Trading for the Masses

Very good trading day today as stock and futures offered up this opportunistic trader a bunch of money making opportunities. We will be back tomorrow as the earnings really start taking off next week. Looking forward to a bump in Volatility.

Calyon’s Golden Child Lays an Egg

A logic Test

The $5 Billion Mulligan

Thin Trading: Fed Fund Futures and Antique Watches

5 Career Saving Tips for New Traders.

Another Month, Another NAR revision

Edgewise

How Housing Predicts Unemployment

The Rent vs Buy Dilemma

Speculation and fundamentals in oil prices

Recessionary Noose is tightening

Confusion leads hedge fund to reveal its shorting of Northern Rock

Filling in Some gaps on Blackberry

When to Short China?

Losing in Prediction markets

Acessing Traders Strengths

Multinational Oil Shares

Volume Volatility where are thee? This trader is pretty worn down from the one way markets we continue to be locked in but the FED is getting its way and controlling the action, although light volumed wouldn’t stir my bullish jones too much if I were all in on the long side. I may not understand the recent action of the market, but I can admit it and stay small and nimble and make my money where I can and not let it get me down. Its all about the money so let’s make some more. Momentum is fleeting as I look around, as it lives in a select few names. Watching and learning here.

S&P futures vs fair value: -4.4. Nasdaq futures vs fair value: -3.2.
A few more earnings reports are out, as Monsanto reports below expectations and lowers guidance , but Costco beats.

GOOG Google tgt raised to $740 from $590 at Merrill (615.18 )

ASEI American Science & Engineering Receives $3.9 Million in Orders for Z Portal and ZBV Screening Systems from U.S. Government

MGM MGM Mirage confirms plan for multi-bln dollar resort complex on 72-acre site in Atlantic City (99.75 ) -Update-
Co confirms the co’s Board of Directors has approved the development of a major resort casino project at Renaissance Pointe in Atlantic City, New Jersey. The new resort will have a budget in the $4.5-$5 bln range, not including value of the land and associated costs.

WWE World Wrestling initiated with a Buy at Roth Capital- tgt $22 (15.42 )
Roth Capital initiates WWE with a Buy and a $22 tgt saying live event attendance has grown in spite of competition from U.F.C and T.N.A, and the P.P.V decline of 2006 appears to be normalizing this year. Firm says D.V.D distribution deal with Genius Products to boost 2H07 consumer products revenues. Firm notes the co is already recording revenues from web video ads and mobile contract with AT&T.

STLY Stanley Furniture announces plan to reduce workforce, consolidate Martinsville-Stanleytown operations (16.68 )
Co announces plans to reduce its workforce and consolidate manufacturing operations by bringing its Martinsville production to Stanleytown and expanding warehouse operations at the Martinsville facility. The action will result in a reduction of about 250 associates over the next two to four months that will include both management and hourly employees at both facilities. The co expects to record a pre-tax restructuring and impairment charge of about $6 mln ($ 4.1 mln after tax), or $.39 per share, about half of which will be non- cash in nature. Most of the earnings impact is expected to occur in the fourth quarter of 2007 and the first quarter of 2008.

Gapping up: CSUN +12.7%, FMT +9.0%, RCH +6.4%, SNTA +5.9%, QXM +5.5%, GOLD +4.1%, SKM +4.0%, COST +3.5%, HOKU +2.9%… Gapping down: KMGB -12.6%, PETM -8.9%, TGB -6.6%, HELE -6.1%, IRBT -5.7%, MON -5.7%, IP -5.4%, VG -5.0%, ESL -4.9%, ACGY -4.7%, CVX -5.6%, VLO -2.6%, SYT -2.7%.

CHS Chico’s FAS: Sept comps not expected to show marked improvement vs. August - Caris (15.03 )
Caris reiterates their Average rating on CHS due to recent merchandising stumbles and a mix shift to lower margined segments, leading to degradation of operating margins and ROIC. Firm expects Sept comps to fall 8%-9%, representing another month of disappointing results. Firm’s investment thesis will be reevaluated with a change to positive comp trends and an inflection point in operating margin and ROIC declines.

WY Weyerhaeuser: NZ’s Carter Holt timber division up for sale, according to report - Reuters reports (75.25 )
Reuters reports New Zealand’s richest man Graeme Hart plans to sell Carter Holt Harvey’s timber products division in an auction that could be worth NZ$2.4 bln ($1.8 bln), the Australian Financial Review reported on Wednesday. The paper, without citing sources, said Australian building materials group Boral, New Zealand’s Fletcher Building and U.S. forestry giant Weyerhaeuser were likely bidders.

Baird raises targets on software stocks; downgrades Cognos
Baird downgraded COGN to Neutral from Outperform, maintaining their $50 tgt based on valuation. The firm says COGN’s stock price has benefited in recent days from takeover speculation following the announced acquisition of Business Objects by SAP (SAP), and now trades just below its recent all-time high. The firm believes software stocks in general have benefited from: 1) the weakness in the U.S. dollar (meaningful revenue outside U.S.), 2) absence of direct exposure to consumer spending, the housing market, or sub-prime lenders, 3) cash-rich balance sheets that remove the need to tap shaky debt markets in near term, 4) an absence of excessive sponsorship (small percentage of Strong Buy ratings), and 5) continued M&A activity. We are raising price targets on Autodesk (ADSK), to $57 from $47, Citrix Systems (CTXS), to $43 from $41, Omniture (OMTR), to $35 from $35, and Salesforce.com (CRM), to $58 from $50.

AMR AMR: American pilots threaten face-off on ‘picket line’ - Bloomberg (25.13 )
Bloomberg reports the co’s pilots set the tone for upcoming contract talks in a letter sent to CEO Gerard Arpey, threatening to face off with the world’s largest carrier “on the picket line.” Allied Pilots Association officers expressed frustration with the carrier’s push to continue joint efforts to cut operating costs and boost productivity while ignoring the union’s concerns. The airline is trying to contain labor costs, its largest expense, as it negotiates new contracts with its three largest unions.

