U.S. stock futures blasted after Asia plunge (Marketwatch)
U.S. futures are getting smashed up this morning after a nightmare trading session in the Asian markets (see next article). Dow futures are off 546 points, while Nasdaq futures are falling 82.5 points; S&P futures are down 60 points, at 855.20. There’s a lot of technical analysis that says the S&P has to hit 800 before we see a decent rebound; more and more, that’s looking the right analysis. That said, with the extent of this selloff, and the huge volatility, the potential for short squeezing has never looked so ominous or looming. Opec cut production by a whopping 1.5million barrels a day, not that that’s likely to have a huge effect: once a commodity market enters freefall, there’s little stopping it.

Tokyo, Seoul Head Asian Market Train Wreck (CNBC.com)
The overnight dealer notes from Hong Kong were all broadly disbelieving of the last-minute rally in the Dow yesterday … and those sentiments couldn’t have been proved more right. The Nikkei plummeted 9.6%, to 7649.08, more than a five-year low. The yen hit a 13-year high vs. the dollar, at around 91 yen. South Korea’s Kospi was off more than 10%, while everything else in Asia pretty much went belly-up too. Although it looks like a U.S.-led thing, much of the Asian mauling is really more to do with the yen than anything else.

Greenspan Concedes Error on Regulation (NYT)
In a dramatic and humbling mea culpa yesterday, the former fed chairman admitted he was “shocked” by the mess we now find ourselves in, and that he may have got it wrong a little bit with regard to regulation. It’s refreshing to see someone being honest right now, rather than blaming the market, the short speculators, the regulators, the homeowners, or whoever else is possibly in the firing line. It makes you think, actually, that he’s the only guy round who stands a chance of fixing the problem … given that half of it seems to have been in saying “we have a problem” in the first place.

German banks overexposed in Iceland (Daily Telegraph)
It turns out that the counter-parties hardest hit by Iceland’s recent banking turmoil are German banks, which are owed $21 billion. That’s around a third of Iceland’s $75 billion debt. German banks are having a hard time; it was also a major lender to both Spain and Ireland, which have been pretty badly beaten up in the credit crunch. These announcements could not have come on a worse day, either.

Sony Blames Profit Warning on Yen, Weak Demand (Business Week)
A lot of the Asian market selloff was down to a surprise announcement by Sony that its earnings would fall 58% on the year, to $2.04 billion, by March 2009. The article explains that Sony sees the higher yen harming sales. It’s not really the harm in sales that’s the issue here however, but more the margin on exports, which is just wiped away when the yen’s sitting up in the 90’s.

Microsoft earnings beat the Street (NYT)
Microsoft is turning out to be a bit of a contrary indicator. When times are rolling, the software giant is lagging … but now that things are in somewhat of a death spiral, earnings are up. Still, only just, a 48 cents a share vs. 47 cents a share. That’s the advantage of a monopoly: it’s almost recession-proof by default. After all, everyone still needs MS Word, if only to polish their resumes while they look for a new employer.

Futures fall as recession fears weigh (Reuters)
There’s no end in sight to the bottom of this week’s selloff — but this morning there is perhaps the beginning of one. S&P futures are down 7.7 points, Dow Jones futures lower by 35 points, and Nasdaq futures are off around 12 points or so. Those numbers are much lower than in futures trading in recent days, but that’s no indication of how bad things can get once the opening bell chimes.

Seoul, Hong Kong extend retreat; Tokyo cuts losses (Marketwatch)
Another spike in the yen and gloomy economic data in Japan overnight brought about a slump in Asian share prices. The Nikkei fell 2.5%, while the Hang Seng dropped 3.6%, to its lowest close since May; South Korea’s Kospi ended 7.5% lower, with trading halted at one point in the day.

Foreclosure Filings Rose 71% in Third Quarter as Prices Fell (Bloomberg)
The title of this piece says it all, really: 765,558 homes either foreclosed, or were auctioned off in the last quarter. As with data from yesterday: no doubt about it, deeply recessionary. In addition, lots of people predicting a rise in foreclosures throughout the rest of the year.

