fund manager Jim Chanos told Bloomberg News in September that he was shorting Agricultural Bank and other Chinese lenders. Investors worried about nonperforming loans pushed the MSCI China Financials Index down about 28 percent from July 1, 2010, to Oct. 24 of this year.
• Rice Jumps Exchange Limit to One-Month High on Asia Flood Damage. Rice futures jumped the most permitted by the Chicago Board of Trade, advancing to a one- month high, as flood damage to crops in Southeast Asia boosted prospects for U.S. exports. Storms since September damaged 12.5 percent of paddies in Thailand, the world’s largest exporter, and crops in the Philippines, Cambodia, Laos and Vietnam, the United Nations’ Food & Agriculture Organization said in a report dated Oct. 21. Floods and drought will cut U.S. output by 23 percent in the season that ends July 31, the government said Oct. 12. Prices have rallied 11 percent in the past two weeks. “Thailand won’t be able to export as much, which will drive business to the U.S.,” Dennis DeLaughter, the owner of Progressive Farm Marketing Inc. in Edna, Texas, said in a telephone interview. “The U.S. doesn’t have very much rice yet, so it will pop up prices. We’re talking about some world trade shortages.” Rough-rice futures for January delivery jumped by the CBOT’s 50-cent limit, or 3 percent, to settle at $17.215 per 100 pounds as of 1:15 p.m. in Chicago. That’s the highest price since Sept. 21, leaving the commodity up 19 percent from a year earlier.
• TI's(TXN) 4Q Forecast Misses Some Estimates. Texas Instruments Inc. (TXN), the largest maker of analog semiconductors, forecast lower fourth-quarter sales than some analysts had estimated, indicating that demand for electronic components remains sluggish. Revenue will be $3.26 billion to $3.54 billion in the period, the Dallas-based company said today in a statement. Doug Freedman, an analyst at RBC Capital Markets, had estimated $3.57 billion for the period.

Wall Street Journal:

• Fresh Worries of Recession Grip Europe. The risk of recession in the euro zone is mounting, according to a closely watched business survey, signalling that a vicious cycle of fiscal austerity and economic contraction threatens even some of Europe's biggest economies. The gloomy outlook comes as political differences among European leaders over how to handle the worsening debt crisis have given way to increasingly personal attacks. After enduring months of criticism from other European leaders, Italian Prime Minister Silvio Berlusconi on Monday issued a defiant statement that lashed back at EU authorities and his euro-zone peers.
  
• George Soros Buys Big Investment in WebMD(WBMD).
  
• My Tax and Spending Reform Plan by Rick Perry. Individuals will have the option of paying a 20% flat-rate income tax and I'll cap spending at 18% of GDP.
• Regulator Flagged SAC Stock Trades. Wall Street regulators expressed mounting concern about SAC Capital Advisors' trading over a nine-year period, detailing in dozens of confidential reports suspicions that the hedge-fund firm might have profited from insider information. The reports, submitted by the regulators to the Securities and Exchange Commission, don't allege wrongdoing by SAC, one of the world's best-known hedge-funds, which is overseen by billionaire founder Steven A. Cohen.
• Islamist Party Set to Win Tunisian Vote. Tunisia's moderate Islamist Nahda Party appears set for a decisive victory in the country's elections for a constituent assembly, in an historic test for how the region's long suppressed Islamic movements will govern.
• The Post-Global Warming World. Moving on from climate virtue.

MarketWatch:

• Netflix(NFLX) Earnings Jump; Shares Plunge on Outlook. Netflix Inc. earnings jumped 63% in the third-quarter despite controversial pricing changes, but a weak forecast for the fourth quarter sparked an after-hours selloff that pushed the stock to a new low. In after-hours trading on Monday, Netflix shares plunged more than 27% to $86.50.
• China's Economy May Face Hard Landing. Analysts see ominous signs in credit, employment and monetary policy. “Investors should prepare for both a hard landing and a yuan devaluation,” said Societe Generale strategist Albert Edwards, who sees the beginning of an era of slow growth in China.

Business Insider:

• The Hot New Worry In China: Domestic Insurance Payments.
• JAT Capital, Tiger Global, And More Are Getting Slammed On Netflix(NFLX).
  

