Tuesday Watch

Late-Night Headlines
Bloomberg:
- Shanghai built more skyscrapers in 15 years than New York did in a century, Beijing has the equivalent of three Manhattans under construction, and China’s government says it’s concerned about a property bubble.
- China, the world’s largest iron ore importer, needs to clear the backlogs at ports that handle commodities used for steelmaking to reduce vessel delays and help sustain the nation’s economic growth, according to analysts attending this week’s World Shipping Summit in Shanghai.

South China Morning Post:
- Sinochem Corp., a state-owned petroleum company, was among 85 Chinese companies named in a United Nations investigative report as illegally paying $6 million to Saddam Hussein’s Iraqi government.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on EBAY.
- Reiterated Underperform on PFG and WPT.

Night Trading
Asian Indices are unch. to +1.0% on average.
S&P 500 indicated -.36%.
NASDAQ 100 indicated -.47%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
AGN/.79
BJS/.42
CEPH/.70
CL/.67
EDS/.14
ERTS/.04
EMR/.99
HTCH/.12
IACI/.26
MMC/.38
MBI/1.38
MHS/.60
MLS/-.19
PNRA/.36
PG/.76
PDLI/-.03
RDC/.41
SIRI/-.16
SYMC/.20
TIE/.64
TXU/2.45
UNA/.17
VIA/.45
ZBRA/.36

Upcoming Splits
- None of note

Economic Releases
10:00 am EST
- Construction Spending for September is estimated to rise .5% versus a .4% gain in August.
- ISM Manufacturing for October is estimated to fall to 57.1 from a reading of 59.4 in September.
- ISM Prices Paid for October is estimated to fall to 75.0 versus a reading of 78.0 in September.

2:15 am EST
- The FOMC is expected to raise the Fed Funds rate by 25 basis points to 4.0%.

Afternoon
- Total Vehicle Sales for October are estimated to fall to 15.5M versus 16.4M in September.
- Domestic Vehicle Sales for October are estimated to fall to 12.5M versus 13.0M in September.

BOTTOM LINE: Asian indices are mostly higher on strength in exporting shares in the region after US economic reports boosted optimism. I expect US equities to open modestly lower and to rise later in the day. The Portfolio is 100% net long heading into the day.

Stocks Finish Near Session Highs on Falling Energy Prices, Better Economic Data and More Optimism

Indices
S&P 500 1,207.01 +.72%
DJIA 10,440.07 +.36%
NASDAQ 2,120.30 +1.46%
Russell 2000 646.61 +1.78%
DJ Wilshire 5000 12,043.73 +.92%
S&P Barra Growth 577.40 +.68%
S&P Barra Value 625.43 +.75%
Morgan Stanley Consumer 587.19 +.43%
Morgan Stanley Cyclical 717.91 +1.19%
Morgan Stanley Technology 499.38 +1.52%
Transports 3,815.46 +1.97%
Utilities 401.11 +1.29%
Put/Call .88 +7.32%
NYSE Arms .92 +82.40%
Volatility(VIX) 15.32 +7.51%
ISE Sentiment 194.00 +55.20%
US Dollar 90.06 +.52%
CRB 316.29 -1.81%

Futures Spot Prices
Crude Oil 59.83 -2.27%
Unleaded Gasoline 152.61 -6.04%
Natural Gas 12.22 -6.37%
Heating Oil 176.98 -4.0%
Gold 467.40 -1.56%
Base Metals 135.03 +1.53%
Copper 181.10 -.49%
10-year US Treasury Yield 4.55% -1.41%

Leading Sectors
Airlines +3.91%
Retail +3.51%
Computer Hardware +2.39%

Lagging Sectors
Defense +.25%
Telecom +.19%
Foods -.16%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on DDR.
- Reiterated Underperform on LVLT.

Afternoon/Evening Headlines
Bloomberg:
- US stocks staged their biggest two-day rally in almost a year as oil prices fell and companies proposed more than $19 billion in acquisitions.
- Fidelity Investments said Robert Stansky will retire after nine years of managing its flagship Magellan Fund.
- Verizon and SBC Communications cleared the final federal hurdle to their multibillion-dollar acquisitions without having to sell assets.
- GM and Wal-Mart are helping convince some economists that the Federal Reserve can stop worrying about wage pressures driving inflation.
- Ralph Acampora, the former director of technical research at Prudential Equity Group whose department was shut down last month, was hired by Knight Capital Group.
- Dell said third-quarter sales missed forecasts because demand from US consumers and UK businesses fell short of its expectations.
- Crude oil and heating oil tumbled, and gasoline fell to the lowest in almost five months, as warmer-than-normal weather may cut consumption in the US Northeast.