Bond Watch: Morning Workout
The market is getting a bit of run in to the downside before the open. Yesterday’s FOMC minutes deflated enthusiasm for a rate cut in Oct. Now trade is left to pick up the pieces in an otherwise catalyst-free session. The 2-10-yr yield spread is pulling in at 51.0 with the less-dovish policy expectations being seen in curve unwinding. Bond prices in the EuroZone were slammed as investors wade back into risky assets & central bankers overseas hold firm on policy. In Japan, bond prices were hit as recent data suggests the BOJ will now have enough economic goodwill to get back to raising rates. Treasuries have wasted little time getting to the downside this morning as investors are busy jumping asset classes to grab higher returns. Bonds are testing price lows from 2 weeks ago. Sentiment is now thoroughly favoring the downside as Sep’s correction of the summer’s gains kicks back in, in the absence of any meaningful catalyst to derail that trend (credit shake downs, subprimes/hedge fund blow ups or bad data). The buck is seeing a little boost via short covering but that flow is drying up as of this writing. The euro is back up testing the 1.4150 level that kept it pinned down late last week. Spot gold is up at 742.28 (+4.3 while crude oil is near flat at 80.21 (-0.05). Just wholesale inventories (10). The euro is at 1.4145 & the yen is at 117.3950 while the 10-yr -03/32nds yielding 4.661%.

Buyers: Rite Aid (RAD 4.45) 10% Owner Jean Coutu Group bought 1,975,262 shares at $4.61… Langer (GAIT 4.99) Director and 10% Owner bought 100K shares at $4.75… AEP Industries (AEPI 39.80) 10% Owner JMP Capital Partners Master Fund bought 101,400 shares at $39.79… Hawk Corp. (HWK 14.26) 10% Owner Discovery Group bought 10K shares at $14.00… DayStar Technologies (DSTI 4.83) 10% Owner Quercus Trust bought 43,300 shares at $4.97. Sellers: Phillips-Van Heusen (PVH 51.5 Officer sold 15K shares at $54.44… Global Industries (GLBL 26.57) 10% Owner sold 173,192 shares at $26.71…Sykes Enterprises (SYKE 16.92) 10% Owner J. Sykes sold 44,500 shares at $17.04… Guess? (GES 52.62) CEO sold 100K shares at $52.19… Universal Display (PANL 19.39) Director sold 20K shares at $18.22… Bolt Technology (BTJ 42.70) Director sold 15K shares at $41.44… GeoEye (GEOY 25.90) 10% Owner Harbinger Capital Partners Master Fund sold 231,925 shares at $25.81… Mitcham Industries (MIND 19.99) CEO sold 50K shares at $20.01… Gap (GPS 18.9 10% Owners (2) William and John Fisher sold 1,561,070 shares at $18.22… LSB Industries (LXU 24.1 10% Owner Jayhawk Capital Mgmt sold 222,945 shares at $23.20.

CSCO Cisco Systems: Hearing tgt raised to $40 from $37 at tier 1 firm (33.08 )

MON Monsanto misses by $0.01, misses on revs; guides FY08 EPS below consensus (89.52 )
Reports Q4 (Aug) loss of $0.18 per share, excluding non-recurring items, $0.01 worse than the Reuters Estimates consensus of ($0.17); revenues rose 13.2% year/year to $1.57 bln vs the $1.62 bln consensus. Co issues downside guidance for FY08, sees EPS of $2.20-2.40, excluding non-recurring items, vs. $2.50 consensus; Y08 guidance reflects a projected growth rate of 10-20%. Key drivers for the quarter were a strong conclusion to the corn seed and traits season in the US as well as increased corn seed revenues in Argentina and Brazil. Key contributors to the co’s growth included higher worldwide seed and traits revenues, as well as increased sales of Roundup an glyphosate-based herbicides globally. These results were partially lower revenues from the company’s soybean seed and trait business, as farmers reduced the number of acres planted in favor of corn. Results also lowered cotton trait revenues, as the total number of acres planted in Australia and the United States were reduced compared with the prior year.

VMSI Ventana Medical: Roche chief confident of Ventana win - FT (87.94 ) -Update-
FT reports the head of Roche has expressed renewed confidence that he will win his $3 bln hostile bid for the co after claiming hedge funds have already bought out the leading shareholders. Franz Humer, chairman and CEO of the Swiss pharmaceutical group, told the Financial Times that he had “no intention of increasing the price” of the $75-a-share bid for Ventana he announced in June, and remained “very confident” of the success of the offer, which closes on November 1. Ventana has consistently argued that the offer price — which is now below the level at which the co is trading — undervalues the co, and few shareholders have sold to Roche. But Mr Humer stressed that there had been no rival offers for Ventana and “the value can only be realized with Roche”.

DWA Dreamworks Animation: Q3 preview - Stifel (33.76 )
Stifel notes DWA is scheduled to report 3Q07 results on Oct 30th. With strong Shrek the Third box office in foreign territories, the upcoming release of Bee Movie, and impending launch of the Shrek the Third DVD, firm believes this sets the stage for favorable comparisons and positive news flow with this announcement. Firm’s ests for the quarter include EPS of $0.43 vs. $0.10 last year and consensus of $0.47 on rev of $159.6 mln, with results propelled by the theatrical release of Shrek the Third, home entertainment catalog sales, and consumer products and television licensing. Firm is increasing their 2007 EPS est to $2.18 from $2.14.

Boston Fed’s Rosengren says have seen improvement in financial markets over past month, important for banks to provide liquidity during times of distress

IRBT IRobot guides Q3 revs below consensus; sees pre-tax loss in Q3; reaffirms FY07 guidance (19.73 )
Co issues downside guidance for Q3 (Sep), sees Q3 (Sep) revs of $63-64 mln vs. $67.48 mln Reuters Estimates consensus. Co reaffirms guidance for FY07 (Dec), sees FY07 (Dec) revs of $233-243 mln vs. $239.60 mln consensus. “Our financial expectations for 2007 remain unchanged,” said Colin Angle, iRobot chief executive officer. “However, the production ramp up by our new contract manufacturer was slower than our initial targeted projections and consequently, revenue from delayed shipments will be recognized in the fourth quarter, resulting in revenue for the third quarter of between $63 million and $64 million,” he added. “This shift from the third to fourth quarters, coupled with unanticipated litigation expenses associated with our legal actions against a former employee and his company, will result in a pre-tax loss of $1 million to $1.5 million for the third quarter.” (Briefing.com note: Current consensus for Q3 EPS is $0.01.)