Zero Hedge:

• As Hope for EFSF Solution Vanishes, Europe Comes Crawling to Uncle Sam. From the WSJ: "Europe may ask the International Monetary Fund to create and run a special new fund to help solve its debt crisis, according to a person familiar with the matter. The idea is one of several options still in the formative stage that European officials are considering as a way to prevent the crisis from engulfing its largest economies

CNBC:

• Obama Under Pressure to Lay Out China Strategy. U.S. lawmakers critical of China's trade policies will use a hearing on Tuesday to press the White House to lay out plans to confront Beijing, even as Republicans resist a bill to punish the world's second-largest economy for its currency policies.
• US States Are Facing Total Debt of Over $4 Trillion. The total of U.S. state debt, including pension liabilities, could surpass $4 trillion, with California owing the most and Vermont owing the least, a new analysis says.

IBD:

• Does Biogen(BIIB) Have A Blockbuster Drug?

NY Times:

• New Unease for Europe's Rescue Plan.

Rasmussen Reports:

• Generic Congressional Ballot. Generic Congressional Ballot: Republicans 44%, Democrats 36%.

Real Clear Politics:

• Is ObamaCare Meant to Be Fiscally Irresponsible?

Reuters:

• Falcone's Harbinger Capital Down 17% in September. Philip Falcone's flagship portfolio lost about 17 percent last month as telecommunications start-up LightSquared, one of the hedge fund manager's biggest investments, faced regulatory hurdles that threaten its business plan. Investors with the billionaire stock picker were told late last week that Falcone's Harbinger Capital Partners Fund II, L.P. had dropped 16.76 percent in September while the Harbinger Capital Partners Special Situations Fund, L.P. lost 9.65 percent, said two investors who saw the numbers but are not permitted to discuss them publicly. "Falcone waited until the end of the quarter to account for all the problems they are facing with LightSquared and that is clearly reflected in these numbers," one of the two investors said. For the year, the flagship fund is down about 12 percent, the source said.
• Veeco Instruments(VECO) Q3 Beats, Sees Weak Q4. Chip-gear maker Veeco Instruments Inc forecast fourth-quarter sales below analysts' expectations on lower bookings from China, and said it expects near-term orders to remain depressed due to a weak demand for backlighting equipment. The company, which makes metalorganic chemical vapor deposition products (MOCVD) -- equipment critical in LED production -- expects an adjusted fourth-quarter profit of 54-86 cents a share, on sales of $175-$215 million. Analysts were expecting a profit of $1.03 a share, on sales of $236.6 million, according to Thomson Reuters I/B/E/S.
• Goldman(GS) Sued by Capmark, Conflicts Alleged. Capmark Financial Group Inc , a large commercial real estate lender that emerged from bankruptcy this month, sued Goldman Sachs Group Inc to recover $147 million it said the bank obtained by taking advantage of conflicts of interest. The complaint filed Monday in U.S. District Court in Manhattan arose out of Capmark's $1.5 billion secured financing facility obtained in May 2009, five months before its Chapter 11 filing, from Goldman and other lenders.

Financial Times:

• Hard Line Adopted on Greek Debt Loss. European negotiators have asked Greek debt holders to accept a 60 per cent cut in the face value of their bonds, a hardline stance that far exceeds losses agreed in a deal between private investors and eurozone authorities three months ago.

Telegraph:

• Angela Merkel Pleads for Germany to Approve Plans to Increase European Bail-Out Fund. Angela Merkel has appealed to German politicians to approve Europe's rescue efforts ahead of a crucial vote that could torpedo the Brussels summit.

La Tribune:

• France's market regulator chief Jean-Pierre Jouyet said banks must voluntarily accept a haircut on their Greek sovereign debt to share the burden with states in face of the crisis, citing an interview.

Globe and Mail:

• Mobius Takes a Swipe at Derivatives. An opaque and bloated derivatives market is ultimately at the root of the volatility roiling stock markets – and investors’ best defence against it is global diversification, argues the man generally recognized as the father of emerging-market investing. “You’ve got $600-trillion in derivatives out there – that’s 10 times more than global GDP,” Mark Mobius, the globe-trotting fund manager at Franklin Templeton Investments, said during a rare visit to Toronto Monday. “One of the things that is making things so unpredictable and difficult in Europe today is that in addition to the debt that Greece, Portugal, Spain and all these countries have, there are the banks, hedge funds and others that have taken out credit default swaps – which in some cases are more than the actual debt. Anyone looking at this from a European Central Bank perspective has got to now account for the impact of the credit default swaps … If the discount on these bonds goes down, their losses multiply.” “This is the crazy situation we’re in now – these derivatives have gotten out of control. And that adds more volatility and more uncertainty to the whole picture.”