BOTTOM LINE: The Portfolio finished substantially higher today on gains in my Retail longs, Semi longs, Computer longs and Airline longs. I did not trade in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished substantially higher, almost every sector rose and volume was above average. Measures of investor anxiety were mostly higher into the close. Overall, a very good day for the bulls as the major indices and breadth finished near session highs. Stabilizing long-term rates even with the strong stock rally and better-than-expected economic data are a big positive. Moreover, I sense a shift in psychology with respect to the positive implications of the sharp fall in energy prices. Unleaded gas futures have now collapsed close to 50% even as refinery utilization remains substantially lower than pre-hurricane levels. Hedge funds had one of their worst months in a long time during October as energy stocks fell and emerging markets faltered. I expect follow-through on today's gains as those funds pile on long to try and recoup recent losses.

Stocks Sharply Higher Mid-day on Falling Energy Prices and Stronger Economic Data

Indices
S&P 500 1,206.50 +.68%
DJIA 10,448.79 +.45%
NASDAQ 2,117.36 +1.31%
Russell 2000 645.83 +1.65%
DJ Wilshire 5000 12,037.22 +.86%
S&P Barra Growth 577.06 +.62%
S&P Barra Value 625.58 +.77%
Morgan Stanley Consumer 587.91 +.55%
Morgan Stanley Cyclical 717.79 +1.17%
Morgan Stanley Technology 499.10 +1.46%
Transports 3,815.90 +1.98%
Utilities 398.98 +.76%
Put/Call .94 +14.63%
NYSE Arms .79 +55.29%
Volatility(VIX) 14.53 +1.96%
ISE Sentiment 190.00 +52.00%
US Dollar 90.10 +.57%
CRB 315.91 -1.93%

Futures Spot Prices
Crude Oil 59.50 -2.81%
Unleaded Gasoline 153.50 -5.80%
Natural Gas 12.26 -6.09%
Heating Oil 177.00 -3.99%
Gold 466.90 -1.73%
Base Metals 135.03 +1.53%
Copper 180.90 -.60%
10-year US Treasury Yield 4.55% -.22%

Leading Sectors %
Retail +3.42%
Airlines +3.41%
Internet +2.12%

Lagging Sectors
Drugs +.15%
Foods -.15%
Gold & Silver -.37%

BOTTOM LINE: The Portfolio is substantially higher mid-day on gains in my Internet longs, Retail longs, Computer longs, Semi longs and Airline longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is substantially higher, almost every sector is rising and volume is slightly above average. Measures of investor anxiety are mostly higher. Today’s overall market action is positive considering the underperformance by energy stocks. Many are trying to espouse the notion that the weakness in the energy complex is a sign of a substantial economic slowdown. I see very little evidence of this. While economic growth is likely slowing from vigorous levels before the hurricanes to average levels during the 4Q, I see few signs of a significant slowdown. A U.S. recession anytime in the near future is highly unlikely. As I have said many times before, energy pricing has been in a fear-induced mania. The fundamentals do not support energy prices anywhere near current levels. Now that we are in the fourth quarter, have survived the greatest hit to the U.S. energy infrastructure in history and inventories are still above five-year averages heading into the winter, traders are re-pricing the entire energy complex. I do not believe this is a sign of significant economic weakness, but a return to saneness in the energy pit. I expect US stocks to trade modestly higher from current levels into the close on short covering and bargain hunting as energy prices remain weaker.

Today's Headlines

Bloomberg:
- The scandal-plagued United Nations, which urges the world’s companies to follow anti-pollution, labor rights and other standards of corporate responsibility, often ignores those aims when investment its own $29 billion employee pension fund.
- Merrill Lynch is earning the most money managing assets for individual investors since the stock market bubble’s peak five years ago.
- Crude oil is falling, heading for its first two-month decline in NY this year, as production recovers, supplies build and demand falls with the US hurricane season nearing an end.
- President Bush has chosen Samuel Alito, a federal appellate judge, as his nominee for the Supreme Court.
- Barrick Gold said it made an offer for rival Placer Dome valued at $9.2 billion in cash and stock.
- Chemicals in certain vegetables and herbs, such as broccoli sprouts, cabbage and gingko biloba, may help prevent cancer, according to five studies presented at a research conference today.
- The US dollar is gaining, reaching the highest in more than two years against the yen, as an index of Chicago-area business activity unexpectedly surged.
- Novartis AG, Europe’s second-largest drugmaker by market value, agreed to pay $5.1 billion to take control of US vaccine maker Chiron as governments raised spending on treatments for ailments such as avian influenza.

Wall Street Journal:
- Saks Inc. is expected to announced that it will sell its Northern department-store group to Bon-Ton Stores for $1.1 billion.
- Kraft’s decision to halt advertising of certain products to children to help curb obesity has gained favor with some officials.
- Janus Capital Group of the US, which manages $130 billion, may be the subject of a takeover after a non-executive director quit last week because of a disagreement over a “strategic option” the company is pursuing.
- Sprint Nextel plans to introduce an over-the-air music downloading service today.
- The indictment of I. Lewis Libby on perjury and related charges may be difficult to prove.
- The SEC plans to check a sample of investment advisory companies randomly each year rather than visit each of them every five years.

