• Underwater mortgages could drown housing recovery. 23% of all U.S. homeowners with a mortgage, or 10.7M, now owe more to the bank than their house is worth, according to a report from First American CoreLogic this morning. More than 5.3M of those mortgages are at least 20% higher then the home's value. Noting the close correlation between negative equity and foreclosures, the firm calls the trend "an outstanding risk hanging over the mortgage market." While more than 40% of borrowers who took out a mortgage at the peak in 2006 are under water, prices have dropped so much that some borrowers who took out loans more than five years ago also owe more than their home's value. Given this, some say it's hard to believe we've broken out of the housing death spiral.
• China will punish non-compliant banks. Chinese banking regulators warned that banks which do not respect capital adequacy rules will face sanctions that could include limits on market access, overseas investments and new branches. The government's economic stimulus this year has generated a surge in bank lending, bringing it to nearly half of total GDP, at 7.37T yuan ($1.08T), and regulators fear a sharp increase in non-performing loans. The regulator recently raised the amount of reserves to 10% from 8%, and has limited the amount of subordinated bonds that banks could count toward capital requirements. Jitters that Chinese regulators will aggressively curb bank lending sent the Shanghai Composite index plunging 3.5% today.
• Fed pushes TARP repayments. Sources say the Fed has asked nine of the TARP recipient banks that underwent stress tests earlier this year to submit a schedule for repayment of the government's cash injections, and wants banks to repay the loans as soon as they have sufficient capital reserves. The request may turn up the pressure for banks accustomed to more flexibility on the timing and process of TARP repayments. Bank of America (BAC) is reportedly one of the banks, which have received about $142B of a total $700B in TARP funds.
• Corporate bond sales hit record. Corporate bond sales surged to a record annual high of $1.171T YTD - more than the $1.167T sold in all of 2007 - as companies take advantage of low interest rates to rebuild their balance sheets. Companies that could not sell debt during the financial crisis are borrowing more aggressively, and being careful to sell debt with longer maturities to avoid being trapped by refinancing risk as they were in 2008, analysts said. The bond sale surge was also supported by the FDIC's debt-guarantee program - companies issued $200B of debt guaranteed by the FDIC this year before the program ended on Oct. 31.
• HP triples share buybacks. Hewlett-Packard (HPQ) raised its share buyback purchases to $12B, three-times the size of those previously planned, as the company reported earnings that beat analyst estimates (see figures below). Revenue from emerging markets and China in particular, along with increased margin on services, boosted HP's earnings. But CEO Mark Hurd said on HP's earnings call that, although there were pockets of returning demand, in particular in printer sales, sales in Europe were still weak. By unit, Services revenue was up 8% to $8.9B; Enterprise Storage and Servers revenue fell 17% to $4.2B; Software revenue declined 16% to $967M; PC sales -12% to $9.9B; Imaging and Printing dropped 15% to $6.5B.
• NBCU IPO could scuttle deal. With right of first refusal, GE (GE) is reportedly leaning toward allowing an IPO of Vivendi's (VIVDY.PK) stake in NBC Universal, as talks over selling the unit to Comcast (CMCSA) stall. The annual window in which Vivendi could decide to sell ends Dec. 10; an IPO would likely scuttle GE's deal with Comcast.
• Where to stash the gold? Investors are piling money into gold, but are having trouble finding a place to put their holdings. According to the WSJ, HSBC (HBC) has asked retail clients to take their gold out of the vault to make room for their institutional investors' gold. Despite the price of gold hovering at about $1,170/ounce, investors are expected to increase holdings of physical gold bars and coins by 21%.
• Existing-home sales hit two-year high. Existing-home sales rose 23.5% year-on-year in October to 6.1M/year, a two-year high, according to a report by the National Association of Realtors released Monday. The $8,000 first-time homebuyer tax credit, due to expire in October, was largely responsible for the surge, the report said (it has since been extended to April). Sales of low-cost homes led the increase, although home prices did not decline sharply during the period. NAR chief economist Lawrence Yun warned that, "with such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer."
• Strauss-Kahn warns of perversity. Today's uncertain regulatory environment is creating a culture of perverse incentives, IMF director Dominique Strauss-Kahn warns: "It might be encouraging a risk-taking culture - a Mardi Gras effect whereby financial institutions party now in expectation of lean times to come." What is needed, he said, is a timetable for reforming the financial sector, and detailed plans for implementation. "We may run out of time - if we wait too long to implement these reforms, it might be too late." Strauss-Kahn added that about half of the world's banking losses have yet to be disclosed.
• Credit-card charge-offs to increase. Credit-card delinquencies have been declining, but Moody's warned Monday they will likely increase in the coming year, driving up charge-offs. Moody's October credit card index showed a decrease in charge-offs to 10.04%, well below the 11.49% record high set in August. But Moody's forecasts that charge-offs will pick up again, hitting a peak of 11-13% in the first half of next year. The early-stage delinquency rate for the past three months is already 14% higher than the same period in 2008.
• SEC to watch for derivatives insiders. The SEC will monitor a wide range of financial instruments, including derivatives and CDS, for insider trading, director Robert Khuzami said on Monday. After the first case of insider trading on CDS in May, Khuzami said the agency will "roll back the curtain and look at patterns across all markets." But some were less than enthusiastic about the initiative, saying the cost of such monitoring outweighs possible benefits: "Do we really need to protect hedge funds from other hedge funds and investment banks in credit default swap trading? Isn't this just a distraction from the SEC's core duty of protecting the ordinary shareholder?"
• Pimco likes Treasurys. Pimco increased its holdings of U.S. government debt in its Total Return Fund to 63% from 48% (.pdf), the highest amount since 2004. Fund manager Bill Gross explained last week that under the "new normal," there is a risk of asset bubbles given that interest rates will remain low for a long time. Gross also raised holdings of corporate debt by 16%, but reduced exposure to mortgage bonds.
• Fujii wants action on deflation. Japanese Finance Minister Hirohisa Fujii said on Tuesday that the Bank of Japan should take action to avoid deflation, urging the bank to cut rates and to step up quantitative easing measures. The central bank said on Friday that growth was increasing, but the government said on the same day that Japan is in deflation for the first time in three years. The government may have trouble raising funds for economic stimulus, because it has set a ceiling of 44T yen ($495B) on bond sales for the next fiscal year. Deflation was one of the main causes of Japan's 'lost decade' in the 1990s.
• Twitter might list, but won't sell. Twitter co-founder Biz Stone says the company might eventually seek a stock market listing, but isn't up for sale. The company, which reportedly received an additional $100M in venture capital last year, is also planning to charge for some of the services it offers, and to introduce paid advertising. The platform had 44.5 million visitors in June, up 15 times from the previous year.
• No bidding war for Opel. European countries that host GM's Opel plants won't be engaging in a bidding war to keep them from closing. The EC chaired a meeting on Monday with the automaker, Spain, U.K., Poland, Belgium and Germany. Under the watchful eye of Competition Commissioner Nellie Kroes, participants agreed that countries could not exchange aid to Opel to preserve jobs at factories. GM is seeking to invest €3.3B ($4.9B) in Opel, but it wants governments to pay for part of that.
• PC sales to return to growth. Gartner reversed its 2009 PC sales forecast, and now expects growth of 2.8% (299M units) from a previous estimate of -2%, noting Q3 shipments were much stronger than expected. However, Gartner still expects dollar sales to dive 10.7% year-on-year to $217B due to "unprecedented declines" in average selling prices (ASPs) as customers settle for "good enough" - a trend it says is likely to continue.
• Icahn takes post on Fountainbleu. Carl Icahn outbid Penn National Gaming (PENN) Monday to become the "stalking horse" bidder for the stalled $3.5B Las Vegas casino the Fontainebleau. Icahn's $155M was $10M higher than Penn's bid, thus setting the base price for auction. The Icahn bid includes about $50M for DIP financing that would be paid back if it is outbid in the auction.
• Black Friday rush may be deceptive. Upscale shoppers are expected to fill retail stores in droves on Friday, but lower-income shoppers won't be in the crowd, according to a survey (.pdf) by Consumer Edge Research. Those earning $150K+ will be snapping up 'Black Friday' bargains, but for every consumer planning to increase how much money he will spend during the holiday, 2.5 say they plan to curb their spending. Preseason trends suggest electronics sales may be solid, while sales of apparel could get pummeled.
• Lehman to return $11B. The bankruptcy administrator for Lehman Bros. International, the defunct U.S. bank's foreign arm, proposed a plan that would return about $11B in assets which have been tied up in bankruptcy court to creditors. If 90% of creditors support the plan in a vote on Wednesday, PricewaterhouseCoopers will be able to give them their money back.

Earnings: Tue. Before Open

• Heinz (HNZ): FQ2 EPS of $0.76 beats by $0.06. Revenue of $2.67B (+2.5%) in-line. (PR)
• Vimpel-Communications (VIP): Q3 EPS of $0.43 misses by $0.02. Revenue of $2.28B (-19.9%) in-line. Mobile subscribers +1.7M Q/Q to 65.4M. (PR)
• Warner Music Group (WMG): FQ4 EPS of -$0.03 misses by $0.08. Revenue of $861M (+0.8%) vs. $820M. (PR)

Earnings: Mon. After Close

• Analog Devices (ADI): FQ4 EPS of $0.36 beats by $0.10. Revenue of $572M (-13%) vs. $524M. Sees Q1 EPS of $0.36-0.37 vs. $0.28, on revenues up 20% Y/Y. Shares +0.9% AH. (PR)
• Atwood Oceanics (ATW): FQ4 EPS of $0.75 beats by $0.06. Revenue of $131M (-18%) vs. $128M. Shares +0.1% AH. (PR)
• Brocade Communications Systems (BRCD): FQ4 EPS of $0.15 beats by $0.02. Revenue of $522M (+30.9%) in-line. Shares +0.7% AH. (PR) (-from Mon. evening)
• Hewlett-Packard (HPQ): FQ4 EPS of $1.14 beats by $0.01. Revenue of $30.8B (-8%) vs. $30.4B. China Q4 revenue up more than 20%. "HP's solid performance in services drove record profit, and the accelerated pace in signings creates strong momentum going into 2010." Shares -0.6% AH. (PR)
• Nuance Communications (NUAN): FQ4 EPS of $0.32 beats by $0.03. Revenue of $276M (+6%) vs. $272M. Shares +1.8% AH. (PR)

Today's Markets

Asia stocks dropped Tuesday, led by China on jitters regulators there will aggressively curb bank lending. Europe is flat at midday, as are futures after a quiet overnight session.

• Asia: Nikkei -1% to 9402. Hang Seng -1.5% to 22423. Shanghai -3.5% to 3224. BSE -0.3% to 17131.
• Europe at midday: FTSE +0.1% to 5361. CAC -0.3% to 3804. DAX -0.1% to 5794.
• Futures: Dow, S&P and Nasdaq all flat. Jan. crude -0.6% to $77.06. Gold +0.3% to $1,167.70. 30-year Tsy +0.23% to 121-06. 10-year +0.14%. Euro -0.1% vs. dollar. Yen +0.3%. Pound -0.5%. Loonie -0.4%.

Tuesday's Economic Calendar

• 7:45 ICSC Retail Store Sales
  8:30 Q3 GDP (2nd estimate); Corporate Profits
  8:55 Redbook Chain Store Sales
  9:00 S&P Case-Shiller Home Price Index
  10:00 Consumer Confidence
  10:00 FHFA Housing Price Index
  10:00 Richmond Fed Mfg.
  10:00 State Street Investor Confidence Index
  1:00 PM Results of $39B, 3-Year Note Auction
  2:00 PM FOMC minutes
  2:00 PM Q3 Thrift Industry Charge-offs
  5:00 PM ABC Consumer Confidence Index
• Notable premarket earnings: AEO, BKS, DLTR, EV, HNZ, HRL, MDT, VIP, WMG
• Notable postmarket earnings: CWTR, JCG, TIVO

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• Most banks fail ratings test. Most major banks still don't have enough capital to comfortably maintain their credit ratings, S&P said Monday, releasing the first global comparison of risk-adjusted capital adequacy for the world's top banks. Mizuho (MFG), Citigroup (C), UBS (UBS) and BBVA all came in well below the global average RAC of 6.7%; Mizuho's was just 2%, Citigroup's was 2.1%, UBS's 2.2%, and BBVA's 5.4%. Banks with stronger than average balance sheets included HSBC (HBC) (9.2%) and Goldman Sachs (GS) (8.3%). In a swipe at widely-used tier-one and leverage ratios, S&P said they aren't consistently calculated or don't adjust for risks. "We do not believe that these two capital ratios, which are the most commonly used by market constituents, are sufficient to assess banks' risk-adjusted capital adequacy."
• U.S. economists upbeat. Reiterating its statement that "the Great Recession is over," the National Association for Business Economists (NABE) boosted its economic growth forecast for 2010 to 2.9%, up from the 2.6% the group predicted last month. However, NABE said it expects the jobless rate to remain stubbornly high, averaging 9.6% in Q4 2010, which should keep a lid on inflation as substantial labor slack and higher productivity gains cut labor costs. "Real GDP growth should also be enough to recover losses from the recession and return output to an all-time high by the end of 2010," it predicted.
• Dimon for Treasury Secretary? With support for Treasury Secretary Tim Geithner waning, JPMorgan (JPM) CEO Jamie Dimon is emerging as a potential successor, sources say. People who know Dimon say he "would love to serve his country," and note he has recently begun making frequent visits to Capitol Hill, and earlier this month published an op-ed that urged the government to allow large institutions that take big risks to collapse rather than receive government aid. Dimon has the support of outspoken bank analyst Dick Bove, who says the Treasury Secretary must be a person "who has earned respect on their own as a result of hard-won battles in finance to represent this nation... That is not Timothy Geithner. It is Jamie Dimon."
• Bullard wants more QE. St. Louis Fed chief James Bullard says the Fed should extend its program to buy mortgage-backed securities and agency bonds beyond the current March deadline in order to remain agile and respond to any weakening in the economy. "I would just like to keep them active at a very low level instead of saying we're shutting down," Bullard told reporters in New York. "Initially it would do nothing for the economy, but it would give the Fed the option to react to future news as it comes in." The Fed has said it will complete its planned $1.25T scheme by March, and recently reduced the agency-debt purchase ceiling to $175B from $200B.
• Microsoft, News Corp. plot Google block. News Corp's (NWS) Rupert Murdoch may yet have his way to make online viewers pay for content if talks he's having with Microsoft (MSFT) pan out. The two have reportedly discussed a tie-up wherein News Corp. would get paid to remove its news websites from Google's (GOOG) search engine. Microsoft, which relaunched its search engine as Bing this year, has talked with other online publishers about a similar move, as it looks for ways to grab market share from Google.
• Ciena connects with Nortel. U.S. network equipment maker Ciena (CIEN) upped its offer by more than $200M to $769M and edged out a joint bid by Nokia Siemens (NOK, SI) and private-equity firm One Equity Partners to buy Nortel's optical networking and carrier ethernet assets. The deal will more than double Ciena's turnover.
• Cadbury hopes for sweeter deal. Not to be left out, Nestle (NSRGY.PK) is thought to be considering a bid for Cadbury (CBY) to challenge Kraft's (KFT) $16.7B hostile offer and a potential counterbid by Hershey (HSY). According to one analyst, Nestle could "blow Kraft out of the water" if it executes an option to sell its majority stake in Alcon (ACL) to Novartis (NVS) for more than $20B come January. Cadbury Chairman Roger Carr told the Sunday Telegraph he would prefer a merger with Hershey rather than Kraft, but added both bids could fail if not sweet enough. Sources say Kraft is considering increasing its bid or offering more cash.
• Price tussle over NBCU. Talks between GE Corp. (GE) and Vivendi have reportedly ground to a halt as the two clash over how to assess the worth of NBC Universal, with a price difference of several hundred million dollars separating them. GE and Comcast (CMCSA) had hoped to announce a deal as early as Monday, but sources say this could now be at least a week away, or perhaps not at all if the French media company decides to pursue an IPO of its 20% stake in NBCU rather than sell it back to GE.
• Goldman lashes back at NYT. Lucas van Praag, spokesman for Goldman Sachs (GS), fired back at the New York Times over the weekend for suggesting in an article and editorial that Goldman had more AIG exposure than it let on pre-bailout, dismissing most of the statements as "speculative." He also took issue with the findings of a government report (.pdf) that said the Fed caved in to AIG's counterparties during the bailout. Goldman still insists its exposure was "close to zero." The Times editorial slammed Goldman for fleecing the American public and called on the firm to make a multi-billion-dollar gift to the federal Bureau of the Public Debt.
• BofA's Lewis may rule another day. Bank of America (BAC) out-going CEO Ken Lewis may stick around a few months later than his scheduled departure of Dec. 31 while the bank continues to hunt for a replacement, sources say. At least four external candidates, including Citigroup (C) director Michael O'Neill, apparently rebuffed approaches. BofA's board has suggested it may extend its search for a permanent replacement into 2010 if the directors can't settle on a candidate in the next four days. The list of prospects has reportedly been narrowed to two BofA executives and at least two outsiders.
• e-Bay in auction freeze-out. eBay (EBAY) is calculating the cost of a disruption to its auction process on Saturday after a surge in live listings prevented users from finding products on the U.S. and some international eBay sites. eBay said it will compensate sellers for affected listings. Saturdays typically account for about 11% of eBay's weekly sales, although this Saturday may be more painful given the upcoming holiday shopping period.
• Oil slick for Reliance. Reliance Industries, which owns the world's largest oil-refining complex, may pay $10-12B to buy bankrupt chemicals and fuel maker LyondellBasell Industries, which is based in Rotterdam. The acquisition by Reliance, listed in Mumbai, could be the biggest acquisition by an Indian company in two years. Analysts said the deal would instantly expand the company's presence in the U.S. and Europe.
• U.S. Healthcare bill faces possible split. The highly contentious U.S. healthcare bill cleared an important Senate hurdle over the weekend, garnering the 60 votes needed to open floor debate on the plan. But lawmakers warned that the bill still faces serious hurdles.
• Coca-Cola targets China. In a move aimed at tripling its sales to middle-class consumers in China, Coca-Cola (KO) is planning to more than double its number of bottling plants in the country over the next ten years. A company official, speaking to investors in Atlanta last week, said the company also planned to distribute more than six times as many Coke-branded coolers to retailers, bars and restaurants in China over the coming decade, employing an expanded sales force to reach an additional 4.7M outlets.

Earnings: Mon. Before Open

• Campbell Soup (CPB): FQ1 EPS of $0.87 beats by $0.06. Revenue of $2.2B (-2.1%) vs. $2.3B. Shares +3.1% premarket. (PR)
• LDK Solar (LDK): Q3 EPS of $0.27 beats by $0.37. Revenue of $282M (+23.5%) vs. $277M. Sees Q4 revenue of $280-310M vs. $259M consensus. (PR)
• Tech Data (TECD): Q3 EPS of $0.84 beats by $0.13. Revenue of $5.64B (-9.5%) vs. $5.33B. Sees Q4 sales up low-to-mid single digits Y/Y vs. consensus of -1.2%. (PR)
• Tyson Foods (TSN): FQ4 EPS of $0.28 beats by $0.02. Revenue of $7.21B (+0.2%) vs. $6.88B. Says F2010 "should be a much better year." Shares +1.8% premarket. (PR)

Today's Markets

Overseas markets were broadly higher Monday, sending futures up overnight.

• Asia: Hang Seng +1.4% to 22771. Shanghai +0.9% to 3339. BSE +0.9% to 17180. Tokyo was closed.
• Europe at midday: FTSE +1.4% to 5343. CAC +1.8% to 3796. DAX +1.7% to 5757.
• Futures at 7:00: Dow +0.9% to 10400. S&P +1.1% to 1102. Nasdaq +1%. Jan. crude +1.2% to $78.40. Gold +1.6% at $1,166. 30-year Tsy -0.1%. 10-year -0.13%. Euro +0.7% vs. dollar. Yen +0.1%. Pound +0.65%.

Monday's Economic Calendar

• 8:30 Chicago Fed National Activity Index
  10:00 Existing Home Sales
  1:00 PM Results of $44B, 2-Year Note Auction
• Notable premarket earnings: BJS, CPB, LDK, TECD, TSN
• Notable postmarket earnings: ADI, ATW, HPQ, NUAN