OPEC Faces Worsening Oil Price Drop as Growth Slips (Bloomberg)
Bloomberg is reporting that OPEC’s rumored 1 million barrel a day cut in production tomorrow at Vienna’s meeting will fail to stem a freefall in oil prices … right on the money: love it or hate it, oil is headed for $45 a barrel, where prices were the last time equities were at this level. The two will move in lockstep: just because the marginal cost of extraction has risen due to drilling in ever colder/more cumbersome climates, doensn’t mean everyone will pay that price.

Is Argentina’s government deliberately trying to fuck its consumers? Off the DJ wire:

Very few bonds had traded yet, but the dollar-denominated Boden 2012 was down sharply to the peso equivalent ARS136 from its open at ARS149.90.

On Tuesday, President Cristina Fernandez signed a bill that, if approved by the legislature, will end the country’s 14-year-old private pension fund system.

The private pension funds are set to receive very limited compensation under the proposed bill, according to a draft of the law which has been sent to Congress for debate.

The companies will “in no case (receive more than) the equivalent of the shareholder capital of the liquidated Administrators,” according to the bill.

In addition, compensation will be paid with government bonds, not cash.

According to Dow Jones, Argentina’s stock market fell 10% in the first 20 minutes of morning trading.

Granted — Argentina is an extreme example, but this is the first of many to come in the emerging market space. How anyone can think that emerging markets are more sheltered from the credit freeze than the giant, federally/huge central bank-backed European and American economies just because they weren’t as leveraged is beyond comprehension.

It doesn’t matter that emerging markets were not leveraged on credit. If the countries whose funds that were propping up their bond markets, equity markets, and growth in general (by buying their products/services) are suffering, they will too. Claiming - as some have - that emerging markets are somehow “decoupled” from America is like saying the Merrill plant-waterer is somehow decoupled from Merrill Lynch’s troubles. If the bottom falls out, the plants go too.

With spiraling oil prices and less and less liquidity around, emerging markets are going to feel pain similar to ‘97 in the not-too-distant future. The fact that a lot of them are running current account surpluses and have enormous sovereign wealth funds won’t matter one iota either, because the point is, there will be no more income to make those surpluses sustainable any longer.

And the sovereign wealth funds that remained tied up in oil cash without diversifying into U.S. equities on the cheap will live to regret it.

Article (No Link): Argentina Stocks Down 10% After First 20 Minutes Of Trading (Dow Jones)

U.S. Futures Weighed Down by Gloomy Earnings Reports (TheStreet.com)
Despite good news from the Apple camp after the bell yesterday, an overnight selloff along with the likes of AT&T, Wachovia and Boeing reporting today is having a gloomy impact on futures trading. S&P futures are off between 19 - 31 points, at 939, while Nasdaq futures are down 17 points, at 1276. Dow futures are in the red by 242 points. The Energy Information Administration is also releasing crude-oil inventory figures for last week.

Mortgage applications dropped 16.6% last week (Marketwatch)
This doesn’t look promising. The weekly mortgage application volume was off 44% from the same week last year, and hasn’t been so low since December, 2000. The four week moving averages for mortgage applications has dropped 9.2%. No doubt about it: that looks recessionary.

Asian markets slide on glum corporate outlook (AP)
When the U.S. sneezes, the world catches cold while Asia gets SARS. So it was overnight: the Nikkei is back through the 9,000-point band, down nearly 7%; Hong Kong fell 5.2%; South Korea’s Kospi slid 5.1%, and China held up a little better, slipping 3.2%. The yen is much higher, prompting a 9% tumble in shares of Sony. This crisis is going to be much more prolonged in emerging markets than over here in the U.S. Dealer notes in Asia are all pointing out Argentina’s next possible default (see next article). Samsung has decided not to buy a stake in Sandisk.

Argentina Default Looms, Pension Seizure Roils Market (Bloomberg)
Mainly because things have been so ugly everywhere right now, lots of investors have taken their eye off Latin America. But if you look closely at the wires every day, leaders in Chile, Argentina and Brazil in particular have been printing money better than Dick Fuld. Now there are genuine fears of a big default in Argentina. The stock market plunged more than 11%, as the government seized around $29 billion of private pension funds. Bond yields are above 24%.

