Contributors

Some of the most popular equity plays among long-term investors are those that pay large dividends. In certain sectors businesses are structured to pay out a significant portion of their available cash to shareholders. It's no surprise that these usual suspects tend to remain on top of tickerspy's top-yielding Index rankings.

Yield, however, isn't the only factor in the equation. As was observed during the economic downturn, stocks with normally paltry dividends ended up boasting impressive yields merely because the share price got crushed. Meanwhile, others suspended their dividend payments to conserve cash. Still, there are a few sectors where investors can bet on consistently high dividend payments, and identifying them just takes a little reading between the lines.

Components of the MLPs Index pay an average 7.9% dividend – higher than any other sector. These largely energy-related master limited partnerships benefit from a structure that allows them to pay out the majority of cash flows to shareholders in lieu of company-level taxes.

For holders of Enterprise Products Partners (NYSE: EPD), Kinder Morgan Energy Partners (NYSE: KMP), and Plains All American Pipeline (NYSE: PAA), the MLP tax structure translates into dividend yields of over 7%.

The Tobacco and Tobacco Products Stocks Index is another place to find
high-yielding equity plays. The tobacco business is fairly straightforward, but these companies also have an interest in dishing out big dividends to shareholders – sitting on a mountain of cash makes easy pickings for lawyers and anti-smoking legislators.

Vector Group (NYSE: VGR), which markets tobacco products through subsidiaries Liggett Group and Vector Tobacco, pays its shareholders a whopping 10.9% dividend. Multi-billion dollar giants Phillip Morris (NYSE: PM) and Altria Group (NYSE: MO) pay 4.8% and 7.3% dividends respectively.

Perhaps the safest equity plays around aren't really equities at all. Bond ETFs trade like stocks, but perform like fixed income. A look at the sector's performance chart compared to the S&P 500 shows that the extremely low-volatility ETFs were largely immune to the economic downturn relative to traditional equities.

While traditional fixed income investors earn interest payments, bond ETFs distribute interest via dividends – the current average yield for the sector is 3.6%.

Whether managing an IRA, hedging against a downside risk, or just looking to add some dividend plays to a diversified portfolio, the sectors above some of the most consistent places to earn high yields.
For a full list of the highest yielding equity sectors and a suite of other performance metrics, visit tickerspy.com.

By Owen Vater, tickerspy.com

Good morning. As a rule, I try not to read too terribly much into a “Fed Day” as there is usually a big batch of volatility that may or may not mean much of anything come the dawn of the next day. Maybe, it’s just me. Or maybe there are others that find themselves inclined to simply stand aside and watch the nuttiness from the sidelines on “Fed Days.” But in any event, the volatility after a Fed announcement, while fun to watch, may not be telling as to what to expect in the future.

But if volatility is the name of your game, then yesterday’s “Fed Day” was your kind of day. We got a rally of nearly 150 points out of the gate then a dive after the Fed statement, a quick bounce back up of 90 points to the high of the day, and then a plunge of 125 into the close. And anyone other than those trading on a 15-minute bar chart was left shaking their heads.

The day got started off on the right foot on the back of rallies in Asia and Europe. The World Bank provided a boost to the bulls’ cause by upping their 2010 GDP forecast in China. And the political types were out telling anyone that would listen that the gubernatorial victories by the republicans in New Jersey and Virginia were a big reason for the early rally. There was talk of a mandate lost by the administration and that the idea of a second economic stimulus bill was suddenly out the window.

Traders may have also been breathing a little easier in front of the Fed announcement as it was becoming clear that this Fed was not in the business of taking Wall Street by surprise. Thus, the worry that Bernanke and friends would drop the ball or do something silly seemed to fade as traders covered some shorts.

Everything seemed to be going along swimmingly through the Fed announcement and it looked like the bulls might have another “melt up” on their hands. The Fed had left rates alone and said that (a) the economy was looking a little better, (b) inflation was nonexistent, (c) they would continue with their current quantitative easing programs until the end of the first quarter, and (d) that they had no intentions of raising rates anytime soon.