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• Geithner pressured to resign over AIG. Loud calls for Treasury Secretary Timothy Geithner's resignation continued on Thursday, over his handling of the AIG (AIG) bailout in particular, and for his management of the financial crisis in general. Geithner, then chairman of the New York Fed, was blamed in a special inspector's report [.pdf] for not being tough enough with AIG's creditors. During hearings in the House Financial Services Committee on Thursday, several Republican Congressmen claimed that Geithner was too "cozy with big banks." Geithner defended his position, saying, "The U.S. ... came into this crisis without anything like the basic tools countries need to contain financial panics. Coming into AIG, we had basically duct tape and string."
• House panel gives green light to Fed audit. The House Financial Services Committee gave the Fed a slap in the face on Thursday when it approved an amendment to the financial services reform bill that would allow the General Accounting Office to audit the bank. Many lawmakers don't approve of the Fed's role in and handling of the financial crisis. Rep. Ron Paul, who has been trying for decades to obtain greater congressional control over the Fed, sponsored the provision. Former Fed Chairman Alan Greenspan and Paul Volcker voiced opposition to the provision in a letter (.pdf) to the House Financial Services Committee early this month and made public yesterday, saying that the measure would destroy the central bank's independence. Fed chief Ben Bernanke told Congress in June that Paul's provision "would effectively be a takeover of policy by the Congress and would be highly destructive to the stability of the financial system, the dollar and our national economic situation."
• Goldman shareholders nix big bonuses. Some of the largest shareholders in Goldman Sachs (GS) are peeved about the $717,000-average bonuses that the bank's staff are to get this year, sources say. Shareholders believe more earnings should go to investors, especially since, despite record net income, analysts expect Goldman's 2009 earnings per share to be 22% lower than in 2007. A spokesman for the bank pointed out that, since going public in 1999, the company has generated a total return of 159%, and Goldman shares have more than doubled this year.
• BOJ keeps rates on hold. The Bank of Japan kept its key interest rate at 0.1% on Friday, despite pressure from the Japanese government to take action on deflation. Finance Minister Hirohisa Fujii said there’s a sense of crisis about falling prices - deflation was one of the causes of Japan's 'lost decade' in the 1990s. The government would like the BOJ to cut rates further and to step up its support of debt markets with asset purchases. Governor Masaaki Shirakawa warned that increasing liquidity would not help to push prices higher. The BOJ is expected to maintain the key interest rate at its current level well into 2010.
• Fed has biggest balance sheet since December. The Fed's balance sheet swelled to its largest point since December as its holdings in agency and mortgage-backed securities increased, data released Thursday showed. Balance sheet liabilities had expanded to $2.19T as of Nov. 19, the highest point recorded since liabilities hit $2.25T on Dec. 31, 2008. The Fed's holdings of mortgage-backed securities increased to $847B, from $776B a week earlier, while its agency debt ownership rose to $153B from $150B. The Fed has said it will continue its support for markets with ongoing purchases of securities, buying $1.25T worth of mortgage-backed securities and $175B in bonds issued by Fannie Mae (FNM), Freddie Mac (FRE) and the Federal Home Loan Bank System.
• Treasury frees banks from TARP. The Treasury announced Thursday that it will auction warrants that the government received from banks as part of the Troubled Asset Relief Program, meaning that JPMorgan Chase (JPM), Capital One Financial (COF) and TCF Financial (TCB) will no longer have obligations under TARP, and will no longer be subject to any restrictions linked to it. The warrants are expected to fetch about $2.75B for the Treasury, and will include a tidy profit, according to professor Linus Wilson. Goldman Sachs (GS) bought back its warrants from the Treasury for $1.1B in July to avoid share dilution, but the Treasury could have earned $1.24B by auctioning the warrants instead. In the auctions, which will be run by Deutsche Bank (DB), banks provide determinations of market value for the warrants, and then the Treasury fixes the prices using independent appraisers.
• Deutsche Telekom seeks U.S. partner. Deutsche Telekom (DT) is reportedly seeking a partner for T-Mobile, its U.S. mobile communications business, one that could help it finance investments in networks with fast data transfers. MetroPCS (PCS), Clearwire (CLWR) and AT&T (T) are all potential candidates, but the company might also look for a purely financial investor from outside the sector. T-Mobile has been losing market share to competitors. Other plans for growing T-Mobile that the company had been considering, including a share sale and a takeover of rival Sprint-Nextel (S), have been abandoned, according to media reports.
• FDIC wants performance-linked pay for rating agencies. The FDIC wants the underwriters of securitized instruments and the agencies that rate them to be paid based on how those issues perform, a key adviser says. "The underwriters get all their cash upfront, the ratings agencies get all their cash upfront, and nobody really has a strong incentive to make sure the loan performs in the long term," FDIC adviser Michael Krimminger said in an interview Thursday. Securitization was at the heart of the credit crunch, as packages of securitized loans with high ratings turned out to be unsound. Other FDIC proposals include requirements for greater disclosure on debt rolled up in securitizations, limits to the amount of debt that can be bought from other companies and a demand that asset-backed issuers retain a certain amount of the credit risk from the pools, Krimminger added.
• Fed's Fisher wants action on "too-big-to-fail" companies. Action must be taken on companies deemed "too-big-to-fail," Dallas Fed President Richard Fisher said on Thursday, but he stopped short of calling for them to be broken up. Fisher wants to force banks to spin off some of their high-risk operations, as the "basic pathology" of these companies must be "treated," if the Fed is to return to traditional policy making. Operations such as proprietary trading, that place the deposit and lending function at risk and otherwise present conflicts of interest, should be stripped away. Fisher also wants to change the regulatory structure so that such firms can no longer come into existence, and to do that he would remove parts of the government safety net to end the moral hazard threat.
• Ferrero, Hershey would break up Cadbury. Ferrero and Hershey (HSY) would probably break up Cadbury (CBY) into separate businesses if the takeover bid that the two companies are mulling for the U.K. candy maker should succeed, an Italian newspaper reported on Friday. Ferrero is reportedly interested in Cadbury's lucrative candy and gum business. The pair would have to beat out U.S. rival bidder Kraft (KFT), whose 9.9B pound ($16.5B) bid has been decisively rejected by Cadbury's board.
• Google unveils Chrome OS. Google (GOOG) aired its new Chrome operating system on Wednesday in a move calculated to compete directly with market-leader Microsoft (MSFT). The new system, which will be available on netbooks for the 2010 holidays, acts more like a web browser than a traditional operating system, which will enable Google to push through advertising to application users. Netbooks running Chrome OS will only be able to run web applications and the user's data will automatically be stored in Google's cloud of internet servers. Google claims the system can boot up in seven seconds, almost as fast as a TV.
• Foreclosures keep rising. Home foreclosures hit a record at the end of September, with one out of seven home loans going bad, and the number is likely to keep growing through next year, the Mortgage Bankers Association said in its Q3 Delinquency Survey Thursday. The record number of foreclosures, up from 1/10 homes at the beginning of the year, shows the housing market isn't close to recovery, the association said. Applications for mortgages to buy homes have declined for six straight weeks despite interest rates below 5% on 30-year fixed-rate loans. And housing starts were down 10% in October, from the previous month, the Commerce Department said on Wednesday. The association blames high unemployment for the trend, but analysts said adjustable-rate mortgages, which cost owners much more now than they did when they were taken out, are equally at fault.
• Dell sees increasing demand. Even though third-quarter results were down 54% - with shipments tumbling 6.7% to 10.3M units year-on-year - Dell (DELL) said on Thursday that demand for its PCs picked up "pretty substantially" following the launch of Microsoft's (MSFT) new Windows 7 operating system in October. Dell CEO Michael Dell said that the company will see increased benefits from the launch of Windows 7 in Q4. Dell also expects its Asia business to return to revenue growth in the near future.
• China to tighten monetary policy. Chinese officials said on Friday that moves to cautiously tighten the country's loose-money policy would begin at the end of the year. Chinese legislator Wu Xiaoling said hikes in the reserve ratio may begin next year. But Wu said that the changes would be small, and the overall accomodative stance of the central bank would not change, noting the government is also concerned about the dangers of an asset bubble. Separately, the government cited progress in stimulating economic growth. Beijing is also closely monitoring surging housing demand. Separately, Senator Charles Schumer asked the Commerce Department to launch an investigation on whether the yuan's peg to the dollar constitutes currency manipulation.

Earnings: Fri. Before Open

• D.R. Horton (DHI): FQ4 EPS of -$0.73 misses by $0.43. Revenue of $1.01B (-34.6%) vs. $1.11B. Backlog of 5,628 homes vs. 5,297 last year. Net sales of 5,008 homes vs. 3,977 last year. (PR)
• J.M. Smucker Company (SJM): FQ2 EPS of $1.22 beats by $0.18. Revenue of $1.28B in-line. Sees full-year EPS of $3.95-4.05 vs. $3.83 consensus. (PR)

Earnings: Thur. After Close

• Dell (DELL): Q3 EPS of $0.23 misses by $0.05. Revenue of $12.9B (-15%) vs. $13.2B. "We are seeing improvement in overall underlying IT demand that is continuing into the fourth quarter. The same is true with momentum in Dell's business, specifically in our Large Enterprise and SMB segments." Shares -6.1% AH. (PR)
• Dress Barn (DBRN): FQ1 EPS of $0.38 beats by $0.05. Revenue of $404M (+7%) vs. $390M. Same-store sales up 4%. Shares +6% AH. (PR)
• Foot Locker (FL): Q3 adjusted EPS of $0.10 misses by $0.03. Revenue of $1.2B (-7%) in-line. Same-store sales down 8.2%. Sales in U.S. lower than anticipated; sales trend improvement in Europe and continuing sales gains in Asia/Pacific. Shares -4.6% AH. (PR)
• Gap (GPS): Q3 EPS of $0.44 in-line. Revenue of $3.6B (+1%) in-line. Same-store sales flat. Announces stock buyback of up to $500M. Shares -1.2% AH. (PR)
• Intuit (INTU): FQ1 EPS of -$0.10 beats by $0.06. Revenue of $493M (+2%) vs. $488M. Sees Q2 EPS of $0.29-0.32 vs. $0.37. Reaffirms full-year guidance. Shares -2.5% AH. (PR)
• Wet Seal (WTSLA): Q3 EPS of $0.04 in-line. Revenue of $141.5M (-3%) vs. $140.6M. Sees Q4 EPS of $0.03-0.07 vs. $0.08, on revenue of $149M-155M vs. $156M. Shares -6.1% AH. (PR)

Today's Markets

Asian markets were mixed Friday, but Europe stocks and U.S. futures have moved lower.

• Asia: Nikkei -0.5% to 9498. Hang Seng -0.8% to 22456. Shanghai -0.4% to 3308. BSE +1.4% to 17022.
• Europe at midday: FTSE -0.1% to 5263. CAC -0.2% to 3752. DAX -flat at 5700.
• Futures: Dow -0.5% to 10280. S&P -0.5% at 1089. Nasdaq -0.4%. Jan. crude -0.6% to $77.57. Gold -0.2% to $1,139.80. Treasurys are moderately higher. Euro -0.4% vs. dollar. Yen +0.4%. Pound -1%.

Friday's Economic Calendar

• 12:05 BoJ Rate Decision
  10:00 Mass Layoffs
  10:00 Markup: Financial Regulatory Reform
• Notable premarket earnings: ANN, DHI, SJM

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• JPMorgan snaps up Cazenove. JPMorgan (JPM) agreed to acquire the half of British stockbroker Cazenove it doesn't own for £1B ($1.7B) in a widely-expected deal. JPMorgan will combine JPMorgan Cazenove's cash equities and research divisions with its existing operations covering Europe, the Middle East and Africa. JPMorgan has weathered the financial crisis better than most rivals, and is now taking advantage of its problems and grabbing opportunities.
• OECD doubles growth forecast. The 30 countries that make up the Organization for Economic Cooperation should grow 1.9% next year - twice what the group forecast in June - and by 2.5% in 2011, according to its latest Economic Outlook. China will lead the way both years, with 10.2% growth seen in 2010. Heavy debt levels mean the U.S. and euro regions will lag, gaining 2.5% and 0.9% respectively. The OECD gave 2011 growth forecasts for the first time, with the U.S. seen growing 2.8%, the euro area 1.7%, Japan 2% and China 9.3%.
• Obama warns of double dip. The U.S. is flirting with a double-dip recession if it doesn't act to contain rising U.S. deficits, President Barack Obama warned Wednesday in an interview with Fox TV. The government is challenged in trying to boost the economy and spur job creation while setting a path toward long-term deficit reduction. Obama said the administration is considering tax measures to spur companies to hire.
• Blackstone eyes Birds Eye. Blackstone Group's (BX) Pinnacle Brands will reportedly pay $1.3B in cash to buy privately-held Birds Eye Foods, the largest frozen-vegetable company in the U.S. and owner of brands such as Duncan Hines and Swanson, another sign private-equity deals may be coming back to life. Birds Eye is majority-owned by the private-equity firm Vestar Capital Partners.
• Vivendi wants no part of NBCU. Vivendi's (VIVDY.PK) CFO says the company has no plans to be part of the future JV that Comcast and General Electric (GE) are discussing. Selling its 20% percent stake in NBCU would give Vivendi "additional financial headroom" after it gained control of Brazil's telecoms operator GVT last week, he said, but cautioned, "we are not there yet."
• Did Goldman mislead over AIG risk? Goldman Sachs (GS) could have been on the line for billions of dollars in losses when AIG collapsed if the U.S. government hadn't come to the insurer's rescue, a new government report suggests, confirming everyone's suspicions. Among other things, the report raises doubts about Goldman's previous claims that it was hedged against potential AIG losses, and suggests that Goldman would have found it difficult to liquidate its trading positions with AIG, even at discounts. A Goldman spokesman called the risks a "moot point."
• Fortinet on fire. In a promising sign for venture-capital-backed IPOs, Fortinet (FTNT) soared 33% after the network security provider launched on Nasdaq Wednesday, the fourth best showing of any U.S. IPO this year, although one analyst said this was in part because shares were priced at a discount to its peers. Venture-capital backed IPOs have mostly lagged those by private-equity owned companies in 2009.
• Toll warns of FHA train wreck. Homebuilder Toll Brothers (TOL) said the FHA has created a potential "train wreck" because it insures home purchases made with down-payments as small as 3.5%. FHA loans accounted for about 8% of the mortgages Toll closed last quarter, while the agency guarantees 20% of all single-family loans. While the FHA's insurance reserve ratio has fallen to an all-time low, a senior government official denied that the FHA is the next subprime mortgage crisis.
• Wells in auction-rate slapdown. One year after the auction-rate securities market collapsed, Wells Fargo (WFC) agreed to repay up to $1.4B to brokerage clients whose assets were frozen when the market collapsed. Wells will also pay a $1.9M fine and reimburse investors who sold their holdings at a discount. Wells said the repurchase will have an estimated impact of $150M in Q4, and that it expects to recover this over time through redemptions of the securities. So far, banks have been forced to buy back $61B in ARS since February 2008.
• AMD cleans up debt. In a move to clean up its debt-riddled balance sheet, AMD (AMD) said it's buying back up to $1B of convertible notes and $390M in senior notes. To help pay for the converts, the company plans to issue $500M of senior notes due in 2017 in a private offering. AMD's shares rose 8.9%.
• U.S. wants out of GM. The U.S. government wants to fast-track its way out of the nearly 61% stake it holds in GM as part of a policy to restructure the automaker in bankruptcy, and is planning to to exit through an IPO as soon as Q4 2010, providing the automaker is meeting its recovery targets and financial markets are receptive. GM is revaluing its balance sheet to provide "fresh start" accounting of its assets and liabilities since emerging from bankruptcy in July. Last week, GM said it may repay government loans sooner than expected. Separately, a senior official in the administration's auto task force said the group was caught off guard when GM decided to scrap a planned sale of its Opel unit backed by Germany, but affirmed the company's independence to make such decisions.
• No more "too big to fail". Still smarting over the tens of billions the government spent to save some of America's biggest financial firms year, the House Financial Services Committee approved a proposal that would empower regulators to break up large financial firms that threaten economic stability. The measure was an amendment to a broader bill that's expected to face a committee vote as soon as Friday. Regulators would evaluate factors such as a firm's size, exposure, leverage and relationships, and would have the power to call for tougher oversight, halt or change a firm's activities, limit mergers and acquisitions, or even dismantle them.
• Fed may focus on back-door tightening. St. Louis Federal Reserve Bank President James Bullard said Wednesday that, "The main challenge for monetary policy going forward will be how to adjust the asset purchase program without generating inflation while interest rates are near zero" and that the inflation outlook hinges on what the Fed does with this program. The Fed has bought $300B in longer-term U.S. government debt and plans to purchase about $1.43T in mortgage-related securities by the end of March. Bullard suggested the Fed would not wait as long as it has after previous recessions to raise interest rates, given criticism that a delay fueled the housing bubble.
• Santa may come late for Amazon rivals. Sony (SNE) and Barnes & Noble (BKS), both angling for a piece of the growing e-book reader market that Amazon.com (AMZN) cornered with Kindle, are falling behind in the race to get rival products out in time for Christmas delivery. Sony said Wednesday its new Daily Edition Reader - promised to be ready for the holidays - will only ship Dec. 18 through Jan. 8, adding that the actual delivery date can’t be guaranteed. Barnes & Noble said the same last week. Late orders could leave the field wide open to Amazon. Separately, Sony pushed back its elusive 5% operating profit margin - originally slated for 2008 - to 2013.
• New head of DirecTV signals sale? The appointment of a PepsiCo veteran with no experience in pay-TV could signal that parent Liberty Media (LINTA) is prepping DirecTV Group (DTV) for a sale, sources say. Verizon (VZ) and AT&T (T) have already expressed interest in the unit over the past year, but the talks ground to a halt due to regulatory concerns and are not currently active. Liberty Media shareholders are set to vote today to approve a plan to split DirecTV from Liberty Entertainment (LMDIA), a move some believe could pave the way for a telephone company to put in a bid for DirecTV, perhaps prompting a similar bid for smaller rival Dish Network (DISH).
• Paulson gold bug. After clocking $20B by betting against the housing and financial markets for his hedge fund, John Paulson is launching a new fund that will buy shares of gold-related investments and gold derivatives. Paulson reportedly has more than 10% of his some $30B under management in gold-related investments, including billions of dollars worth of gold ETFs and futures. Although Paulson's gotten a boost from the recent surge in gold prices, some say the rally raises questions about the timing of the launch.
• GE sees slow growth for key unit. The economic downturn in the U.S. and European economies will likely bog down revenue growth for General Electric's (GE) technology infrastructure segment, a senior company official says. The division accounts for 39% of GE's profit. Growth in China will likely help, but won't offset the downside the company will feel in developed markets, he said.
• U.S. data damps inflation fears. Consumer prices rose moderately in October, suggesting the Fed will refrain from raising rates in the near future. CPI rose 0.3% from 0.2% in September; economists were expecting a 0.2% climb. Home construction data, meanwhile, suggest that the economic recovery is still hooked on government support after October home construction fell 10.6% from the prior month to 529,000, the fewest starts since April's record low.
• Ambac back from brink. Ambac (ABK), once the No. 2 bond insurer in the U.S., said its main bond-insurance unit now has a capital surplus - quelling fears of a liquidity crunch and possible bankruptcy in 2010. The company, which has been hobbled by losses from derivative-based guarantees it sold on mortgage-related securities during the housing boom, said statutory capital for Ambac Assurance Corp. was $856M, well above the $2M minimum required. Ambac said in an 8-K filing that it benefited from $311M reinsurance payments and its ability to cancel four asset-backed securities derivative contracts that had been worth more than $5B for cash payments of $520M. Shares jumped 44% to close at $1.01.

Earnings: Before Open

• Children's Place (PLCE): Q3 EPS of $1.38 in-line. Revenue of $463M (+2.8%) in-line. SSS -2%. (PR)
• Dick's Sporting Goods (DKS): Q3 EPS of $0.16 beats by $0.07. Revenue of $990M (+7.1%) vs. $961M. Sees Q4 EPS of $0.41-0.46 vs. $0.57 consensus. "Our estimates also recognize the continued uncertain consumer environment, particularly as we head into our largest quarter of the year." Shares -3.3% premarket. (PR)
• Patterson Companies (PDCO): FQ2 EPS of $0.41 in-line. Revenue of $815M (+7.3%) vs. $788M. (PR)
• Sears (SHLD): Q3 EPS of -$0.81 beats by $0.28. Revenue of $10.19B vs. $9.92B. Gross margin 27.2% vs. 26.8% last year. SSS -4.6%. Total debt $3.8B vs. $4.5B last year. (PR)
• Suntech Power (STP): Q3 EPS of $0.16 beats by $0.08. Revenue of $473M (-20.4%) vs. $427M. Shares +3.5% premarket. (PR)
• Trina Solar (TSL): Q3 EPS of $1.29 beats by $0.53. Revenue of $250M (-14.1%) vs. $216M. (PR)
• Williams-Sonoma (WSM): Q3 EPS of $0.16 beats by $0.11. Revenue of $729M (-3.1%) vs. $686M. (PR)

Earnings: Wed. After Close

• Gymboree (GYMB): Q3 EPS of $1.15 beats by $0.02. Revenue of $266M (+2%) vs. $269M. Sees Q4 EPS of $0.95-1.03 vs. $1.13. Shares -2.4% AH. (PR)
• Hot Topic (HOTT): Q3 EPS of $0.15 beats by $0.02. Revenue of $189.6M (-4%) vs. $190.5M. Sees Q4 EPS of $0.23-0.26 vs. $0.30. Shares -4.8% AH. (PR)
• Jack in the Box (JACK): FQ4 EPS of $0.70 beats by $0.15. Revenue of $540M (-7%) vs. $549M. Sees fiscal 2010 EPS of $1.90-2.10 vs. $2.32. Expects Q1 same-store sales down 10% and fiscal 2010 SSS down 3-7%. Shares -5.9% AH. (PR)
• Limited Brands (LTD): Q3 EPS of $0.02 beats by $0.03. Revenue of $1.8B (-4%) in-line. Same-store sales down 2%; raises full-year EPS guidance to $0.93-1.08 from $0.75-0.90, vs. $0.97. Shares +3.2% AH. (PR)
• NetApp (NTAP): FQ2 EPS of $0.37 beats by $0.07. Revenue of $910M (+0%) vs. $881M. Sees Q3 EPS of $0.36-0.37 vs. $0.36, on revenue of $935M-955M vs. $921M. Shares +4.3% AH. (PR)
• Netease.com (NTES): Q3 EPS of $0.44 misses by $0.05. Revenue of $129M (+9%) vs. $139M. Shares -8% AH. (PR)
• PetSmart (PETM): Q3 EPS of $0.31 beats by $0.03. Revenue of $1.3B (+4%) in-line. Same-store sales up 0.3%. Shares -1.2% AH. (PR)
• Phillips-Van Heusen (PVH): Q3 EPS of $1.08 beats by $0.19. Revenue of $697M (flat) vs. $670M. Sees Q4 EPS of $0.38-0.42 vs. $0.49, on revenue of $585M-595M vs. $582M. Raises full-year guidance to $2.59-2.63 from $2.30-2.40, vs. $2.50. (PR)

Today's Markets

Asia markets were sharply lower Thursday, with the exception of Shanghai. In Europe, stocks are under pressure at midday, as are U.S. futures in the premarket.

• Asia: Nikkei -1.3% to 9549. Hang Seng -0.9% to 22643. Shanghai +0.5% to 3321. BSE -1.3% to 16786.
• Europe at midday: FTSE -0.6% to 5311. CAC -1% to 3790. DAX -0.8% to 5740.
• Futures Dow -0.7% at 10332. S&P -0.9% to 1098.50. Nasdaq -0.8%. Jan. crude -0.9% to $79.36. Dec. gold -0.6% to $1,134.50. 30-year Tsy +0.21% to 120-24. 10-year +0.09%. Euro -0.5% vs. dollar. Yen +0.6%. Pound -0.5%.

Thursday's Economic Calendar

• 8:30 Initial Jobless Claims
  9:00 Conference: Restoring Global Financial Stability
  10:00 Leading Indicators
  10:00 Philly Fed Business Outlook
  10:00 CRE Leading Indicator
  10:00 Hearing: Financial Regulatory Reform
  10:00 Markup: Restoring American Financial Stability Act
  10:30 EIA Natural Gas Inventory
  4:30 PM Money Supply
• Notable premarket earnings: BKE, DKS, GME, HP, PDCO, PLCE, ROST, SHLD, STP, TSL, WSM
• Notable postmarket earnings: DELL, DBRN, FL, GPS, INTU, WTSLA