OPEC, Alone (Forbes.com)
Oil fell through the $70 band overnight, to $69.48 a barrel, even as OPEC is mulling a 1 - 2 million barrel cut in daily output. Russia’s surplus ceases to be once oil falls lower than $70 a barrel, raising concerns there about economic tightening. Despite pleas from OPEC, Norway is refusing to cut production, however.

Wal-Mart profit could be hurt by new supplier standards (Reuters)
Finally, Wal Mart is cleaning up its quality standards act, although chief exec Lee Scott says that could harm margins and make goods more expensive for customers. Wal Mart gets around $9 billion worth of products a year from China. With everyone raising the standards bar, and Chinese consumption declining, things are going to look precarious on the economic front there very soon (if they don’t already).

The recession can’t stop people buying iPhones:

Apple Inc said on Tuesday that quarterly profit rose 26 percent, driven by sales of its new iPhone, but it issued a forecast for the current quarter well below Wall Street expectations.

After-hours trading in Apple shares were halted by the Nasdaq prior to the earnings announcement.

Apple reported a profit in its fiscal fourth-quarter ended September 27 of $1.14 billion, or $1.26 a share, up from $904 million, or $1.01 a share, in the year-ago period.

Revenue rose 27 percent to $7.9 billion.

Analysts were expecting the company to post a profit of $1.11 a share on revenue of $8.04 billion, according to Reuters Estimates.

Mac shipments are up 21%, iPod shipments higher by 8%. It’s strange to think of people buying Nano’s when they don’t have enough for the groceries.

Meanwhile, E*Trade’s loss is narrowing, but Yahoo slumped short of expectations by more than 50% (delivering 4 cents a share vs. 9 cents expected).

There’s a theme here. Lots of companies are reporting stronger-than-expected earnings for the third quarter, while warning that things are about to get ugly.

That’s reminiscent of the first quarter, when stronger earnings managed to avert a recession in Q2, but with many companies saying “it’s all downhill from here over the summer.” It’s possible - just possible - that these Q3 earnings will be sufficiently strong to avert a catastrophic GDP figure this time round, but one which will then fall again when it comes to Q109.

In other words, we could continue dipping into these intra-quarterly recessions, while still avoiding any “official” recession being called. Unfortunately, if that happens then that could just prolong the pain in the market, since a selloff never really has time to work it’s way through the system properly.

U.S. Stocks Seen Lower; Earnings Take the Stage (TheStreet.com)
It’s a lower open, but probably an up day. S&P futures are only down marginally, by 8.7 points, while Nasdaq futures are lower by 21 points. Most of this is to do with fears over earnings of Texas Instruments, but then again, E*Trade and Yahoo! report after the bell, and may well beat dismal expectations. If that happens, there will be a surge at the close.

Overnight Dollar Libor Declines to 1.28 Percent, BBA Says (Bloomberg)
Good news! At long last … LIBOR has fallen below the federal reserve’s target for the first time since October 3rd. The rate dropped 23 basis points.

Nikkei, Sensex extend gains, Hang Seng retreats (Marketwatch)
Asian markets were mixed but mostly down overnight; the Nikkei gained 3.3%, China’s Shanghai Composite Index slipped 0.8%, and the Hang Seng slid 1.8%. The drop in shares in Hong Kong was mainly down to China Mobile reporting lower than expected earnings, and conglomerate Citic Pacific facing a $1.9 billion foreign exchange loss. The reality is, the U.S. will probably emerge from the credit crunch in pristine condition when compared with how Asia’s economies will suffer. Expectations for growth are so high over there that few companies this earnings season can possibly jump over the pole. India’s Sensex was up 4%, but that was down to a one percentage point rate cut (to 8%) and possible restrictions on short selling. Well, we all know how that works out in the end.

