Trade the News Market Internals Update at 12:00ET

Dow +72 S&P +12.7 NASDAQ +51

***Economic Data***

– (TU) Turkey Oct Capacity Utilization: % v 76.0%e; Industrial Confidence: v 112.4 prior
– (US) Sept Chicago Fed National Activity Index:-0.22 v -0.21e
– (EU) ECB completed €4.5B in weekly settlements vs. €2.2B prior in its Gov’t bond Buying program (SMP); To drain €169.5B in next 7-day Term Deposit Tender vs. €165.0B prior

– Caterpillar has single-handedly dispelled the gloom emanating out of Europe this morning. US indices are up, with the Nasdaq leading the way higher after a sub-par performance last week. In Europe, little was accomplished over the weekend and officials continue to negotiate ahead of the next big summit meeting on Wednesday. In the US, President Barack Obama will promote a series of executive branch steps aimed at jumpstarting the housing market this week. Note that gains on the S&P500 are hitting some resistance at the key 1,250 level. Treasury prices are little changed with the 10-year yield holding just above 2.2%. Oil and copper prices continue to push higher by another 3% and 6% respectively after Chinese PMI data reached a five-month high.

– Caterpillar ground consensus estimates into dust this morning, reporting a Q3 profit that up 44% on a y/y basis. The firm also pushed its full-year forecast up to the top end of its prior range, although its initial FY12 outlook range for revenue was right in line with expectations. With inventories at low levels, the company indicated that sales remain steady even as uncertainty about developed economy growth is unlikely to go away anytime soon. Manufacturer Eaton Corp was in line with consensus expectations and reaffirmed its 2011 outlook. Apparel maker VF Corp beat expectations on solid profit and revenue growth, and also raised its quarterly dividend. There have been several major acquisitions also aiding sentiment. Health insurer Cigna announced a deal to acquire HealthSpring Inc for about $3.8B, or $55/shr, boosting its business of selling Medicare to the elderly. The move represents a significant diversification for Cigna, which has largely focused its U.S. health plans on businesses. The company said it would issue new equity to cover about 20% of the purchase price. Oracle struck a deal to buy RightNow Technologies for around $1.5 billion, or $43/shr, for a 20% premium to the prior close.

– EUR/USD tested session lows of 1.3823 on concerns that Germany and France would not be able to reach a deal on the EFSF at Wednesday’s EU leader summit. There were vague rumors that the summit could be again postponed, but the EU Commission stated that it remained on course. EU Commissioner Juncker stated what many analysts had already predicted, namely that banks needed to prepare for 50-60% losses on Greek debt. The euro was off its worst level of the morning after the ECB increased the amount it settled in its government bond buying program to €4.5B from last week’s €2.2B. This was the first week-on-week increase in settlements since Sept 12th. USD/JPY hovered just above the 76 handle as dealers passed around a think tank report suggesting that Japan’s MoF would not partake in SNB-style FX intervention, although it might authorize FX interventions by the BoJ. Many pointed out that the BoJ could not set a yen floor or ceiling even it wanted to after having preached to China about the virtue of a floating rate so many times in the past.

***Looking Ahead***

– 11:00 (US) Fed to purchase $2.25-2.75B in Notes/Bonds
– 11:30 (US) Treasury to sell $56B in 3-Month and $27B in 6-Month Bills
– 11:30 (IS) Israel Central Bank Interest Rate Decision: Expected to leave the Base Rate unchanged at 3.00%
– 12:00 (IT) PM Berlusconi Cabinet meets to discuss pension reform
– 13:00 (US) Fed’s Dudley to speak to Bronx Chamber of Commerce
– 18:00 (EU) EU’s Juncker speaks in Zurich

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