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• Hershey and Ferrero mull rival Cadbury bid. Hershey (HSY) is in talks with Italian confectionary giant Ferrero about a rival bid to Kraft's (KFT) $16.7B offer for Cadbury (CBY). Cadbury rejected Kraft's hostile bid last week, calling it "derisory." The American and the Italian candy makers have reportedly not been able to decide how to slice up Cadbury's businesses, which are worth $9B billion in annual sales - in particular deciding which one should get Cadbury's higher-margin gum and candy units. Analysts said that neither Hershey nor Ferrero could fund a Cadbury takeover on their own.
• Morgan Stanley, MUFG to split up brokerage. Morgan Stanley (MS) and Mitsubishi UFJ Financial Group (MTU) changed their plans about merging their brokerage operations in Japan, originally announced in March after MUFG made Morgan Stanley a $9B loan during the financial crisis. Current plans, which will delay the merger for two months, will create a two-company JV, one of which will be called Mitsubishi UFJ Morgan Stanley Securities, 60%-owned by MUFG, and will include Morgan Stanley's investment-banking business; the other will be controlled by Morgan and will include its equity and bond trading businesses.
• Fed officials disagree on recovery. Top Fed officials gave different points-of-view on Tuesday about the pace of recovery. Inflation hawk Jeffrey Lacker, president of the Richmond Fed, said that recovery is solidly under way, and he expects the economy to grow at a reasonable pace next year, though there could be "patches of lingering weakness." Cleveland Fed President Sandra Pianalto and San Francisco Fed chief Janet Yellen disagreed, saying that the economic recovery will be sluggish. Yellen warned that the Fed could not maintain its loose money stance for too long, regardless of the pace of recovery. "It is a core responsibility of the Federal Reserve to preserve price stability," she said.
• SkyTeam seeks to lure JAL. Troubled Japan Airlines has been offered a $1B package if it will join Delta Airlines (DAL) and its SkyTeam alliance. SkyTeam airlines would buy $500M of JAL or convertible securities, and Delta, by itself, would pay $200M in asset-backed financing and as much as $300M in guarantees to cover any losses caused by leaving the Oneworld alliance led by American Airlines (AMR). Delta said that joining SkyTeam's larger network would boost JAL’s sales by $400M a year. JAL has $15B in debt and has applied for mediated debt restructuring as part of a government bailout plan - the third such bailout the company has had to seek since 2000.
• Hedge-fund assets increase for sixth straight month. Hedge-fund assets rose $7.8B in October, the sixth straight month assets under management have improved, researcher Eurekahedge said on Tuesday. Net inflows totaled $10.2B, while performance-based losses were $2.4B for the month. Eurekahedge's Hedge Fund Index was up 16% this year, its best performance since 2003. Europe attracted the most capital, with four out of the five regions in the report reporting positive net flows for the month.
• Friction between Obama and Hu on yuan. Despite repeated urging by President Obama of Chinese President Jintao to liberalize the yuan-dollar peg, the joint statement issued by the two leaders after today's meeting made no mention of foreign exchange. Hu used the meeting to complain about recent U.S. trade measures that placed tariffs on Chinese exports of pipes and tyres. In its third-quarter report last week, China alluded to freeing up the yuan, but since then the bank has been chiding the U.S. about letting its loose money policies incite speculation against the greenback.
• Buffett and Blankfein aid small business. Goldman Sachs (GS) is teaming up with Warren Buffett (BRK.A) to set up a $500M program to aid small business, a move widely seen as image repair for the investment bank which has been taking a beating over executive bonuses. CEO Lloyd Blankfein issued a public apology on Tuesday for the bank's role in the financial crisis. The program, called "10,000 Small Businesses," is aimed at helping small businesses grow and create jobs, and will dedicate $300M to helping small businesses raise capital and grow; the remaining $200M will be given to universities and schools to expand education opportunities for these companies.
• Who should pay for 'too-big-to-fail?' The House Financial Services Committee agreed to include in the proposed banking reform bill a provision to require banks and funds to make payments in advance to provide for companies deemed 'too-big-to-fail,' aimed at insuring taxpayers don't wind up footing the bill when banks go bust. "Wall Street companies and executives should have to pay for their own mistakes," said Rep. Paul Hodes, D-N.H., the provision's author. But the amount to be collected from the industry is to be capped at $200B. A similar bill making its way through Senate would permit bank regulators to use taxpayer funds to dismantle a failed institution, and later recoup those costs from the industry.
• GM's Opel could set off bidding war. With cash reserves of $2.5B, General Motors' Opel unit has enough cash to survive into the first quarter, acting CEO Nick Reilly said on Tuesday. Opel announced Tuesday plans to cut 10,000 jobs and about 25% of its output, which will mean closing plants in at least one country in Europe. Opel will need government aid, Reilly said, adding that he didn't want to start a bidding war among governments in countries where Opel has plants. "But if a country refuses to participate, it could influence the plan somewhat," he added. For now, Germany has refused to provide aid, still angry about GM's backpedaling on a state-financed sale of Opel to Magna International (MGA) and Sberbank. But the U.K. has already promised financing, and Spain is mulling doing the same.
• Three Dems threaten to block Senate healthcare reform. Three Democratic senators could vote against the healthcare reform bill in the Senate, which would scuttle the bill. Debate is due to start this week, but Sen. Ben Nelson,(D.-Neb.), Mary L. Landrieu (D.-La.), and Blanche Lincoln (D.-Ark.) have all declared that they may not support the bill; it would require just one of them voting against for the bill not to pass. All Republican senators have already stated that they will not vote for the bill. Senate Majority Leader Harry Reid (D.-Nev.) is working hard to negotiate with the three holdouts. The bill would spend $1T over ten years, creating a government-run insurance plan and making health insurance obligatory for all individuals.
• Retailers show signs of life. Target (TGT), TJX (TJX), and Saks (SKS) all posted solid Q3 results Tuesday, a sign consumers have begun spending. TJMaxx parent TJX had the strongest results, with quarterly profit up 32% year-on-year. Target's profits rose 18%, and Saks surpised analysts by earning a small profit after more than a year of straight losses. Meanwhile, credit card researchers Synovate Mail Monitor and Credit Karma said average credit-card balances increased during October. The average consumer carried $7,573 of credit-card debt, a 14% increase from $6,641 a month earlier. The numbers indicate the holiday spend may not be as disappointing as was originally expected.
• Merrill deal a 'mistake,' BofA director says. Bank of America director Chad Gifford called the decision to acquire Merrill Lynch last year a "mistake," in an email sent to his children in January. The email emerged in the House investigation of the Merrill deal, which pushed BofA's quarterly dividend down to a penny, and which the government had to finance with a $20B cash injection. Gifford told the House committee that, despite the losses at Merrill, he'd supported the deal because it was good for shareholders. Retail bank head Brian Moynihan also testified at these hearings, but failed to explain why he was chosen to replace Tim Mayopoulos as General Counsel shortly before the Merrill deal was completed. Some Congressmen speculated that Mayopoulos was fired because he warned the board that it could not make use of a clause in the merger agreement that allowed BofA to back out of the deal. Moynihan argued, immediately after Mayopoulos was fired, that the clause could be invoked, and it was used as leverage to obtain the $20B from the Treasury.
• Boeing gets its contract back. A federal appeals court ruled on Tuesday that Boeing's (BA) $1B 10-year contract to maintain the KC-135 Tanker Jet for the Air Force was valid. Rival Alabama Aircraft Industries (AAll) had contested the contract, alleging that the bidding process had been unfair. The appeals court had overruled the judgment of a lower court in favor of the Alabama company. Alabama Aircraft Industries said it may appeal the decision.
• IRS divulges deal with Switzerland. The Internal Revenue Service on Tuesday released the terms of its banking secrecy deal with Switzerland. The banks must reveal the names of U.S. depositors who do not file a W-9 form for three years. But the deal only applies to depositors who had more than CHF1M ($992,802) in their accounts at any time from 2001 through 2008, and which generated average annual revenue of more than CHF100,000 ($98,892) over three years. The deal dates from the time UBS (UBS) agreed to pay the U.S. government $780M to avoid prosection on tax evasion charges. The deal was the result of protracted negotiations between the two countries.
• Wall Street sees record profits. Profit at Wall Street firms is now back to the levels seen before the financial crisis, according to a report released on Tuesday by New York State Comptroller Thomas P. DiNapoli. Goldman Sachs (GS), Merrill Lynch (BAC), Morgan Stanley (MS) and the investment banking arm of JPMorgan Chase (JPM) earned $22.5B in the first nine months of this year. Net revenue at the four firms reached a high of $57.7B in the second quarter. Securities trading with low-interest rate capital and declining interest payments were behind the profits, the report said.
• Apollo plans NYSE listing. Private-equity giant Apollo, with $38.3B assets under management, is planning a New York Stock Exchange listing in coming weeks, sources say. Apollo will list shares that now trade on platforms run by banks, including GSTrUE, which was set up by Goldman Sachs in 2007 for institutional investors, and where the company is valued at $1.55B, although that figure may not reveal the firm's entire value. Apollo plans to take advantage of the current stock market rally, the sources said.

Earnings: Wed. Before Open

• BJ's Wholesale Club (BJ): Q3 EPS of $0.45 in-line. Revenue of $2.51B (+2%) in-line. (PR)
• Chico's FAS (CHS): Q3 EPS of $0.13 beats by $0.06. Revenue of $447M (+123.4%) vs. $415M. SSS +12.8% vs. +3.1% consensus. Shares +11.3% premarket. (PR)
• Navios Maritime (NM): Q3 EPS of $0.20 beats by $0.01. Revenue of $161M (-55.8%) vs. $132M. (PR)
• Perry Ellis International (PERY): Q3 EPS of $0.31 beats by $0.10. Revenue of $178M (-19.9%) vs. $185M. (PR)
• Solarfun Power Holdings (SOLF): Q3 EPS of $0.37 beats by $0.22. Revenue of $145M (-23%) in-line. "We expect to see a healthy demand environment in 2010. The preliminary shipment target for 2010 is 500 MW. We expect strong demand from Germany as project development is accelerated in response to expected feed-in-tariff reductions, from new markets like China and the United States, and as the general availability of funding for solar projects improves." (PR)

Earnings: Tue. After Close

• Autodesk (ADSK): FQ3 EPS of $0.27 beats by $0.04. Revenue of $417M (-31%) vs. $415M. Sees Q4 EPS of $0.19-0.24 vs. $0.25. Shares -9.4% AH. (PR)
• La-Z-Boy (LZB): FQ2 EPS of $0.12 in-line. Revenue of $301M (-9%) vs. $285M. Shares +1.7% AH. (PR)
• Salesforce.com (CRM): Q3 EPS of $0.16 in-line. Revenue of $331M (+20%) vs. $324M. Sees Q4 revenues of $340M-342M vs. $335M. Sees fiscal 2011 growth of 15-16%. Shares -4% AH. (PR)

Today's Markets

Asia stocks were mixed Wednesday, but Europe markets are strong at midday and futures are a drop higher in overnight trading.

• Asia: Nikkei -0.55% to 9,677. Hang Seng -0.32% to 22,840. Shanghai +0.62% to 3,303. BSE -0.3% to 16,998.
• Europe at midday: London +0.4%. Paris +0.7%. Frankfurt +0.7%.
• Futures at 7:00: Dow +0.2% to 10422. S&P +0.2% to 1110. Nasdaq +0.1%. Dec. crude +1.2% to $80.07. Gold +0.7% to $1,147.40. 30-year Tsy -0.13% to 120-29. 10-year -0.14%. 5-year -0.1%. Euro +0.6% vs. dollar. Yen flat. Pound flat.

Wednesday's Economic Calendar

• 7:00 MBA Mortgage Applications
  8:30 Consumer Price Index
  8:30 Housing Starts
  9:00 Small Business Financing Forum
  9:15 Fed's Bullard: U.S. Economy and Monetary Policy
  10:00 E-Commerce Retail Sales
  10:00 AIA Architecture Billings Index
  10:00 Markup: Investor Protection Act
  10:30 EIA Petroleum Inventories
  11:45 PM Fed's Plosser: Monetary Policy
• Notable premarket earnings: BJ, CHS, NM, SOLF
• Notable postmarket earnings: GYMB, HOTT, JACK, LTD, NTAP, NTES, PETM, PVH

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• AIG bailout was muffed. TARP Special Inspector Neil Barofsky said in a report Monday that the New York Fed mishandled the AIG (AIG) bailout by paying its trading partners in full, where it would have been possible to negotiate partial payments. The Fed didn't use its leverage in negotiations, Barofsky complained, including failing to stress that its participation in the process was purely voluntary. In a response letter, the Fed said the terms of the $85B AIG bailout were appropriate given the severity of the crisis, and that leaning on domestic institutions would have been a "misuse of our supervisory authority" and provided an advantage to foreign institutions.
• Bernanke gives mixed signals. The recent pickup in the economy "reflects more than purely temporary factors" and continued moderate growth is likely, Fed Chairman Ben Bernanke said in a speech Monday, though constrained lending and weak labor market remain headwinds to robust growth. Inflation expectations haven't responded to upward or downward pressures, he said, noting plenty of resource slack. Bernanke pledged that low-interest, loose monetary policies would continue for an extended period. In a follow-up Q&A, Bernanke said it's "not obvious" that asset prices are out of line, at least inside the U.S., and that "we can never say never" on using interest rates to deflate bubbles, adding we won't have a "real market-based financial system until it's safe to let a financial firm fail."
• Smelling danger, banks respond. The Financial Services Forum, a lobbying group for 18 of the world's largest financial firms, urged House Financial Services Committee Chairman Barney Frank not to pursue big bank break-up legislation, an idea attracting interest in Congress and causing alarm on Wall Street. In a letter a day before Frank's panel resumes debate on financial reform legislation, the group stressed that size alone does not make firms risky: "The problem is not that some institutions are too large. It's that there is currently no legal authority to unwind, in an orderly way, a failing financial conglomerate."
• U.S. opens door for China banks. Chinese and U.S. regulators are negotiating an agreement aimed at encouraging Chinese firms to buy into small and medium-sized U.S. banks, sources say, something Chinese bankers complain has been difficult for them in the past. The shift highlights how the global financial landscape has been redrawn post crisis, with cash-rich Chinese banks now a force to be reckoned with on the world scene.
• UBS urges patience. UBS (UBS) CEO Oswald Gruebel asked investors to be patient, assuring them the bank was on the come-back track. "We have stabilized UBS's financial condition but we still have some serious topics to address," Gruebel insisted. The bank has fixed a goal for pretax profit at around 15 billion Swiss francs ($14.89B) in the next 3-5 years. In a reference to the bank's history of helping rich foreigners evade taxes, which led to a damaging legal tussle with the U.S. government, Gruebel said he was building "a new UBS: one that performs to the highest standards and behaves with integrity and honesty."
• Obama and Hu set different priorities. At a press conference in Beijing Tuesday, President Obama and Chinese President Hu Jintao had different priorities for economic action. Obama stressed the need for economic balance: "[We need] a strategy where America saves more, spends less, that reduces our long-term debt, and where China makes adjustments... to rebalance its economy and spur domestic demand," Obama said. Hu, on the other hand, thought protectionism was a priority. "I stressed to President Obama that under the current circumstances our two countries need to oppose all kinds of trade protectionism even more strongly."
• Japan, eyeing bond sales, plans new budget. The Japanese government announced plans for a new budget, seeking to maintain economic stimulus measures to support the economy. But the government may have to cut back on some election spending promises if it seeks to keep bond issuance below ¥44T yen ($494B) in the coming year. There is already pressure on government bond yields as declining tax revenues suggest more extended issuance may be necessary.
• GMAC chief ousted by board. GMAC CEO Alvaro de Molina was asked to resign by the board after only 19 months at the helm. GMAC had been preparing a request for additional bailout funds from the Treasury. GMAC director Michael A. Carpenter, who will replace de Molina, has said that he will review the need for that request.
• GM loses $1.5B, but repays loans. General Motors posted a $1.5B loss for Q3, but announced it would repay $6.7B of its $50B government bailout, at the rate of $1B per quarter. Analysts said GM’s results showed a healthier balance sheet, ample cash, and factory production much more in line with consumer demand.
• BOE director says better keep stimulus. Bank of England director Andrew Sentance, a member of the rate setting committee, said on Tuesday that emergency stimulus measures for the U.K. economy had better remain in place for an undetermined period. "We have to be open-minded" about more quantitative easing, Sentance added, even though he thought that the recession in the U.K. had come to an end.
• Fed’s Kohn sees no asset bubbles. Fed Vice Chairman Donald Kohn said in a speech Monday that there was no sign of an asset bubble being caused by the low interest-rate policies the central bank was pursuing. Kohn pointed out that the central bank's loose monetary policies were intended to help investors move into riskier assets.
• U.K. inflation rises. The U.K. Consumer Price Index jumped to 1.5% from a five-year low of 1.1%, the Office of National Statistics said on Tuesday. Food prices pushed the index higher; economists say it's likely only a temporary spike.

Earnings: Tue. Before Open

• Canadian Solar (CSIQ): Q3 EPS of $0.69 beats by $0.15. Revenue of $213M (-15.6%) in-line. Shares +5.1% premarket. (PR)
• Covidien (COV): FQ4 EPS of $0.72 beats by $0.02. Revenue of $2.7B (+0.3%) in-line. (PR)
• Home Depot (HD): Q3 EPS of $0.41 beats by $0.05. Revenue of $16.36B (-8%) in-line. Sees 2010 EPS of $1.55 vs. $1.53 consensus. Same-store sales -6.9%. "There is still a great deal of pressure in the housing and home improvement markets, though there are some positive signs of stabilization." (PR)
• Jacobs Engineering Group (JEC): FQ4 EPS of $0.63 misses by $0.05. Revenue of $2.55B (-20.1%) in-line. Sees 2010 EPS of $2.00-2.60 vs. $2.83 consensus. (PR)
• Melco Crown Entertainment (MPEL): Q3 EPS of -$0.08 beats by $0.01. Revenue of $500M (+69.5%) vs. $520M. Shares -4.5% premarket. (PR)
• Saks (SKS): Q3 EPS of $0.01 beats by $0.12. Revenue of $631M (-8.5%) vs. $624M. SSS -10.1.%. "We believe there is more stability and predictability in our business compared to twelve or even six months ago; however, the overall environment remains challenging." Shares +3% premarket. (PR)

Earnings: Mon. After Close

• Assured Guaranty (AGO): Q3 adjusted EPS of $0.44 beats by $0.13. Revenue of $389M (+161%) vs. $338M. Shares -0.2% AH. (PR)
• Pacific Sunwear of California (PSUN): Q3 EPS of -$0.17 beats by $0.03. Revenue of $268M (-17%) vs. $260M. Sees Q4 EPS of -$0.28 to -$0.35 vs. -$0.11. Shares -11.2% AH. Update 4:54 p.m.: Shares -18.8% AH. (PR)
• Sina (SINA): Q3 EPS of $0.34 beats by $0.03. Revenue of $96.4M (-9%) vs. $99.5M. Sees Q4 revenue of $93M-96M vs. $99.5M. Shares +4.8% AH. (PR)

Today's Markets

Asian and European markets were mixed Tuesday, leaving futures flat after a light-volume overnight session.

• Asia: Nikkei -0.6% to 9730. Hang Seng -0.1% to 22914. Shanghai +0.2% to 3283. BSE +0.1% to 17051.
• Europe at midday: FTSE -0.3% to 5366. CAC -0.3% to 3853. DAX -0.2% to 5793.
• Futures: Dow, S&P and Nasdaq all flat. Dec. crude -0.6% to $78.45. Gold -0.7% at $1,131. 30-year Tsy -0.21% to 120-19. 10-year -0.17%. 5-year -0.12%. Euro -0.5% vs. dollar. Yen +0.1%. Pound -0.3%.

Tuesday's Economic Calendar

• 5:30 Fed's Yellen: Lessons from the Crisis
  7:45 ICSC Retail Store Sales
  8:30 Producer Price Index
  8:55 Redbook Chain Store Sales
  9:00 International Capital Flow
  9:15 Industrial Production
  10:00 Results of $75B, 28-Day TAF Auction
  10:00 Hearing: BofA-Merrill Lynch Merger
  10:00 Markup: Investor Protection Act
  10:15 Fed's Lacker: Economic Outlook
  11:00 Hearing: Financial Stability Improvement Act
  12:30 PM Fed's Pinalto speaks
  1:00 PM NAHB Housing Market Index
  3:00 PM Hearing: U.S. and the G-20
  5:00 PM ABC Consumer Confidence Index
• Notable premarket earnings: CSIQ, COV, DDS, HD, JEC, MPEL, SKS, TGT, TJX
• Notable postmarket earnings: ADSK, CRM, LZB

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• JPMorgan, Cazenove to tie the knot. Sources say JPMorgan (JPM) is set to pay close to £1B ($1.7B) for the 50% it doesn't already own in Cazenove, the vaunted 190-year U.K. stock broker. The New York-based bank teamed up with the privately-owned Cazenove in November 2004 to expand relations with U.K. clients. The deal, which is reportedly at an advanced stage, is expected to trigger windfall profits for some of London's leading financiers. Just under half of Cazenove's shares are owned by current staff, while some 9% are owned by institutions and the rest by former partners.
• GM gearing out of debt. General Motors plans to start paying the $6.7B it owes the U.S. government and to possibly wash its hands of the entire amount by the middle of 2011, sources say. A potential catch: the carmaker plans to use other money from the government to repay the borrowing. A congressional oversight panel had reported in September that taxpayers were unlikely to get back the bailout funds lent to automakers.
• Cisco hikes Tandberg offer. Cisco Systems (CSCO) sweetened its bid for Norway's video-conferencing-equipment maker Tandberg in an offer that values the company at $3.39B, or 170 Norwegian kroner a share ($30.35 a share), up from its previous offer of 153.50 kroner a share in September. Tandberg's board and management back the deal, and said it has received acceptances from more than 40% of its shareholders including its two largest. Cisco said it will withdraw the offer if it doesn't get a 90% level of acceptances by Dec. 1.
• Setback for Merck's cholesterol drug. Zetia, Merck's (MRK) cholesterol drug, suffered a setback after a new study found that Abbott Laboratories' (ABT) Niaspan was more effective and safer as a secondary cholesterol treatment. Two prior studies had raised questions about the value and effectiveness of Zetia and Vytorin, and sales have dropped 14% to about $3B this year. Some doctors have questioned the validity of the study, noting it lacked in size and duration, and was ended early.
• Bristol-Myers plans nutritionals spin-off. In a move aimed at focusing on its core medicine business, Bristol-Myers (BMY) said Monday it will spin off its stake in its nutritionals division, Mead Johnson (MJN), in a deal that could net as much as $6.5B. Earlier this year, Bristol-Myers sold 17% of Mead Johnson in an IPO offering.
• GE jets to China. GE (GE) said Sunday it's making a "substantial" investment to establish a joint venture in China, hoping to tap the country's growing appetite for planes, and with an eye on a planned aircraft that the Chinese government hopes will rival commercial jets from Boeing (BA) and Airbus. GE will form a 50-50 JV with China's leading aircraft company, Aviation Industry Corp., to jointly supply avionics systems for jetliner makers globally. The business is part of GE's aviation-systems division, which generates annual revenue of about $2.5B, roughly 13% of GE's 2008 aviation revenue of $19.2B. The joint venture requires Chinese regulatory approval and is expected to launch in mid-2010.
• Citi sells Bellystem24 to Bain. In a move aimed at rustling up more cash to help shore up its finances, Citigroup (C) said it will sell its 93.5% stake in Japanese telemarketer Bellystem24 to the private equity firm Bain Capital, for ¥93.5B ($1B), as had been widely expected. Bain beat back rival bidders Permira and a team of CVC Capital and Blackstone (BX). The telemarketer will be purchased through a tender offer, which will be launched by a firm owned by funds advised by Bain. Citi said the tender will be completed on Dec. 30 and that the deal is not expected to have a material impact on the bank's net income or capital ratios.
• Japan reignites, for now. Japan's economy grew at the fastest pace in more than two years in Q3, fueled by government stimulus measures and exports to Asian neighbors. GDP grew an annualized 4.8%, marking the country's second consecutive quarter of expansion and an acceleration from the 2.7% pace of Q2. But even as gains surpassed economists' expectations, there were indications the strength may not be sustainable, as signs of a possible deflationary spiral emerged with price patterns falling by the sharpest rate in 50 years. Elsewhere, Japan's government appeared closer to approving new stimulus measures that could be worth $30B as economic growth is likely to slow next year due to sluggish personal spending and rising inventories.
• Hoenig on big banks: Let them fail. The U.S. economy still faces "significant weaknesses," KC Fed president Thomas Hoenig said Monday, "and coupled with a rapidly rising level debt and enormous moral hazard issues, we have a great deal of work ahead of us." Speaking at a central banking event in Abu Dhabi, Hoenig also urged policymakers to allow large financial institutions to fail if needed: "Our institutions must be allowed to fail no matter what their size or political influence."
• Sony waiting for spending spark. In an interview over the weekend, Sony (SNE) CEO Howard Stringer said the consumer electronics industry continues to languish and that "we are waiting for a signal that hasn't arrived." Stringer noted a stronger yen and tougher competition from Korea and China had hurt the Japanese market, while in the U.S. he warned the recovery "will be neither a V nor a W, but an L."
• China accuses Fed of reckless rate policy. China said the Fed is endangering global recovery with its insistence on keeping domestic interest rates near zero for the next 12-18 months. China's chief bank regulator rebuked the U.S. for fueling speculative capital flows that may spur asset-price inflation, which he said has already led to massive dollar arbitrage speculation. His comments came two days after the CEO of Hong Kong, Donald Tsang, said he was "scared" because "America is doing exactly what Japan did last time" when Japan's zero interest rate policy contributed to the 1997 Asian financial crisis.
• GM may have to go it alone with Opel - Germany. Germany's promise to provide state aid to GM's European arm Opel no longer applies now after GM backed out of the Magna International (MGA)-led, government-backed deal to take over the carmaker, German Economy Minister Rainer Bruederle says. "GM Chairman Ed Whitacre has said that his company can handle Opel, so this means that agreements and pledges that were based on other concepts are moot," he told reporters Monday. "Opel has the same right as any other German company to apply for state aid. We have a duty to examine this thoroughly. The outcome is open and there is no entitlement to have it approved."
• Apple bites back at Psystar. A U.S. District judge ruled Friday that Psystar Corp., which sells computers based on the Apple (AAPL) Mac operating system, violated Apple's copyright, apparently ending a two-year battle.
• UBS: what's behind the turnaround? Investors are waiting for UBS CEO Oswald Grubel to unveil a far-reaching plan today to turn the hard-hit bank around. Among other moves, they will be looking to see how the recently recruited head of the bank's U.S. wealth-management unit plans to improve profits and staunch an exodus of bankers, and whether there will be any indications if Grubel will sell the division in the longer term.
• Vivendi nabs Brazil telecom bid. Vivendi said it has purchased a controlling stake in GVT SA for 7.2 billion reais ($4.18B), giving it a foothold in Brazil's telecom market and upstaging a competing bid by Telefonica SA (TEF), Europe's second largest phone company. France's Vivendi, the owner of the world's largest music company, said GVT fits with its strategy of secular expansion in rapid-growth economies. Vivendi is widely thought to be looking to shed its stake in NBC Universal.

Earnings: Before Open

• Lowe's (LOW): Q3 EPS of $0.24 in-line. Revenue of $11.38B in-line. "We are beginning to see signs of improved performance in some of the hardest-hit housing markets including California, Florida and areas of the desert Southwest." (PR)
• GM: Q3 revenue of $28B vs. consensus of $22.9B, up $4.9B from Q2. Dealer inventories fell 158K to 424K. Market share was flat at 19.5%. Says it will accelerate repayment of its outstanding $6.7B in rescue loans ahead of the July 2015 maturity date. (PR)

Today's Markets

Overseas markets posted solid gains Monday, sending U.S. futures higher in overnight trading.