In short, the Fed statement was little changed from last time and you had to hunt hard to find even single word changes, let alone any new messages or clues about the future. Thus, those traders looking for a sign as to when the Fed would begin to implement their “exit strategy” went home disappointed.

Speaking of disappointment, the financials tanked hard in the last hour or so and took the rest of the market down with it. And while the dollar did rally a smidge during that timeframe, we really can’t blame this move on the greenback. However, we did see a quick spike in interest rates after the Fed meeting as the yield on the 10-year moved up from 3.51 to 3.55 in short order. So, perhaps there were some sell programs tied to move as rising rates is also a bad thing for the dollar carry trade. But we’re going to chalk it up to fun with computers on a Fed Day while everyone else was simply watching from the sidelines.

Turning to this morning, we had a good report from Cisco (CSCO) after the bell, which has helped improve the mood a bit. On the news front, both the BOE and the ECB left interest rates unchanged earlier this morning and we’ve got the nation’s retailers reporting same-store sales comparisons this morning. For example, Target (TGT) just reported a October comps of -0.1%, which was below the StreetAccount estimate for +0.3%

On the economic calendar, we see that Initial Claims for Unemployment for the week ending October 31st were reported at 512K; below the consensus estimate for 522K. The prior week’s numbers were revised higher to 532K from 530K. Continuing claims for Unemployment Insurance for came in at 5.749M; in line with consensus 5.75M.

In addition, Q3 Nonfarm Productivity was reported up 9.5%; well above the consensus of 6.5%. Unit Labor Costs (a measure of wage inflation) fell by -5.2%; more than the consensus estimate of -4.2%. Last quarter’s Nonfarm Productivity was revised to 6.9% from 6.6% and Unit Labor Costs were revised to -6.1% from -5.9%.

Running through the rest of the pre-game indicators, the foreign markets are mixed with Europe fractionally lower. Crude futures are unchanged with the latest quote showing oil trading lower by $0.01 to $80.39. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.55%, while the yield on the 3-month T-Bill is currently at 0.04%. Finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a stronger open. The Dow futures are currently ahead by about 77 points; the S&P’s are up by about 8 points, while the NASDAQ looks to be about 16 points above fair value at the moment.

Earnings After The Bell

Allstate ALL $0.99 $1.01
Cisco Systems CSCO $0.36 $0.31
Corrections Corp CXW $0.33 $0.31
Evergreen Solar ESLR -$0.09 -$0.08
Goldcorp GG $0.19 $0.16
Health Care REIT HCN $0.77 $0.77
J2 Global JCOM $0.43 $0.45
Kimco Realty KIM $0.30 $0.31
Liberty Global LBTYA -$0.45 $0.06
Microchip MCHP $0.24* $0.21
Medivation MDVN -$0.42 -$0.39
Murphy Oil MUR $0.98 $0.99
99 Cents Only NDN $0.14 $0.07
News Corp NWSA $0.22 $0.18
Prudential Financial PRU $1.59 $1.34
Qualcomm QCOM $0.48 $0.52
Sunstone Hotel SHO $0.14 $0.14
Whole Foods WFMI $0.20 $0.18

Earnings Before The Bell

Cardinal Health CAH $0.54 $0.42
Cigna CI $1.13 $1.03
CVS Caremark CVS $0.65 $0.64
Dr. Pepper Snapple DPS $0.54 $0.49
Dynegy DYN -$0.25* $0.03
Holly Corp HOC $0.47 $0.45
Imax IMAX $0.06 $0.01
King Pharmaceuticals KG $0.29 $0.27
Nasdaq OMX Group NDAQ $0.42 $0.42
MetroPCS Communications PCS $0.21* $0.09
Spectra Energy SE $0.30 $0.26
Sara Lee SLE $0.32* $0.15
Scotts Miracle-Gro SMG -$0.23 -$0.33
Teradata TDC $0.38 $0.29
Telephone & Data TDS $0.33 $0.43
Time Warner Cable TWC $0.76 $0.76
Wendy's/Arby's Group WEN $0.06 $0.06