NY Times:
- NBC reporter Tim Russert, whose testimony was used to indict I. Lewis Libby is uneasy about being involved in a subject he’s reporting on.
- Atticus Capital, Third Point LLC, York Capital and other hedge funds face losses of 5-10% for October, as investments in energy stocks, takeovers and overseas stocks falter.
- The economic interaction between China and Japan has been increasing while diplomatic relations worsen.
- Sean McManus, appointed last week as the president of CBS News, faces a challenge in his new role after a flawed report last year on President Bush’s Vietnam-era National Guard service and the ensuing retirement of Dan Rather.
- Small Internet access companies are trying to find new ways to connect with consumers as bigger companies dominate the market for high-speed services and they say they may have found the answer in wireless technology.

NY Post:
- The Port Authority of NY & New Jersey will test smart cards next month on the PATH railroad linking Manhattan to New Jersey.

San Francisco Chronicle:
- California wineries expect to reap 3.15 million tons of grapes this year, the second-largest harvest in state history.

USA Today:
- US federal lawmakers have ordered an investigation into the increasing costs of repairing and maintaining machines that check luggage for bombs at airports.

Financial Times:
- Carlyle Group, which manages the fourth-largest US buyout fund, may join a group of bidders considering an offer for Computer Sciences, the No. 5 US computer-services company.

Basler Zeitung:
- Roche Holding AG wants to issue licenses allowing companies and governments to produce the Tamiflu flu drug on the condition that the product is kept for use in a possible pandemic and not sold.

Il Messaggero:
- Italy aims to eliminate the use of oil in the production of electricity in the next five years, citing Industry Minister Claudio Scajola.

Incomes Rebound Strongly, Spending Remains Healthy, Inflation Modest, Chicago Manufacturing Strong

- Personal Income for September rose 1.7% versus estimates of a .3% increase and a downwardly revised .9% decrease in August.
- Personal Spending for September rose .5% versus estimates of a .5% increase and a .5% decline in August.
- PCE Core for September rose .2% versus estimates of a .1% gain and a .1% increase in August.
- Chicago Purchasing Manager for October rose to 62.9 versus estimates of 57.4 and a reading of 60.5 in September.

BOTTOM LINE: US consumer spending rose in September and incomes rebounded after plunging in August because of uninsured losses from Hurricane Katrina, Bloomberg reported. The 2.0%(YoY) rise in the PCE core, the Fed’s favorite inflation gauge, was within their forecast at the beginning of the year of a 1.75%-2.0% increase. Excluding the effects of the hurricanes, personal income rose .5% in September versus a .3% increase in August. Moreover, American incomes rose 6.3%(Year-over-Year) in September, about twice the rate of most inflation readings. I expect income growth to decelerate and spending to remain strong into year-end as economic growth slows to average rates and energy price declines accelerate.

An index of Chicago-area business activity unexpectedly rose this month adding to evidence that the US economy snapped back after Hurricane Katrina and Rita, Bloomberg reported. The backlog component of the index surged to the highest in a year. The new orders component spiked to 72.6, the highest since March, from 68.3 in September. As well, the prices paid component rose to 79.6 from 76.3 in September. Finally, the employment component of the index rose to 51.3 from 48.4 last month. I continue to believe manufacturing will add to economic growth over the next few months on inventory rebuilding spurred by more confidence in US economic growth.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Monday Watch

Weekend Headlines
Bloomberg:
- Wal-Mart Stores said October same-store sales rose about 4.3%, beating its forecast.
- OPEC said there have been no buyers for the extra oil it began offering on Oct. 1, when it effectively suspended its quota system for the first time since the 1990 Gulf War after prices surged following Hurricane Katrina.
- Japan’s Prime Minister Koizumi, who plans to step down in September, will select his final cabinet today. The choices are expected to reflect his drive to cut public spending, sell state-owned assets and lower the nation’s debt, analysts say.
- Wall Street’s biggest bond-trading firms say Ben Bernanke will be as zealous in fighting inflation as Alan Greenspan when he takes over as chairman of the Federal Reserve on Feb. 1.
- The Bill & Melinda Gates Foundation has announced $258.3 million in grants to find ways to combat malaria, which kills 2,000 African children every day.
- Hiring rebounded this month and manufacturers turned out more goods as the US economy shook off the effects of two hurricanes, economists expect reports this week will show.
- Orix Corp., Japan’s largest non-bank finance company, will buy closely held investment bank Houlihan Lokey Howard & Zukin for $500 million to start offering advisory and restructuring services in the US.