LNN Lindsay reports Q4 EPS of $0.32 vs $0.26 in yr ago qtr; co reports revs up 30% yr/yr to $73.5 mln with no estimates (46.08 )

ABT Abbott Labs: The implications of the Endeavor panel for Xience - Wachovia (54.86 )
Wachovia notes that while the spotlight will be on MDT’s Endeavor at the FDA Advisory Committee meeting today, the stakes are also high for ABT because the panel will discuss whether the Endeavor filing contains adequate follow-up data and this could have implications for ABT’s drug-eluting stent, Xience. They believe the panel will likely conclude that Endeavor has adequate follow-up data. Firm thinks that if the FDA moves forward with the 11/29 Xience panel, it may indicate that the agency believes Xience has adequate follow-up data for a positive panel recommendation. They say a delay to the U.S. launch of Xience would have the greatest impact on ABT and BSX (negative for ABT, positive for BSX).

CAG ConAgra pies may be linked to Salmonella - WSJ (25.05 +0.12)
WSJ reports the co voluntarily stopped production yesterday at the Missouri plant that makes its Banquet pot pies after health officials said the pies may be linked to 139 cases of salmonella in 30 states. ConAgra officials believe the co’s pies are safe if they are cooked properly, but the co told consumers not to eat its chicken or turkey pot pies until the govt and co investigations are complete.

EBAY eBay: U.K. fee structure tweaks a possible preview for U.S. sellers - Cantor (39.10 )
Cantor notes EBAY U.K. announced fee changes in its Photography and Toys & Games categories, with lower insertion fees, free gallery, and higher final value fees, from 10/23/07-12/31/07. While potentially a LT positive, firm does not know if this is a narrow test or a preview of things to come in key markets/categories. Nonetheless, firm finds these changes noteworthy for several reasons, given that eBay seems to be: 1) tacitly acknowledging that seller economics may be strained; 2) aligning itself more closely than ever with sellers bringing it in closer line with other venues, and putting more weight to drive conversions; 3) warming to the idea of category-specific pricing, reflecting the wide margin/profit variances that can exist between categories.

VLO Valero Energy guides below consensus for Q3 (72.19 )
Co issues downside guidance for Q3 (Sep), sees EPS of $1.30-1.40, ex items vs. $2.01 Reuters Estimates consensus. The company expects to report lower throughput margins for the third quarter of 2007 as compared to the third quarter of 2006, primarily due to substantially higher feedstock costs resulting from increased premiums for light sweet crude oils and narrower discounts for sour crude oils and other feedstocks. In total, higher feedstock costs are expected to reduce the company’s throughput margins by approximately $700 million in the third quarter versus the same quarter of last year.

Filings: Terremark Worldwide (TMRK) files for a 3.06 mln share common stock offering by selling shareholders… ATP Oil & Gas (ATPG) files for a mixed shelf offering… Entertainment Ppties (EPR) files for a 1.4 mln share common stock secondary offering… iStar Financial (SFI) files for a convertible notes offering (supplement to a prospectus dated Oct 9)… Pricings: Esterline Technologies (ESL 57.7 prices a 3.45 mln share common stock offering at $55/share… Layne Christensen (LAYN 56.77) prices a 2.7 mln share common stock offering at $54.50/share… IPOs: Textainer Group (TGH), a co that leases shipping containers, prices its 9 mln share IPO at $16.50/share, well below the forecast range of $19-$21… Targanta Therapeutics (TARG), a biopharma focused on the development and commercialization of antibiotics for serious infections treated or acquired in hospitals and other institutional settings, prices its 5.75 mln share IPO at $10/share, below the $12-$14 forecast range… Compellent Technologies (CML), a maker of computer storage systems, prices its 6 mln share IPO at $13.50/share, above the forecast range of $10-$12.

MSO Martha Stewart initiated with a Buy at Roth Capital- tgt $20 (13.49 )
Roth Capital initiates MSO with a Buy and sets a $20 tgt, based on climbing magazine ad pages, a Macy’s launch that could have an immediate impact, new leadership at marthastewart.com and overhead shrinking in 2H07 and ‘08.

AA Alcoa: Earnings miss; would buy on any weakness - FBR (39.72 )
Friedman Billings says adjusting for a restructuring charge and the Chalco sale, AA’s adjusted EPS were $0.59, below their est of $0.66 & consensus expectation of $0.65. Regardless of the earnings miss, firm would buy on any weakness, given its balance sheet improvements, expected asset sales at higher multiples than the corporate multiple, and an increased share-buyback program. Firm believes that AA could buy back 17.5% of its shares by YE 2008 with cash on hand and the sale of the packaging business while still keeping its debt/cap ratio below the targeted 35%. Firm continues to believe that AA could be acquired, within six to 12 months, closer to their tgt acquisition price of $49.

DSL Downey Fincl announces that the housing environment will impact Q3; expects operating loss of $0.84/share for the qtr (59.37 )Co announces that it will report 3Q07 financial results on Oct 17, 2007, and, subject to finalization of results, that it expects to incur an operating loss for the qtr of approx $23 mln or $0.84/share on a fully diluted basis. This will reduce net income for the first nine months of 2007 to approx $52 mln or $1.87/share on a fully diluted basis. Q3 results are adversely affected by the continued weakening in the housing market. More specifically, the qtr will include the following pre-tax amounts: An approximate $82 mln provision for credit losses, which will increase the allowance for loan losses to approx $144 mln or 1.22% of loans held for investment. An approximate $9 mln valuation reduction to real estate held for development to reflect declines in the value of single family home lots in which the co is a joint venture partner. Daniel Rosenthal, President and CEO, commented, “… The continued weakening and uncertainty relative to the housing market, coupled with the Q3 disruption in the secondary mortgage markets, unfavorably impacted our borrowers and the value of their loan collateral. This has been particularly true in certain geographic areas such as the greater Sacramento and Stockton areas of Northern California and San Diego County… In response to recent trends and events, we have further tightened our lending guidelines, activated a loan modification group to work with borrowers on a proactive basis, and provided the necessary resources to dispose of homes acquired through foreclosure on a timely basis…” (Briefing note: Consensus for Q3 is EPS of $1.08, which will likely not be considered comparable.)