Oil Declines as Dollar’s Gain Dims Commodities’ Appeal as Hedge (Bloomberg)
Those who claim the era of a high U.S. dollar and falling oil prices are over ought to think again: oil is down to $73.12 a barrel, while the dollar is at a one month high vs. the euro. Unicredit analyst Jochen Hirtzfeld says: “We think OPEC will cut production by about 1 million barrels, stabilizing prices.” Yeah, right. And Goldman though oil was stable at $150 in May.

U.S. Moves Toward Stimulus as Bernanke, Bush Shift (Bloomberg)
There’s another stimulus package on the way. Details are as yet unclear, but Bernanke wants to “open the idea” of a second round of cash infusions to the economy, since the credit crunch is “hitting home.” Paulson claims there’s enough money now set aside for the government to buy stakes in financial firms that are hit by the credit freeze.

Sun Eclipsed By Poor Results—Again (Forbes.com)
The sun never seems to shine on Sun Microsystems, despite the enormous validity of hardware today. Sun said yesterday that it expects to report revenue of around $3 billion, compared with estimates of $3.2 billion. “Sun and its customers are seeing the impact of a slowing economy,” according to chief exec Jonathan Schwartz. Given that tech is beating the street broadly across the board, this doesn’t resonate well. Sun is a badly run company, and has been for decades. That’s all.

Editor’s Note: Bulls & Bears is a weekly column featuring the opinions of market insiders. Wall Street’s most revered investing maestros Jim Cramer and Donald Trump didn’t return our calls this week (we were later told to refer to their shows, vintage bankruptcy filings, respectively, for comment). But for what it’s worth, in between the throng of the mid-day mob, the following agreed to tell us what they thought for this week’s feature. Make of it what you will:

Tom Au, Director, R.W. Wentworth & Co.
I’ve picked the fair value of the Dow at 7,000; that’s its “investment value”, which is book value plus ten times dividends. In the 60 years from 1932 to the end of the Persian Gulf War in 1992 the investment value was essential for valuing the Dow. But the Persian Gulf War created a new era and a new economic mentality, with America as the world’s global superpower. But now we no longer have the strong dollar, low oil prices, and we’re no longer the world’s unchecked superpower, so all the things that have led American and European investors to take the Dow above its investment value have just disappeared. Warren Buffet appears to be buying into the post-1992 value of the Dow; by that measure stocks look cheap. But if you take the Dow at its 1932 - 1992 value, stocks are still expensive.

Art Hogan, Chief Market Analyst, Jefferies & Co.
Even if you factor in the downdraft we’re in right now and the one coming in 2009, the value of the S&P 500 still doesn’t point to expensive stocks. In the worst-case scenario in 2009 we go down 25%. There’s so much support in the financial space right now with the federal reserve and other central banks continuing to pour liquidity into the system, so financials will bottom out and look good. [But] energy stocks go down faster with a drop in the energy price than they go up with a rise. Consumer discretionary type names such as homebuilders still have some way to go, and things tied to ad spending should be avoided.

U.S. stock index futures rise; eyes on earnings (Reuters)
It’s looking like today’s going to be another big, big rebound day if things hold up. S&P futures are up 2.9%, Dow futures are rising 2.4%, and Nasdaq futures are gaining 2.8%, as of the early morning. If earnings come in broadly much better than expectations this week, this may mark the beginning of the end of the bear market. Haliburton reports this morning; AMEX and Texas Instruments after the bell. San Disk also reports; separately Toshiba is planning to buy 30% of production capacity.

Asia Stocks To Twist With U.S. Earnings (Forbes.com)
Here’s my weekly Asia markets outlook column at Forbes. Looks like it’s going to be a volatile week in Asia, with some hope of markets outperforming if earnings fare well (and plunging if worse than expected). Alibaba — which has lost a big % in recent weeks — may jump this week if majority shareholder Yahoo! comes up with positive earnings; investors in Hong Kong real estate developers will be looking to earnings of Caterpillar. Economic growth in the region is contracting as quickly as it came.