Wall Street Research Summary

Upgrades:
# Palm (PALM) – Barclays
# Brinker Intl (EAT) – Bernstein
# Deutsche Telekom (DT) – Citi
# Medtronic (MDT) – Credit Suisse
# Companhia Vale do Rio Doce (VALE) – Deutsche Bank
# Dominion (D) – Jefferies
# TRW Automotive (TRW) - KeyBanc
# Aqua America (WTR) – Macquarie Research
# ON Semiconductor (ONNN) – Piper Jaffray
# El Paso (EP) – RBC Capital
# Eldorado Gold (EGO) – RBC Capital
# Baker Hughes (BHI) - Weeden
# Allis-Chalmers Energy (ALY) – Wells Fargo

Downgrades:
# Olympic Steel (ZEUS) – Added to Sell list at Goldman
# Molson Coors (TAP) – Goldman Sachs
# FEMSA (FMX) – HSBC
# Terex (TEX) – Morgan Stanley
# Garmin (GRMN) – RBC Capital

Long positions in stocks mentioned: PALM, TAP, CSCO, CVS

* Report includes items that make comparisons to the consensus estimate questionable

Make the decision to have a great day and until next time, “may the bulls be with you!”

David D. Moenning
Founder TopStockPortfolios.com

For more "top stock" portfolios and research, visit www.TopStockPortfolios.com

The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.com and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.

Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

From Notable Calls

Wanted to highlight some comments on STEC Inc (NASDAQ: STEC) following results (stock was down 30% in after hours trading):

- Needham says they remain positive about enterprise SSD opportunity in 2010, but recognize that the EMC inventory overhang clouds the story temporarily. Despite this dynamic, they are comfortable with at least $2 in earnings power for 2010, leaving the stock compelling following the overreaction to 3Q/4Q earnings.

ZeusIOPS revenue improves slightly. ZEUSIOPS revenues were approximately $60.7 million, up from roughly $57 million in the previous quarter but below firm's original estimate for $68 million.

Estimated reserves announced against recent $120 million supply arrangement (who they believe is EMC) for sales & marketing efforts to facilitate sell-through at customer, which indicated it may now carry inventory into 1Q2010.

Adjusting estimates. Revising 4Q estimates to $102 million in revenue and $0.52 in non-GAAP EPS, vs. their prior $105 million and $0.50. For 2009, their forecast becomes $350 million and $1.60, vs. prior $351 million and $1.57.2010 estimates revised to $420 million and $2.00 fro previous $464 million and $2.30.

Nevertheless the downdraft in the stock in the aftermarket presents an opportunity to investors that can see through the inventory noise. Needham sees this opportunity and maintain their Strong Buy, but lower their target to $30 from $46 based on 15x C2010 EPS of $2.00, a conservative multiple given 30-50% EPS growth.

- J.P. Morgan maintains their Overweight rating but lowers target to $42 (prev. $50) saying STEC’s 3Q earnings call did not offer any antidote to keep the bears from roaring. They expect the stock to be down in the near term. The company reported a solid print, but the outlook lacked major upside, which the stock has been built to expect. More important, the sudden cloudiness around its top customer is not a positive development. Excess inventory at EMC and the establishment of a new marketing program stand to fuel investors’ concerns of growing pains or competitive shifts in the making. The company suggested the former, but in any event, firm's view on STEC stands to be bruised in the near term.

Customer concentration exacts a toll on the near term. STEC commented that there is an undisclosed level of excess inventory of its ZeusIOPS SSDs at EMC, which could spill into 2010. JPM expects investors to be disappointed, and the news could raise the specter of competitive risks in the making or EMC customers adopting SSDs at lower rates. All this comes in the face of recent comments out of EMC that its SSD-related business has gained traction.