Mortgage Applications
The weekly MBA mortgage applications index rose 2.4% last week, with purchasing applications up by 2.1% & refis higher by 2.7%. The fixed 30-yr mortgage rate was up at 6.40% while the 15-yr climbed to 6.03% & 1-yr adjustable rate mortgage dipped to 6.15%.

DAI Daimler: Chrysler, UAW talks go past contract expiration - Reuters (103.84 )
Reuters reports Chrysler and the United Auto Workers union continued labor negotiations into Wednesday despite the expiration of the extension of their current contract, a source close to the talks told Reuters. In a letter to UAW local officials, union President Ron Gettelfinger said the indefinite contract extension with the co would end at 11:59 p.m. Tuesday, and Chrysler workers would go on strike unless the “basis for a tentative agreement” was reached by 11 a.m. on Wednesday. Talks at Chrysler’s Auburn Hills, Michigan, headquarters ran until almost 4 a.m. on Tuesday. They resumed later in the day and ran straight through into the early hours of Wednesday.

Credit Suisse believes MLPs are poised to Outperform other high yield instruments
Credit Suisse believes that Master Limited Partnerships provide a compelling valuation proposition for investors relative to other yield investments, including high yield debt, regulated utilities, and REITs. MLPs currently pay a dividend yield of 6.2% vs. high yield debt at 8.5%, regulated utilities at 4.4%, and REITs at 3.8%. They est that the MLPs in their universe will be able to grow distributions through 2010 at a CAGR of 5.1%, which firm believes is in-line with REITs and superior to regulated utilities. Firm says based on their conservative fundamental valuation and not relative valuation as described above, MLPs in their coverage universe still hold a 17% potential upside. They recommend investors focus on EEP, EPD, KMP, MIC, NS, and BWP.

TMA Thornburg Mortg: Management revises loss ests higher - FBR (12.29 )
Friedman Billings notes TMA revised ests on asset sales and related losses that were previously announced in August. TMA now estimates losses related to MBS sales of $1.099 bln, an increase of $236 mln, or about $1.40 per share. These higher losses are primarily related to the liquidation of $5.5 bln of assets by financing counterparties in August for which TMA did not have complete pricing information until late Sept/early Oct. Given mgmt’s revised loss forecast, firm now ests book value (BV) of $10.40, a reduction of approx $1.60 per share from their previous pro forma BV of $12.00. Firm adjusts their tgt to $13 from $14 per share to reflect the lower BV.

TD Ameritrade (AMTD) announces that it recently acquired the business of Market Gear, a provider of professional-grade options trade analysis tools, in order to accelerate enhancements to its options platform. Co says the result is the upcoming “Options 360, a robust, yet easy-to-use offering for traders and investors looking to use options to identify market opportunities and better manage risk.”… Amarin(AMRN) announces that it has initiated a cardiovascular development strategy to capitalize on the known therapeutic benefits of unsaturated fatty acids in cardiovascular disease… O2Micro International (OIIM) was issued 13 claims under United States patent number 7,248,240 for its External Electrode Fluorescent Lamp System Protection architecture… Dynamics Research (DRCO) announces that it was awarded $1.34 mln in task orders and modifications under the Air Force’s Design and Engineering Support Program contract… Covad Communications (DVW) announces that it has signed an agreement with Granite Telecommunications, a reseller of bundled local dial tone and long-distance voice services to Fortune 100 customers… Critical Therapeutics (CRTX) announces the issuance of four new U.S. patents during 2007 that strengthen the co’s intellectual property protecting its two pre-clinical programs, alpha-7 nicotinic acetylcholine receptor and High Mobility Group Box 1… Gasco Energy (GSX) provided an interim operations update on its Riverbend Project in Utah’s Uinta Basin. Estimated cumulative net production for the qtr ended Sep 30, 2007 was 990 million cubic feet equivalent a 4.5% increase over the third qtr of 2006.

YUM YUM! Brands: U.S. business in early stages of turnaround; tgt to $46 - FBR (38.11 )
Friedman Billings believes it appears YUM has more pricing power in China than previously realized and will capitalize on it by taking more price–than historically–in the future to offset commodity and inflation pressures. Overall, firm believes China and YRI divisions look extremely strong, and the U.S division is finally showing signs of a possible rebound. Firm believes a U.S. business recovery could provide a significant second leg of growth for the stock–as, even at its current depressed earnings level, it still contributes approx 47% of EPS in 2007. Firm raises their tgt to $46 from $41

Friedman Billings believes China’s resource development trends helping extend commodity cycle
Friedman Billings expects Chinese metal supply growth to slow down over the coming 12-18 months as current policies are better enforced and new policies further tax high-cost, low-value-added production. Firm says this should add support to the current commodity bull cycle, and this is bullish on a longer-term macro scale for aluminum and zinc in their commodity coverage. Firm says no material supply response has been witnessed to date. However, their own analysis adds further conviction that slowing supply growth should be forthcoming.

RVBD Riverbed Technology: Patent infringement allegation may create buying opportunity - Nollenberger (47.18 )
Nollenberger believes the Quantum (QTM) allegation may create a buying opportunity for RVBD. Firm notes QTM reported after the close yesterday that it has filed a patent infringement lawsuit against RVBD. While they acknowledge that these types of issues can create uncertainty for investors and opportunities for competitors, firm reiterates their Buy rating and $55 tgt for RVBD based on their belief that the resolution of this issue will be immaterial to RVBD’s business. As such, firm encourages investors to use any weakness in RVBD’s stock resulting from this issue over the next few days as an opportunity to buy the shares of a solid co operating in a large market, with excellent growth prospects. Firm notes QTM may also have their sights set on PKTR, FFIV, BCSI, CTXS, JNPR and CSCO.

NKTR Nektar Therapeutics says tumor growth inhibition and pharmacokinetic profile of NKTR-102 in multiple solid tumors to be presented at upcoming AACR-NCI-EORTC (8.57 )Co announces that preclinical data for its proprietary product candidate NKTR-102 will be presented at the upcoming AACR-NCI-EORTC International Conf on Molecular Targets and Therapeutics on October 25, 2007. The presentations will highlight new results from preclinical trials of NKTR-102 in mouse models of colorectal, lung and breast cancers.