• Asia: Nikkei +0.2% to 9791. Hang Seng +1.7% to 22944. Shanghai +2.7% to 3275. BSE +1.1% to 17033.
• Europe at midday: FTSE +1.5% to 5353. CAC +0.8% to 3838. DAX +1% to 5744.
• Futures at 7:00: Dow +0.6% to 10308. S&P +0.8% to 1100. Nasdaq +0.6%. Dec. crude +1.2% to $77.27. Gold +1.1% to $1,129. 30-year Tsy +0.39% at 119-29. 10-year +0.17%. Euro +0.3% vs. dollar. Yen +0.2%.

Monday's Economic Calendar

• 8:30 Retail Sales
  8:30 Empire State Mfg Survey
  10:00 Business Inventories
  10:00 Philly Fed's Survey of Professional Forecasters
  12:15 PM Bernanke: Economic Outlook
  1:15 PM Fed's Fisher: The Fed and the Economy
  6:15 PM Fed's Kohn: Policy Challenges
• Notable premarket earnings: LOW, PWRD, SOL, SCR
• Notable postmarket earnings: AGO, PSUN, SINA

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• Liberty Global pays €3.5B for Germany's Unitymedia. Liberty Global (LBTYA) agreed to acquire Germany's #2 cable operator, Unitymedia, from its private-equity owners BC Partners and Apollo Management for a total of €3.5B including debt. Liberty said it's paying 7.4x 2010e Ebitda to acquire Unity, which will complement its "existing European footprint, and has significant untapped growth potential in one of the fastest-growing cable markets in Europe." Unity's competitors include Deutsche Telekom (DT) and Sky Deutschland (NWS). Liberty's global cable footprint including Unitymedia will exceed 40M homes.
• BA, Iberia to merge. British Airways (BAIRY.PK) and Iberia (IBRLF.PK) agreed to a complex, $7B "merger of equals." BA shareholders will own 55% of the new airline, which will be the world's third-biggest by revenue. Named TopCo, it will be led by BA CEO Willie Walsh, registered in Madrid, house its main offices in London, and will not be subject to U.K. takeover laws. The pair estimate €400M in synergies by the end of year-five, and expect to close the deal in late 2010. The merger will meld BA's web of U.S. routes with Iberia's Latin America services, extending its leading trans-Atlantic position and consolidating its #3 status in Europe. Shares of both were up 3-5% in early trading.
• Europe returns to growth, at a canter. The euro zone returned to growth in Q3, but quarterly GDP came in at a weaker than expected +0.4% (consensus: +0.6%), up from -0.2% in Q2. Year-on-year GDP contraction narrowed to -4.1% (consensus: -3.9%) from -4.8% in Q2. The consensus miss was expected after France and Germany announced Q3 growth that undershot estimates - +0.7% vs. +0.8% expected for Germany, and +0.3% vs. +0.7% expected for France. Economists were underwhelmed by the results, and warned growth could reverse in coming quarters once car scrapping and other stimulus schemes fade.
• Yuan will rise with time. A top Chinese central banker told Asia-Pacific officials Friday that Beijing wants to let the yuan move more freely, but that any change will be very gradual, and that China will not bow to external pressure. The APEC meetings have been noteworthy for their focus on the weak dollar, but officials - including Tim Geithner - have refrained from pressuring Beijing to unhitch the yuan from its informal dollar peg. "The U.S. and China depend too much on each other and this has to change," the banker said.
• Dell announces first smartphone. Dell (DELL) announced it will enter the smartphone business, sealing initial partnerships with two of the world's largest mobile operators - China Mobile (CHL) and Claro (AMX). The Mini 3 smartphones will be designed around the Android (GOOG) platform. "Our entry into the smart phone category is a logical extension of Dell's consumer product evolution over the past two years," Dell said. "We are developing smaller and smarter mobile products that enable our customers to take their internet experience out of the home and do the things they want to do whenever and wherever they want."
• AMD cashes in its chips. Archrivals Intel (INTC) and Advanced Micro Devices (AMD) announced a game-changing settlement to their antitrust and patent infringement dispute, including a $1.25B payment from Intel to AMD and a five-year cross-licensing agreement. Intel also agreed not to induce competitors to shun AMD, but Intel has denied ever doing so. Numerous government lawsuits and private class-action litigation against Intel will not go away as a result of the deal, but Intel did eliminate its exposure to AMD-related charges. Intel CEO Paul Otellini called the pact a good deal for Intel shareholders, a sentiment shared by analysts who believe a court ruling could have cost it more. AMD CEO Dirk Meyer said the agreement proves to its customers, once and for all, "that AMD will survive and continue to offer them a choice of suppliers."
• White House sure of debt increase. The Treasury is confident Congress will raise the U.S. debt limit by year-end, and not allow a showdown similar to one that shuttered parts of the government in 1995. Sources say the White House is looking for a $1-1.5T increase beyond its current $12.1T limit. The request is higher than a proposed increase already passed in the House, but would get the government through the November 2010 midterm congressional elections without needing another increase. Geithner has repeatedly stressed the need to bring deficits down to sustainable levels, but in the short-term he's more worried about the need to keep up spending until unemployment recedes.
• Barofsky bets on TARP losses. TARP will "almost certainly" result in a loss to taxpayers, Neil Barofsky, the special inspector general for the $700B U.S. financial-industry bailout, said Thursday. "We need to temper or be realistic about our expectations, a dollar-for-dollar return is just highly unrealistic." Barofsky also said he's conducting 65 investigations of possible TARP fraud.
• Boeing fixes one problem, finds another. Boeing (BA) finally finished fixing the problem that postponed the maiden flight of its long-delayed 787 Dreamliner, but in doing so discovered another issue with the plane's wings. Metal bolts inside the wings of one of the six test airplanes were found to have slightly cracked the surrounding material, which engineers cited as another reason to keep the plane grounded. Still, Boeing says it's "on track to fly by the end of the year."
• Iconix gets a read on Playboy. Iconix Brand Group (ICON), owner of London Fog, is reportedly in talks to buy Playboy Enterprises (PLA), and has looked at its books. Iconix CEO Neil Cole is thought to be looking to add more brands that it can license to retailers and manufacturers. 56-year-old Playboy, which was worth about $100M before yesterday, has been looking to sell itself since Scott Flanders replaced Christie Hefner as CEO in June. Her father, Hugh, owns 70% of Playboy's voting shares and 28% of the Class B shares.
• FHA's razor-thin reserves. The FHA's capital reserves are almost depleted, making it likely the goverment-controlled housing market lender will require a taxpayer bailout. The FHA has said for months that its reserves for unexpected loan losses would fall short of the required 2% level by this fall, but an audit released Thursday showed that reserves have been depleted much faster than expected; its capital-reserve fund fell to $3.6B as of Sept. 30, down 72% from a year earlier, leaving reserves at just 0.53% of the $685B in total loans insured by the FHA.
• FDIC orders banks to prepay $45B. The FDIC's board approved Thursday $45B of bank premium prepayments that it needs after its deposit insurance fund slipped into a deficit at the end of Q3. The prepayments - which equate to three years of dues - will satisfy the fund's "need for liquidity without imposing undue burden on the industry," FDIC Chairman Sheila Bair said. A surge in failures - 120 so far this year - has pushed the industry-supported fund into a deficit for the first time since 1991.

Earnings: Fri. Before Open

• Abercrombie & Fitch (ANF): Q3 EPS of $0.30 beats by $0.10. Revenue of $765M (-14.6%) in-line. Same-store sales -18%. Shares +7.5% premarket. (PR)
• Mizuho Financial Group (MFG): FH1 profit of ¥87.8B ($974M) vs. ¥56.3B expected and -7.1% from ¥94.6B a year ago. Revenue of ¥1.49T (-21.6%). Q2 net income of ¥92.3B vs. ¥69B expected and -¥38.4B a year ago. Bad loan charges -38% to ¥85.8B. (MW, Bloomberg)
• Yingli Green Energy (YGE): Q3 EPS of $0.18 beats by $0.01. Revenue of $326M (+1%) vs. $329M. Shares +1.3% premarket. (PR)

Earnings: Thur. After Close

• Blockbuster (BBI): Q3 EPS of -$0.20 misses by $0.09. Revenue of $910.5M (-21%) vs. $1B. Shares -13.2% AH. (PR)
• Disney (DIS): FQ4 EPS of $0.46 beats by $0.05. Revenue of $9.9B (+4%) vs. $9.3B. Shares +2.2% AH. (PR)
• Nordstrom (JWN): Q3 EPS of $0.38 misses by $0.01. Revenue of $2B (-5%) vs. $1.9B. Same-store sales -1.2%. Raises full-year EPS guidance to $1.83-1.88 from $1.50-1.65, vs. $1.81 and expects full-year same-store sales down 6-7%. Shares -4.8% AH. (PR)

Today's Markets

Asia and Europe stocks were mostly higher Friday, fueling modest gains in overnight futures trading.

• Asia: Nikkei -0.3% to 9770. Hang Seng +0.7% to 22554. Shanghai +0.5% to 3188. BSE +0.9% to 16849.
• Europe at midday: FTSE +0.3% to 5290. CAC -0.2% to 3801. DAX +0.2% to 5675.
• Futures: Dow +0.3%. S&P +0.4% to 1091.50. Nasdaq +0.3%. Dec. crude +0.5% to $77.31. Gold +0.2% to $1,109. Treasurys are flat. Euro +0.3% vs. dollar. Yen +0.4%. Pound +0.6%.

Friday's Calendar

• 8:30 Trade Balance
  8:30 Import/Export Prices
  9:40 Kenneth Feinberg speaks
  9:55 Reuters/UofM Consumer Sentiment
  10:30 EIA Natural Gas Inventory
  11:30 Fed's Evans: Asset Price Bubbles and Monetary Policy
  8:30 PM Never Again? Building a Stronger Financial System
• Notable premarket earnings: ANF, A, JCP, TK, YGE

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• H-P grabs 3Com, takes on Cisco. Hewlett-Packard (HPQ) agreed to acquire networking-equipment maker 3Com (COMS) for $2.7B, or $7.90/share - a 39% premium to Wednesday's close. With 3Com, H-P - the world's largest PC maker - gains a networking business that competes directly with Cisco's (CSCO) core business of routing and switching, and a strong foothold in China, which accounts for half of 3Com's revenue. Analysts were largely enthusiastic about the deal, saying 3Com was one of the biggest values in the networking space, second only to Cisco in the breadth of its enterprise portfolio. Cisco responded swiftly, saying on its blog that networking acquisitions "only validate the fact that networking is becoming the platform for all forms of communications and (information technology)." H-P also preannounced Q4 EPS of $1.14 vs. consensus of $1.12, and revenue of $30.8B vs. $29.8B. After hours, HPQ was -0.6%, and COMS was +35%.
• UTech buys GE Security for $1.8B. GE (GE) agreed to sell its fire alarm and security systems unit to United Technologies (UTX) for $1.82B in cash, as had been widely speculated. UTX said its customers "will see increased breadth and depth of product offerings" as a result of the deal. The unit includes Edwards Systems Technology, which GE bought for $1.4B from SPX Corp. (SPW) in 2005. The business offers building management systems that help control commercial structures during fires, earthquakes and other emergencies, and would take United "beyond just perimeter and access security," one analyst said.
• Benmosche stays put. AIG (AIG) CEO Robert Benmosche told employees Wednesday in an internal memo he remains "totally committed to leading AIG through its challenges" despite his frustrations with government curbs on compensation at the company. The reassurance came after reports Benmosche might bail after just three months at the helm, saying strict compensation rules made it almost impossible to retain talent. In the memo, he called the pay curbs a "barrier" that "stand in the way of restoring AIG's value" and repaying its debt.
• World banks prop up dollar. Central banks say they've been snapping up dollars this week in an effort to stem its slide and hold down the value of their currencies. While Geithner continues to pay lip service to maintaining a strong dollar, Washington has yet to take any concrete steps to stop the bleeding, which is beneficial to U.S. exports and tourism.
• TARP repayments reduce gov't borrowing. The U.S. will borrow "substantially less" than initially anticipated, with banks already repaying rescue funds and more "significant repayments" ahead, Treasury's Geithner says. Reduced borrowing, a narrowing of the current account deficit, and signs that Americans are saving more all contribute to global confidence that the U.S. can rein in its deficit, he said today in Singapore.
• High oil prices could derail recovery. The IEA revised its 2010 world oil demand forecast slightly higher, but warned that rising crude prices could smother the fragile economic recovery. IEA now expects global oil demand to rise to 86.2M barrels a day, up 140K from October. Rising stock markets, a weak U.S. dollar, and rebounding world economies have driven crude prices up almost 80% this year, despite a persistent overhang in oil inventory which now stands at 60 days of forward cover.
• Foreclosures fall, but for how long? Foreclosures slowed for a third straight month, but remain sharply higher than a year ago. The number of homeowners who received foreclosure notices fell 3% month-on-month to 333K, up 18.9% from the same month in 2008. Rick Sharga of RealtyTrac, which released the report, cautioned the improvement was likely temporary: “It’s good to see that foreclosures have slowed down marginally, but we don’t really think it’s a trend." The firm predicts 3.2-3.4M properties will go into foreclosure in 2009, up from 2.3M in 2008.
• Art auction smokes projections. A very positive art auction at Sotheby's (BID) has some thinking the art-market recession may be on the mend. Sotheby's brought in $134.4M at an auction of post-war and contemporary art Wednesday night in Manhattan, including a smoky sheet of dollar bills by Andy Warhol that went for $43.7M. Total proceeds blew away Sotheby's' internal estimate of $67.9-$97.7M, and also outdid its $125M sale of a year ago. 52 of the 54 works offered found buyers.
• Microsoft strikes back at modders. Microsoft (MSFT) booted as many as 1M players from its Xbox Live gaming service on suspicions they modified their consoles to play illegally downloaded games. The move comes amid this week's release of "Call of Duty: Modern Warfare 2" (ATVI), the most highly-anticipated Xbox game of the year. "All consumers should know that piracy is illegal and that modifying their Xbox 360 console to play pirated discs violates the Xbox Live terms of use, will void their warranty, and result in a ban from Xbox Live," Microsoft said in a statement. It's not clear how Microsoft detected the Xbox rigging.
• Turkeyless Thanksgiving for BofA? Bank of America (BAC) may miss its internal deadline of naming a new CEO by Thanksgiving, due in part to its inability to zero in on a clear frontrunner, and amid worries that the process must be approved by the Fed.
• Mortgage apps rise. Mortgage applications rose 3.2% from a week ago, led by a 11.3% gain in refinancing, which now accounts for 71.5% of all applications, up from 66% last week. MBA said the average 30-year mortgage rate fell to 4.9% from 4.97% in last week's survey. Freddie Mac's weekly survey of mortgage rates comes out at 10:00.

Earnings: Before Open

• AECOM Tech (ACM): FQ4 EPS of $0.48 beats by $0.02. Revenue of $1.63B (-0.2%) in-line. Sees 2010 EPS of $1.90-2.00 vs. $2.03. (PR)
• EnCana (ECA): Q3 EPS of $1.03 misses by $0.14. Revenue of $3.88B (-64.2%) vs. $3.08B. (PR)
• Kohl's (KSS): Q3 EPS of $0.63 beats by $0.02. Revenue of $4.05B (+6.5%) in-line. Sees Q4 EPS of $1.14-1.24 vs. $1.25. (PR)
• Urban Outfitters (URBN): Q3 EPS of $0.36 beats by $0.01. Revenue of $506M (+6%) in-line. Operating margin 19% vs. 17.1% in Q2. (PR)
• Wal-Mart (WMT): Q3 EPS of $0.84 beats by $0.03. Revenue of $98.66B vs. $99.88B. Sees Q4 EPS of $1.08-1.12 vs. $1.12 consensus. "The sales environment continued to be difficult this quarter, but customer traffic is up throughout the company." (PR)

Earnings: Wed. After Close

• Advance Auto Parts (AAP): Q3 EPS of $0.69 beats by $0.03. Revenue of $1.3B (+6%) in-line. Third-quarter same-store sales increased 4.7%. Shares -3.7% AH. (PR)
• Applied Materials (AMAT): FQ4 EPS of $0.13 beats by $0.10. Revenue of $1.5B (-25%) vs. $1.3B. Expects revenue growth of more than 30% in fiscal 2010. Reports "increased net sales and profitability in our semiconductor equipment business, with improved demand and financial performance in all of our segments." Shares +0.7% AH. (PR)
• Computer Sciences (CSC): FQ2 EPS of $1.40 beats by $0.05. Revenue of $4B (-5%) in-line. Shares -2.9% AH. (PR)
• Ctrip.com (CTRP): Q3 EPS of $0.44 (RMB3.03) beats by $0.12. Revenue of $80M (+47%) vs. $72M. Sees Q4 revenue of $100M-104M vs. $75M. Shares +10.5% AH. (PR)
• Green Mountain Coffee Roasters (GMCR): FQ4 EPS of $0.34 beats by $0.01. Revenue of $222M (+65%) vs. $217M. Shares -9.1% AH. (PR)

Today's Markets

Asia markets headed lower Thursday. Europe stocks are flat at midday, and futures are under some selling pressure.

• Asia: Nikkei -0.7% to 9804. Hang Seng -1% to 22398. Shanghai -0.1% to 3173. BSE -0.9% to 16696.
• Europe at midday: FTSE flat at 5266. CAC -0.2% to 3808. DAX flat at 5669.
• Futures: Dow -0.3$ at 10230. S&P -0.3% to 1092.50. Nasdaq -0.4%. Dec. crude -0.8% to $78.65. Gold +0.1% to $1,116. Dec. 30-year Tsy -0.34% to 118-31. 10-year -0.12%. Euro -0.3% vs. dollar. Yen and pound are flat.

Thursday's Calendar

• 3:30 Geithner speaks
  7:00 MBA Mortgage Applications
  8:15 Bloomberg Washington Summit
  8:30 Initial Jobless Claims
  10:00 FDIC: Final Ruling on Prepaid Assessments
  11:00 EIA Petroleum Inventories
  1:00 PM Results of $16B, 30-Year Bond Auction
  2:00 PM Treasury Budget
  4:30 PM Money Supply
• Notable premarket earnings: ACM, ECA, KSS, URBN, WMT
• Notable postmarket earnings: BBI, DIS, JWN

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• AIG steward threatens to jump ship. Just three months after taking the job, AIG (AIG) CEO Robert Benmosche has told the board he's ready to quit. Insiders say Benmosche feels compensation restrictions imposed by pay czar Kenneth Feinberg have left him in an impossible situation, without the ability to retain talent. Benmosche's own $10.5M package is the largest approved under the Treasury Department's recent curbs on executive pay. A departure could be highly disruptive, but it's not altogether clear whether the threat was serious, or was meant to ruffle feathers; insiders say Benmosche made a similar threat in August. As far as a possible replacement - how about Ken Lewis?
• Bad trades aren't criminal. A jury found two Bear Stearns fund managers did not lie by presenting an upbeat picture while their funds plunged in value, a setback for lawmakers hoping for easy convictions in the wake of bailouts and foreclosures. Investors lost $1.6B when Bear funds, managed by Ralph Cioffi and Matthew Tannin and heavily invested in mortgage-backed securities, collapsed in the summer of 2007. Jurors said that while the pair clearly made some bad investments, their salesmanship did not cross the line into fraud.
• Strong dollar critical to recovery - Geithner. Treasury Secretary Tim Geithner said Wednesday that maintaining a strong dollar is "very important" for the economy. Speaking to Japanese reporters, Geithner said, "We bear special responsibility for trying to make sure that we are implementing policy in the U.S. that will sustain confidence not just among American investors... but investors around the world" that the U.S. will fix its budgetary problems as its economy improves. Geithner also said he sees no contradiction between a strong dollar and the desire to bolster exports.
• World Bank frets U.S. joblessness. World Bank president Robert Zoellick warned Wednesday that untamed U.S. unemployment threatens to trigger loan defaults and drag on consumption, hobbling a nascent recovery. "You're going to have problems with delinquencies of credit card loans, consumer loans, people won't be able to pay their mortgages," he told reporters in Singapore. "Some banks are going to continue to be troubled by bad loans." While Zoellick concedes government stimulus spending will fuel growth through the middle of 2010, he's worried what happens afterward: "What's the other source of demand?"
• Logitech buys LifeSize, gains foothold in videoconferencing. Logitech (LOGI) agreed to buy privately-held LifeSize Communications, a developer of high-definition video systems, audioconferencing equipment, and video management software, for $405M, bolstering its position in the much-prized video communication market. LifeSize Communications has more than 9,000 video conferencing customers. On Tuesday, Cisco (CSCO) revealed that most shareholders in videoconferencing developer Tandberg had spurned its $3.1B takeover offer.
• Dodd unveils rival financial overhaul. Sen. Chris Dodd, who chairs the Senate banking committee, unveiled a 1,136 page plan to overhaul financial regulations that is substantially different from plans discussed in the House and favored by President Obama. Dodd's plan calls for removing the Fed and FDIC from day-to-day supervision of banks, opting for a new two-pronged agency, one branch to monitor and diffuse systemic risks posed by large financial companies, and the other to regulate smaller banks. Conversely, the SEC would see its power and budget increase by allowing it to keep fees it collects from Wall Street firms, instead of relying on Congress. With fewer than 20 days left in the legislative session, it's almost certain Congress will not deliver on President Obama’s request to repair the financial regulatory system by year-end.
• GM's chairman clashes with CEO. In a growing clash between GM CEO Fritz Henderson and his board, GM's chairman Ed Whitacre said he's not comfortable with management's 2010 forecasts, and indicated Henderson's timetable for an IPO - the second half of 2010 - may be too optimistic. Rather than worrying about selling shares, the former AT&T chief says the company's focused on repaying the $6.7B it owes to taxpayers. In an interview with the Wall Street Journal, he said management needs to make progress on such issues as reducing customer-sales incentives, changing perceptions about GM, and constructing a realistic business plan.
• Global confidence dips. Confidence in the world economy dropped in November after some central banks took or spoke about steps to start unwinding emergency stimulus. Bloomberg's Professional Global Confidence Index fell to 60.3 from 61.7 in October. At well above 50, optimists still outnumber pessimists, but their confidence "hinges almost entirely on the level of stability produced by extraordinary monetary support," one economist who participated in the survey said.
• United on verge of GE security purchase. United Technologies (UTX) in nearing a purchase of GE's fire alarm and security systems unit for at least $1.8B, and a deal could be announced as early as Thursday, sources say. GE's security unit includes Edwards Systems Technology, which GE bought for $1.4B from SPX Corp. (SPW) in 2005. The Edwards business offers building management systems that help control commercial structures during fires, earthquakes and other emergencies, and would take United "beyond just perimeter and access security," one analyst says.
• Blackstone, KKR prepare to sell TDC stake. Sources say Blackstone (BX), KKR and three more private-equity firms that bought an 88% stake in Denmark's TDC are preparing for an exit. The group bought the stake in 2006 with about $3B in cash and $12B in debt; it's thought to be worth about $7.4B today.
• Credit card issuer fails. Advanta (ADVNA), a large issuer of credit cards to small businesses, filed for bankruptcy after massive customer defaults led to an unsustainable capital shortfall. Advanta has assets of $363M and debts of $331 million. It said it has almost $100M in cash, but cannot meet all its obligations.
• China exports recover some more. China's exports continued to improve, falling 13.8% in October vs. a 15.2% decline in September and 20%-plus drops earlier in the year. Chinese authorities have begun urging banks to be more cautious in lending, and today the PBOC warned "definite expectations of inflation have formed in the market." The fall in China's consumer prices narrowed to 0.5% in October from 0.8% in September, and is widely expected to turn positive in coming months.
• Mortgage mod program picks up speed. The Treasury said Tuesday one-in-five eligible homeowners have now enrolled in its mortgage-modification program, although few of the trial modifications are turning into permanent fixes. Treasury's Making Home Affordable program has now initiated 650,000 loan modifications, up from 500K in late September. "The program is having a pronounced impact in areas particularly hard hit by the housing crisis," Treasury's Barr said in a statement.