Outlook lacks upside potential to the Street consensus. STEC shares have been under pressure the past two months. Investors’ expectations have been reduced but still tuned for upside. For the Dec. qtr, STEC’s guidance likely is not enough to prop up the stock, despite the reduced expectations. STEC expects revs of $101-103 million and non-GAAP EPS of $0.51-0.53. The Street consensus had been at $107 million in revs and EPS of $0.52 prior to yesterday’s call.

STEC stands to be in the penalty box. JPM maintains their Overweight rating on STEC. They continue to believe that the enterprise SSD market is a high-growth market and that STEC should be a lead beneficiary. This central part of their thesis stands to be overshadowed in the near term by the EMC set back. STEC’s stock stands to languish pending greater clarity on the EMC and IBM ramps.

Notablecalls: I see at least 2 downgrades (ThinkEquity & Oppenheimer) on STEC this morning so playing the bounce here is not for the faint hearted. Yet, with 50% short interest and with the stock now more than halved from its $40 peak levels, we may witness one.

If one can bring himself or herself to looking past the EMC inventory issue, SSD is still an interesting opportunity in the longer-term. The stock is not expensive here considering $2+ EPS power.

I think the shorts will not be scrambling to cover just yet but some will ring the register, given the huge gains they are sitting on. What I have learned over the years is that shorts have a lot of patience. More than most longs, for that matter.

SSD is a new tech so give it some wiggle room.

Personally, I'm keeping it small buying some around $16 and adding some possibly closer to $15 level. Again, this is NOT for the faint hearted.

For more calls go to http://notablecalls.blogspot.com/

Good morning. The recent wild ride on Wall Street continued yesterday as the Dow’s swing of 181 points intraday definitely kept everyone on their toes. And while the focus in the market had been all about the earnings reports and whether or not Corporate America could deliver some top-line growth, it now appears that the focus has shifted to the charts of the dollar and the banks.

Stocks enjoyed a nice pop out of the gate yesterday on the back of more good economic news out of China, where the PMI grew at the fastest rate in eight years. The bulls then wasted little time in celebrating some good news here at home as the reports from the ISM Manufacturing Index as well as Pending Home Sales and Construction Spending all came in well above expectations. And with the better economic news came some selling in the dollar. Thus, before you could reload the coffee pot, the DJIA was enjoying gains of nearly 150 points and it looked like the bulls had relocated their mojo.

But from there a one-two punch in the financial sector and some issues on the charts created the rollercoaster ride that was Monday’s session. First, there was Citi (C) breaking down below important support and second, there was testimony from Jon Greenlee, warning about banks' potential losses from commercial real-estate loans. (In case the name isn’t familiar, Greenlee is the director of the Fed's Division of Banking Supervision and Regulation.) It will suffice to say that the two caused a problem for both the banks and the market in general.

Among other things, Greenlee said that "Poor loan quality, subpar earnings, and uncertainty about future conditions raise questions about capital adequacy for some institutions." He then added, "The condition of the banking system is far from robust. Two years into a substantial economic downturn, loan quality is poor across many asset classes and, as noted earlier, continues to deteriorate as weakness in housing markets affects the performance of residential mortgages and construction loans."

The renewed worry about the banks triggered a midday reversal, which was highlighted by a swoon of 130 Dow points in less than an hour. The dance to the downside was, of course, accompanied by a corresponding rise in the dollar as these two asset classes remain inversely joined at the hip at the present time. And speaking of the dollar, the joke making the rounds is that like it or not, these days everyone is now a currency trader.

The bulls will tell you that the afternoon rebound was an encouraging sign. After all, the bears had their chance to really have a big inning, but couldn’t get it done. Yet on the other side of the aisle, our friends in fur point to the fact that the S&P and NASDAQ couldn’t move above their respective 50-day moving averages, which is a precursor of bad things to come.