Wall Street Journal:
- The US Treasury Dept. is prepared to incorporate recommendations from a tax panel into a policy-revision plan by the start of the next year should the president approve the group’s suggestions.
- Microsoft, battling perceptions that it’s lost the lead in technology innovation to Web-based companies, will disclose new plans this week to make its software better suited to the Internet.

NY Times:
- Wal-Mart Stores is preparing to announce an “ambitious plan” to improve business in Japan that will include upgrading about 200 stores.
- Two genes have been identified that contribute to dyslexia, citing a meeting of the American Society of Human Genetics yesterday.
- “Concierge” doctors, who are paid a large annual fee to provide more attention, time and care to patients, delight their clients.
- Google is becoming one of the leading players in the world of advertising, citing Goldman Sachs.
- Shares of publicly traded water companies have surged as large amounts of water controlled by municipalitites will soon come under the purview of private companies.
- Venezuela’s President Chavez is establishing socialism by founding state companies, seizing private factories and establishing cooperatives and worker-run businesses.
- Venezuela’s opposition said the government’s policy of seizing large farming estates is benefiting government officials. Land from the seizures is being given or sold to backers of President Chavez and his Fifth Republic Movement, and not landless peasants. The seizures are especially benefiting the country’s military.

Star-Ledger of Newark:
- New Jersey slipped to 44th in a national ranking of state business climates, hurt by taxes and over-regulation.

Washington Post:
- US Defense Secretary Donald Rumsfeld is asking Congress for $750 million and expanded authority to support counterrorism, border security and law enforcement in other countries.

AP:
- Viacom’s Paramount Pictures is removing some billboards that promote the 50 cent film “Get Rich or Die Tryin” after complaints they promoted gun violence.
- President Bush will reveal on Nov. 1 how his administration plans to fight any global influenza outbreak at the National Institute of Health.

Computer World:
- Consumers are expected to spend approximately 25% more online this holiday season than they did last year, several analysts said.

Financial Times:
- Kroger Co. will continue with its strategy of cutting prices to increase sales.
- Intel wants electronic medical equipment-makers to fit standard plug and cable sizes so equipment is interchangeable in the way computers are, citing CEO Otellini.

Sunday Telegraph:
- Wal-Mart Stores may expand in India.

Sunday Times:
- Walt Disney may start a mobile-phone company in the UK next year.

Weekend Recommendations
Barron's:
- Had positive comments on BUD, STA, SSW, DFG and EDS.

Goldman Sachs:
- Reiterated Outperform on GE and CEM.
- Reiterated Underperform on FSS.
- Reiterated bearish view of slot manufacturers, reiterated Underperform on IGT.

Night Trading
Asian indices are +.75% to +1.75% on average.
S&P 500 indicated +.08%.
NASDAQ 100 indicated +.19%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/Estimate
AES/.15
HUM/.51
INTU/-.30
K/.64
OXY/2.63
VLO/4.22

Upcoming Splits
None of note

Economic Releases
8:30 am EST
- Personal Income for September is estimated to rise .3% versus a .1% fall in December.
- Personal Spending for September is estimated to rise .5% versus a .5% decline in August.
- The PCE Core for September is estimated to rise .1% versus a .2% increase in August.

BOTTOM LINE: Asian Indices are higher, led by exporting companies in the region after a government report last week showed strong US growth. I expect US stocks to open higher and maintain gains throughout the day. The Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,198.41 +1.60%



Click here for the Weekly Wrap by Briefing.com.

Weekly Scoreboard*

Indices
S&P 500 1,198.41 +1.60%
DJIA 10,402.77 +1.84%
NASDAQ 2,089.88 +.37%
Russell 2000 635.33 +.41%
DJ Wilshire 5000 11,933.82 +1.36%
S&P Equity Long/Short Index 1,053.34 +.57%
S&P Barra Growth 573.48 +.89%
S&P Barra Value 620.78 +2.28%
Morgan Stanley Consumer 584.68 +1.23%
Morgan Stanley Cyclical 709.46 +3.30%
Morgan Stanley Technology 491.91 -1.15%
Transports 3,741.81 +3.26%
Utilities 396.01 +2.42%
S&P 500 Cum A/D Line 6,278.00 -1.94%
Bloomberg Crude Oil % Bulls 25.0 +233.33%
Put/Call .82 -18.0%
NYSE Arms .51 -60.77%
Volatility(VIX) 14.25 -11.65%
ISE Sentiment 125.00 -10.71%
AAII % Bulls 32.05 -25.66%
US Dollar 89.59 -.74%
CRB 322.13 -.12%

Futures Spot Prices
Crude Oil 61.22 +1.11%
Unleaded Gasoline 162.42 -.96%
Natural Gas 13.05 -.95%
Heating Oil 184.35 -1.28%
Gold 475.00 +1.71%
Base Metals 133.00 +1.33%
Copper 181.95 +1.99%
10-year US Treasury Yield 4.56% +3.87%
Average 30-year Mortgage Rate 6.15% +.82%