Earnings: Wed. Before Open

• ING Group (ING): Q3 net profit of €778M vs. €229M last quarter and -€568M a year ago. CEO Jan Hommen said ING wants to repay the remainder of the €10B in rescue funds it received, and plans to pay back €5B before year-end. Shares +6.4% premarket. (PR)
• Macy's (M): Q3 EPS of -$0.03 beats by $0.04. Revenue of $5.28B (-3.9%) in-line. Sees Q4 EPS of $1.00-1.05 vs. $1.17 consensus. Sees Q4 SSS down 1-2% vs. -2.7% consensus. Shares -2.7% premarket. (PR)

Earnings: Tue. After Close

• A123 Systems (AONE): Q3 EPS of -$1.78 may not compare to consensus estimates of -$0.33. Revenue of $23.6M (+3%) vs. $19.2M. Shares -3.5% AH. (PR)
• Atmos Energy (ATO): FQ4 EPS of -$0.17 misses by $0.09. Revenue of $1.35B (+2%) vs. $1.32B. Shares -2.5% AH. (PR)
• Clearwire (CLWR): Q3 EPS of -$0.43. OIBDA of -$198.8M. Revenue of $69M (+13%) vs. $67M. Revenue comparison to Sprint's WiMAX business in prior year. Shares -1.2% AH. (PR)

Today's Markets

Asia stocks were mostly higher Wednesday. Europe is sitting on healthy gains, and futures are higher.

• Asia: Nikkei flat at 9872. Hang Seng +1.6% to 22627. Shanghai -0.1% to 3175. BSE +2.5% to 16850.
• Europe at midday: FTSE +1.2% to 5292. CAC +1.2% to 3830. DAX +1.3% to 5687.
• Futures: Dow +0.7% at 10287. S&P +0.8% to 1100. Nasdaq +0.8%. Dec. crude +0.5% to $79.50. Gold +1.2% to $1,115,60. Treasurys are flat. Euro +0.3% vs. dollar to $1.503. Yen +0.1%. Pound -0.4%.

Wednesday's Calendar

• Veterans Day - stock/futures markets open, bond markets closed.
• Notable premarket earnings: FLO, M
• Notable postmarket earnings: AAP, AMAT, CSC, CTRP, GMCR

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• EU casts shadow over Oracle's Sun. European antitrust authorities formally objected to Oracle's (ORCL) proposed $7.4B takeover of Sun Microsystems (JAVA), issuing a statement of objections that focuses on whether Oracle ownership of Sun's MySQL database software would reduce competition. The move doesn't necessarily mean the EU will reject the deal, but should delay the process. The U.S. Justice Department, which has already signed off on the combo, reiterated that the merger is "unlikely to be anticompetitive." Oracle, meanwhile, said the acquisition "does not threaten to reduce competition in the slightest," adding that the EC's concerns "reveal a profound misunderstanding of both database competition and open source dynamics."
• Lending standards loosen. A smaller percentage of banks tightened lending standards in Q3, according to the Fed's loan officer survey, but credit conditions remain far from a comfort zone. About 25% of banks tightened standards on good quality real estate loans, down from 75% in July 2008. Banks tightening standards for credit cards fell to 15% from 35% last quarter, the lowest percentage since April 2008. And 15% of banks tightened standards on commercial and industrial loans, down from 80% in October 2008. "We're back to just normally tight, not pathologically tight," says an economist.
• U.K. most at risk of AAA downgrade. The U.K. is most at risk among large developed economies of losing its AAA rating, Fitch said Tuesday, but the ratings service maintained its stable rating which it said "reflects our expectation that the U.K. government will articulate a stronger fiscal consolidation program next year." In response, U.K. Trade Minister Mervyn Davies insisted Britain's sovereign rating is "absolutely" safe, and said the government's "been very clear that over the next four years there's going to be a program to reduce the public debt level." In May, S&P put the U.K.'s AAA credit rating on negative outlook, saying it would make a decision after the government makes its intentions clear.
• Moody's sees AIG comeback. AIG (AIG) will be able to repay its $60B Fed credit line and "much or all" of the Treasury's $69.8B investment if financial markets stabilize, Moody's said Monday. In a vote of confidence for CEO Robert Benmosche's strategy of rebuilding some of the businesses AIG previously targeted for sale, Moody's said, "We believe that the slower approach to restructuring could help AIG to generate more favorable values from its business portfolio than would be the case under rushed asset sales."
• Employment trends turn corner. In perhaps the most bullish employment report since the onset of the recession, Conference Board reported its Employment Trends Index rose 0.7% to 89.3 in October from 88.7 last month. "The Employment Trends Index has likely turned a corner in September, and the historical relationship between the index and employment suggests that job losses will end in early 2010," the group said, adding, "While layoffs have certainly declined in recent months, we still expect to see employers adding hours to their existing workforce before hiring will strongly increase." The improvement was driven by positive contributions from measures of jobless claims, temporary hires, industrial production, and sales. Conversely, Gluskin Sheff's David Rosenberg said unemployment may hit a post-war high of 13% as growth stagnates. "This is going to be the mother of all jobless recoveries. At the beginning of the year, who was calling for unemployment to go up to 10%?"
• Hedge funds alive and well. Hedge fund assets may top the previous high of $2T by the end of 2010 as double-digit returns lure investors, Deutsche Bank says. "We fully expect to see material inflows into 2010 and beyond. The expected growth is reflective of continuing institutional demand for increased risk-adjusted returns in the face of low bond yields and disappointing passive equity performance." Global hedge funds have rebounded faster than expected, recovering to $1.53T in September from $1.33T in March, even as regulators turn up the pressure to increase scrutiny of the industry and amid some high-profile scandals.
• Barclays accused of huge Lehman heist. In a recent court filing, Lehman's creditors claim Barclays (BCS) received Lehman securities valued at $50B for just $45B in cash, accusing the U.K. bank of the "largest theft in banking history." Some Lehman executives who negotiated that deal, the complaint asserts, knew they would receive offers to work at Barclays, and received or were offered plump compensation deals. At the time, the deal was presented in bankruptcy court by Lehman's lawyers as a wash.
• Cadbury bitter at Kraft's bland offer. Kraft (KFT) took its offer for Cadbury (CBY) directly to shareholders, disappointing investors who had hoped Kraft would sweeten its original bid of 300p and 0.2589 new Kraft shares for each Cadbury share. Kraft said its proposal "offers the best immediate and long-term value for Cadbury's shareholders and for the company itself compared with any other option currently available, including Cadbury remaining independent." Cadbury, not surprisingly, recommended shareholders "emphatically" reject Kraft's (KFT) "derisory" offer, which it says "is worse than the proposal that the Board has previously rejected as fundamentally undervaluing Cadbury and its prospects," due to a drop in Kraft's share price. The cash and share offer originally valued Cadbury at £10.2B, but is now worth about £9.8B. Kraft now has 28 days to publish a prospectus on the offer for Cadbury shareholders, and 60 days to collect enough shares to clinch a deal.
• Google picks up mobile ad leader for $750M. In a push to expand its digital advertising empire to cellphones, Google (GOOG) agreed to acquire mobile advertising start-up AdMob for $750M in stock. AdMob is a leading seller of banner ads on iPhone apps and mobile-specific web pages; the acquisition could help establish Google as an early leader in the small but rapidly expanding mobile phone advertising business. Aggregate sales of mobile ads were just $160M last year.
• Madoff payback fund could swell. Settlement talks between Madoff trustee Irving Picard and lawyers for the estate of Madoff investor Jeffry Picower are making progress, with Picower's family lawyer saying discussions range between $2.4B (the amount Picower withdrew over the six-year recovery period allowed for the trustee’s claims under New York State law) and $7B (the total amount of his withdrawals over several decades). The estate is large enough to add at least several billion dollars to the $1.4B the trustee has gathered so far.

Earnings: Tue. Before Open

• HSBC (HBC): Q3 profit was "significantly ahead" of a year ago, in part due to the first drop in U.S. impairment charges in more than three years. "The more positive signals that we saw in the U.S. run-off portfolio in the first half have continued, with the result that our North American operations did not require any capital support from the group during the quarter. We should have further evidence by the year-end as to whether this is a sustainable trend." Shares +2.6% premarket. (PR, MW)
• JA Solar (JASO): Q3 EPS of $0.10 beats by $0.07. Revenue of $193M (+119.7%) vs. $136M. Shares +9% premarket. (PR)
• Tyco International (TYC): FQ4 EPS of $0.61 beats by $0.07. Revenue of $4.42B (-16.3%) vs. $4.32B. (PR)

Earnings: Mon. After Close

• Arena Pharmaceuticals (ARNA): Q3 EPS of -$0.38 misses by $0.04. Revenue of $1.7M (+20%) vs. $2.4M. (PR)
• Clear Channel Outdoor (CCO): Q3 EPS of -$0.10 misses by $0.02. Revenue of $661M (-19%) vs. $665M. Shares -0.1% AH. (PR)
• Electronic Arts (ERTS): FQ2 EPS of $0.06 misses by $0.01. Revenue of $1.15B (+2%) vs. $1.13B. Announces cost-reduction plan that will eliminate 1,500 jobs by the end of the first quarter (900 of them in development) saving $100M annually. Expects October is another down month. Shares -1.4% AH. (PR)
• Fluor (FLR): Q3 EPS of $0.89 misses by $0.01. Revenue of $5.4B (-4%) vs. $5.5B. Shares -6.2% AH. (PR)
• Hologic (HOLX): FQ4 EPS of $0.28 beats by $0.01. Revenue of $403M (-9%) vs. $400M. Sees Q1 EPS of $0.24-0.26 vs. $0.30 on revenue of $400M-405M vs. $414M, and full-year EPS of $1.15-1.19 vs. $1.24, on revenue of $1.625B-1.65B vs. $1.69B. Shares -4.4% AH. (PR)
• Lions Gate Entertainment (LGF): FQ2 EPS of $0.26 beats by $0.20. Revenue of $394M (+3%) vs. $375M. Shares +5.6% AH. (PR)
• Live Nation (LYV): Q3 EPS of $0.82 beats by $0.02. Revenue of $1.8B (+14%) vs. $1.6B. Expects Ticketmaster merger to close in Q1. Shares -1.3% AH. (PR)
• MBIA (MBI): Q3 EPS of -$3.50 misses by $2.45. Total consolidated revenue of $-620M, incorporating an $810M unrealized loss on insured credit derivatives. Shares -12.5% AH. (PR)
• McDermott International (MDR): Q3 EPS of $0.50. Revenue of $1.7B (+1%) vs. $1.5B. Shares +1.4% AH. (PR)
• Priceline.com (PCLN): Q3 EPS of $3.45 beats by $0.53. Revenue of $731M (+30%) vs. $694M. Sees Q4 EPS of $1.52-1.62 vs. $1.49 on sequential revenue gain of 24-28%. Shares +8.2% AH. (PR)
• Qiagen (QGEN): Q3 EPS of $0.26 beats by $0.03. Revenue of $260M (+13%) vs. $257M. Raises full-year EPS guidance to $0.88-0.90 vs. $0.85. Shares +3.8% AH. (PR)
• Rackspace (RAX): Q3 EPS of $0.06 misses by $0.01. Revenue of $162M (+17%) vs. $159M. Shares +0.4% AH. (PR)
• Sequenom (SQNM): Q3 EPS of -$0.24 beats by $0.04. Revenue of $9M (-21%) vs. $8.5M. Shares -4% AH. (PR)
• Silver Wheaton (SLW): Q3 EPS of $0.11 in-line. Revenue of $69.8M (+77%) vs. $76.4M. Shares +1.1% AH. (PR)

Today's Markets

Asian markets moved higher overnight following strong U.S. gains Monday. Europe markets are flat-to-slightly-higher at midday. Stock futures are slightly lower.

• Asia: Nikkei +0.6% to 9871. Hang Seng +0.3% to 22268. Shanghai +0.1% to 3179. BSE -0.3% to 16441.
• Europe at midday: FTSE +0.3% to 5249. CAC +0.1% to 3788. DAX +0.3% to 5634.
• Futures: Dow -0.2% at 10176. S&P -0.2% to 1089.50. Nasdaq -0.1%. Crude -0.2% at $79.27. Gold -0.1% to $1,100.30. Dec. 30-year Tsy +0.24% to 118-25. 10-year +0.18%. Euro -0.05% vs. dollar. Yen +0.2%. Pound -0.4%.

Tuesday's Calendar

• 7:45 ICSC Retail Store Sales
  8:55 Redbook Chain Store Sales
  8:55 Fed's Lockhart: Emerging Trends in Real Estate
  9:00 Conference: Cross-Border Insolvency Issues
  10:00 Job Openings and Labor Turnover
  10:00 Q3 Metro Home Prices/State Resales
  10:05 Fed's Yellen: The Outlook for the Economy and Real Estate
  11:15 Fed's Rosengren speaks
  1:00 PM Results of $25B, 10-Year Note Auction
  7:30 PM Fed's Fisher: Economy
• Notable premarket earnings: ARM, BZH, DSX, JASO, TYC
• Notable postmarket earnings: AONE, ATO, CLWR, PAAS

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• Northrop unloads TASC. Northrop Grumman (NOC) agreed to sell its TASC consulting unit to a pair of private-equity firms - KKR and General Atlantic - for $1.65B. TASC unit provides engineering and consulting services to the U.S. military and state governments. Northrop said it expects the sale to generate net cash proceeds of $1.1B, which it will use to repurchase shares. The deal is the latest in a recent uptick in LBO acquisitions which have returned after a two-year dry stretch. Still, with four banks - Barclays (BCS), Royal Bank Of Canada (RY), Deutsche Bank (DB) and a lending unit of the CPP - combining to put up senior debt of well under $1B, today's deals are still a far cry from the mega-mergers of the credit boom.
• G-20 keeps drip open. G-20 leaders said it's too early to withdraw global stimulus efforts despite signs that a global economic recovery is underway. "Economic and financial conditions have improved following our coordinated response to the crisis," officials said in a communique (.pdf) following a two-day gathering in St. Andrews. "However, the recovery is uneven and remains dependent on policy support, and high unemployment is a major concern. To restore the global economic and financial system to health, we agree to maintain support for the recovery until it is assured." Stocks, commodities and futures rallied Monday: "Markets don't need to be worried that these governments and central banks are suddenly going to take away all the stimulus measures," one strategist said. "Risk appetite should remain supported into the end of the year."
• Put up or shut up day for Kraft. Kraft (KFT) could raise the cash portion of its bid for Cadbury (CBY) to 400p ahead of today's deadline, and is expected to take the bid directly to Cadbury's shareholders. Kraft has enlisted Royal Bank of Scotland (RBS), Credit Suisse (CS), Barclays (BCS) and BNP Paribas to help provide a £5.5B bridge loan. Kraft's initial bid of 300p and 0.2589 KFT shares per CBY share was valued at 745p/share, but is now worth about 720p with the decline in Kraft's stock. According to U.K. takeover rules, by launching an offer today Kraft would set in motion a 28-day deadline to publish a prospectus on the offer for Cadbury shareholders, and would have 60 days to collect enough shares to clinch a deal.
• Healthcare bill: next stop Senate. The Obama healthcare overhaul passed a House vote by a narrow margin Saturday (220-215), setting up a fractious debate in the Senate - where Democrats don't enjoy the same broad majority - this week. The bill would cost $1.05T over a decade to provide health insurance to another 36M Americans. It requires most Americans to carry insurance, creates a new exchange where they can shop for it, and gives low income earners tax credits to help them pay for it. In an appearance Sunday, Obama said he is "absolutely confident" a healthcare bill will also pass through the Senate.
• Sprint group to pour another $1.5B into Clearwire. Sources say Sprint Nextel (S) and a number of its Clearwire JV (CLWR) partners are preparing to pump another $1.5B or more into the wireless broadband provider. The Sprint group first invested $3.2B in Clearwire 18 months ago, taking a majority stake in a bet on Clearwire's version of 4G wireless broadband, WiMax. Some rivals have favored a comparable technology knows as LTE. $1B of a new infusion would come from Sprint, with Comcast (CMCSA), Intel (INTC), Time Warner Cable (TWC) and Bright House Networks kicking in another $500M. Google, a key JV partner, isn't thought to be involved in this round.
• Comcast, GE agree on CNBU valuation. After weeks of wrangling, GE (GE) and Comcast (CMCSA) reportedly agreed to value NBC Universal at about $30B, and a deal to give Comcast a 51% stake in GE's media and entertainment arm could come as early as this week, though it's still unclear whether 20% NCBU stakeholder Vivendi has signed off on the proposal. Sources say the pair met last week with debt-raters to ascertain the impact of $9B in debt a new NBCU would assume as part of the combination, and hope this week to be told it would be considered investment grade.
• Murdoch paper cleared of spy charges. The U.K. Press Complaints Commission said Monday it has found no proof journalists at Rupert Murdoch's The News of the World regularly hacked the phones of public figures to secure sensational stories. The probe was prompted after reports in The Guardian said the practice at the tabloid was widespread. In response, the Guardian described the PCC's report as complacent, saying the PCC did not have the "ability, the budget or the procedures to conduct its own investigations."
• Axa Asia Pacific shuns $10B bid from parent. Axa Asia Pacific (AXAPY.PK), the Australian unit of France’s biggest insurer (AXA -1.1% premarket), rejected an unsolicited $10B bid from its parent and AMP Ltd. (AMLTF.PK). CEO Rick Allert said Axa Asia Pacific would consider a higher offer, but called today's offer too low. Axa said today it will raise £2B through a rights offer to finance acquisitions.
• Brown backs down on transactions tax. World leaders publicly snubbed U.K. PM Gordon Brown's bold pitch for a global tax on financial transactions which would be used to fund future bailouts. Brown surprised ministers by pitching the initiative during a speech to the G-20 assembly Saturday to the dismay of his peers, who unanimously agreed with U.S. Treasury chief Tim Geithner in saying economic leaders don't think taxpayers should have to pay for future financial sector foibles. Brown backed down Sunday, though he continues to believe tighter bank regulation may not suffice to protect against future risk.
• Reynolds eyes stake in smokeless tomorrow. Cigarette giant Reynolds American (RAI) is in advanced talks to buy closely held Niconovum AB, a Swedish maker of nicotine-replacement therapies such as Zonnic pouch and Zonnic gum. A deal would be the largest move by Reynolds into nicotine products, as sales of cigarettes continue to decline. Reynolds controls about 28% of the U.S. cigarette market, second to Altria (MO) which has about 50%. Sources say the deal could be valued at €30M.

Earnings: Mon. Before Open

• DISH Network (DISH): Q3 EPS of $0.18 misses by $0.26. Revenue of $2.89B (-1.5%) vs. $2.93B. Net customers +241K to 13.85M. (PR)
• Energy Conversion Devices (ENER): FQ1 EPS of -$0.34 misses by $0.03. Revenue of $42.9M (-55.2%) vs. $56.4M. Shares -0.1% premarket. (PR)
• GTx (GTXI): Q3 EPS of -$0.35 in-line. Revenue of $3.6M (+20%) vs. $4M. (PR)
• Hospitality Properites Trust (HPT): Q3 FFO of $0.77 misses by $0.01. Revenue of $264M (-15.4%) vs. $272M. (PR)
• Nationwide Health Properties (NHP): Q3 FFO of $0.56 in-line. Revenue of $97.8M (+3.4%) vs. $94.4M. Sees full-year EPS of $2.22-2.23 vs. $2.28. (PR)
• Quicksilver Resources (KWK): Q3 EPS of $0.25 beats by $0.03. Revenue of $207M (-12.5%) in-line. (PR)
• Rockwell Automation (ROK): FQ4 EPS of $0.37 beats by $0.10. Revenue of $1.07B (-27.6%) in-line. (PR)
• Tesoro (TSO): Q3 EPS of $0.24 beats by $0.23. Revenue of $4.74B in-line. Expects to spend less than its stated capex budget of $600M. Shares +3.7% premarket. (PR)
• Warner Chilcott (WCRX): Q3 EPS of $0041 misses by $0.01. Revenue of $253M (+9%) in-line. (PR)
• Western Refining (WNR): Q3 EPS of -$0.05 beats by $0.01. Revenue of $1.83B (-40.6%) vs. $1.75B. Shares +0.5% premarket. (PR)
• Windstream (WIN): Q3 EPS of $0.24 beats by $0.03. Revenue of $734M (-7.5%) vs. $747M. (PR)

Today's Markets

Overseas markets and commodities surged Monday, and U.S. futures have gained overnight. The dollar is getting pounded in early trading.

• Asia: Nikkei +0.2% to 9809. Hang Seng +1.7% to 22208. Shanghai +0.4% to 3176. BSE +2.1% to 16499.
• Europe at midday: FTSE +1.8% to 5219. CAC +1.6% to 3766. DAX +1.7% to 5579.
• Futures: Dow +0.85% at 10063. S&P +0.9% to 1076. Nasdaq +0.9%. Crude +1.5% to $78.60. Gold +1.1% at $1,108. 30-year Tsy -0.18% to 118-07. 10-year -0.07%. Euro +0.9% vs. dollar. Yen -0.2%. Pound +1.1%.

Monday's Calendar

• 10:00 Employment Trends Index
  1:00 PM Results of $40B, 3-Year Note Auction
  6:30 PM Fed's Tarullo: Financial Regulation
• Notable premarket earnings: DISH, ENER, GTXI, HPT, KWK, NHP, ROK, SRE, TSO, WCRX, WIN, WNR
• Notable postmarket earnings: ARNA, CCO, ERTS, FLR, HOLX, LGF, LYV, MBI, MDR, PCLN, QGEN, RAX, SLW, SQNM

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• House dissects the bailout. The government's guarantee of $300B in corporate bonds saved a handful of giant companies up to $25B in borrowing costs, and put taxpayers at great risk, the Congressional panel charged with overseeing TARP says. In one of the first systematic efforts to analyze TARP, the panel, headed by Elizabeth Warren, found seven companies (GE, GS, C, BAC, JPM, MS, WFC) received 82% of the benefits of lower borrowing costs. The good news for taxpayers is that the bet has worked out: feds so far have collected a total of $17B in fees for all their emergency guarantees, while losing a paltry $2M. (read the COP's latest TARP report)
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• Insider probe grows tentacles. Authorities filed criminal charges against 14 people, including lawyers and an ex-Moody's (MCO) analyst, widening their crackdown on insider trading. At the center of yesterday's arrests, Zvi Goffer, a trader nicknamed "Octopussy" because his tentacles gripped so many confidential sources. Unlike the Galleon scheme, which was built on corporate insiders passing on early earnings estimates to fund operators, the newer ploy involves investors obtaining advanced information about pending deals - including Bain Capital's 2007 attempt to buy 3Com (COMS) - from people involved in them. Dow Jones has details of the 14 people arrested so far.
• Fannie wants another $15B. Fannie Mae (FNM) plans to tap emergency funds for a fourth time this year, bringing its draws of taxpayer money to $60B. According to an SEC filing late yesterday, Fannie Mae will seek $15B in Treasury financing after posting an $18.9B Q3 net loss. Analysts say the government-sponsored lender will likely tap its entire $200B lifeline, and may still need more.
• FHFA approves tax credit sale. Also buried in Fannie Mae's (FNM) SEC filing yesterday was that it agreed to sell $2.6B in unused tax credits to unnamed buyers, and received approval for the deal from its regulator, the FHFA. But the Treasury is thought to be leery of signing off on the sale, reportedly to Goldman Sachs (GS) and Berkshire Hathaway (BRK.A). In a statement (.pdf) Thursday, the FHFA said the sale "is consistent with FHFA's ongoing efforts to conserve Enterprise assets and with the Enterprise's multifamily housing mission."
• Bursting the next bubble. U.K. Chancellor of the Exchequer Alistair Darling set the agenda ahead of the G20 meetings in St. Andrews today, saying leaders needed to develop a technique to deflate asset bubbles before they explode: "We have got to make sure we don't get ourselves into a situation where some pressure starts to rise and then it becomes bigger and bigger and when the whole thing comes to an end it has catastrophic consequences," he said in an interview. Russian Finance Minister Alexei Kudrin noted Darling's concerns weren't out in the ether: "We need to be very careful with this huge amount of injected liquidity." A recent survey of investment managers by Goldman Sachs found 75% think low rates are already triggering "too-strong" climbs in assets.
• OECD registers global uptick. Signs of improvement have emerged in most major economies, with a marked recovery in the U.S. and Japan, and strong indications of growth in several European economies and China, the OECD said Friday. However the OECD warned that signals of expansion should be interpreted with caution, because it's still unclear how much of the measured increase of economic activity is due to a true improvement, and how much is due to a drop in long-term expectations, against which current activity is measured.
• Moynihan to address Congress on Merrill merger. Sources say Brian Moynihan, head of Bank of America's (BAC) consumer banking unit and a contender to succeed CEO Ken Lewis, has agreed to testify before Congress about his role in the Merrill Lynch takeover. He’ll be joined by Timothy Mayopoulos, whom Moynihan replaced as general counsel in December as the Merrill deal almost unraveled. Mayopoulos, who is now is general counsel at Fannie Mae (see above), has said he was given no reason for his dismissal. Moynihan's testimony could center on why Mayopoulos was given the boot, and what legal advice Moynihan gave to Ken Lewis prior to his meeting with the board.
• Retail sales climb for second month. U.S. retailers had their best month in more than a year, with major chains reporting a combined 1.8% year-on-year gain. In a promising note, upscale chains Nordstrom (JWN) and Saks (SKS) beat expectations, the first signs of recovery in among high-end shoppers. The big question is whether shoppers - many who are in the throes of joblessness - will turn out in force for the holidays.
• New rule cripples injured banks. A new rule that will cap the interest rates paid to depositors by banks deemed "not well capitalized" will likely accelerate the rate of bank failures. The cap - 0.75% above the U.S. average - is meant to prevent weaker banks from driving up costs for the rest of the industry.