Turning to this morning, we’ve got lots of inputs but nothing on the economic front. First, Australia’s central bank raised rates again. And while the move was not unexpected, it does heighten the expectations for the Fed to start talking about an exit strategy. Next, there are “issues” across the pond with Lloyds Banking Group and Royal Bank of Scotland in terms of needing government assistance as well earnings problems from UBS (UBS).

But, we’ve got some good news as well as Warren Buffett’s Berkshire Hathaway has decided to purchase Burlington Northern (BNI) for $100, which is a 31.5% premium from last night’s closing price.

Running through the rest of the pre-game indicators, the foreign markets are mostly lower with Europe having a bad day. Crude futures are moving down with the latest quote showing oil trading off by $0.83 to $77.30. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.41%, while the yield on the 3-month T-Bill is currently at 0.05%. And in looking at currencies, it appears the dollar is stronger at the moment – and we all know what that means. Finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a lower open. The Dow futures are currently off by about 60 points; the S&P’s are down by about 7 points, while the NASDAQ looks to be about 11 points below fair value at the moment.

Yesterday's Earnings After The Bell


Anadarko Petroleum APC -$0.11 -$0.34
Avis Budget Group CAR $0.65 $0.44
Chesapeake Energy CHK $0.70 $0.65
Kinross Gold KGC $0.00 $0.12
Kindred Healthcare KND $0.14 $0.03
Principal Financial Group PFG $0.57 $0.65
Republic Services RPG $0.39 $0.37
Hanover Insurance THG $0.89 $0.98

Earnings Before The Bell

AmerisourceBergen ABC $0.44 $0.40
Archer-Daniels ADM $0.77 $0.57
American Tower AMT $0.17 $0.17
Cameron Intl CAM $0.58 $0.52
Rockwell Collins COL $0.93 $0.87
Cognizant Technology CTSH $0.45 $0.41
Emerson EMR $0.67 $0.60
Frontier Communications FTR $0.17 $0.16
IntercontinentalExchange ICE $1.18 $1.15
MasterCard MA $3.48 $2.93
Medco Health MHS $0.75 $0.72
Royal Caribbean RCL $1.07 $1.01
Rowan Companies RDC $0.54 $0.52
Polo Ralph Lauren RL $1.75 $1.31
Tenet Healthcare THC -$0.01 -$0.02
Viacom VIA.B $0.69 $0.57

* Report includes items that make comparisons to the consensus estimate questionable

Wall Street Research Summary

Upgrades:
# AstraZeneca (AZN) – BofA/Merrill
# AvalonBay (AVB) – BofA/Merrill
# ValueClick (VCLK) - Citi
# Royal Dutch Shell (RDS.A) – Credit Suisse
# Overseas Shipholding (OSG) – FBR Capital
# Ford (F) – Target increased at Goldman
# Tenaris (TS) – Jefferies
# Linear Technology (LLTC) – Morgan Stanley
# Maxim Integrated (MXIM) – Morgan Stanley
# Bed Bath & Beyond (BBBY) – Initiated Buy at UBS
# Best Buy (BBY) – Initiated Buy at UBS
# Home Depot (HD) – Initiated Buy at UBS
# Lowe’s (LOW) – Initiated Buy at UBS
# Advance Auto Parts (AAP) – Initiated Buy at UBS
# AutoZone (AZO) – Initiated Buy at UBS

Downgrades:
# GlaxoSmithKline (GSK) – BofA/Merrill
# Affiliated Managers (AMG) – Goldman
# Altera (ALTR) – Morgan Stanley
# Intel (INTC) – Morgan Stanley
# Micron (MU) – Morgan Stanley
# Xilinx (XLNX) – Morgan Stanley
# Nvidia (NVDA) – Morgan Stanley
# KLA-Tencor (KLAC) – Morgan Stanley
# Novellus (NVLS) – Morgan Stanley
# Applied Materials (AMAT) – Target reduced at Morgan Stanley

Long positions in stocks mentioned: GS, VRX, GEO, VCLK, GSK

Best wishes for a pleasant day and until next time, “may the bulls be with you!”