AMAT Lehman downgrades semiconductor capital equipment sector stocks (20.66 )
Lehman downgraded AMAT, KLAC and LTXX to Equal-weight from Overweight and lowered AMAT’s tgt to $20 from $25, KLAC to $52 from $65 and LTXX to $4 from $8. The firm also downgraded NVLS to Underweight from Equal-weight and lowered their tgt to $23 from $33. On the semiconductor capital equipment sector, the firm remains concerned about excess memory spending, the commoditization of semiconductors, and potential negative impact of slowdown in worldwide economic growth. While they do believe consensus estimates are too high for 2008, they believe actual expectations priced into stocks are a bit more muted and that outlook for strong free cash flow generation will provide some support for the group. As they expect no visibility to recovery anytime soon, they view stocks largely as range-bound with risk more heavily skewed to the downside.

Upgrades: J.P Morgan upgrades Volvo (VOLV 19.43) to Neutral from Underweight. Downgrades: CIBC downgrades Allot Communications (ALLT 6.74) to Sector Perform from Outperform noting ALLT pre-announced much weaker than expected 3Q07 sales and lowered its ‘07 outlook. Firm says while their ests already reflected low expectations (below guidance), the scope of the miss is well beyond… Morgan Stanley downgrades Georgia Gulf (GGC 12.99) to Underweight from Equal Weight… Suntrust downgrades Western Union (WU 20.91) to Neutral from Buy in advance of 3Q07 results as their confidence in WU’s long term organic rev and profit growth model is waning. Miscellaneous: J.P Morgan initiates Elec For Imaging (EFII 27.55) with a Neutral… J.P Morgan removes Continental Airlines (CAL 37.33) from their Focus List… UBS initiates Air Products (APD 97.97) with a Buy and a $115 tgt… UBS initiates Praxair (PX 84.99) with a Buy and a $94 tgt, also added to strategic stock selection list… UBS initiates Sigma Designs (SIGM 55.52) with a Buy and a $65 tgt… Wachovia resumes coverage of Darden Restaurants (DRI 44.7 with a Market Perform following the co’s recently completed tender offer for RARE Hospitality. The firm says RARE Hospitality acquisition enhances Darden’s portfolio of brands, however, in the near term they are somewhat cautious given the challenging cost environment for consumers.

VMSI Ventana Medical says Histology Journal to publish three studies highlighting benefits of Ventana’s Symphony System (87.94 )Co announces that the results of three studies highlighting the safety, efficiency, and productivity benefits of the Symphony One-Touch H&E slide preparation system will be published in the latest issue of the peer-reviewed journal, The Journal of Histotechnology. These studies, which were conducted in association with the Cleveland Clinic and Midwest Anatomic Pathology Laboratory, will also be presented at the National Society for Histotechnology Symposium/Convention in Oct, 2007. The first study highlighted the value of utilizing the xylene substitute Symphony Clear in conjunction with Symphony, thereby eliminating the risks of xylene exposure to laboratory technicians. Symphony’s ability to replace xylene in the H&E process decreases potential personal risk and harm to laboratory technicians. The second study concluded that Symphony reduces common, everyday inefficiencies in H&E workflow beyond that of any “dip-and-dunk” system. The study identified Symphnony’s ability to establish a process that protects stain quality from everyday variables and dramatically increases laboratory efficiency. In the third study, Symphony was found to mitigate productivity bottlenecks with innovative technologies, reproducible and consistent staining quality, and the elimination of excess sorting throughout the staining process.

BABY Natus Medical to acquire Excel-Tech (16.95 )
BABY and Excel-Tech announce that the cos have entered into a definitive agreement for Natus to acquire XLTEK. XLTEK develops and markets computer-based electro diagnostic systems and disposable supplies used by medical practitioners to aid in the detection, diagnosis, and monitoring of neurologic and sleep disorders. Natus will acquire all of the outstanding common shares of XLTEK at a cash price of C$3.25 per share. “This acquisition affirms our position as the market leader in neurology and brings Natus one-step closer to achieving our stated goal of growing revenue to a $250 million annual run-rate by the end of 2008…”

Downgrades: Piper Jaffray downgrades Target (TGT 65.75) to Market Perform from Outperform… JP Morgan downgrades Tuesday Morning (TUES 8.89) to Neutral from Overweight… Merrill Lynch downgrades Logitech (LOGI 29.19) to Neutral from Buy… Piper Jaffray downgrades Alnylam Pharma (ALNY 36.55) to Market Perform from Outperform… Bear Stearns downgrades General Maritime (GMR 25.67) to Peer Perform from Outperform… BofA downgrades Microchip Technology (MCHP 31.9 to Neutral from Buy… BofA downgrades BEA Systems (BEAS 14.05) to Neutral from Buy… BofA downgrades Genworth Financial (GNW 31.72) to Neutral from Buy… Lehman downgraes Applied Materials (AMAT 20.66), KLA-Tencor (KLAC 54.21), and LTX Corp (LTXX 3.90) to Equal-weight from Overweight… Lehman downgrades Novellus (NVLS 28.00) to Underweight from Equal-weight… BofA assumes AIG (AIG 69.39) and downgrades to Neutral from Buy and lowers their tgt to $74 from $80, as they believe that many are overestimating the impact of Foreign Life on the overall co and the future growth rate is likely to be more in line with insurance peers… Keefe Bruyette downgrades Thronburg Mortgage (TMA 12.29) to Underperform from Market Perform… Friedman Billings downgrades Ametek (AME 45.33) to Market Perform from Outperform with a $46 tgt saying while fundamentals remain strong, current trading levels present limited upside.

Downgrades: JP Morgan upgrades MGI Pharma (MOGN 30.74) to Overweight from Neutral… Lehman upgrades Audiocodes (AUDC 5.97) to Overweight from Equal-weight… Lehman upgrades Carnival (CCL 51.33) to Overweight from Equal-weight… Lehman upgrades Royal Caribbean (RCL 41.35) to Overweight from Equal-weight. Miscellaneous: Baird initiates S.Y. Bancorp (SYBT 28.45) with an Outperform and sets a $33 tgt, as they believe a capital-rich balance sheet and top-tier profitability should translate into sustainable, annual cash dividend increases of 10% and continued stock repurchase activity… Baird initiates Stericycle (SRCL 56.10) with a Neutral and sets a $59 tgt, based on valuation, as they would be more aggressive in the mid-$40s or if earnings catch up with the passing of time, although they view SRCL as an attractive core holding for long-term growth investors… BofA initiates Allstate (ALL 58.84) with a Neutral and sets a $62 tgt… Lehman initiates Satyam Computer Services (SAY 28.09) with an Underweight… Lehman initiates Sirf Tech (SIRF 25.10) with an Overweight… Lehman initiates Trimble Navigation (TRMB 41.97) with an Overweight.