Earnings: Fri. Before Open

• AIG (AIG): Q3 EPS of $2.85 beats by $0.87. Total equity $76.5B, up $14.4B from Q2. "Our results reflect continued stabilization in performance and market trends." Shares -4.8% premarket. (PR)
• Fortress Investment Group LLC (FIG): Q3 EPS of $0.11 beats by $0.02. Revenue of $144M (-22.4%) vs. $123M. (PR)
• Mirant (MIR): Q3 EPS of $0.38 misses by $0.78. Revenue of $454M (-79.1%) vs. $734M. (PR)
• Scripps Networks (SNI): Q3 EPS of $0.39 beats by $0.03. Revenue of $364.5M (+0.1%) in line. (PR)
• Suncor Energy (SU): Q3 EPS of C$0.23 misses by C$0.06. (PR)

Earnings: Thur. After Close

• Activision Blizzard (ATVI): Q3 EPS of $0.04 in-line. Revenue of $755M vs. $724M. Sees Q4 EPS of $0.43 vs. $0.44, on revenues of $2.22B vs. $2.3B. Sees full-year EPS of $0.63 vs. $0.64. Shares +2.8% AH. (PR)
• Atmel (ATML): Q3 EPS of -$0.01 beats by $0.01. Revenue of $318M (-21%) vs. $304M. Sees Q4 revenue up 3-7%. Shares -0.3% AH. (PR)
• CBS (CBS): Q3 EPS of $0.39 beats by $0.17. Revenue of $3.35B (flat) vs. $3.19B. Operating income before depreciation and amortization of $566M compared with year-ago loss of $13.48B. Sees full-year OIBDA of $1.725B-1.925B. Shares -1.4% AH. (PR)
• Crocs (CROX): Q3 EPS of $0.01 beats by $0.09. Revenue of $177M (+2%) vs. $156M. Shares -6.3% AH. (PR)
• EOG Resources (EOG): Q3 EPS of $0.81 beats by $0.15. Revenue of $1B (-69%) vs. $1.1B. Raises full-year production growth targets to 6% from 5.5%. Shares +0.1% AH. (PR)
• Hansen Natural (HANS): Q3 EPS of $0.60 misses by $0.03. Revenue of $308M (+8%) vs. $309M. Shares -8.2% AH. (PR)
• International Game Technology (IGT): FQ4 EPS of -$0.07 may not be comparable to estimate of $0.17. Revenue of $231M (-23%) vs. $498M. Unfavorable items affecting comparability reduce income by $0.30/share. Shares -0.3% AH. (PR)
• Intrepid Potash (IPI): Q3 EPS of $0.13 misses by $0.01. Revenue of $66M (-55%) vs. $64M. Shares -1.3% AH. (PR)
• JDS Uniphase (JDSU): FQ1 EPS of $0.04 beats by $0.02. Revenue of $298M (-21%) vs. $292M. Sees Q2 sales of $320M-345M vs. $306M. Shares +4.9% AH. (PR)
• Leap Wireless International (LEAP): Q3 EPS of -$0.85 misses by $0.33. Revenue of $600M (+21%) vs. $620M. Shares +0.5% AH. (PR)
• Nvidia (NVDA): Q3 EPS of $0.19 beats by $0.09. Revenue of $903M (+1%) vs. $838M. Sees Q4 sales up 2%. Shares +5.9% AH. (PR)
• Public Storage (PSA): Q3 FFO of $1.44 beats by $0.19. Revenue of $352M (-5%) vs. $405M. Shares -0.9% AH.(PR)
• SandRidge Energy (SD): Q3 EPS of $0.16 in-line. Operating cash flow of $85.6M (-38%). Shares -5.8% AH. (PR)
• Skyworks Solutions (SWKS): FQ4 EPS of $0.24 beats by $0.02. Revenue of $228M (-2%) vs. $222M. Shares +3.5% AH. (PR)
• Sotheby's (BID): Q3 EPS of -$0.89 misses by $0.58. Revenue of $45M (-41%) vs. $60M. Shares -3.8% AH. (PR)
• Starbucks (SBUX): FQ4 EPS of $0.24 beats by $0.03. Revenue of $2.4B (-4%) in-line. Expects full-year EPS growth of 15-20% from $0.80, and sees little net impact from commodities, with favorable coffee prices offsetting higher dairy prices. Expected capex of $500M-$550M. Shares +3.9% AH. (PR)
• Sunoco (SUN): Q3 EPS of -$0.29 misses by $0.19. Revenue of $8.7B (-43%) vs. $7.8B. Shares -0.6% AH. (PR)
• Tenaris (TS): Q3 EPS of $0.19 misses by $0.18. Revenue of $1.8B (-42%) vs. $1.9B. Shares -1.1% AH. (PR)
• VeriSign (VRSN): Q3 EPS of $0.33 beats by $0.01. Revenue of $258M (+5%) vs. $259M. Shares -4.8% AH. (PR)

Today's Markets

Asia markets headed higher Friday. Europe stocks are flat at midday, and futures are flat heading into the nonfarm payroll data on deck at 8:30.

• Asia: Nikkei +0.7% to 9789. Hang Seng +1.6% to 21830. Shanghai +0.3% to 3164. BSE +0.6% to 16158.
• Europe at midday: FTSE +0.2% to 5137. CAC flat at 3708. DAX flat at 5483.
• Futures: Dow flat at 9957. S&P flat at 1064. Nasdaq +0.1%. Crude +0.1% at $79.76. Gold +0.5% to $1,094. 30-year Tsy +0.16% to 118-13. Dollar is flat vs euro, yen and pound.

Friday's Calendar

• 4:00 G20 St. Andrews, Day 1
  8:15 Community Bankers Symposium
  8:30 Nonfarm payrolls
  9:30 Hearing: Employment Situation
  10:00 Wholesale Trade
  10:00 Briefing: Unemployment data and economic recovery
  3:00 PM Consumer Credit
• Notable premarket earnings: AIG, BAM, BEXP, BX, EIX, FIG, MIR, NVAX, SNI, SU

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• Fed stays put. The Fed Open Market Committee left target rates unchanged at 0-0.25% by unanimous vote, saying conditions are still "likely to warrant exceptionally low levels of the federal funds rate for an extended period." The Fed acknowledged an ongoing pickup in economic activity, but warned things are likely to remain weak for a while. It noted "substantial" resource slack will continue to dampen cost pressures, and it continues to believe "inflation will remain subdued for some time." It also pared its expectations for buying agency debt and agency MBS to $175B compared to a former maximum of $200B, to wrap up by the end of Q1. Here's a side-by-side comparison of Wednesday's statement with the previous one. Stocks surged after the statement, but a late-day selloff sent major indexes back to breakeven.
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• Dodd's drastic detour on bank regulation. Senate Banking Committee Chairman Christopher Dodd is reportedly readying legislation that would strip the Fed and FDIC of almost all their bank-supervision powers, creating in their place a new agency in charge of supervising all banks and bank-holding companies. Dodd's proposal would also create a council of regulators, overseen by the White House, to monitor systemic risks to the financial system. The suggestion is in stark contrast to approaches taken by the House and favored by the Obama administration, which have pushed to expand the Fed's powers. Dodd's model is likely to face heavy resistance, particularly from the banking industry, which is ironic since Dodd has been criticized for being too cozy with Wall Street bankers.
• Skype deal almost done. The private-equity investors that agreed to buy 65% of Skype from eBay (EBAY) for about $2.1B are on the verge of settling their dispute with Skype's founders in a deal that will give them 10% of Skype and a presence on its board, in exchange for giving up rights to the peer-to-peer technology they control and a significant amount of cash. An official announcement could come as soon as this morning.
• Senate shuffles taxes. The Senate passed legislation Wednesday that would give tax breaks to big companies impacted by the recession; increase taxes on multinational firms; extend and expand the homebuyers tax credit; and lengthen unemployment benefits. The proposed tax increases are aimed at offsetting the cost of the breaks, which business leaders worry may be a harbinger of more tax increases to come.
• Chambers sounds all clear. Cisco's (CSCO) net profit dropped 19% on lower sales (see data below), but CEO John Chambers gave an optimistic outlook on the economy and said businesses were ready to resume spending on technology. On Cisco's Q3 earnings call, Chambers told analysts the recovery "is well underway" and that economic improvements were "gaining momentum" worldwide. He also predicted Cisco's revenue would grow in Q4 after a year of contraction.
• Junk default rate hits post-Depression high. The global speculative-grade default rate rose to 12.4% in October, surpassing the record set in 1991 for the highest proportion of defaults since the Great Depression, Moody's said in a report this morning. Moody's believes the default rate may peak in November at 12.5%, noting the total number of defaults declined to eight in October, the lowest count this year.
• Big bonuses are back. Wall Street incentive pay is set to rise by about 40% according to a closely-watched survey to be released today, as stronger markets collide with the backlash over bonuses. Johnson Associates predicts incentive-based payouts will surge by as much as 60% from 2008, led by employees in rebounding businesses like fixed income and equities. In contrast, the firm predicts declines of 15-30% at hedge funds, private-equity firms and prime-brokerage operations which have seen a marked drop in AUM.
• Consumer bankruptcy strikes new high. Consumer bankruptcy filings hit 135,913 in October, an 8.9% jump from September, and 27.9% higher than a year ago, according to a study by the American Bankruptcy Institute. "The debt overhang from literally a decade or more of really high consumer spending and low savings rates has put families in a particularly vulnerable spot," ABI's Samuel Gerdano said. The rise outpaced a 7% month-on-month increase in business filings.
• Downgrade dominance declines. S&P said it downgraded only one more nonfinancial firm in October than it upgraded (24-23), a marked improvement considering the downgrade/upgrade ratio from Sept. 2008 to Aug. 2009 was 835-115. S&P said the large drop "supports our belief that aggregate credit quality, although weak, is stabilizing," and noted that the number of companies with a negative ratings outlook or on watch for downgrade has declined steadily. Meanwhile, more than $4B in new corporate bonds were offered Wednesday, including a $2B sale by DuPont (DD).
• BOE boosts bond buying: The Bank of England kept its target bank rate at 0.5%, as expected, but raised its bond buying program to £200B from £175B, which it expects to complete in about three months. "Banks’ funding conditions have improved, though financial conditions remain fragile," the Bank said, and noted "a number of indicators of spending and confidence, however, suggest that a pickup in economic activity may soon be evident."
• Private-sector jobs still sliding. ADP's October employment report showed private U.S. payrolls declined by 203,000, while revising September's loss to 227K from 254K - the seventh straight month of declining job losses. ADP's report comes two days before the government's official nonfarm payroll data, and has been reasonably well correlated with NFP data in recent months. Consensus estimates suggest 150–175K job losses in October and an unemployment rate of 9.9%.
• Online job seeking rises slowly. Monster's index of online job advertising inched up to 120, vs. 119 in Sept and 150 a year ago. Healthcare and public administration demonstrated solid growth, but retail and hospitality hiring retracted. "The rise in the October Index, along with an improvement in the annual rate, indicate a mild expansion in the underlying employer demand for workers," Monster said. "While the decline in consumer confidence has likely contributed to reduced job demand in the retail and hospitality sectors, employers are actively recruiting in the healthcare and public sectors, resulting in stability of the overall Index."

Earnings: Thur. Before Open

• Allied Capital (ALD): Q3 EPS of $0.02 misses by $0.05. Revenue of $M in-line. Shares -1.3% premarket. (PR)
• Biovail (BVF): Q3 EPS of $0.44 beats by $0.04. Revenue of $212M in-line. (PR)
• Cardinal Health (CAH): FQ1 EPS of $0.54 beats by $0.11. Revenue of $24.8B (+5.9%) vs. $24B. (PR)
• Canadian Natural Resource (CNQ): Q3 EPS of C$1.21 misses by C$0.04. Revenue of C$2.82B (+2.7%) vs. C$2.99B. (PR)
• CenturyTel (CTL): Q3 EPS of $0.90 beats by $0.09. Revenue of $1.87B (+188.3%) in-line. (PR)
• CIGNA (CI): Q3 EPS of $1.13 beats by $0.10. Revenue of $4.52B (-6.9%) in-line. (PR)
• CVS Caremark (CVS): Q3 EPS of $0.65 beats by $0.01. Revenue of $24.6B (+17.7%) in-line. Shares +1% premarket. (PR)
• Delta Petroleum (DPTR): Q3 EPS of -$0.35 misses by $0.24. Revenue of $23.9M (-66.8%) vs. $21.9M. "We are extremely disappointed with the results of the Gray well, but exploration drilling carries with it significant risks." Shares -12.8% premarket. (PR)
• DirecTV Group (DTV): Q3 EPS of $0.37 misses by $0.02. Revenue of $5.47B in-line. (PR)
• Dr Pepper Snapple (DPN): Q3 EPS of $0.54 beats by $0.05. Revenue of $1.43B (-4%) in-line. Sees full-year EPS of $1.92-1.96 vs. $1.97. ""While the economy is showing some signs of recovery, it's still too early to see this translate into higher beverage sales. For the quarter, liquid refreshment beverage trends remained negative." Shares +0.7% premarket. (PR)
• Dynegy (DYN): Q3 EPS of -$0.10 misses by $0.13. Revenue of $673M (-61.7%) vs. $877M. (PR)
• Frontier Oil (FTO): Q3 EPS of -$0.26 misses by $0.11. Revenue of $1.1B (-45.4%) in-line. (PR)
• King Pharmaceuticals (KG): Q3 EPS of $0.29 beats by $0.02. Revenue of $463M (+19.3%) vs. $445M. (PR)
• Lamar Advertising (LAMR): Q3 EPS of -$0.05 beats by $0.11. Revenue of $167M (-13%) vs. $164M. (PR)
• Macerich (MAC): Q3 FFO of $0.97 beats by $0.05. Revenue of $201M (+49.8%) in-line. (PR)
• Manulife Financial (MFC): Q3 EPS of C-$0.12 misses by C$0.32. Revenue of C$13.75B. (PR)
• MGM Mirage (MGM): Q3 EPS of $0.02 beats by $0.10. Revenue of $1.71B (-12.7%) vs. $1.47B. Las Vegas Strip RevPAR fell 21%. Amends credit facility to refinance existing debt and provide more debt of up to $1B. Shares +5.7% premarket. (PR)
• MetroPCS Communications (PCS): Q3 EPS of $0.21 beats by $0.12. Revenue of $895M (+30.4%) vs. $869M. (PR)
• MF Global (MF): FQ2 EPS of $0.01 misses by $0.03. Revenue of $493M (-40.9%) vs. $273M. (PR)
• Nasdaq (NDAQ): Q3 EPS of $0.42 in-line. Revenue of $691M (+3.3%) vs. $355M. (PR)
• Petrohawk Energy (HK): Q3 EPS of $0.14 beats by $0.02. Revenue of $238M (-22%) vs. $305M. (PR)
• Plains Exploration & Production (PXP): Q3 EPS of $0.30 misses by $0.23. Revenue of $313M (-56.5%) vs. $376M. Shares -0.6% premarket. (PR)
• Sara Lee (SLE): FQ1 EPS of $0.24 beats by $0.08. Revenue of $2.59B (-7.4%) vs. $3.16B. Shares +0.2% premarket. (PR)
• Sirius XM Radio (SIRI): Q3 EPS of $0.00 beats by $0.02. Revenue of $630M (+2.8%) vs. $609M. Ends quarter with 18,515,730 subscribers, +102,295 from Q2. Shares +3.9% premarket. (PR)
• Spectra Energy (SE): Q3 EPS of $0.30 beats by $0.04. Revenue of $933M (-13.6%) vs. $986M. (PR)
• Teradata (TDC): Q3 EPS of $0.38 beats by $0.09. Revenue of $425M (-3.2%) in-line. (PR)
• Thomson Reuters (TRI): Q3 EPS of $0.43 beats by $0.03. Revenue of $3.21B (-3.6%) in-line. "While the weak year-to-date net sales experienced in recent quarters are now flowing through into revenues, we expect this dip to be shallow and limited to the next few quarters." (PR)
• Time Warner Cable (TWC): Q3 EPS of $0.76 beats by $0.01. Revenue of $4.5B (+3.6%) in-line. (PR)
• Watson Wyatt (WW): FQ1 EPS of $0.84 beats by $0.12. Revenue of $401M (-5.8%) vs. $394M. Sees FQ2 EPS of $0.81-0.86 vs. $0.89 (PR)
• Wendy's Arby's Group (WEN): Q3 EPS of $0.06 in-line. Revenue of $903M vs. $916M. Shares +3.8% premarket. (PR)

Earnings: Wed. After Close

• Allstate (ALL): Q3 EPS of $0.99 misses by $0.02. Revenue of $7.6B (+4%) vs. $8.5B. Shares -2.1% AH. (8-K)
• Amdocs (DOX): FQ4 EPS of $0.53 beats by $0.04. Revenue of $707M (-14%) vs. $679M. Sees Q1 EPS of $0.51-0.55 vs. $0.50, on revenue of $705M-725M vs. $676M. Shares +6.2% AH. (PR)
• Cisco Systems (CSCO): Q3 EPS of $0.36 beats by $0.05. Revenue of $9B (-13%) vs. $8.7B. Shares +2.8% AH. (PR)
• Corrections Corp. of America (CXW): Q3 EPS of $0.39 beats by $0.07. Revenue of $426M (+6%) vs. $423M. Shares -2.7% AH. (PR)
• Eagle Bulk Shipping (EGLE): Q3 EPS of $0.06 beats by $0.03. Revenue of $42M (-19%) in-line. Shares -5.7% AH. (PR)
• Evergreen Solar (ESLR): Q3 EPS of -$0.40 misses by $0.32. Revenue of $78M (+251%) vs. $74M. Shares +2.1% AH. (PR)
• Goldcorp (GG): Q3 EPS of $0.19 beats by $0.03. Revenue of $692M (+25%) vs. $614M. Shares +2.1% AH. (PR)
• Goodrich Petroleum (GDP): Q3 EPS of -$0.87 misses by $0.70. Revenue of $24M (-61%) vs. $52M. Shares -7% AH. (PR)
• Health Care REIT (HCN): Q3 FFO (normalized) of $0.77 in-line. Revenue of $145M (+4%) vs. $143M. Sees full-year EPS of $3.10-3.12 vs. $3.13. Shares +1.6% AH. (PR)
• ION Geophysical (IO): Q3 EPS of -$0.06 misses by $0.03. Revenue of $102.4M (-53%) vs. $102.6M. Shares -8.4% AH. (PR)
• Microchip Technology (MCHP): FQ2 EPS of $0.29 beats by $0.08. Revenue of $227M (-16%) vs. $218M. Sees FQ3 EPS of $0.33-0.35 vs. $0.24, on revenue of $236M-245M vs. $224M. Shares +1.6% AH. (PR)
• Murphy Oil (MUR): Q3 EPS of $0.98 misses by $0.01. Revenue of $5.2B (-37%) vs. $4.4B. Sees Q4 EPS of $0.75-0.90 vs. $1.18. Shares -2% AH. (PR)
• News Corp. (NWS): FQ1 EPS of $0.22 beats by $0.04. Revenue of $7.2B (-4%) in-line. Shares +3% AH. (PR)
• ON Semiconductor (ONNN): Q3 EPS of $0.16 beats by $0.06. Revenue of $473M (-19%) vs. $455M. Shares +4% AH. (PR)
• Prudential Financial (PRU): Q3 EPS of $1.59 beats by $0.26. Revenue of $6.6B (+4%) vs. $6.65B. Shares +0.4% AH. (PR)
• Qualcomm (QCOM): FQ4 EPS of $0.48 misses by $0.04. Revenue of $2.7B (-19%) vs. $2.8B. Sees Q1 revenue of $2.55B-2.75B vs. $2.84B. Shares +1% AH. (PR)
• Sunstone Hotel Investors (SHO): Q3 FFO of $0.14 in-line. Revenue of $176M (-20%) vs. $180M. Shares +2% AH. (PR)
• THQ (THQI): FQ2 EPS of -$0.08 beats by $0.40. Revenue of $101M (-39%) vs. $92M. Shares +11.5% AH. (PR)
• Whole Foods Market (WFMI): FQ4 EPS of $0.20 beats by $0.02. Revenue of $1.8B (-2%) in-line. Same-store sales down 0.9%. Shares -7.7% AH. (PR)

Today's Markets

Asian markets were mixed Thursday. Europe is lower at midday, and futures are flat.

• Asia: Nikkei -1.3% to 9717. Hang Seng -0.6% to 21479. Shanghai +0.8% to 3155. BSE +0.9% to 16064.
• Europe at midday: FTSE -0.5% to 5082. CAC -0.4% to 3656. DAX -0.3% to 5426.
• Futures: Dow -0.1% to 9778. S&P -0.1% to 1046. Nasdaq -0.25%. Crude -0.6% to $79.90. Gold +0.1% to $1,089.20. 30-year Tsy +0.45% to 118-20. 10-year +0.25%. 5-year +0.19%. 2-year +0.05%. Euro -0.2% vs. dollar. Yen +0.3%. Pound -0.3%.