Leading Sectors
Oil Service +6.67%
Energy +5.01%
Steel +4.88%

Lagging Sectors
HMOs -3.35%
Hospitals -3.79%
Semis -3.84%

One-Week High-Volume Gainers
One-Week High-Volume Losers

*5-Day % Change

Stocks Sharply Higher Mid-day on Positive Economic Data

Indices
S&P 500 1,193.26 +1.22%
DJIA 10,364.67 +1.32%
NASDAQ 2,082.17 +.89%
Russell 2000 632.79 +1.46%
DJ Wilshire 5000 11,894.94 +1.30%
S&P Barra Growth 571.76 +1.19%
S&P Barra Value 618.51 +1.41%
Morgan Stanley Consumer 582.93 +1.02%
Morgan Stanley Cyclical 707.40 +1.31%
Morgan Stanley Technology 490.03 +.40%
Transports 3,728.03 +1.46%
Utilities 393.91 +1.78%
Put/Call .82 -26.13%
NYSE Arms .57 -63.17%
Volatility(VIX) 14.51 -9.43%
ISE Sentiment 126.00 -18.18%
US Dollar 89.62 +.58%
CRB 321.85 -.48%

Futures Spot Prices
Crude Oil 61.10 +.10%
Unleaded Gasoline 161.50 +1.41%
Natural Gas 12.99 -5.07%
Heating Oil 184.25 -.61%
Gold 474.80 -.17%
Base Metals 133.00 -.34%
Copper 182.00 +.89%
10-year US Treasury Yield 4.58% +.85%

Leading Sectors %
Airlines +3.32%
Steel +2.72%
REITs +2.40%

Lagging Sectors
Wireless unch.
Coal -.60%
Semis -1.35%

BOTTOM LINE: The Portfolio is slightly higher mid-day on gains in my Internet longs, Retail longs and Airline longs. I covered some of my IWM and QQQQ shorts, thus leaving the Portfolio 75% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are higher and volume is slightly above average. Measures of investor anxiety are mostly lower. Today’s overall market action is positive considering the rise in long-term rates and political news. It appears the lows of two weeks ago will hold and equities should see much better performance through year-end. I expect US stocks to trade modestly higher from current levels into the close on short covering.

Today's Headlines

Bloomberg:
- Iran’s President Mahmoud Ahmadinejad stood by his comment that Israel “must be wiped off the map,” ignoring condemnation from the European Union, US and Russia.
- I. Lewis Libby was indicted by a grand jury investigating who leaked the name of an alleged covert CIA agent. Libby resigned shortly afterward. Karl Rove, who made four appearances before the grand jury, wasn’t charged.
- Natural gas prices continue to fall after a report yesterday showed US stockpiles were ample to meet winter demand.

Wall Street Journal:
- Verizon Communications faces demands from local authorities to fund a variety of projects in exchange for allowing the company to roll out its high-speed network.
- Oil prices at more than $60 a barrel are spurring increased interest in biofuels, including plants that use turkey feathers, bones, fat and even entire birds to produce diesel fuel.
- Esprit, a brand that largely disappeared from the US, is attempting a US comeback with high-fashion goods.
- Abigail Johnson, Fidelity Investments’ biggest shareholder, has reduced her stake in the US mutual-fund company, raising questions about whether she will succeed her father at the head of the firm.
- Delta Air Lines may end its Song discount carrier unit introduced in 2003, and apply some of the experience gained to Delta flights.

NY Times:
- The American Association of Retired Persons is seeking to attract more members by selling and endorsing products.
- The US oil and gas industry, awash with money, is facing a labor and equipment shortage.
- Fifth Third Bank of Cincinnati may be the subject of takeover interest as disappointing deposit growth reversed its fortunes and sent its stock down.

Washington Post:
- Rosa Parks, the African-American whose arrest helped spark the US civil-rights movement, may be honored by Congress with a vigil in the Capitol Rotunda to market her death on Oct. 24.
- The FBI may not monitor the locations of cellular phone users without showing evidence that a crime took place or is in progress.
- A federal program that has doled out more than $10 billion to help schools and libraries access the Internet has wasted millions of dollars.

Le Figaro:
- A French Islamist terrorist group has obtained shoulder-held anti-aircraft missiles from Chechnya with the intention of bringing down an airliner at a French airport, citing judicial documents.

US Growth Streak Best Since 1986, Inflation Contained, Confidence Remains Weaker

- Advance 3Q GDP rose 3.8% versus estimates of a 3.6% increase and a 3.3% gain in 2Q.
- Advance 3Q GDP Price Index rose 3.1% versus estimates of a 2.8% increase and a 2.6% increase in 2Q.
- Advance 3Q Personal Consumption rose 3.9% versus estimates of a 3.3% increase and a 3.4% gain in 2Q.
- 3Q Employment Cost Index rose .8% versus estimates of a .8% gain and a .7% increase in 2Q.
- Final Univ. of Mich. Consumer Confidence for October fell to 74.2 versus estimates of 76.0 and a prior estimate of 75.4.