21st Century Business Herald:

• Growth in China's energy consumption will likely slow in the future as the country may have already passed a peak, citing Wu Yin, deputy director of the National Energy Administration, speaking at a forum.
  

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.50% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 197.0 -5.0 basis points.
  
• Asia Pacific Sovereign CDS Index 153.25 +2.25 basis points.
• FTSE-100 futures -.40%.
  
• S&P 500 futures -.23%.
  
• NASDAQ 100 futures -.23%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (X)/.52
• (SPG)/1.67
• (NOV)/1.16
• (LXK)/1.03
• (AMG)/1.52
• (BTU)/.86
• (ILMN)/.22
• (DAL)/.94
• (R)/1.02
• (DD)/.56
• (DGX)/1.11
• (ODP)/.00
• (UA)/.83
• (COH)/.70
• (MMM)/1.61
• (CMI)/2.25
• (BRCM)/.77
• (FFIV)/.98
• (MCK)/1.39
• (ITW)/.98
• (SHW)/1.69
• (UPS)/1.05
• (CCI)/.12
• (DV)/.95
• (AMZN)/.24
• (BXP)/1.24
• (ESRX)/.76
• (AGCO)/.75

Economic Releases
9:00 am EST

• The S&P/CS 20 City MoM% SA for August is estimated to rise +.1% versus a +.05% gain in July.

10:00 am EST

• Consumer Confidence for October is estimated to rise to 46.0 versus 45.4 in September.
• The House Price Index for August is estimated to rise +.2% versus a +.8% gain in July.
• Richmond Fed Manufacturing for October is estimated to rise to 0 versus -6.0 in September.
  

Upcoming Splits

• (QSII) 2-for-1
  

Other Potential Market Movers

• The Spain Auction, ECB's Mersch speaking, Slovak Vote on EFSF, 2-Year Treasury Note Auction, weekly retail sales reports and the BIO Investor Forum could also impact trading today.
  

BOTTOM LINE: Asian indices are slightly lower, weighed down by technology 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 75% net long heading into the day.

Stocks Rising into Final Hour on European Debt Crisis Optimism, Diminishing Global Growth Worries, More US QE3 Talk, Short-Covering

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Almost Every Sector Rising
  
• Volume: Below Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 29.42 -6.07%
  
• ISE Sentiment Index 115.0 +7.48%
  
• Total Put/Call .96 +12.94%
  
• NYSE Arms .62 -39.08%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 129.83 -1.30%
  
• European Financial Sector CDS Index 217.46 -2.45%
  
• Western Europe Sovereign Debt CDS Index 338.33 +.20%
  
• Emerging Market CDS Index 303.78 -2.93%
  
• 2-Year Swap Spread 37.0 -1 bp
  
• TED Spread 42.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .00% -1 bp
  
• Yield Curve 195.0 +1 bp
  
• China Import Iron Ore Spot $141.90/Metric Tonne -.49%
  
• Citi US Economic Surprise Index 17.0 +2.2 points
  
• 10-Year TIPS Spread 2.03 +3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +3 open in Japan
• DAX Futures: Indicating +4 open in Germany

Portfolio:

• Higher: On gains in my Medical, Retail, Biotech and Tech sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and then added them back
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is bullish, as the S&P 500 trades right to technical resistance at 1,250 as it approaches its 200-day moving average, despite global debt angst, rising food/energy prices, emerging markets inflation worries and global growth fears. On the positive side, Coal, Alt Energy, Oil Service, Steel, Computer, Semi, Networking, Bank, HMO, Construction, Homebuilding, Gaming and Airline shares are especially strong, rising more than +2.5%. Cyclicals and small-caps are outperforming. (XLF) has traded well throughout the day. Copper is jumping +7.1%. Major Asian equity indices rose 2-4% today. The China sovereign cds is falling -7.68% to 139.36 bps and the Spain sovereign cds is down -5.32% to 354.83 bps. On the negative side, Utility, Telecom, Road & Rail, Retail, Restaurant, Drug, Energy and Oil Tanker shares are lower-to-slightly higher on the day. Oil is jumping +4.2%, the UBS-Bloomberg Ag Spot Index is rising +1.45% and Gold is +.8% higher. Despite the recent rally in equities, the 10-year yield is just slightly higher over the last five days, which is also a negative. Rice is still close to its multi-year high, rising +33.0% in about 15 weeks. The France sovereign cds is climbing +1.6% to 189.17 bps, the Italy sovereign cds is rising +1.0% to 450.33 bps, the Portugal sovereign cds is climbing +3.1% to 1,112.33 bps, the Ireland sovereign cds is up +1.09% to 772.50 bps, the Belgium sovereign cds is up +3.2% to 299.33 bps and the UK sovereign cds is rising +1.0% to 84.66 bps. The TED spread is now at the highest since June 2010. The Libor-OIS spread is at the widest since July 2010. The 2-Year Euro Swap and 2-Year swap spreads are still very close to their recent highs, which is also noteworthy considering the recent strong equity advance. The Western Europe Sovereign CDS Index, the European Financial Sector CDS Index and the Asia-Pacific Sovereign CDS Index are still near their records and trending higher. China Iron Ore Spot continues to pick up downside steam, falling -26.05% since February 16th and -21.6% since Sept. 7th. Investors are cheering a positive economic datapoint out of China, a potential leveraged EFSF European debt "solution" and more US QE3 talk. This is sending commodities soaring, which is a large negative for emerging market economies. As well, the ratings agencies have yet to weigh in on the ramifications of using more debt in Europe to solve an acute debt crisis, which could prove a large snag. I expect US stocks to trade mixed-to-lower into the close from current levels on global debt angst, profit-taking, technical selling, rising food/energy prices, emerging markets inflation fears and more shorting.

Today's Headlines

Bloomberg:

• Merkel Seeks German Backing for Summit. Chancellor Angela Merkel will seek backing from German lawmakers to bolster the euro bailout fund on the same day she heads to a European summit, as banks joust with leaders over the size of losses they take on Greek bonds. Leveraging the European Financial Stability Facility rescue fund to more than 1 trillion euros ($1.4 trillion) and how far to cut Greece’s debt load emerged as two main hurdles in the way of a deal to stop the debt crisis at the Oct. 26 European Union summit, the second in four days. The euro weakened as Merkel’s party proposed a full vote in parliament, also on Oct. 26. “We are still missing some important parts of the complex puzzle that is how to solve Europe’s debt crisis,” Kathleen Brooks, research director at Forex.com in London, said today. “The biggest challenge for the German Chancellor over the next 48 hours is to persuade the German Bundestag to agree to the changes to the EFSF.” Merkel, as the biggest contributor to euro-area bailouts, is once more the fulcrum in the deliberations to stamp out the crisis that came to light two years ago in Greece. Under the terms of an agreement struck with her coalition, she must seek parliamentary backing for any changes to the rescue fund that carry budget implications for Europe’s biggest economy. “This is new territory,” Steffen Seibert, Merkel’s chief spokesman, told reporters in Berlin today, when asked whether parliament could dictate Merkel’s stance at the next summit. Lawmakers will discuss two models for leveraging the EFSF, neither of which is “mutually exclusive,” Seibert said.
• Sovereign, Bank Risk Rises as Europe Waits on Debt-Crisis Fix. The cost of insuring against default on sovereign and bank debt rose in Europe as policy makers wrangle over how to contain the region’s debt crisis. The Markit iTraxx Financial Index of credit-default swaps on the senior debt of 25 banks and insurers increased four basis points to 242 according to JPMorgan Chase & Co. at 2 p.m. in London. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments climbed nine basis points to 333. Credit-default swaps protecting French debt rose four basis points to 190, contracts on Ireland increased 13 basis points to 765, Italy widened four basis points to 444, and Portugal was 36.5 basis points higher at 1,111, according to CMA.
• Dollar Libor-OIS Spread at 2-Year High Amid Europe Bank Concern. A gauge of banks’ reluctance to lend widened to the most since July 2009, a sign that market tensions are increasing as Europe’s leaders work on a plan to bolster their nations’ banks. The dollar Libor-OIS spread was 34.13 basis points at 2:10 p.m. London time. The spread widened to 34.53 basis points, according to data from the British Bankers’ Association. That’s the most since July 6, 2009, based on closing-market rates. “This highlights that there’s still some stress in the funding markets,” said Eric Wand, a fixed-income strategist at Lloyds Bank Corporate Markets in London. “Banks are having problems attracting dollar funding, probably because so much is still unknown about the European bank recapitalization plans.” Measures of money-market stress have been elevated throughout the regional debt crisis, Wand said. The rate at which London-based banks say they can borrow for three months in dollars rose to the most in more than a year. The London interbank offered rate, or Libor, for dollar loans climbed to 0.420282 percent from 0.41833 percent yesterday, data from the British Bankers’ Association showed. That’s the highest since August 2010. A measure of banks’ reluctance to lend to one another in Europe also increased. The Euribor-OIS spread, the difference between the borrowing benchmark and overnight index swaps, rose to 76.3 basis points from 74.5 basis points. Lenders increased overnight deposits at the European Central Bank to the most since Oct. 10. Banks parked 202 billion euros at the Frankfurt-based ECB. That compares with a year-to- date average of 62.8 billion euros.
• Caterpillar(CAT) Beats Estimates. Caterpillar Inc. (CAT), the world’s largest construction and mining-equipment maker, posted third- quarter profit and sales that topped analysts’ estimates as demand rose for shovels and drills used to dig up metals. Net income climbed 44 percent to $1.14 billion, or $1.71 a share, from $792 million, or $1.22, a year earlier, the Peoria, Illinois-based company said in a statement today. The average of 15 analysts’ estimates compiled by Bloomberg was for $1.57. Sales increased 41 percent to $15.7 billion from $11.1 billion, compared with the $14.9 billion average of analysts’ estimates. The shares climbed as much as 5.7 percent in New York.
• Oracle(ORCL) Buys RightNow(RNOW) for $1.5 Billion to Add Cloud Services. Oracle Corp. (ORCL), the world’s second- largest software maker, agreed to buy RightNow Technologies Inc. (RNOW) for $1.5 billion, gaining customer-service expertise to bolster a new Internet-based product. RightNow investors will get $43 a share, Oracle said today in a statement. That’s 20 percent more than Bozeman, Montana- based RightNow’s closing price on Oct. 21.
• Crude Oil Rises for Second Straight Day on Economic Growth in China, Japan. Crude oil rose to the highest level in more than two months, exceeding $90 a barrel as data showed economic growth in China and Japan and as U.S. equities rose. Crude for December delivery rose $3.12, or 3.6 percent, to $90.52 a barrel at 12:34 p.m. on the New York Mercantile Exchange. The price reached $90.86, the highest level since Aug. 4. Brent oil for December settlement increased $1.18, or 1.1 percent, to $110.74 a barrel on the London-based ICE Futures Europe exchange.
• China GDP Engine Gets Less Mileage: BlackRock(BLK). A near doubling in the Chinese economy’s reliance on credit over the past decade will prompt slower growth in coming years, risking diminished returns for investors, according to research by BlackRock Inc.
• Jobs Outlook in U.S. Worse Since 2010, Business Economists Say. U.S. companies’ hiring plans reflect the worst employment outlook since January 2010 as demand slows in the world’s largest economy, a private survey showed. Fewer companies project payrolls to rise in the next six months compared with a July survey, while more plan to cut workers, the National Association for Business Economics said today in Washington.
• MF Global(MF) May Be Lowered to Junk by Moody's as Corzine Adds Trading Risk. MF Global Holdings Ltd. had its credit ratings cut to the lowest investment grade by Moody’s Investors Service after the broker run by former New Jersey governor Jon Corzine failed to reach earnings targets and on concern risk management isn’t sufficient. Moody’s lowered MF Global’s long-term ranking to Baa3 from Baa2 and left the New York-based company on review for a further downgrade, the ratings firm said today in a statement. The “current low interest environment and volatile capital market conditions” make it unlikely MF Global can achieve financial targets of $200 million to $300 million in annual pretax earnings, Moody’s said. Corzine, who helped run Goldman Sachs Group Inc. from 1994 to 1999, is attempting to transform MF Global into a medium- sized investment bank and has sought to increase trading with the firm’s money and facilitate transactions for clients. Moody’s highlighted added exposure through repurchase transactions to the debt of European governments that have been among the hardest hit by the region’s sovereign debt crisis. “MF Global’s increased exposure to European sovereign debt in peripheral countries and its need to inject capital into its broker-dealer subsidiary to rectify a regulatory capital shortfall highlights the firm’s increased risk appetite and raises questions about the firm’s risk governance,” Al Bush, a senior analyst at Moody’s, said in the statement announcing the downgrade.