David D. Moenning
Founder TopStockPortfolios.com

For more "top stock" portfolios and research, visit www.TopStockPortfolios.com


The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.com and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.

Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

After weeks of economic data and earnings reports being adorned with the words "better than expected," it appears the tide has turned lately as the preface to the majority of data over the past couple weeks has been just the opposite. In other words, just about the time investors became convinced that the economy was indeed improving and that the letter best used to describe the rebound was a "V," the data turned punk; raising questions about the recovery, the holiday shopping season, and the outlook for earnings going forward.

After Tuesday's disappointing drop in Consumer Confidence, the bulls were looking to the report on New Home Sales to get the momentum moving back in their direction. However, this one also came in well below expectation as sales of new homes unexpectedly fell -3.6% in September, when analysts had expected to see an increase of +2.6%. Speaking of surprises, it was the first decline in six months, and the the prior two months were downward.

In short, the consistency of which the data has surprised to the downside lately has put a question mark on the outlook for the future. It was less than two weeks ago that the bulls were sitting pretty with the Dow having pushed through the magical 10,000 level (again), but that was before the dollar rally, the return of the ‘risk aversion trade,’ and the breakdown of important technical levels on the charts.

While it is true that the rise in the dollar over the past five sessions has definitely created some selling pressure due to the programs tied to the technical levels in the greenback, it is disconcerting to see the damage done to the major indices during this pullback. So far, the S&P has fallen -5.03% from its October 19th high while the NASDAQ is off -5.4%, and the Russell 2000 has gotten smoked for a loss of -9.23%.

However, it isn’t just the amount of the decline or the snapping of the important moving averages that worries us. No, it is more the internal weakness and the sudden dive in our momentum indicators that has us thinking that after five pullbacks that were “short and shallow,” this one just might be different (after a requisite bounce, of course).

Given the relationship of the decline in stocks to the rise in the dollar, the bulls will argue that this too shall pass. Our heroes in horns argue that dollar is simply enjoying a bounce in a bear market and since the fundamentals aren’t exactly positive for the greenback, it will resume its slide soon enough. This will help the reflation trade and once again, everything will return to normal.

While we do expect to see an upside bounce in stocks in the near term to test what will now be resistance zones, we should also point out that the ‘risk aversion’ trade is making a comeback. For example yesterday’s T-Note auction saw the second highest bid-to-cover ratio on record and direct participation in the auction of “safe” investments was more than 7.5 times normal. This is something to watch going forward.

Turning to this morning, we’ve got a decent batch of economic data to deal with as the Government reported that the third quarter GDP in the U.S. rose by 3.5%, which was above the expectations for a gain of 3.2% and last quarter’s drop of -0.7%.

Personal Consumption came in at 3.4% vs. consensus 3.1%. The GDP Price Index (a measure of inflation) was +0.8% vs. consensus +1.4% and Core PCE was in line with the consensus estimate at 1.4%.

In addition, Initial Claims for Unemployment Insurance for the week ending 10-17 were reported 530K; above the expectations for 525K and down 1K from the prior week’s reading of 531K. Continuing claims came in at 5.797M versus the consensus estimate of 5.905M and the prior week’s revised total of 5.945M.

Running through the rest of the pre-game indicators, the foreign markets are mostly lower. Crude futures are moving up with the latest quote showing oil trading up by $1.09 to $78.55. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.48%, while the yield on the 3-month T-Bill is currently at 0.06%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a higher open. The Dow futures are currently ahead by about 75 points; the S&P’s are up by about 9 points, while the NASDAQ looks to be about 10 points above fair value at the moment.