BOTTOM LINE: US economic growth quickened to a 3.8% annual rate in the third quarter, faster than economists predicted and evidence the economy was able to withstand higher energy costs, Bloomberg reported. Companies pared inventories for the second quarter in a row which will likely boost growth in 4Q as companies rebuild inventories. US growth has exceeded 3% for 10 straight quarters, the best streak since the 13 quarters that ended in March 1986 and the best performance among the G-7, which includes Japan, Germany, the UK, France Italy and Canada. Consumer spending rose 3.9% last quarter, the most this year and higher than the 20-year average of 3.4%. The core personal consumption expenditures index, Greenspan’s favorite inflation gauge, rose at a 1.3% annual rate, the slowest since the second quarter of 2003. The trade deficit narrowed to $611.8 billion from $614.2 billion in 2Q, adding .08 percentage point to 3Q GDP after adding 1.1 percentage points in 2Q. This is the first time trade has added to growth in back-to-back quarters since the last half of 1995. I continue to believe growth slowed to below average levels after the hurricanes struck in September and that a bounce back to average growth will occur into year-end.

US consumer confidence fell below estimates this month as energy costs remained elevated, Bloomberg reported. The average price of gas is 38% higher than this time last year. The current conditions component of the index fell to 91.2 from 98.1 in September. Since reaching a record in September, the average price of gas has fallen five of the past eight weeks and was $2.60/gallon in the week ended Oct. 24. I continue to anticipate a sharp rebound in consumer sentiment over the next few months.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Friday Watch

Late-Night Headlines
Bloomberg:
- Japan’s consumer prices fell in September for a fourth month, suggesting more than seven years of deflation lingers and the central bank won’t end its policy of flooding the economy with cash anytime soon.
- Japan’s households spent less for the fourth month in five in September, signaling that the pace of consumer spending in the world’s second-largest economy may slow in the third quarter of the year.
- Japan’s industrial production rose less than expected as rising fuel prices heightened concern among manufacturers that export demand by slow, signaling the pace of growth in the world’s second-largest economy may ebb.
- Microsoft threatened to pull its Windows operating system from South Korea if antitrust regulators order the company to remove programming for instant message and movie player services.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on LLL, CRL, KLAC, IMCL, CFC, GP and HMA.
- Reiterated Underperform on UST, MRO, CAN, UHS and CTL.

Business Week:
- The shares of Advanta Corp.(ADVNA), the No. 3 issuer of credit cards to small businesses, may rise as much as 27% because it may be a takeover target.
- The shares of USG Corp.(USG), the No. 1 maker of gypsum wallboard, may decline on asbestos liabilities.
- Southwest Airlines may rise to $22 a share, or 42%, within a year because it has used financial instruments known as hedges to limit the effect of price variations on some of its fuel through 2009.

Night Trading
Asian Indices are -1.50% to -.50% on average.
S&P 500 indicated -.07%.
NASDAQ 100 indicated -.26%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
APC/2.89
ADM/.33
AVP/.29
BHI/.67
BMY/.33
CHKP/.31
CVX/1.90
COCO/.07
OSTK/-.51

Upcoming Splits
- GPN 2-for-1

Economic Releases
8:30 am EST
- Advance 3Q GDP is estimated to rise 3.6% versus a 3.3% gain in 2Q.
- Advance 3Q GDP Price Index is estimated to rise 2.8% versus a 2.6% rise in 2Q.
- Advance 3Q Personal Consumption is estimated to rise 3.3% versus a 3.4% gain in 2Q.
- Advance 3Q Employment Cost Index is estimated to rise .8% versus a .7% gain in 2Q.

9:45 am EST
- Final Univ. of Mich. Consumer Confidence for October is estimated to rise to 76.0 from a prior estimate of 75.4.

BOTTOM LINE: Asian indices are lower on worries over slowing growth in the US and Japan. I expect US equities to open lower and to rise modestly later in the day. The Portfolio is 50% net long heading into the day.