Thursday's Calendar

• 4:00 Monster Employment Index
  5:00- Retail same-store sales
  7:00 BOE Rate Decision
  7:45 ECB Rate Decision
  8:30 Initial Jobless Claims
  8:30 Productivity and Costs
  8:30 IMF Macroeconomic Conference, Day 1
  10:30 EIA Natural Gas Inventory
• Notable premarket earnings: ALD, BVF, CAH, CDE, CI, CNQ, CTL, CVS, DNR, DPS, DPTR, DTV, DYN, FTO, GNA, HK, KG, KIM, LAMR, MAC, MF, MGM, NDAQ, OCR, PCS, PXP, RRI, SE, SIRI, SLE, TDC, TWC, WEN, WW
• Notable postmarket earnings: ATML, ATVI, BID, CBS, CIM, CROX, EOG, HANS, IGT, IPI, JDSU, LEAP, NVDA, PSA, SBUX, SD, SUN, SWKS, TIE, TS, VRSN

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• GM U-turn on Opel sparks German road rage. German officials were outraged by GM's surprise decision to keep Opel, its European arm, abandoning a long-expected sale to a Magna- (MGA) led group that the German government had agreed to back with €4.5B of state aid. GM said improving business conditions and the strategic importance of Opel had prompted the move, which came after the EU forced GM's board to revisit the deal over concerns Germany had influenced its decision. GM expects restructuring Opel to cost about €3B; it's unclear whether the German government will help it restructure.
• Buffett joins Goldman in bid for tax credits. Sources say Berkshire Hathaway (BRK.A) has joined Goldman Sachs (GS) in a bid to buy $3B in tax credits from Fannie Mae (FNM), adding a twist to a politically sensitive deal. The credits are virtually worthless to Fannie Mae, and require it to take losses each quarter as their value declines, while profitable companies could use them to offset taxes. The government, which controls Fannie, is thought to be reluctant to approve a deal that would allow Goldman to save on taxes, given the firm's already tenuous standing with lawmakers and on Main Street; taking widely-respected Buffett as a partner could reduce the tension.
• Berkshire bets big. Warren Buffett says his $100/share bid for Burlington Northern Santa Fe (BNI) was his first and only offer, stressing that the deal is "not a bet on next month or next year. We're going to own it forever." Berkshire (BRK.A) will pay about 60% cash and 40% stock for the railroad, taking on $8B in debt and depleting its cash store to about $20B, leaving it almost fully-invested according to its standards, which analysts say could result in strategic divestments in the future. Berkshire will split its so-called Baby Berkshire shares (BRK.B) by 50 to enable small Burlington stakeholders to participate in the share swap, which will help bring its famously pricey stock within the means of retail investors.
• Obese healthcare premiums. A Senate probe found U.S. health insurers (AET, CI, CVH, HUM, UNH, WLP) are spending considerably less of their premiums on medical care than official industry estimates - an average of $0.70/dollar instead of the $0.87 cited by industry group AHIP. The report also singled out Cigna for mis-categorizing $5B worth of clients. "The American people and I are asking a serious question and one that deserves a straight answer – why are health insurance costs going up each year?" Sen. Jay Rockefeller said. "While health-care costs are spiraling upwards, consumers are paying more and getting less, and the health insurance industry doesn't want anyone to know what they are up to."
• Regulators fret Asia bubble. The World Bank warned Tuesday that the sudden reappearance of billions of dollars in investment capital in East Asia is "raising concerns about asset price bubbles," while the IMF cited "a risk" that surging Hong Kong asset prices are being driven by a flood of capital "divorced from fundamental forces of supply and demand." About $53B has gone into emerging-market stock funds this year.
• China backs Shanghai Disney. Beijing gave Disney (DIS) the go-ahead to build a $4B theme park in Shanghai, allowing the media giant to establish a presence in a massive market that has presented substantial hurdles to foreign entertainment companies. The park has been discussed for close to a decade. Disney already operates a theme park in Hong Kong.
• Oracle awaits EU veto. Oracle (ORCL) is expecting a formal objection to its planned $7.4B acquisition of Sun Microsystems (JAVA) from the EU Commission within days, sources say. Despite concerns over the deal's impact on the database market, Oracle has refused to make any concessions to European regulators.
• Bain in exclusive talks to buy Citi's Bellsystem. Private-equity group Bain Capital is reportedly in exclusive negotiations with Citigroup (C) to buy its Japanese telemarketer Bellsystem24 in a deal that could be worth more than $1B. A team of CVC Capital and Blackstone (BX) also made an offer in the final round of bidding, which closed last Friday. Citigroup put Bellsystem24 up for sale as part of its efforts to raise cash; it has already sold its retail broker Nikko Cordial Securities and asset management firm Nikko Asset Management in Japan.
• Car sales show spark. U.S. vehicle sales declined less than 1% in October, the first signs of a recovery without the aid of government incentives. The drop made October the year's strongest month aside from August, which received a lift from the cash-for-clunkers program. The seasonally adjusted annual sales rate was 11.2M. "Thinking of where we've come from, it's certainly a positive signal," J.D. Power's Jeff Schuster said. GM's sales rose 5% - the first gain since Jan. 2008. Ford's (F) grew 3%.
• Second IPO nixed. Aviv REIT Inc. (AVI) became the second U.S. company in less than a week to pull its IPO after pricing and demand failed to meet investors' expectations, dealers said. September and October's 18 IPOs have collectively beaten the S&P 500 by just 0.3% during their first month of trading - the worst showing on record.
• Mortgage apps rise. Mortgage applications increased 8.2% from a week ago, MBA said, led by a 14.5% jump in refinancing. The average rate for 30-year fixed mortgages declined to 4.97% from 5.04%.
• Oct. Challenger Job-Cut Report: Announced layoffs fell to 55,679 vs. 66,404 in September, the lowest total since March 2008. As recently as October 2008, the number stood at 113K.

Earnings: Wed. Before Open

• Agrium (AGU): Q3 EPS of $0.16 in-line. Revenue of $1.84B (-40.8%) vs. $2.07B. (PR)
• Ambac (ABK): Q3 EPS of $7.58 vs. consensus of -$4.43. Revenue of $23.6M (-24.6%) vs. $23.4M. Says results "reflect significant unrealized mark-to-market gains in the credit derivatives portfolio and gains resulting from reinsurance cancellations during the quarter." Shares +30% premarket. (PR)
• Automatic Data Processing (ADP): FQ1 EPS of $0.56 beats by $0.06. Revenue of $2.1B (-3.6%) in-line. (PR)
• Aqua America (WTR): Q3 EPS of $0.25 in-line. Revenue of $181M (+2.1%) vs. $189M. Increases quarterly dividend by $0.01 (7.4%) to $0.145. Says results were negatively impacted by eighth wettest summer in 137 years. (PR)
• Baker Hughes (BHI): Q3 EPS of $0.26 misses by $0.10. Revenue of $2.23B (-26%) in-line. Says international results were negatively impacted by price discounting. Expects to complete acquisition of BJ Services (BJS) in Q1 2010. (PR)
• Becton Dickinson (BDX): FQ4 EPS of $1.25 beats by $0.01. Revenue of $1.9B (+5%) in-line. (PR)
• Comcast (CMCSA): Q3 EPS of $0.33 beats by $0.08. Revenue of $8.8B (+3%) in-line. Declares quarterly dividend of $0.0675. (PR I, II)
• Devon Energy (DVN): Q3 EPS of $1.10 beats by $0.20. Revenue of $2.1B (-64.9%) in-line. O&G production is up 8% YTD. Shares +4.3% premarket. (PR)
• Diedrich Coffee (DDRX): FQ1 EPS of $0.07 beats by $0.02. Revenue of $15.8M (+52%) vs. $13.2M. Diedrich is being acquired by Peet's Coffee & Tea (PEET). (PR)
• Foster Wheeler (FWLT): Q3 EPS of $0.71 beats by $0.08. Revenue of $1.22B (-29.2%) vs. $1.29B. (PR)
• Garmin (GRMN): Q3 EPS of $1.02 beats by $0.03. Revenue of $781M (-10.2%) vs. $704M. Gross margin 52%. Operating margin 30% from 25% last year. (PR)
• Huntsman (HUN): Q3 EPS of -$0.24 misses by $0.16. Revenue of $2.11B (+13%) vs. $1.95B. Says expansion of Asian ops "has allowed us to take advantage of markets less affected by the ongoing global recession." Anticipates economic recovery will continue. (PR)
• IAMGOLD (IAG): Q3 EPS of $0.18 beats by $0.08. Revenue of $235M (+3.7%) vs. $224M. Shares +3.5% premarket. (PR)
• Liz Claiborne (LIZ): Q3 EPS of $0.43 misses by $0.23. Revenue of $770B (-24.1%) vs. $790B. Says it's seeing "significantly improved comparable store sales results" Q4 to date. (PR)
• Marsh & McLennan (MMC): Q3 EPS of $0.48 beats by $0.22. Revenue of $2.52B (-10.5%) vs. $2.6B. (PR)
• Martha Stewart Living Omnimedia (MSO): Q3 EPS of -$0.22 misses by $0.13. Revenue of $49.8M (-25.1%) vs. $51.3M. Shares -8.1% premarket. (PR)
• MFA Finanacial (MFA): Q3 EPS of $0.25 misses by $0.01. Shares +0.3% premarket. (PR)
• Molson Coors (TAP): Q3 EPS of $1.14 beats by $0.16. Revenue of $854M (-7.3%) vs. $834M. (PR)
• Pulte Homes (PHM): Q3 EPS of -$1.15 misses by $0.46. Revenue of $1.09B (-30%) vs. $1.23B. Says results "reflect a homebuilding industry that continues its transition toward more stable market conditions as lower prices and historically low mortgage rates are helping to support homebuyer demand. Challenges remain, however, as economic weakness, foreclosures, rising unemployment and recent uncertainty over the expiration of the federal tax credit continue to influence buyer behavior." (PR)
• Quanta Services (PWR): Q3 EPS of $0.32 beats by $0.11. Revenue of $781M (-25.6%) vs. $858M. (PR)
• R.R. Donnelley & Sons (RRD): Q3 EPS of $0.54 beats by $0.09. Revenue of $2.5B vs. $2.4B. (PR)
• Time Warner (TWX): Q3 EPS of $0.61 beats by $0.08. Revenue of $7.13B (-5.9%) in-line.(PR I, II)
• Transocean (RIG): Q3 EPS of $2.65 misses by $0.02. Revenue of $2.82B (-11.6%) in-line. (PR)
• TRW Automotive (TRW): Q3 EPS of $0.68 beats by $0.52. Revenue of $3.11B (-13.5%) vs. $2.87B. Sees Q4 revenue of $3.2B vs. $3B. "The cautious optimism that has emerged for the industry is supported by the increasing vehicle production forecasts. Although it appears the bottom of the financial crisis has been reached, full recovery will be a long and gradual process." (PR)
• Tyco Electronics (TEL): Q3 EPS of $0.30 beats by $0.03. Revenue of $2.7B (-24.6%) vs. $2.6B. (PR)
• Watson Pharmaceuticals (WPI): Q3 EPS of $0.66 beats by $0.01. Revenue of $662M (+3.3%) vs. $688M. (PR)
• XTO Energy (XTO): Q3 EPS of $0.86 beats by $0.02. Revenue of $2.29B (+7.7%) in-line. (PR)

Earnings: Tue. After Close

• Anworth Mortgage Asset (ANH): Q3 EPS of $0.27 misses by $0.04. Interest income of $63M (-14%). Shares +2% AH. (PR)
• CBL & Associates Properties (CBL): Q3 FFO of $0.50 beats by $0.03. Revenue of $263M (-8%) vs. $255M. Shares -0.8% AH. (PR)
• Con-Way (CNW): Q3 EPS of $0.39 misses by $0.20. Revenue of $1.1B (-18%) in-line. Shares +0.1% AH. (PR)
• Crown Castle International (CCI): Q3 EPS of -$0.13 misses by $0.09. Revenue of $429M (+12%) vs. $419M. Sees full-year EPS of -$0.58 to -$0.49 vs. -$0.45, on revenue of $1.54B vs. $1.66B. Shares -6.3% AH. (PR)
• Digital River (DRIV): Q3 EPS of $0.42 beats by $0.01. Revenue of $99.4M (+3%) vs. $98.3M. Sees Q4 EPS of $0.30-0.34 vs. $0.42. Shares -1.3% AH. (PR)
• Discovery (DISCA): Q3 EPS of $0.22 misses by $0.05. Revenue of $854M (+1%) vs. $850M. Shares -0.1% AH. (PR)
• Excel Maritime (EXM): Q3 EPS of $0.81 beats by $0.68. Revenue of $174M (-25%) vs. $101M. Shares +6% AH. (PR)
• Exco Resources (XCO): Q3 EPS of $0.20 misses by $0.02. Revenue of $131M (-70%) vs. $229M. Shares -0.5% AH. (PR)
• Hartford Financial (HIG): Q3 core EPS of $1.56 beats by $0.45. Results exclude highly variable realized gains/losses. Raises full-year EPS guidance to $0.85-1.05 from $0.00-0.20, vs. $0.50. Shares +4.8% AH. (PR)
• Kraft (KFT): Q3 EPS of $0.55 beats by $0.07. Revenue of $9.8B (-6%) vs. $10.3B. "Our volume/mix, profit margin and cash flow trends are strengthening as we successfully execute our growth plan." Shares -2.9% AH. (PR)
• Onyx Pharmaceuticals (ONXX): Q3 EPS of $0.35 beats by $0.13. Revenue of $69M (+36%) vs. $65M. Shares -0.7% AH. (PR)
• Pioneer Natural Resources Company (PXD): Q3 EPS of -$0.06 misses by $0.13. Revenue of $410M (-32%) vs. $400M. Shares -0.2% AH. (PR)
• STEC (STEC): Q3 EPS of $0.50 beats by $0.03. Revenue of $98M (+54%) vs. $97M. Shares -31.9% AH. (PR)
• Unum Group (UNM): Q3 EPS of $0.64 in-line. Revenue of $2.52B (+3%) vs. $2.56B. (PR)
• Vivus (VVUS): Q3 EPS of -$0.30 beats by $0.01. Revenue of $4.3M (-2%) vs. $5.3M. Shares -3.7% AH. (PR
• Yamana Gold (AUY): Q3 EPS of $0.12 misses by $0.01. Revenue of $333M (+50%) vs. $358M. Shares -2% AH. (PR)

Today's Markets

Overseas markets posted solid gains Wednesday after U.S. markets rebounded from early weakness to finish off Tuesday flat. Futures are higher in moderate overnight trading.

• Asia: Nikkei +0.4% to 9844. Hang Seng +1.8% to 21615. Shanghai +0.5% to 3129. BSE +3.3% to 15912.
• Europe at midday: FTSE +0.8% to 5080. CAC +1.6% to 3643. DAX +1.4% to 5429.
• Futures at 7:00: Dow +0.6% to 9780. S&P +0.6% to 1048. Nasdaq +0.3%. Dec. crude +0.5% to $80.04. Gold +0.4% to $1,089.50. 30-year Tsy -0.16% to 118-28. 10-year -0.11%. Euro +0.4% vs. dollar. Yen -0.5%. Pound +0.7%.

Wednesday's Calendar

• 7:00 MBA Mortgage Applications
  7:30 Challenger Job-Cut Report
  8:15 ADP Jobs Report
  9:00 Treasury Quarterly Refunding
  10:00 ISM Non-Manufacturing PMI
  10:30 EIA Petroleum Inventories
  2:15 PM FOMC statement
• Notable premarket earnings: ABK, ADP, AGU, BDX, BHI, CMCSA, DVN, FWLT, GRMN, HUN, IAG, LIZ, MFA, MMC, PHM, PWR, RDN, RIG, RRD, TAP, TEL, TOT, TRW, TWX, WTR, XTO
• Notable postmarket earnings: ALL, CSCO, CXW, DOX, EGLE, ESLR, GDP, GG, HCN, IO, MCHP, MUR, NWS, ONNN, PRU, QCOM, SHO, SVNT, THQI, WFMI

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• Buffett buys Burlington for a cool $44B. Berkshire Hathaway (BRK.A) announced it will acquire the 77.4% of Burlington Northern (BNI) it doesn't already own for $100/share in cash and stock - a 30% premium to Monday's close of $76.07. The transaction is worth $44B, including $10B in outstanding debt. Here's what Warren Buffett had to say: "Our country's future prosperity depends on its having an efficient and well-maintained rail system. Conversely, America must grow and prosper for railroads to do well. Berkshire's $34B investment in BNI is a huge bet on that company, CEO Matt Rose and his team, and the railroad industry. Most important of all, however, it's an all-in wager on the economic future of the U.S. I love these bets."
• Stocks slide; futures fall. Global stock markets painted a gloomy picture Tuesday, with bourses in Asia and Europe taking 2%-plus losses as risk appetite took a breather and investors clamored for safe-haven assets, sending the dollar and U.S. Treasurys climbing and futures tumbling (see data below in Today's Markets). "The basis for the correction seems to rest on three legs," Merrill economist Bill O'Neill said. "Worries over prospects for holders of equity in banks; concern that interest-rate hikes are imminent; and paradoxically, that recovery in 2010 will be crippled by a U.S. consumer unwilling or unable to open his or her wallet." Others took the recent downturn as a sign equity prices had gotten ahead of real improvements in the economy.
• Stanley, B&D craft $8.4B merger. Stanley Works (SWK) agreed to buy rival Black & Decker (BDK) for $4.5B in stock, the culmination of a courtship that spanned 27 years and three other attempts. The bid values B&D at about $57.57/share, a 22% premium to Monday's close. "The more we talked, the more we felt like these were two very complementary and unique companies," BDK CEO Nolan Archibald said, adding both CEOs were "totally swayed" by potential synergies of $350M. Stanley shareholders will own about 50.5% of the combined company; B&D shareholders will get 49.5%.
• Lloyds, RBS diverge on aid. Lloyds (LYG) and Royal Bank of Scotland (RBS) unveiled agreements with the U.K. Treasury over their participation in its program to insure toxic assets, and detailed the divestments they will need to make to satisfy EU regulators. Lloyds opted out of the expensive U.K. asset-protection scheme, saying it would raise £21B, including a £13.5B rights issue; the government will maintain its 43% stake in the bank. The move subjects Lloyds to more modest EU demands: Lloyds said it will dispose of "a retail banking business" with a 4.6% market share and about 19% of its mortgage portfolio; sell £180B in noncore assets; and limit acquisitions over the next 3-4 years. RBS will enter the asset-protection scheme to insure £282B of its illiquid loans, with the first £60B in losses borne by RBS. The government will inject another £25.5B into RBS, raising its stake to 84.4%. RBS will sell its RBS retail network in England and Wales and NatWest branches in Scotland; RBS insurance; Global Merchant Services; and its stake in RBS Sempra Commodities. LYG +2.8% premarket. RBS -8%.
• Outflows continue to plague UBS. Shares of UBS (UBS) are -7% premarket after the Swiss bank said it doesn't expect client inflows to recover anytime soon due to its mangled reputation as a result of its tax dispute with the IRS. UBS posted a fourth straight quarterly loss of 564M francs (-$552M), worse than the 207M loss expected by the Street. Total client outflows rose to 36.6B francs ($35.8B), led by a doubling of outflows at its Americas wealth-management division. On a media call, CFO John Cryan cited UBS's "residual reputational issue" along with "some morale issues among advisers" that it needs to face, and said UBS expects "modest outflows from Swiss clients until we return to profit."
• EU sees gradual recovery. The EU lifted its 2010-2011 growth forecast to 0.75% and 1.5% respectively, but cautioned its outlook is "highly uncertain" given that "significant fiscal and monetary policy measures" are supporting the recovery. Predicting government deficits will swell to 7.5% of GDP, the Commission said a "protracted period of fiscal consolidation will have to follow at some stage to put public debt back on a sustainable footing."
• RBA hikes rates again. Australia's central bank, the first G-20 member to break from super-loose monetary policy, raised interest rates for the second time in two months - to 3.5% - amid a rapidly improving economic outlook. The bank hinted it may not boost rates again in December, saying the rises in October and November would work to temper inflation and ensure a sustainable upswing in the economy, which sent the Aussie dollar (ETF: EWA) lower. The central bank has never hiked rates three months in a row.
• CRE breaks death spiral. Prices of investment-grade commercial real estate rose 4.4% in Q3, according to the MIT CRE's transaction-based index, possibly signaling an end to the sector's year-long downward spiral. "One quarter does not a trend make and we are still well below normal trading volume," David Geltner, director of research at MIT/CRE, said. "Nevertheless, this is the strongest sign of a bottom that we've had in two years." The positive news comes in stark contrast to gloomy remarks from the Fed's John Greenlee, who said Monday (.pdf) that regional banks building up "unprecedented concentrations of CRE loans" will suffer the impact of worsening conditions in real estate markets, and warned, "Poor loan quality, subpar earnings, and uncertainty about future conditions raise questions about capital adequacy for some institutions."
• Hat trick of upside surprises. U.S. manufacturing activity hit its highest level in 3.5 years and pending home sales contracts unexpectedly surged, reducing fears the economy's budding recovery would falter. ISM's manufacturing index climbed 3.1 points to 55.7 (vs. 53.3 consensus) as companies began rebuilding inventories. "Overall, it appears that inventories are balanced and that manufacturing is in a sustainable recovery mode," ISM said. Pending home sales rose for the eighth straight month, the longest streak on record, with NRA's index gaining 6.1% (vs. +0.7% consensus) to 110.1. The index is now at its highest since Dec. 2006. And construction spending (.pdf) rose 0.8% (vs. -0.3% consensus) to an annual $940B, though the gain was offset by a large downward revision to August's number.
• Pensions bulge while market caps shrink. Pensions rose an average of 19% for top executives in 2008, even as their companies' stock prices fell by 37% amid a global downturn, according to an analysis of SEC filings. The growth was largely due to arcane pension formulas that have received little scrutiny.

Earnings: Tue. Before Open

• Alpha Natural Resources (ANR): Q3 EPS of $0.47 beats by $0.09. Revenue of $729M (+5.9%) in-line. Shares -0.9% premarket. (PR)
• American Tower (AMT): Q3 EPS of $0.17 in-line. Revenue of $444M (+8.5%) vs. $430M. (PR)
• AmerisourceBergen (ABC): FQ4 EPS of $0.44 beats by $0.04. Revenue of $18.27B (+9.7%) vs. $18.06B. Shares +5.5% premarket. (PR)
• Archer Daniels Midland (ADM): FQ1 EPS of $0.77 beats by $0.20. Revenue of $14.9B (-29.5%) vs. $17.9B. Shares +0.1% premarket. (PR)
• Cameron International (CAM): Q3 EPS of $0.58 beats by $0.05. Revenue of $1.23B (-18.1%) in-line. Shares -0.3% premarket. (PR)
• Cognizant Technology Solutions (CTSH): Q3 EPS of $0.45 beats by $0.04. Revenue of $853M (+16.2%) vs. $806M. Sees Q4 EPS of $0.45 vs. $0.42 and revenue of at least $880M vs. $830M. Shares +6.9% premarket. (PR)
• Emerson Electric Company (EMR): FQ4 EPS of $0.67 beats by $0.07. Revenue of $5.32B (-20.5%) in-line. Sees 2010 revenue of $19.45-19.87B vs. $20.21B. "We are well positioned for economic recovery, but the shape and speed of the recovery remains unknown and we expect weakness to continue in the near-term." Shares -1% premarket. (PR)
• Expeditors International of Washington (EXPD): Q3 EPS of $0.27 misses by $0.02. Revenue of $1.04B (-33.7%) in-line. "There certainly were significant challenges during the latter part of this quarter as both air and ocean carriers imposed capacity reductions in order to implement very aggressive price increases. While we wouldn't call it 'The Perfect Freight Storm,' the rapidity of these carrier moves created a pricing environment that resulted in our experiencing single digit airfreight yields out of Asia during the first several weeks of September. Ocean yields were also significantly impacted." (PR)
• Frontier Communications (FTR): Q3 EPS of $0.17 beats by $0.02. Revenue of $527B (-5.6%) in-line. Shares -0.3% premarket. (PR)
• Gaylord Entertainment (GET): Q3 EPS of -$0.32 misses by $0.21. Revenue of $199M (-12.2%) vs. $202M. (PR)
• IntercontinentalExchange (ICE): Q3 EPS of $1.18 beats by $0.03. Revenue of $256M (+27.3%) in-line. Shares +0.2% premarket. (PR)
• Marathon Oil (MRO): Q3 EPS of $0.61 beats by $0.04. Revenue of $14.48B (-37.9%) vs. $13.7B. Shares +1.3% premarket. (PR)
• Marvel Entertainment (MVL): Q3 EPS of $0.26 beats by $0.02. Revenue of $106M (-42.1%) vs. $92.5M. Disney (DIS) is due to acquire Marvel by year-end. (PR)
• MasterCard (MA): Q3 EPS of $3.48 beats by $0.54. Revenue of $1.36B (+1.9%) in-line. Gross dollar volume +0.3%. Purchase volume +0.4%. Shares +3.3% premarket. (PR)
• Medco Health Solutions (MHS): Q3 EPS of $0.75 beats by $0.03. Revenue of $14.79B (+17.8%) in-line. Shares +2.5% premarket. (PR)
• Northgate Minerals (NXG): Q3 EPS of $0.03 misses by $0.01. Revenue of $120M. (PR)
• Oshkosh Truck (OSK): FQ4 EPS of $0.27 beats by $0.11. Revenue of $1.49B (-19.8%) vs. $1.4B. "We expect to be solidly profitable in fiscal 2010, led by significant revenue growth in our defense business, which should more than offset anticipated low demand at our construction-related businesses." Shares +3.8% premarket. (PR)
• Petroquest Energy (PQ): Q3 EPS of $0.07 misses by $0.06. Revenue of $50.3M (-35.8%) vs. $52.2M. Shares -6.5% premarket. (PR)
• Polo Ralph Lauren (RL): FQ2 EPS of $1.75 beats by $0.44. Revenue of $1.37B (-3.8%) vs. $1.31B. "We are raising our sales expectations for the remainder of the year, but we continue to be cautious with our outlook and are planning accordingly." Shares +2.7% premarket. (PR)
• Rockwell Collins (COL): FQ4 EPS of $0.84 misses by $0.03. Revenue of $1.19B (-7%) in-line. Shares -2.7% premarket. (PR)
• Royal Caribbean Cruises (RCL): Q3 EPS of $1.07 beats by $0.07. Revenue of $1.8B (-14.5%) in-line. Sees "a slight loss" in Q4 vs. consensus of +$0.04. "Like many other travel companies, we saw more strength than we expected during our peak season but have been experiencing more pricing pressure on some of our traditionally softer fall season sailings." Shares -3.2% premarket. (PR)
• St. Joe Company (JOE): Q3 EPS of -$0.08 misses by $0.02. Revenue of $43.2M (+30.1%) vs. $28.9M. (PR)
• Teva Pharmaceutical Industries (TEVA): Q3 EPS of $0.89 beats by $0.01. Revenue of $3.55B (-7.6%) vs. $3.63B. Shares -2% premarket. (PR)
• Viacom (VIA): Q3 EPS of $0.69 beats by $0.12. Revenue of $3.32B (-2.7%) in-line. Shares +0.7% premarket. (PR)
• Vornado (VNO): Q3 FFO of $1.25 beats by $0.08. Revenue of $671M (-0.7%) vs. $637M. Shares -0.5% premarket. (PR)