Upgrades: BofA upgrades Everest Reinsurance (RE 113.12) to Buy from Neutral and raises their tgt to $128 from $112, as they now believe stock price appreciation will at least track growth in book value per share for the next 12 months… BofA upgrades PartnerRe (PRE 80.17) to Buy from Neutral and raises their tgt to $89 from $77, as they believe stock price appreciation will at least track growth in book value per share for the next 12 months… Bernstein upgrades Tesoro (TSO 52.00) to Outperform from Market-perform, as refining margins in the West Coast have fallen to trough levels and are set to rebound in their view while the co’s assets are in markets likely to remain tight this spring and which should benefit from a strong seasonal margin rebound. Downgrades: Oppenheimer downgrades Digital River (DRIV 50.19) to Neutral from Buy and sets a $50 tgt, as they don’t expect a significant pick up in earnings growth rates given Symantec pricing pressure and platform investments more than offset a ramp in Microsoft and video game business… Wachovia downgrades Jones Lang LaSalle (JLL 105.3 to Market Perform from Outperform, as they believe deal flow will slow down over the next 6-12 months… Baird downgrades Cognos (COGN 49.06) to Neutral from Outperform and maintains their $50 tgt, based on valuation… Deutsche Bank downgrades Amedisys (AMED 40.13) to Hold from Buy and maintains their $44 tgt, based on valuation… Jefferies downgrades Dynamic Materials (BOOM 53.30) to Hold from Buy and raises their tgt to $58 form $45, based on valuation.

Sensex ends up 371pts at 18,651- The Business Standard
The Business Standard reports that following yesterday’s record-breaking run, the Sensex opened with a bang at 18,473 - up 193 points from the previous close. Unabated buying in capital goods and technology stocks saw the index rally to a fresh all-time intra-day high of 18,704. The Sensex finally ended (provisional) at a record 18,651 - up 371 points.

Asian stocks rise, led by Nintendo, BHP, Samsung Electronics - Bloomberg.com
Bloomberg.com reports Asian stocks rose, led by Nintendo and BHP Billiton, after the Federal Reserve eased concern the U.S., the region’s biggest export market, is heading for a recession… Japan’s Nikkei 225 Stock Average gained 0.1% to 17,177.89, while the broader Topix lost 0.1%, one of three indexes to decline in the region with New Zealand and Singapore. Markets in Taiwan and Pakistan were closed for holidays. Hong Kong’s Hang Seng Index advanced to a new high, led by China Mobile, after Chief Executive Donald Tsang said the government will cut tax rates on corporate profits and salaries.

European bank stocks drop, led by HBOS; Cadbury Schweppes gains - Bloomberg.com
Bloomberg.com reports European bank stocks fell, led by HBOS Plc and Bank of Ireland Plc, after Lehman Brothers Holdings said the companies will be hurt by lower growth in mortgage sales and increased funding costs… National benchmarks rose in nine of 17 western European markets that were open. France’s CAC 40 slid 0.3%, while Germany’s DAX added 0.1%. The U.K.’s FTSE 100 fell 0.4%. The Stoxx 50 and the Euro Stoxx 50, a measure for the euro region, retreated 0.1%.

Miscellaneous: Oppenheimer initiates drugstore.com (DSCM 3.2 with a Buy and sets a $5 tgt, as they believe that accelerating growth in DSCM’s key higher margin Beauty segment should drive Ebitda above consensus estimates… Oppenheimer initiates Shutterfuly (SFLY 34.30) with a Buy and sets a $42 tgt, as they expect revenue and Ebitda growth of 30%-40% over the next 2-3 years driven by the intersection of secular growth in digital photography and increasing adoption of user generated print publishing… Morgan Keegan initiates BPZ Energy (BZP 9.04) with an Outperform, based on cash flow, proved reserves and exploration potential… Morgan Keegan initiates Callon Petroleum (CPE 13.57) with an Outperform, as they believe the market has failed to appreciate the significance of the co’s purchase of Entrada from BP… Morgan Keegan initiates TXCO Resources (TXCO 10.6 with an Outperform, as the co’s significant acreage position offers shareholders significant upside through ongoing development drilling as well as higher impact exploration in the Tar Sands and Pearsall Shale with reserve potential of several hundred million barrels of oil and a Tcf of gas, respectively.

Miscellaneous: BofA initiates Platinum Underwriters Holdings (PTP 37.21) with a Neutral and sets a $42 tgt… BofA initiates Max Capital Group (MXGL 28.6 with a Buy and sets a $33 tgt… BofA initiates The Hanover Insurance Group (THG 45.36) with a Buy and sets a $52 tgt… BofA initiates Travelers Companies (TRV 53.30) with a Buy and sets a $64 tgt… BofA initiates Selective Insurance Group (SIGI 22.89) with a Buy and sets a $28 tgt… BofA initiates Chubb (CB 55.45) with a Buy and sets a $63 tgt… BofA initiates CNA Surety (SUR 19.17) with a Neutral and sets a $21 tgt… BofA initiates XL Capital (XL 81.46) with a Buy and sets a $96 tgt… BofA assumes Aspen Insurance Holdings (AHL 29.69) with a Buy and raises their tgt to $35 from $31… BofA initiates Horace Mann Educators (HMN 21.51) with a Neutral and sets a $23 tgt… BofA assumes RenaissanceRe (RNR 64.49) with a Buy and raises their tgt to $75 from $68… BofA initiates Arch Capital (ACGL 76.65) with a Neutral and sets an $82 tgt… BofA initiates Endurance Specialty Holdings (ENH 41.80) with a Neutral and sets a $45 tgt… BofA assumes Hartford Financial (HIG 97.74) with a Buy and lowers their tgt to $110 from $113… BofA assumes Axis Capital (AXS 39.62) with a Buy and raises their tgt to $46 from $42… BofA initiates Marsh & McLennan (MMC 26.60) with a Neutral and sets a $28 tgt… BofA initiates Safeco (SAF 61.37) with a Neutral and sets a $64 tgt… BofA initiates Progressive (PGR 20.16) with a Neutral and sets a $21 tgt… BofA initiates OneBeacon Insurance (OB 21.34) with a Neutral and sets a $24 tgt.