Wall Street Journal:

• Fearing Europe in Japan. Norio Nakajima is losing sleep. The head of one of Japan's biggest asset managers says a gut feeling born of 40 years' experience in the financial markets keeps him awake nights: fear of another flare-up in the European debt crisis.
• FedEx(FDX) Expects Holiday Shipments to Rise 12%. FedEx Corp. forecast record holiday shipping Monday but said the increased package volume would be fueled by its least-profitable, ecommerce-related residential service.
  

MarketWatch:

• Europe Bank Recapitalization Not So Easy. It’s a testament to the scope of the euro zone’s debt crisis that a multibillion bank recapitalization plan is described as the “easy” part of the deal being negotiated by European officials. Recapitalization is the easiest element politically, said Michael Symonds, credit analyst at Daiwa Capital Markets in London. But it’s not clear the recapitalization plan, as currently envisioned, will inspire lasting market confidence.

CNBC.com:

• Why Don't We Know More About Bank of America's(BAC) Derivatives?

Business Insider:

• A Greek Trader Tells Us The State Of Things.
• The 10 Biggest Problems With Doing Business in China.
• Apple(AAPL) is Building iTV Prototypes, And You Can Probably Expect a 50" iTV by Late Next Year.
• Meanwhile, The Entire European Economy Looks Like A Horror Show. (graph) From Markit, a look at a bunch of fresh PMI numbers across Europe. While China may be holding up... Europe not so much. Everyone is negative, except Germany, which is just clinging to growth.

Zero Hedge:

• Chart of the Day: Correlation Between Hedge Fund Returns and Market Hits All Time Record. (graph)
• Head of China Sovereign Wealth Fund Voices Displeasure With China's Debt Slaves, Call Europeans "Lazy" and "Entitled".
• Trichet Interrupts Speech Calling for Formation of European Finance Ministry, Booed Off by German Students.
• Peripheral and Core Eurozone Yields and Spreads at Widest Since October Equity Lows. (graph)
  

NY Post:

• Google(GOOG) Lender Bender. Google is not likely to finance a buyout of Yahoo! without getting an equity stake as part of the deal, said a source close to the situation. At the same time, antitrust regulators would likely frown on any deal that would give Google a stake in a rival, the source said. “Google is not in the lending business,” the source added.
  

LA Times:

• Solyndra-Linked Fundraiser Still Boosting Obama Campaign. Steven Spinner, a former Energy Department official with ties to the failed solar company, continues to raise money for the president and help organize events.

Reuters:

• Italy's Berlusconi Hits Back at EU Partners' Demands. Italian Prime Minister Silvio Berlusconi hit back at pressure for urgent reforms from European partners on Monday, and said he would bring reform proposals to the next European Union summit. "We have firm positions, that we will bring to the next EU summit," Berlusconi said in a statement. He added that no country in the EU should be giving lessons to other member states. Berlusconi summoned his cabinet for an emency meeting on Monday evening to discuss demands from Germany and France for swift economic reforms, which have met opposition from his coalition allies.

Telegraph:

• Debt Crisis: Live.

Global Times:

• Steel Traders in Difficulty as Bank Loans Become Scarce. The recent decline in steel prices has increased the difficulties confronting small- and medium-sized steel traders, industry sources told the Global Times Monday. Steel traders used to be able to get loans from banks and then use the capital to invest and make a profit, but with the downturn in prices, loans are harder to get. "It's a common way to get more profit as steel traders. Banks also can get a stable profit by providing loans to traders when the steel market is good," an employee surnamed Liu who works for a Shanghai-based trading company told the Global Times Monday. Liu said his company had halted its steel trade business because the factory price for steel is now higher than the market price.