Earnings: Mon. After Close

• Anadarko (APC): Q3 EPS ex-items of $0.40 may not compare to estimate of -$0.33. Gains that may affect comparability, including reversed accrual and unrealized derivatives loss, of $0.51/share. Revenue of $2.7B (-55%) vs. $2B. Shares +0.7% AH. (PR)
• Avis Budget Group (CAR): Q3 EPS of $0.54 misses by $0.01. Revenue of $1.5B (-14%) vs. $1.6B. Shares +6.5% AH. (PR)
• Axis Capital (AXS): Q3 EPS of $1.05 beats by $0.33. Revenue of $452M (-29%) vs. $581M. (PR)
• Chesapeake Energy (CHK): Q3 EPS of $0.70 beats by $0.05. Revenue of $1.8B (-76%) vs. $2B. Shares -1.1% AH. (PR)
• Forest Oil (FST): Q3 EPS of $0.48 misses by $0.04. Revenue of $177M (-50%) vs. $252M. Shares -1.8% AH. (PR)
• Hecla Mining (HL): Q3 EPS of $0.09 beats by $0.09. Revenue of $95.2M (+39%) vs. $68.7M. Shares +2.4% premarket. (PR)
• Kinross Gold (KGC): Q3 EPS of $0.00 misses by $0.12. Revenue of $582M (+16%) vs. $578M. Shares +0.4% AH. (PR)
• MannKind (MNKD): Q3 EPS of -$0.42 beats by $0.06, on no revenues. "While we continue to be fully engaged in the task of navigating our NDA through the FDA review process, we are continuing to run additional studies of AFRESA." Shares +4.5% AH. (PR)
• Republic Services (RSG): Q3 EPS of $0.32 misses by $0.04. Revenue of $2.07B (+149%) in-line. Sees full-year EPS of $1.46-1.48 vs. $1.46. Shares -0.2% AH. (PR)
• Principal Financial Group (PFG): Q3 EPS of $0.74 beats by $0.09. Revenue of $2.3B (-9%) vs. $2.5B. Shares +2.4% AH. (PR)
• St. Mary Land (SM): Q3 EPS of $0.23 beats by $0.03. Revenue of $186M (-43%) vs. $187M. (PR)

Today's Markets

China was the lone gainer on an otherwise dismal Tuesday in Asia. Europe shares are getting pummeled. Stock futures are under severe pressure. Treasurys and the dollar are up strongly.

• Asia: Nikkei -2.3% to 9803. Hang Seng -1.8% to 21240. Shanghai +1.2% to 3114. BSE -3.1% to 15405.
• Europe at midday: FTSE -2.2% to 4993. CAC -2.2% to 3560. DAX -1.8% to 5335.
• Futures: Dow -1% to 9637. S&P -1.15% to 1027. Nasdaq -1%. Dec. crude -1.4% to $77.06. Gold +0.4% to $1058.20. Dec. 30-year Tsy +0.42% to 120-10. 10-year +0.26%. 5-year +0.18%. 2-year +0.06%. Euro -0.8%. Yen +0.3%. Pound -0.7%.

Tuesday's Calendar

• 7:45 ICSC Retail Store Sales
  8:55 Redbook Chain Store Sales
  9:30 Markup: Investor Protection Act
  10:00 Factory Orders
  10:00 Results of $25B, 70-Day TAF Auction
  10:00 Peter Orszag: Rescue, Recovery, and Reining in the Deficit
  12:00 PM FOMC begins two-day meeting
  12:00 PM Oct. Auto Sales
  5:00 PM ABC Consumer Confidence Index
• Notable premarket earnings: ABC, ACOR, ADM, AMT, ANR, CAM, COL, CTSH, EMR, EXPD, FTR, GET, HCP, HNT, ICE, JOE, JRCC, LPX, MA, MHS, MRO, MVL, NXG, OSK, PER, PKD, PQ, RCL, RDC, RL, SNH, TE, TEVA, THC, TLM, VIA, VNO
• Notable postmarket earnings: ACAS, ANH, AUY, CBL, CCI, CNW, DISCA, DRIV, EXM, HIG, KFT, ONXX, PXD, STEC, UNM, VVUS, XCO

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• CIT makes it official. CIT Group (CIT) filed for bankruptcy protection Sunday with broad support from its debtholders, but taxpayers will lose the $2.3B invested in CIT, marking the first definitive loss in the government's rescue of the financial system. Nearly 90% of CIT's bondholders voted in favor of the prepackaged bankruptcy, which CIT says will enable it to reduce total debt by $10B, significantly reduce its liquidity needs over the next three years, enhance its capital ratios and accelerate its return to profitability. Bondholders will receive about $0.70 on the dollar, a number that could have fallen as low as $0.06 had CIT entered a freefall bankruptcy. With $71B in assets and $65B in liabilities, CIT's bankruptcy ranks among the largest in corporate history. (CIT's bankruptcy filing)
• Goldman wants Fannie's credits. Goldman Sachs (GS) is in talks to buy up to $1B in tax credits from Fannie Mae (FNM) for an undisclosed amount. But the government - which controls Fannie - is reluctant to approve a deal that would allow Goldman to reduce its tax bill "given the animus held by many lawmakers toward big Wall Street firms in general, and Goldman in particular." Fannie and its rival Freddie Mac (FRE) loaded up with billions of dollars in the credits - which were created to spur investment in low-income housing - during the boom years, but now have no use for them.
• Comcast/GE near deal. Sources say a deal giving Comcast (CMCSA) control of GE's (GE) NBC Universal could be announced as soon as next week after a tentative agreement was reportedly reached Friday. GE would contribute $12B in debt to the new entity, and retain 49% ownership, while Comcast would kick in "several billion dollars" and its stable of cable networks for its 51%. Talks with Vivendi, which owns 20% of NBCU, continue to center on how to arrive at a mutually acceptable valuation - and are currently the main roadblock to a deal.
• Denbury picks up Encore of $4.5B. Denbury Resources (DNR) agreed to acquire Encore Acquisition Co. (EAC) in a transaction worth $4.5B including the assumption of $1.25B in debt. Denbury will pay $50 for each share of EAC - $15 in cash and $35 in stock - a 35% premium to Friday's close. "All of our operations are in the Gulf Coast. It is good to expand to another area, to get a footprint in another location like the Rockies," Denbury CEO Phil Rykhoek said, noting the combo will have one of the largest reserves of crude among independents. Denbury plans to sell off some non-core oil and gas assets next year to pay down its debt. JPMorgan (JPM) will provide Denbury with a new $1.6B line of credit and another $1.25B in bridge financing.
• Lupus drug passes critical 2nd trial. Human Genome Sciences's (HGSI) experimental lupus drug Benlysta was successful in a second large clinical trial, paving the way for approval of the first new treatment for the disease in 50 years. While not as strong as the results from an initial study, the results released Monday should be enough to secure FDA's go-ahead. Hopes for Benlysta have been growing since initial results were released in July, surprising many experts who had been sceptical given the previously poor track record of new lupus treatments. HGSI +41% premarket.
• Pfizer eyes Protalix. Pfizer (PFE), is reportedly considering a JV with Israel's Protalix, and may even buy the company. Protalix developed the ProCellEx system for producing medical proteins through genetically engineering carrot cells; the method is up to 90% cheaper than other methods. Last month Protalix said its experimental drug to treat Gaucher's disease, Uplyso, was successful in a late-stage clinical trial. If approved, it would compete with Genzyme (GENZ) blockbuster Cerezyme.
• The cost of doing better. UAW rank-and-file dealt Ford (F) a fatal blow, overwhelmingly rejecting proposed contract concessions that would bring its costs in line with GM and Chrysler. "This was a tough sell from the beginning," a professor who specializes in labor issues said. "Ford was caught in between doing better and advertising that, and the UAW already giving Ford concessions." Sources say Ford will continue talks with the union to find ways to cut costs, but may look to move some production to lower-cost locations if it can't remain competitive in the U.S.
• Goldman secretly bet on the housing crash. In 2006 and 2007, Goldman Sachs (GS) sold more than $40B in mortgage-backed securities to pension funds, insurance companies, labor unions and foreign financial institutions, while failing to disclose it was betting heavily on a sharp drop in U.S. housing prices. While some say the omission may be a violation of securities laws, Goldman says it had no obligation to disclose its internal hedges.
• Kelly tells BofA 'no thanks.' Bank of New York Mellon (BK) CEO Robert Kelly was reportedly asked to become Bank of America's (BAC) next CEO, but said he's not interested in the position. While BofA's search committee hasn't ruled out hiring an insider - with Gregory Curl and Brian Moynihan the current favorites - the Kelly feelers reflect the board's growing interest in outside candidates.
• Nest egg keeps growing. U.S. companies are holding on to more cash than in any time during the last 40 years, according to a study by the WSJ. In Q2, the 500 largest nonfinancial companies held 9.8% of their assets ($994B) in cash and short-term investments, up from 7.9% ($846B) a year earlier. Firms are hoarding cash to ensure they can cover day-to-day costs after credit markets froze up last year, catching many off guard; their unwillingness to spend during the downturn is another factor increasing the bulge. In the short-term, large cash balances are a curse for the economy, but analysts say a strong cash position will enable companies to transition more quickly into growth mode when reinvestment begins.
• Full speed ahead in Asia. Asian factory activity grew again in October, with China hitting an 18-month high, suggesting the region is on an economically solid footing and will likely lead the global recovery. In comments released along with the official version of China's PMI, a government researcher said China's economy could grow 9.5% in Q4.

Earnings: Mon. Before Open

• Cooper Tire & Rubber (CTB): Q3 EPS of $0.77 beats by $0.11. Revenue of $794M (-1.1%) vs. $715M. (PR)
• Dean Foods (DF): Q3 EPS of $0.34 beats by $0.01. Revenue of $2.77B (-13.2%) vs. $2.94B. (PR)
• Ford (F): Q3 EPS of $0.26 beats by $0.38. Revenue of $30.9B (-2.5%) vs. $28.3B. U.S. market share +2.2% Y/Y. Expects full-year 2009 U.S. industry sales of 10.6M, consistent with previous guidance. Shares +4.3% premarket. (PR)
• Humana (HUM): Q3 EPS of $1.78 beats by $0.01. Revenue of $7.72B (+8%) in-line. (PR)
• Loews (L): Q3 EPS of $1.08 beats by $0.19. Revenue of $3.74B (+25.9%) vs. $3.35B. (PR)

Today's Markets

Asian markets were mostly lower Monday. Europe shares are trading higher at midday, and U.S. futures have moved higher overnight.

• Asia: Nikkei -2.3% to 9803. Hang Seng -0.6% to 21620. Shanghai +2.7% to 3077. BSE -1% to 15896.
• Europe at midday: FTSE +0.6% to 5073. CAC +0.5% to 3626. DAX +0.1% to 5422.
• Futures at 7:00: Dow +0.5% at 9715. S&P +0.6% to 1039. Nasdaq +0.3%. Crude +1.4% to $78.06. Gold +1.4% to $1,054. 30-year Tsy -0.21% to 119-29. 10-year -0.1%. Euro +0.3 vs. dollar. Yen flat. Pound -0.5%.

Monday's Economic Calendar

• 9:00 Supreme Court: Mutual Fund Fees
  10:00 ISM Manufacturing Index
  10:00 Construction Spending
  10:00 Pending Home Sales
  10:00 President’s Economic Recovery Advisory Board: The Economy
  11:30 Hearing: Residential and Commercial Real Estate
  3:00 PM Roundtable: Executive compensation
• Notable pre-market earnings: CLX, CSE, CTB, DF, F, HUM, L, SYY
• Notable post-market earnings: APC, AXS, CAR, CHK, FST, HL, KGC, MNKD, PFG, RSG, SM, VMC

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• Economy surges back to growth. Stocks logged their best one-day gain in three months on Thursday after the U.S. economy returned to growth in Q3. The government's first estimate of GDP showed the economy expanded at an annual rate of 3.5%, the first growth quarter in more than a year, and well ahead of Street estimates of 3%, sending Treasury prices and the dollar lower as traders exited safe havens. As recently as last week economists had called for a 3.3% gain, but they pared their estimates in the past couple days after week durable goods sales data came up short. "The economy has emerged with gusto from the deepest recession since WWII," one economist said. "The short-term prospects for the economy remain good."
• Private sector must lead the way - Geithner. The return to GDP growth is encouraging but the recovery is still fragile, Treasury Secretary Timothy Geithner said at a Q&A session Thursday evening following yesterday's Q3 GDP announcement. "The number today was really encouraging... it was broad and strong and it wasn't just cash-for-clunkers and it wasn't just economic stimulus... but it's important to remember that it's very early," he said. Geithner stressed that a robust recovery would have to be led by the private sector, saying the U.S. can't borrow-and-spend its way to health.
• Repsol strikes again. Repsol (REP), long derided as the oil company with no oil, will today announce a "fairly sizeable" discovery in the Gulf of Mexico's Shenzi field that it says will help reduce U.S. dependence on foreign oil. Today's discovery comes on top of big finds in Brazil and West Africa, and leaves Repsol with the unexpected challenge of developing a sudden surge in oil and gas resources. "We've had some success in exploration," CEO Antonio Brufau said.
• CIT, Goldman adjust $3B credit line. CIT Group (CIT) reached an agreement with Goldman Sachs (GS) to amend a $3B loan facility, ending their dispute over a $1B "make whole" payment CIT would have owed Goldman if it files for bankruptcy. Goldman will reduce the loan size to $2.13B, wiping out the unused portion of the facility, for which CIT will pay Goldman a $285M penalty, and post an additional $250M of collateral. The announcement, made in an 8-K filing, comes two days after CIT raised an additional $4.5B to bolster its restructuring.
• Rio Tinto doubles capex. A confident Rio Tinto (RTP) doubled its planned 2010 capital spend to at least $5B after it cut debt and saw signs of economic recovery. Rio had planned to cut capex to $2.5B - just enough to sustain current mines. "We will continue our program of cost reduction and debt repayments, but our renewed strength enables us to focus on disciplined capital expenditure on premier growth options," CEO Tom Albanese said. Rio, the world's #3 mining group, said it had cut its debt by 42% so far this year to $22.3B. (statement)
• EDF/Constellation deal at risk. State-owned nuclear power operator EDF is facing pressure from the French government to abandon its $4.5B deal to buy 49.9% of Constellation Energy Group's (CEG) nuclear assets and build four reactors with the U.S. company. "For us, the priority strategy for EDF is indeed in Europe, notably the U.K. and Italy, and everything outside Europe is less essential to EDF's expansion," an unnamed government official said.
• Credit crunch continues. Loan defaults by small and medium-sized U.S. businesses rose in September to 0.85% from 0.81% in August, according to risk management firm PayNet, but accounts in moderate (30 days plus) and severe (90 days plus) delinquency decreased to 4.22% (from 4.35%) and 1.4% (from 1.48%) respectively, the lowest since January. PayNet's Small Business Lending Index, which measures the volume of financing, is down 22% from a year ago, a sign lenders remain reluctant to extend credit to small and medium-sized businesses. "It's hard to imagine a robust recovery when you see numbers like this," PayNet founder Bill Phelan said.
• BoJ holds steady. The Bank of Japan left its key rate unchanged at 0.1%, but said it would discontinue its corporate bond and commercial paper purchase program at the end of December, as scheduled - "given that issuing conditions in the CP and corporate bond markets have been improving markedly, and thus the purpose of the purchases to restore market functioning has been achieved." Still, the BoJ stressed that this doesn't signal the beginning of its exit strategy, and extended its special lending facility to provide three-month funds at 0.1% until the end of March. Remarking on the decision to scrap its corporate funding support, Japan's PM Yukio Hatoyama remarked that it's hard to be as optimistic as the BoJ. (statement)
• House Energy and Commerce Committee OKs consumer agency. A second House panel voted Thursday to create a Consumer Financial Protection Agency to oversee mortgages, credit cards and other financial products, with a full House vote expected in November. The House bill falls short of the administration's original proposal, exempting auto dealers, credit, mortgage and title insurers and banks with less than $10B in assets, among others - exceptions some worry will weaken the agency's power.
• Sands gets OK for $2-3B IPO. Sources say Las Vegas Sands (LVS) has received approval from the Hong Kong stock exchange for a $2-3B IPO of its Macau unit. Sands will kick off pre-marketing next week, and launch its roadshow on Nov. 9, with a trading debut set for the end of November. Goldman Sachs (GS), Citigroup (C) and UBS (UBS) are coordinating. LVS rose 12% Thursday after posting a surprise Q3 profit; shares are up another 12% premarket.
• Junk bond rally becomes self-fulfilling. Demand for junk bonds hit record highs last week, with investors pouring another $207M into junk bond funds, pushing YTD inflows to a record $27.8B. Junk bond indexes are up more than 50% YTD, as investors become more comfortable with risk. The growing cash flow enables shaky companies to head off default - adding more fuel to the rally.
• AIG won't sell Japan units. AIG (AIG) says it will not sell its two Japanese insurers, AIG Edison Life Insurance and AIG Star Life Insurance, reversing its decision from a year ago at the height of the crisis. AIG said in a statement it now believes it would improve its corporate value to keep the two Japanese units, which have a very firm financial base and strong sales network.
• Energy IPO runs out of steam. Former Enron unit AEI, which operates power and gas distribution lines in Latin America, canceled its IPO Thursday hours after it slashed the size of the deal by two-thirds in the face of weak demand. The IPO, managed by Goldman Sachs (GS), Credit Suisse (CS), Citigroup (C) and JPMorgan (JPM), is the first U.S.-listed IPO this year to be withdrawn after an attempt to price the offering. AEI faulted market conditions for the withdrawal, but analysts say its debt load, risk exposure and expected payout to its private-equity owners also raised concerns.
• ChiNext soars on debut. China's Nasdaq-lookalike ChiNext stock market launched trading Friday with strong gains. An initial 28 companies listed, and shares gained 46-123% from their IPO prices, in line with expectations. The listees priced their IPOs at a hefty 56x 2008 earnings.

Earnings: Fri. Before Open

• Alcatel-Lucent (ALU): Q3 net loss of €182M vs. -€174.4M consensus. Sales of €3.69B (-9.3%) vs. €3.88B consensus. Says it has achieved 80% of its goal to reduce annual expenses by €750M. Shares -2.9% premarket. (PR)
• Ameren (AEE): Q3 EPS of $1.16 beats by $0.13. Revenue of $1.82B (-11.9%) vs. $2.1B. (PR)
• American Axle & Manufacturing (AXL): Q3 EPS of -$0.18 beats by $0.20. Revenue of $410M (-22.4%) vs. $420M. Shares -1.4% premarket. (PR)
• Aon (AOC): Q3 EPS of $0.65 misses by $0.01. Revenue of $1.81B (-2.1%) in-line. (PR)
• Apartment Investment and Management Company (AIV): Q3 FFO of -$0.35 in-line. Revenue of $319M (-7.3%) vs. $313M. (PR)
• Arch Coal (ACI): Q3 EPS of $0.16 beats by $0.12. Revenue of $615M (-20.1%) vs. $605M. Shares +3.9% premarket. (PR)
• Chevron (CVX): Q3 EPS of $1.72 beats by $0.25. Revenue of $46.63B (-40.9%) vs. $47.84B. "In our downstream operations, we continued to experience weak margins on the sale of gasoline and other refined products. Weak demand and plentiful supply affected all our major markets." Shares +0.7% premarket. (PR)
• CMS Energy (CMS): Q3 EPS of $0.32 misses by $0.02. (PR)
• Constellation Energy Group (CEG): Q3 EPS of $1.23 beats by $0.16. Revenue of $4.03B vs. $4.48B. Sees full-year EPS of $3.25-3.45 vs. consensus of $3.10. (PR)
• Coventry Health Care (CVH): Q3 EPS of $0.68 beats by $0.14. Revenue of $3.44B (+17.7%) in-line. Shares +2.4% premarket. (PR)
• Cummins (CMI): Q3 EPS of $0.56 beats by $0.19. Revenue of $2.53B (-31.5%) in-line. “While we saw improvement in some markets in the third quarter, we expect the economic climate to remain challenging until late 2010 - especially in the U.S. and Europe.” (PR)
• Dominion Resources (D): Q3 EPS of $0.99 beats by $0.09. Revenue of $3.65B (-16.4%) vs. $3.94B. Sees Q4 EPS of $0.55-0.65 vs. $0.67. (PR)
• Duke Energy (DUK): Q3 EPS of $0.40 beats by $0.02. Revenue of $3.4B (-3.2%) vs. $3.8B. "Industrial sales volumes continued to show signs of stabilization." (PR)
• Estee Lauder (EL): FQ1 EPS of $0.85 beats by $0.51. Revenue of $1.83B (-3.7%) in-line. Shares +4.5% premarket. (PR)
• ITT Industries (ITT): Q3 EPS of $1.03 beats by $0.13. Revenue of $2.7B (-6.3%) in-line. (PR)
• NYSE Euronext (NYX): Q3 EPS of $0.53 beats by $0.07. Revenue of $1.05B (-9.6%) in-line. Announces equity investment in its U.S. futures exchange by Citadel, GETCO, Goldman Sachs (GS), Morgan Stanley (MS) and UBS (UBS), with NYX to remain largest shareholder. (PR I, II)
• Penske Auto Group (PAG): Q3 EPS of $0.34 beats by $0.06. Revenue of $2.59B (-12.9%) in-line. Shares (PR)
• Progress Energy (PGN): Q3 EPS of $1.22 beats by $0.03. Revenue of $2.82B (+4.7%) in-line. (PR)
• Regency Centers (REG): Q3 FFO of $0.69 in-line. (PR)
• Simon Property Group (SPG): Q3 FFO of $1.38 beats by $0.06. Revenue of $925M (-1.1%) vs. $892M. Shares -0.4% premarket. (PR)
• Sony (SNE): FQ2 net loss of ¥26.3B ($287.5M) vs. consensus of -¥40.4B. Revenue of ¥1.66T (-20%). Sees full-year net loss of ¥95B, up from a previous forecast of -¥120B and -¥98.9B last year. Sees sales -5.6%, unchanged. (PR)
• Tim Hortons (THI): Q3 EPS of C$0.34 misses by C$0.12. Revenue of C$564M (+10.7%) vs. C$552M. (PR)
• Ultra Petroleum (UPL): Q3 EPS of $0.57 beats by $0.05. Revenue of $155M (-47.8%) vs. $239M. (PR)
• Weyerhaeuser (WY): Q3 EPS of -$0.26 beats by $0.19. Revenue of $1.41B (-33.2%) in-line. (PR)