ETF short interest provides some great insights into what the market really thinks.

I’m going to ignore Matt’s twitter-length rebuttal of my last post, and instead point to an excellent set of data that just appeared in my inbox. State Street Global Advisors publishes (as many firms do) a monthly report on the ETF industry. What grabbed me this time was the short-interest report.

It should come as no surprise that ETFs are heavily shorted. After all, one of the great things about ETFs is that phrase “exchange-traded.” It means you can fold, twist and mutilate an ETF just like you can any other stock, and that means that if you can find it to borrow, you can short it. And since many ETFs are phenomenally liquid, they can be pretty easy to locate for shorting.

Overall, short interest in ETFs as reported on Oct. 15 was 11.84 percent. This is substantially

$100 billion in assets by December 2010? In a best-case scenario for Schwab, they’ll be closer to $10 billion.

More realistic would be something like $5 billion. But let’s put the over/under at $10 billion by 12/31/2009 and put something interesting on the line, shall we?

Seriously. One-hundred billion would make Schwab the third-largest ETF provider in the world at current levels, surging past ProShares, PowerShares and Vanguard and nipping at the heels of State Street Global Investors. Having a built-in distribution system is a good thing, but it isn’t THAT much of a good thing.

And I’ll say this: They better get busy if they’re even going to reach $10 billion. We’re one week into the project and they’re sitting on a combined $17 million spread among four products.

Obviously, one week is not a legitimate test. My point is that Schwab moving into ETFs isn’t like flipping a switch. The bigger impact

• Adecco announced plans to acquire professional staffing firm MPS (NYSE:MPS) for $1.3 billion

• Pfizer (NYSE:PFE) bettered earnings and revenue expectations with third quarter adjusted results of 51 cents a share, 3 cent higher than Zacks estimates, on revenues of $11.6 billion, which beat Zacks estimates of $11.47 billion. Full-year guidance was also raised to $2.00-$2.05 from $1.90-$2.00 prior

• United Technologies (NYSE:UTX) third quarter numbers beat consensus estimates with earnings of $1.14 versus Zacks estimates of $1.12 on revenues of $13.38 billion up from estimates of $13.40 billion. The firm expects full year earnings in the mid-point of its earlier guidance of $4.00-$4.20

• State Street (NYSE:STT) reported third quarter operating earnings of $1.05 a share, beating Zacks estimates of $1.00 a share, as revenues of $2.77 billion were above estimates of $2.22 billion. However, the company lowered full-year operating results from $4.25-$4.50 to $4.13-$4.17

• Comerica (NYSE:CMA) reported third quarter earnings

With buyers back in action, US stocks rose to their fresh one-year highs and remained near their high points as optimism grew that an economic recovery, helped by solid third-quarter earnings reports and increased M&A activity, is on cards. 

The Dow Jones industrial average rose 96.28 points, or 0.96%, to close at 10,092.19.  The broader S&P 500 index jumped 10.23 points, or 0.94%, to 1,097.91 and the tech-heavy Nasdaq climbed 19.52 points, or 0.91%, to 2,176.32, its highest point since September 26, 2008.  Market breadth was positive, with advancing shares ahead of decliners by a margin of three-to-one.  Only five of the DJIA thirty declined in price.

After the close, iPhone maker Apple Inc. (NASDAQ:AAPL) and Texas Instruments (NYSE:TXN) reported better-than-estimated numbers, fuelling hopes for the technology industry.  Last week Google Inc. (NASDAQ:GOOG) and Intel Corp’s (NASDAQ:INTC) numbers had come in above expectations.

Although there were some jitters last

Pimco is ready to launch the first short-term TIPS ETF in the U.S.

Pimco is set to launch its second exchange-traded fund on Monday, again sticking with short-term Treasuries.

This time, however, the world’s biggest bond fund manager is moving into Treasury Inflation-Protected Securities. It’s a market with two entrenched competitors already vying for investment dollars. But TIPS have been hot attractions so far this year, and if inflation hawks are correct, could heat up even more in coming years.

New Competition

The Pimco 1-5 Year U.S. TIPS Index Fund (NYSE Arca: STPZ) will be the first to focus on the short-end of the yield curve. The two others already on the market take an intermediate tilt: the iShares Barclays TIPS Bond Fund (NYSEArca: TIP) and the SPDR Barclays Capital TIPS ETF (NYSEArca: IPE).

State Street Global Advisors also sponsors a global TIPS ETF, the SPDR DB International Government Inflation-Protected Bond ETF (NYSEArca: WIP). It

Law Firms Threatening Action Against Leveraged ETF Providers

At least two law firms say they're talking to clients who use leveraged exchange-traded funds about potential lawsuits against the funds' providers.

The list is large and includes ETFs sponsored by ProShares, PowerShares, Direxion and ETF Securities, which recently entered the U.S. (see story here.)

How do we know this? The law firms, of course, put out a press release. You can read it here.

Two Deutsche Bank Funds Hit By CTFC Ruling

A pair of PowerShares-DB commodity ETFs will be curtailed in how much they can buy in soybeans, wheat and corn due to a decision by the Commodity Futures Trading Commission.

You can read this Bloomberg News report for more details. Also, check Matt Hougan's blog here.

SSgA's Hoguet: Sovereign Wealth Funds To Buy SDRs

Special drawing rights, or SDRs, are what the International Monetary Fund uses internally as currency markers to traverse

• Fluor (NYSE:FLR) on Monday reported second quarter earnings of 93 cents a share versus $1.12 a share on a revenue decline of 8% to $5.3 billion

• Freddie Mac (NYSE:FRE), which had reported its first profit in two years, yesterday warned that the Taylor, Bean & Whitaker Mortgage Group collapse might cause it "significant" losses

• State Street (NYSE:STT) cautioned that $625 million that it set aside to address claims from losses linked to subprime mortgages might be exhausted

• General Motors (NYSE:GM) and eBay (NASDAQ:EBAY) announced hundreds of California dealers are starting online car auctions

• Cumberland Pharmaceuticals announced that an initial public offering of its 5.0 million shares was priced at $17 per share.  The stock will start trading with the symbol CPIX

• American Capital Agency priced its 3.75 million common offering at $23.30 per share with the symbol AGNC

• Tellabs (NASDAQ:TLAB) announced a $200 million share buyback plan; its Chairman

• Goldman Sachs (NYSE:GS) raised General Electric (NYSE:GE) to "buy" and upped its price target on the firm to $15 from $13

• American Express (NYSE:AXP) joined the ranks of banks buying back TARP-issued warrants, as it paid the Treasury $340 million, providing the government a 26% return on its investment.  Other firms include Goldman Sachs (NYSE:GS), US Bancorp (NYSE:USB), and State Street (NYSE:STT)

• Sumitomo Trust announced plans to acquire Citigroup's (NYSE:C) entire stake in Nikko Asset Management for $1.2 billion

• Sanofi-Aventis announced it agreed to acquire a 50% stake in Merck's (NYSE:MRK) animal health venture for $4 billion

• Visa (NYSE:V) reported earnings, ex-items, of 67 cents a share, ahead of Street projections of 64 cents on revenues of $1.6 billion, versus estimates of $1.64 billion

• Motorola (NYSE:MOT) topped estimates for the second quarter with adjusted results of a one cent loss versus estimates of a 4 cent loss.  The company

[Editor's Note: After more than a year of chaos and controversy, some of the leading U.S. banks saw their stock prices soar during the second quarter. As part of its mid-year forecast series, Money Morning examines the outlook for U.S. banks for the rest of this year. To see earlier stories from our mid-year forecast series, please click here.] By Martin Hutchinson Contributing Editor Money Morning

Can U.S. bank stocks continue their winning streak?

In February, I analyzed the top 12 U.S. banks to determine whether they really needed $1.5 trillion in taxpayer-provided bailout capital. I concluded that only a few of those banks seemed to be in any danger of collapse, and actually recommended several.

Policymakers and the market later came to agree with me: The Standard & Poor’s 500 Financial Index has more than doubled from its March low and several bank stocks have posted triple-digit …

(Gold is the August contract on the NY Mercantile Exchange. Silver, copper and oil are the September contracts.)

NEW YORK - US stocks finished narrowly mixed on Tuesday as the market’s strong momentum from a hefty two-week rally helped overcome an early wave of profit-taking. Markets reacted to a weaker-than-expected survey on consumer confidence that was mitigated by positive news from the housing sector and generally strong corporate news. The Dow Jones Industrial Average drifted down 11.79 points, or 0.13 per cent, to settle at 9096.72, retreating modestly from a two-week surge of nearly 12 per cent. The Nasdaq composite meanwhile rose 7.62 points, 0.39 per cent, to 1975.51 in a late recovery, while the broad-market Standard & Poor’s 500 index dipped 2.56 points, 0.26 per cent, to settle at 979.62.

LONDON - European stock markets closed with losses, with sentiment dented by profit-taking and a disappointing reading