Stocks Finish Near Session Lows on Growing Economic Concerns

Indices
S&P 500 1,178.90 -1.05%
DJIA 10,229.95 -1.11%
NASDAQ 2,063.81 -1.73%
Russell 2000 624.03 -2.25%
DJ Wilshire 5000 11,742.89 -1.23%
S&P Barra Growth 564.94 -1.15%
S&P Barra Value 609.85 -.95%
Morgan Stanley Consumer 577.04 -.92%
Morgan Stanley Cyclical 698.28 -.95%
Morgan Stanley Technology 488.10 -1.35%
Transports 3,674.32 -1.63%
Utilities 387.03 -1.30%
Put/Call 1.11 +21.98%
NYSE Arms 1.58 +73.92%
Volatility(VIX) 16.02 +9.80%
ISE Sentiment 151.00 +10.22%
US Dollar 89.12 -.41%
CRB 323.41 -.25%

Futures Spot Prices
Crude Oil 61.04 -.08%
Unleaded Gasoline 159.40 +.09%
Natural Gas 13.52 -1.16%
Heating Oil 185.60 +.11%
Gold 475.60 unch.
Base Metals 133.45 +.28%
Copper 179.75 -.36%
10-year US Treasury Yield 4.55% -.57%

Leading Sectors
Insurance -.02%
HMOs -.05%
Banks -28%

Lagging Sectors
Oil Tankers -3.22%
Coal -3.36%
Broadcasting -3.43%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on FORM and ENH.
- Upgraded AET to Outperform.

Afternoon/Evening Headlines
Bloomberg:
- French President Chirac threatened to derail international trade talks by ruling out further cuts in European Union farm subsidies and tariffs.
- GM, which gets more than a quarter of its revenue from large pickups and sport-utility vehicles, is adding a line of small SUVs that will get better fuel mileage than the larger models.
- DaimlerChrysler AG, Siemens AG, and Volvo AB are among 2,253 companies that paid illegal kickbacks to Saddam Hussein to win business from the oil-for-food program which was designed to allow Hussein to sell oil to buy food and medicine for impoverished Iraqis, former US Fed chairman Volcker said today in a report.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Retail longs, Semi longs and Medical longs. I did not trade in the afternoon, thus leaving the Portfolio 50% net long. The tone of the market very negative today as the advance/decline line finished substantially lower, every sector declined and volume was average. Measures of investor anxiety were mostly higher into the close. Overall, today’s market action was negative. A variety of stocks sustained meaningful damage. Buyers walked away in many cases. We are approaching the type of action I would expect to see at a tradable market bottom. I expect stocks to hold recent lows seen two weeks ago and embark upon a strong rally next month.

Stocks Lower Mid-day on Economic Concerns

Indices
S&P 500 1,185.32 -.52%
DJIA 10,280.14 -.63%
NASDAQ 2,075.80 -1.15%
Russell 2000 626.61 -1.85%
DJ Wilshire 5000 11,800.84 -.75%
S&P Barra Growth 567.84 -.64%
S&P Barra Value 612.94 -.45%
Morgan Stanley Consumer 579.40 -.52%
Morgan Stanley Cyclical 701.08 -.56%
Morgan Stanley Technology 490.47 -.87%
Transports 3,686.48 -1.32%
Utilities 390.43 -.43%
Put/Call 1.03 +13.19%
NYSE Arms 1.23 +34.77%
Volatility(VIX) 15.32 +5.0%
ISE Sentiment 155.00 +13.14%
US Dollar 89.07 -.47%
CRB 323.69 -.17%

Futures Spot Prices
Crude Oil 61.15 +.73%
Unleaded Gasoline 160.00 +.98%
Natural Gas 13.67 -2.35%
Heating Oil 185.75 +.08%
Gold 475.60 +.55%
Base Metals 133.45 +.28%
Copper 180.40 -.77%
10-year US Treasury Yield 4.56% -.40%

Leading Sectors %
HMOs +1.00%
Insurance +.47%
Gold & Silver +.30%

Lagging Sectors
Networking -2.66%
Oil Tankers -3.02%
Coal -3.27%

BOTTOM LINE: The Portfolio is slightly lower mid-day as gains in my Energy-related shorts and Steel shorts are more than offset by losses in my Semiconductor longs, Retail longs and Medical longs. I added to my IWM and QQQQ shorts, thus leaving the Portfolio 50% net long. The tone of the market is negative as the advance/decline line is substantially lower, most sectors are lower and volume is around average. Measures of investor anxiety are mostly higher. Today’s overall market action is negative considering the decline in long-term rates and fall in energy prices. The EIA reported natural gas stockpiles rose 77 bcf to 3139 bcf vs. estimates of a 66 bcf rise. Natural gas inventories continue to rise above the five-year average for this time of the year, even with substantial production still shut in the Gulf. As this production comes back and demand fails to meet expectations this winter, natural gas should see a substantial decline beginning next month. I expect US stocks to trade modestly higher from current levels into the close on short covering.

Today's Headlines

Bloomberg:
- European Union leaders condemned Iranian President Mahmoud Ahmadinejad’s comment that Israel “must be wiped off the map,” adding to tensions over Iran’s nuclear program.
- Israel’s forces struck the Gaza Strip from the air and arrested Palestinian militants in the West Bank as Prime Minister Sharon ordered a military buildup in response to a bombing that killed five Israelis.
- Harriet Miers withdrew her nomination for the Supreme Court, saying “I am concerned that the confirmation process presents a burden for the White House and our staff that is not in the best interest of the country.”
- OPEC is scheduled to ship 2% more oil in the four weeks ending Nov. 12 than in the previous four weeks, consulting company Oil Movements said.
- Crude oil and heating oil are falling after an Energy Dept. report showed that US stockpiles of natural gas, a competing fuel, rose more than expected last week even though over 50% of Gulf of Mexico production remains shut-in.