GSK GlaxoSmithKline and Synta Pharmaceuticals announce development and commercialization collaboration for STA-4783 in oncology (53.60 )Co and Synta Pharmaceuticals (SNTA) announces the execution of a global collaboration agreement for the joint development and commercialization of STA-4783, a first-in-class, small-molecule, oxidative stress inducer that is entering Phase 3 clinical development for the treatment of metastatic melanoma. Under the terms of the agreement, the cos will share responsibility for development and commercialization of STA-4783 in the U.S. and GSK will have exclusive responsibility for development and commercialization of STA-4783 outside the U.S. SNTA will receive an upfront cash payment of $80 mln. SNTA will also be eligible to receive potential milestone payments of up to $135 mln for events leading to approval of STA-4783 in metastatic melanoma, further development and regulatory milestones of up to $450 mln across various indications and up to $300 mln in potential commercial milestone payments based on achieving certain net sales thresholds. SNTA will continue to fund all development for metastatic melanoma in the U.S. and the companies will share responsibility and costs for development of STA-4783 in other indications. Synta and GSK will jointly commercialize STA-4783 in the U.S. with Synta receiving a tiered profit share based on levels of annual net sales. The parties will share development costs outside of the U.S. and Synta will receive double-digit tiered royalties on net sales. In addition, GSK may, subject to SNTA’s agreement, purchase, up to $45 mln of SNTA’s common stock upon the future achievement of specified development and regulatory milestones.

COST Costco beats by $0.08, reports revs in-line; reports September same store sales +6.0% vs +4.7% Briefing.com consensus (63.31 ) Reports Q4 (Aug) earnings of $0.91 per share, excluding non-recurring items, $0.08 better than the Reuters Estimates consensus of $0.83; revenues rose 3.0% year/year to $20.48 bln vs the $20.57 bln consensus. Co announces same store sales increased 5.0% vs +4.7% Briefing.com consensus.

After Hours Summary: AA up 0.2% on earnings; CVX down 2.1% (sees Q3 net income significantly below the record $5.4 bln earned in Q2) Companies moving in after hours trading in reaction to earnings: Trading Up: MPET +5.5%; VSGN +1.8%; AA +0.2%… Trading Up: ANPI +10.9% (announces intent to file 510(k) for its innovative 5-FU Central Venous Catheter based on positive results from pivotal trial); FMT +9.6% (Fremont General: Harbinger Capital Partners reports 9% stake); BLDP +3.7% (Exide Technologies Signs Agreement With Ballard Power Systems for Forklift Truck Power Solution); SLTC +1.1% (Co and Versata Software announce settlement of patent litigation and development of joint marketing relationship); DENN +2.0% (reports Q3 same store sales +1.3%) … Trading Down: ALLT -14.0% (lowers Y07 rev guidance); IP -2.7% (reduces Q3 earnings outlook due to shortfall in land sales); RVBD -2.4% (Co responds to Quantum Corporation); NDN -2.1% (reports Q2 sales above consensus); CVX -2.1% (sees Q3 net income significantly below the record $5.4 bln earned in Q2); JTX -1.6% (promotes Michael Yerington to CEO); SBUX -1.1% (recalls children’s plastic cups due to choking and laceration hazards); QTM -1.0% (files patent infringement lawsuit against Riverbed); SLM -1.0% (J.C. Flowers confirms that their offer to amend the terms of the Sallie Mae transaction was allowed to expire without discussion); SMTL -0.9% (announces it has sold an advanced Raider tool to a customer focused on development of high-efficiency, low cost-per-watt solar devices); PCLN -0.4% (American Airlines signs exclusive opaque participation agreement with Priceline.com).

CVX Chevron sees Q3 net income significantly below the record $5.4 bln earned in Q2 (92.80 +1.22) -Update-
Co says, “The lower projected earnings are mainly the result of a sharp decline in refined-product margins for the downstream business and the impact of nonrecurring items. In Q2, nonrecurring items included a benefit of $680 mln from the co’s sale of its common stock investment in Dynegy. Third quarter results are expected to include an approximate $260 mln gain on the sale of the co’s marketing assets in the Benelux countries. Nonrecurring net charges in Q3 are projected to be ~$700 mln. These charges include asset impairments, environmental remediation provisions, income tax adjustments, asset retirement obligations, and severance provisions. Co also provides an operational update: Worldwide daily oil-equivalent production for the first two months of the third quarter declined about 1% from 2.63 million barrels per day in the second quarter. U.S. crude realizations improved by $8.55 per barrel — in line with the increase in West Texas Intermediate (WTI) and California heavy crude prices. International liquids realizations were higher by $5.35 per barrel, slightly more than the increase in Brent spot prices. U.S. natural gas realizations decreased $0.81 per thousand cubic feet, reflecting similar reductions in bid week pricing.

AA Alcoa misses by $0.02, beats on revs, increases buyback authorization from 10% to 25% of shares outstanding (39.72 +1.42)Reports Q3 (Sep) earnings of $0.64 per share, $0.02 worse than the Reuters Estimates consensus of $0.66; revenues fell 3.2% year/year to $7.39 bln vs the $7.28 bln consensus. Co also increases share buyback authorization from 10% to 25% of shares outstanding.

Fed Yellen: Growth to slow, return to trend in “year or so” - DJ
Fed’s Yellen saw signs of what might be called “bubbles” in bond and credit markets before crisis - Reuters
Fed’s Yellen says reassessment of risk not an unhealthy base for long-term growth.

MMM 3M CEO announces growth plan on track (95.69 +0.2 -Update-
Co notes at a meeting of institutional investors and investment analysts in St. Paul Tuesday, MMM CEO George Buckley outlined how the co is executing its four-prong growth strategy - advancing its core businesses, growing through complementary acquisitions, building new business in adjacent markets and continuing to drive strong international expansion. CEO says, “We have increased R&D investment by 11% over 2006 and picked up the pace of new product introductions. In addition, we have made 15 complementary acquisitions this year.” CEO said the primary focus remains rebuilding and expanding MMM’s core, especially what he termed MMM’s “enduring franchises” such as adhesives, abrasives, tapes and films. Co also notes that in addition, co outlined plans to accelerate international growth through leveraging local and regional brands, and streamline the company’s supply chains by locating manufacturing operations closer to customers in emerging markets.

Poole says dollar impact on manufactures ‘relatively small’
Poole Says Weaker Dollar Not Fueling Major Inflation Concern
Fed’s Poole says ‘moderate growth is the best forecast’
Fed’s Poole says U.S inflation expectations are ‘well anchored’
Poole calls recent U.S dollar forecasts ‘idle speculation’, says currency forecasting models ‘aren’t worth a damn’
Fed’s Poole says dollar’s drop is ’something that’s not explicable’

Fed policy minutes weaken rate cut hopes
The minutes from the FOMC’s Sept 18 policy committee meeting show that the Fed wanted to act quickly to restore confidence and liquidity to the financial mkts. Hence the large 50 basis point reduction in the fed funds rate target to 4.75% announced that day. More important is what is not in the minutes. There is no indication that the Fed believes it is time to start a steady rate reduction cycle in order to bring economic growth back to the long-term trend of 3%. In fact, the Fed lowered their economic forecasts for 2008 and said that growth would not firm to above its potential (3% real growth) until 2009. Apparently, the Fed does not intend to lower rates right away to get economic growth going as soon as possible… The minutes do not, in our opinion, reflect a change in sentiment on the part of committee members that it is now time to start a cycle of policy easing. There are no statements that support that view. Instead, the desire for the rate cut was rooted firmly in the risks that the liquidity problems on Wall Street would have an adverse effect on the economy. As that risk fades, so does the likelihood of further rate cuts… The Fed may indeed cut rates further if economic growth weakens, but that does not appear to be happening. In fact, since the Sept 18 rate cut, the weak Aug employment data was revised higher and the Sept data showed a decent gain. Consumer spending has remained on track. Housing is weak, but it has been for almost two years now. The minutes suggest that the financial mkt’s hopes for further rate cuts are overly optimistic. Rate cuts may happen, but they are far from certain.

Inflation: recognized that incoming data on core inflation continued to be favorable, and they generally were a little more confident that the decline in inflation earlier this year would be sustained…. Higher benefit costs, rising unit labor costs more generally, reduced markups, and levels of resource utilization both in the United States and abroad that remained relatively high were all cited as factors that could contribute to inflationary pressures. Inflation risks could be heightened if the dollar were to continue to depreciate significantly… Main Reason Behind the Decision: Members emphasized that because of the recent sharp change in credit market conditions, the incoming data in many cases were of limited value in assessing the likely evolution of economic activity and prices, on which the Committee’s policy decision must be based. Members judged that a lowering of the target funds rate was appropriate to help offset the effects of tighter financial conditions on the economic outlook. Without such policy action, members saw a risk that tightening credit conditions and an intensifying housing correction would lead to significant broader weakness in output and employment. Similarly, the impaired functioning of financial markets might persist for some time or possibly worsen, with negative implications for economic activity. In order to help forestall some of the adverse effects on the economy that might otherwise arise, all members agreed that a rate cut of 50 basis points at this meeting was the most prudent course of action.

Although financial markets were expected to stabilize over time, participants judged that credit markets were likely to restrain economic growth in the period ahead… Given existing commitments to customers and the increased resistance of investors to purchasing some securitized products, banks might need to take a large volume of assets onto their balance sheets over coming weeks, including leveraged loans, asset-backed commercial paper, and some types of mortgages. Banks’ concerns about the implications of rapid growth in their balance sheets for their capital ratios and for their liquidity, as well as the recent deterioration in various term funding markets, might well lead banks to tighten the availability of credit to households and firms… Meeting participants also noted that financial market conditions, while seeming to have improved somewhat in the most recent days, were still fragile and that further adverse credit market developments could well increase the downside risks to the economy… recent data suggested greater weakness in the housing market than had previously been expected… Although employment probably was not as weak as the most recent monthly data had suggested, trend growth in jobs had fallen off even prior to the recent financial market strains, and participants judged that some further slowing of employment growth was likely… to date, initial claims for unemployment insurance did not indicate a substantial and widespread weakening in labor demand, and labor markets across the country generally remained fairly tight… Participants thought that the most likely prospect was for consumer expenditures to continue to expand at a moderate pace on average over coming quarters, supported by growth in employment and income… Participants reported that recent financial market developments generally appeared to have had limited effects to date on business capital spending plans and expected that business investment was likely to remain healthy in coming quarters

Moreover, lower housing wealth, slower gains in employment and income, and reduced confidence seemed likely to restrain consumer spending in 2008. Despite the recent difficulties in some corporate credit markets, financial conditions confronting most nonfinancial businesses did not appear to have tightened appreciably to date. But going forward, the staff anticipated that businesses would scale back their capital spending a touch in response to financing conditions that were likely to become a little less accommodative and to more modest gains in sales… With credit markets expected to largely recover over coming quarters, growth of real GDP was projected to firm in 2009 to a pace a bit above the rate of growth of its potential… Incoming data on consumer price inflation that were slightly to the low side of the previous forecast, in combination with the easing of pressures on resource utilization in the current forecast, led the staff to trim slightly its forecast for core PCE inflation.

Real disposable income rose further in July, as wages and salaries posted a strong gain and energy prices came down. However, household wealth likely was providing a diminishing impetus to the pace of spending, reflecting recent declines in stock market wealth and an apparent further deceleration in house prices… housing sector remained exceptionally weak… Orders and shipments of capital goods posted a strong gain early in the third quarter… Most of the readings available on economic developments after August 9, when financial turmoil intensified, were measures of confidence. They dropped, on average, but otherwise were consistent with the indicators reported for July… China: scant data for August received thus far provided little indication that the turmoil in financial markets had a significant negative impact on real economic activity in emerging-market economies… the median expectation of longer-term inflation in early September remained in the range seen over the past couple of years… Credit turmoil: Pressures eased a bit in mid-September, but short-term financial markets remained strained… the staff marked down the fourth-quarter forecast, reflecting a judgment that the recent financial turbulence would impose restraint on economic activity in coming months, particularly in the housing sector. The staff also trimmed its forecast of real GDP growth in 2008 and anticipated a modest increase in unemployment.