Yesterday's Earnings After The Bell

Aflac AFL $1.25 $1.20
Assurant AIZ $1.07 $0.93
AvalonBay AVB $1.09 $1.08
CB Richard Ellis CBG $0.08 $0.10
Cerner CERN $0.57 $0.57
Dun & Bradstreet DNB $1.13 $1.09
Equity Residential EQR $0.53 $0.52
Express Scripts ESRX $0.81 $0.80
Flowserve FLS $2.07 $2.00
FMC Corp FMC $0.89 $0.89
First Solar FSLR $1.79 $1.71
Kirby Corp KEX $0.65 $0.65
Lincoln National LNC $0.84 $0.76
LSI Corp LSI $0.18 $0.04
Realty Income O $0.47 $0.46
Owens-Illinois OI $0.95 $0.93
O'Reilly Auto ORLY $0.63 $0.56
Ryland Group RYL -$1.20 -$0.95
Questar STR $0.60 $0.50
Symantec SYMC $0.36 $0.33
Teradyne TER $0.14 $0.12
Torchmark Corp TMK $1.48 $1.49
Companhia Vale do Rio Doce VALE $0.32 $0.31
XL Capital XL $0.89 $0.63
Today's Earnings Before The Bell

Barrick Gold ABX $0.54 $0.46
American Electric Power AEP $0.93 $0.85
Aetna AET $0.69 $0.66
Autonation AN $0.36 $0.34
Apache APA $1.58 $1.64
Airgas ARG $0.68 $0.67
AVon Products AVP $0.36 $0.39
Allegheny Energy AYE $0.45 $0.55
Ball Corp BLL $1.24 $1.17
Colgate-Palmolive CL $1.12 $1.11
CME Group CME $3.35 $3.31
Eastman Kodak EK -$0.41 -$0.19
Iron Mountain IRM $0.21 $0.24
Kellogg K $0.94 $0.84
Lancaster Colony LANC $1.01 $0.83
Lubrizol LZ $2.52 $2.52
Moody's MCO $0.43 $0.38
Motorola MOT $0.02 $0.01
Monster Worldwide MWW $0.01 $0.00
Mylan MYL $0.32 $0.27
Noble Energy NBL $1.10 $0.82
Newmont Mining NEM $0.79 $0.54
Nu Skin Enterprises NUS $0.41 $0.41
Office Depot ODP -$0.08 -$0.09
Procter & Gamble PG $1.06 $0.98
Sprint Nextel S -$0.17 -$0.10
Smith Intl SII $0.07 $0.15
Snap-On SNA $0.44 $0.27
Strayer Education STRA $ 1.21 $1.15
Ventas VTR $0.66 $0.63
Waste Management WM $0.54 $0.54
Xcel Energy XEL $0.48 $0.51
Exxon Mobil XOM $0.98 $1.03
Olympic Steel ZEUS $0.06 $0.24

Wall Street Research Summary

Upgrades:
# Genworth Financial (GNW) – BofA/Merrill
# Biomarin Pharmaceutical (BMRN) – Credit Suisse
# Boston Properties (BXP) – Deutsche Bank
# Petroquest Energy (PQ) – JP Morgan
# Human Genome (HGSI) – JP Morgan
# URS Corp (URS) – Morgan Joseph
# Plains Exploration (PXP) – Morgan Stanley
# ConocoPhillips (COP) – Societe Generale
# ArcelorMittal (MT) – Societe Generale
# Urban Outfitters (URBN) – Thomas Weisel

Downgrades:
# Goodyear Tire (GT) – BofA/Merrill
# First Solar (FSLR) – BofA/Merrill
# Agnico-Eagle Mines (AEM) – Credit Suisse
# RRI Energy (RRI) – Removed from conviction buy list at Goldman
# Activision Blizzard (ATVI) – Piper Jaffray
# PPD, Inc (PPDI) – Wells Fargo
# Gannett (GCI) – Wells Fargo

Long positions in stocks mentioned: GS, CERN, ESRX, LZ, MWW

Be sure to take time to breathe and until next time, “may the bulls be with you!”

David D. Moenning
Founder TopStockPortfolios.com

For more "top stock" portfolios and research, visit www.TopStockPortfolios.com

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