OPEC Plans Supply Cut as Crude Oil Heads Toward $50 (Bloomberg)
Emerging markets are starting to feel the pain of the credit crunch. It was just a matter of time - many derive a disproportionate share of revenue from oil sales. OPEC now looks set to cut production quotas after a surge in volume of December puts at $50. Venezuela and Iran need $80 oil to remain profitable; Saudi Arabia can get by on $65. Inadvertently, this could be the greatest (and cheapest) counter-terrorism measure in the whole eight years of the current administration.

China’s Economic Growth Is Slowest in 5 Years (New York Times)
China’s growth slowed to just 9% in the third quarter, according to the latest data. Economists expected growth as high as 9.7%. The upside is that inflation is down, to 4.6% last month from 4.9% previously.

ING shares surge after 10 billion euro capital deal (Marketwatch)
It was only a matter of time before stocks began surging again on bailout packages. ING got 10 billion euros from the Dutch government, and separately, sold its Taiwanese life insurance business to Taiwan-based Fubon Financial Holding for $600 million. ING’s share price rebounded more than 20% on the news.

Editor’s Note: I’ll be on CNN International on Sunday night at 8.30 p.m. EST, talking about global markets in the week ahead. Tune in!

Stocks Advance in Europe, Led by RBS; U.S. Index Futures Drop (Bloomberg)
Just because it was a good night overseas, doesn’t mean we’ll see an up day today. To be honest, in this market it’s anyone’s guess right now where the U.S. trading day ends. On the upside, there’s a more upbeat feeling on Wall Street lately, but equally, Thursday’s rally came very late. There’s still lots of speculation on the dealer notes overseas that the late U.S. rally was down to options expirations.

Asia stock markets mixed after Wall Street rebound (AP)
A weird day in Asia, with Japan jumping on the overnight gains in the Dow, while Hong Kong slumped. In typical wet-T-shirt-competition-reporter AP fashion, the data is wrong in the above article. The Nikkei rose 2.8%, while the Hang Seng fell 4.4%. China’s Shanghai Composite Index gained 1.1%. Gains on the mainland were mainly down to officials pondering whether to let Citic, Haitong, and Guotai offer margin on securities trading.

CIC to increase stake in Blackstone to 12.5% (Financial Times)
Finally, China is getting in on the act of buying up cheap U.S. securities. CIC, China’s sovereign wealth fund, said it’s planning to buy Blackstone shares on the open market in a bid to increase its shareholding in the private equity giant to 12.5%, from 9.9%. It’s about time CIC made a move, with the Japanese snapping up everything else in recent weeks.

Oil Rises From 13-Month Low as Stocks Gain, OPEC May Cut Output (Bloomberg)
With global markets on the way up again, oil is also rising. The black liquid was gaining around $3 in early European trading, to $73.02 a barrel. That’s probably too big a swing from yesterday’s $69.85 a barrel, given markets are up, but not that sharply.

Overnight interbank dollar rates continue to inch lower (Reuters)
Short term rates are on the way down, but long term rates still have some way to go. Interbank rates for overnight dollar deposits were dramatically down, to 1% - 1.5%, from 1% - 2.5% the day before.

So … suddenly, the market turned up 4% or so.

Unfortunately, this is less likely anything to do with equity valuations being at bargain prices, and more to do with index option expirations, many of which take place Friday. This should by all accounts be somewhat expected: there are usually spikes in the market at this time of the month (such as around Sept. 19 when the same thing was going on), and some index options cannot be traded on the expiration date (various Dow and S&P options in particular).

Which again raises the question: when do we hit a bottom? Much of the recent talk of hitting a bottom in the stock market is probably misplaced, and definitely too narrowly focused. The truth is, in a bear market a bottom has less to do with how cheap equities become relative to earnings, and more to do with other macroeconomic factors (as is true in a bull market very often, too).

Likewise, the issue with the various bailout packages is not so much that they are politically problematic, but that they try and correct the microeconomic climate, rather than the macroeconomic one. (For example, a reduction in the Japanese interest rate would have had more effect than the Asian, European, and U.S. ones combined).

There are four factors combined that most probably trigger the “buy” signal: the value of the dollar, the value of the yen, the price of gold, and the price of oil. When these four factors hit favorable valuations all at once, equity prices will probably see a big rush in buying. Here’s why: