Easy Al & the Gang meet today to cut rates for the 10th time in less than a year. Fed futures are pointing to a half point cut, but its still too close to call. (I'm betting a quarter here and again in December).

Regardless of what they do, have a game plan in place -- quarter point will likely send stocks lower as the jaw boners will be disappointed. Half point could spark a head fake rally, followed by profit taking. Best Strategy? "Buy the rumor, sell the news."

Yield formula equities
The Fed is not the only way rates come down. By dropping the 30 year bond, the Treasury department also pushed down long rates -- making equities more attractive by a common stock yeild comparison model. (Used by Yardeni, A.J. Cohen and Big Al)

"The huge rally [the 10-year] has experienced in the past couple of days has certainly impacted valuation," according to Thomas Van Leuven, a strategist at J.P. Morgan. "If the 10-year becomes the unrivaled long Treasury, there would be a step-up in demand for it," resulting in still higher prices and yet lower yields.

That, in turn, would suggest equities are more attractive: Using a target of 4.50% for the 10-year yield, J.P. Morgan has estimated 1100 as fair value for the S&P 500 for year-end 2002. But a 10-year yield of 4.25% brings the fair value for stocks to 1160, he said.

Tech gains boost Tokyo stocks
Tokyo stocks opened higher Tuesday with technology shares leading the way, after optimism for a U.S. interest-rate cut boosted the Nasdaq to its highest close since August.

In early morning trade, the leading Nikkei Average rose 63.66 points, or 0.6 percent, to 10,511.20, while the broader TOPIX advanced 0.6 percent to 1,060.28.

-CSCO The networking giant reported first-quarter pro forma earnings of 4 cents per share vs. Wall Street targets of just 2 cents per share. In early October, CEO John Chambers said he was "very comfortable" with financial estimates of 2 cents a share on revenue of $4.16 billion.

Before you get too excited, fiscal-first quarter earnings fell 77 percent as the declining economy hampered sales. Shares moved higher in after-hours trading Monday night, hitting a high of $18.88.

Chambers acknowledged that the company has little idea of where business is headed over the next six to 12 months, due in part to economic weakness that was exacerbated by the Sept. 11 terrorist attacks.

-BRCM, LSI Cisco's quarter "confirms the worst may be over for the wireless communication chip vendors," ABN-Amro says. That's good news for Broadcom (BRCM) and LSI Logic (LSI), the firm says, because they "have a higher exposure to enterprise networking market as opposed to the service provider market." ABN-Amro also raises its rating on Cisco to buy from add "as market conditions are stable with early signs of growth ahead." (Dow Jones) -NT More good news for the networking sector: Nortel received a four-year, $1.1 billion supply and services agreement from Sprint to transform Sprint's digital circuit-switched network.

One final note on the networking sector: On November 21st, The General Services Administration (GSA) will be accepting industry information that will assist in the development of GOVNET. GOVNET will be the Intranet connecting government entities in the lower 48 states. GOVNET will be used to gather intelligence, a key to the war on terrorism. GOVNET could provide the IT Spending Catalyst. Cisco would be a logical participant. SOURCE: www.StockMktMomentum.com

-MSFT "Key States Want Tighter Rules on Microsoft"

State antitust officials sought new limits on Microsoft, the WSJ reported. At least six of the 18 co-plaintiff U.S. states plan to tell a judge that they can't support the Justice Department pact without further curbs on Microsoft's monopoly power.

Massachusetts became the first state to oppose the antitrust settlement between Microsoft Corp. and the DoJ, as other states considered whether to seek tougher remedies against the world's largest software company.

Several states, notably California, may also decide to press for court-imposed restrictions to prevent Microsoft from perpetuating its Windows monopoly on personal computer operating software. The 18 states that sued Microsoft have until tomorrow to tell U.S. District Judge Colleen Kollar-Kotelly whether they will join the settlement negotiated by the Bush administration.

The judge must hold hearings on proposed stiffer remedies if even one state opposes the settlement. She also will conduct a separate proceeding on whether the agreement is in the public interest. While industry critics say the plan is riddled with loopholes, investors were encouraged by the proposal.

-QCOM tonite; No special edge here -- instead of a coin toss, I'd be out of the way before the close -- stock's in the middle of a range and could break either way)

-BP reported in line earnings yesterday at the high end of its range; Oil shares generally fell on Tuesday in sympathy with a falling Brent crude oil price, off 30 cents at $19.15 per barrel.

-SMH Discussed here yesterday, requires the same "circumspection" as any stock within the sector. It looks a bit extended, as do most of its components. Use the same timing for entry and exits, as well as the same stop losses as you would any stock.

SMH can give an investor diversity -- less risk than any one stock -- but is still subject to the same pullback within an extended market as any equity is.

Crude Oil Falls to 2-Year Low as OPEC Prepares to Trim Output

New York: Crude oil fell to a two-year low, dropping for a fifth straight session, on expectations that OPEC will fail to achieve the production cuts some members have proposed. OPEC this month may reduce its daily quotas by more than 1 million barrels, said Ali Rodriguez, the group's secretary- general. Even so, OPEC last month exceeded its targets by 3.6 percent, a Bloomberg survey showed, and the group's crude oil index is down 33 percent since the terrorist attacks of Sept. 11.

"OPEC has been able to enforce discipline and post tremendous profits the last couple of years, as demand rose,'' said Joe DiPaolo, an economist at ChevronTexaco Corp., the second- biggest U.S. oil company. "They find it hard to hold the reins when demand is stagnant or falls.''

Crude oil for December delivery fell 16 cents to $20.02 a barrel on the New York Mercantile Exchange, the lowest closing price since July 22, 1999. Prices fell to a two-year intraday low of $19.69 on Friday. Oil has dropped 28 percent since Sept. 11.

SOURCE: Bloomberg

AOL mentioned yesterday as one to watch, if it develops into a declining triangle. Counter balancing that is "Harry Potter" -- a potential blockbuster Christmas movie. One should never anticipate Technical formations; Rather, be aware what is potentially forming and have a game plan. That's the reason AOL was mentioned here yesterday.

Technimentals (Kevin Lane)
Favorite Pick: Gilette (G) 30 3/4 up to 33
Add to the AEP short position up to 45

Two to watch: Readrite (RDRT) and Hutchenson Technology (HTCH)

MARKET SHORT-TERM EXTENDED
"Monday the market remained very resilient, gapping up in the morning off the bat and holding that gap all day. It traded in a very narrow kind of flag formation and then broke out mid-day and ran up to the highs for the day."

More importantly, the technicals bore that out. It was 2-1 advance-declines on New York, and about 18-11 on Nasdaq. Up/down volume was very strong on Nasdaq, nearly 7-1 positive, and 3-1 positive on New York.

The market at this point is a bit short-term extended, having moved from 1320 to 1490, 170 points or 15% in just about five days, so we may be due for a pullback shortly. (Source: http://www.thetechtrader.com)

"A good trader has to have three things: a chronic inability to accept things at face value, to feel continuously unsettled and to have humility."
--Michael Steinhardt

LONDON CALLING: Holiday uncertainty for UK retailers
Economists still see OK Christmas, but unknowns loom
By Emily Church, CBS.MarketWatch.com

EXCERPT:
LONDON (CBS.MW) - The UK's largest retailer on Tuesday squashed indications that clothing sales tumbled in October, but Marks & Spencer was unable to offer insight into the far more important holiday season.

The November-December shopping season, as always, is the key for most of the retailers' profits. Every year something seems to threaten the holiday cheer in the viciously competitive industry, and it's usually the margin-busting discounters.

Yet this year's much-awaited spoiler, a recession in the UK, has yet to take form. As a result, there's some possibility that the UK retail sales will emerge in relatively good shape, according to economists.

The holiday season "should be reasonably buoyant," said S&P UK economist Stuart Edwards. "Consumer confidence has fallen, not to the levels it was at the beginning of the 1990s. It may not be the best year ever, but I think it will hold up quite well."

Why the markets survived Sept. 11
Commentary: Action from past crisis saved the day
By Todd E. Petzel

EXCERPT:

WILTON, CONN. (CBS.MW) -- The events of September 11 were horrific on many levels and we are still a long way away from understanding their full impact. But there are a few positives that we observed in our capital markets infrastructure that should make us feel more secure about the future. Our ability to cope with the current situation stems directly from our experiences in 1987, 1993 and 1998.

In October 1987, we watched capital markets on the edge of oblivion. On Black Monday, the 19th the floor of the New York Stock Exchange was overwhelmed by massive sell orders built up over the weekend.

The physical support system didn't fare much better. Disk drives that held orders to be routed to the floor filled up and essentially rejected new orders without notifying the brokers or customers. Peak trading volume was 600 million shares, a record at that time.

But as bad as the 19th was, for many of us the morning of the 20th was scarier. We were living in a world of five-day settlements and huge questions loomed about the solvency of many of the biggest broker dealers. The flood of sell orders continued. The S&P 500 index futures in Chicago halted trading for a significant time because the Chicago Mercantile Exchange thought the NYSE was closed. It wasn't. The floor market makers were simply paralyzed by the magnitude of orders and the resulting imbalances.

--Barry Ritholtz
November 6, 2001

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