Wall Street Journal:
- Altria Group is designing an inhaler to treat various ailments, including smoking-related lung disease.
- A group of investors that lost money when WorldCom collapsed has reached a $651 million litigation settlement, with most of the money to be paid by the company’s banks.
- Yahoo! and Microsoft’s instant-messaging services allow phone calls through the Internet, although some problems exist that can disrupt international connections.

NY Times:
- Mammograms have helped to reduce the number of deaths in the US caused by breast cancer, citing the National Cancer Institute.
- The United Nations oil-for-food program had the participation of 4,500 companies, of which more than half illegally gave money to Saddam Hussein to build weapons stockpiles, citing an investigation into the program. Hussein and companies from 60 countries benefited from the $64 billion UN program that was introduced to help feed the Iraqi people.
- Intel co-founder Andrew Grove donated $26 million to City College of NY, the school’s biggest cash gift.

NY Post:
- JPMorgan Chase is introducing a new credit card that will allow users to instantly pay for transactions by touching the card to a checkout scanner.
- Google said it’s considering ways to expand its advertising business to add buying and selling television ad time.

AP:
- Yahoo! said it will double the price of its music-service subscription starting Nov. 1.

INA:
- Iranian President Mahmoud Ahmadinejad called Israel’s withdrawal from Gaza a “trick” and said the Islamic world would “wipe Israel away.”

Durables and Jobless Claims Fall, New Home Sales Rise

- Durable Goods Orders for September fell 2.1% versus estimates of a 1.5% decline and an upwardly revised 3.8% gain in August.
- Durables Ex Transportation for September fell 1.0% versus estimates of an .8% gain and an upwardly revised 5.1% increase in August.
- Initial Jobless Claims for last week fell to 328K versus estimates of 340K and 356K the prior week.
- Continuing Claims rose to 2904K versus 2862K prior.
- New Home Sales for September rose to 1222K versus estimates of 1250K and a downwardly revised 1197K in August.

BOTTOM LINE: US durable orders fell more than forecast in September, a sign that rising energy prices may have made companies more wary about purchasing new aircraft, computers and communications equipment, Bloomberg said. A machinist strike at Boeing contributed to a 42% plunge in aircraft orders. Bookings for non-defense capital goods excluding aircraft, an indication of future business investment, fell 1.2% in September after rising 4% the prior month. I expect Durable Goods Orders to rebound through year-end on lower energy prices and hurricane rebuilding.

The number of American filing first-time claims for unemployment benefits declined for a second week as filing waned from workers displaced by the Gulf Coast hurricanes, Bloomberg said. The four-week moving average of jobless claims fell to 366,500 from 376,500 the prior week. The insured employment rate, which tracks the US unemployment rate, rose to 2.3% from 2.2%. The labor market should continue improving from the effects of the hurricanes through year-end.

US new home sales rose in September from the second-lowest level of the year, suggesting that rising energy costs and mortgage rates have yet to damp the housing market, Bloomberg said. The median price of a new home fell to $215,700 from $228,800 in August. New homes sales are still on pace to set another annual record. The supply of new homes for sale at the current pace was unchanged from August at 4.9 months. New home sales rose 24.9% in the Midwest and 5.6% in the South. Sales fell 20% in the Northeast and 11.8% in the West. I continue to believe the housing market is slowing to more healthy sustainable levels.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Thursday Watch

Late-Night Headlines
Bloomberg:
- Roche Holding AG is halting sales of the influenza drug Tamiflu in the US to ensure the medicine is available during the flu season.
- The US House passed legislation that would create a stricter federal regulator for Fannie Mae and Freddie Mac in response to more than $15 billion of accounting errors at the government-chartered mortgage finance companies.
- The US Senate Budget Committee approved a package of $39 billion in spending cuts, as part of a Republican-lead effort to reduce the budget deficit.
- Crude oil is little changed in NY after falling 2.9% yesterday when a report showed US oil stockpiles rose twice as much as expected last week.
- The US dollar is rising to the highest in more than two years against the yen amid speculation the US economy will remain strong and the Fed will keep raising rates.
- Jermaine Dye drove in the winning run with an eight-inning single as the Chicago White Sox beat the Houston Astros 1-0 to win their first World Series title in 88 years.

Financial Times:
- Time Warner’s board may meet today to discuss a possible partnership with its AOL division and Google or Microsoft.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on AMLN, PSSI, EPD, ACLS, CAH, BXP, SYMC, AHC, EPE, SII and DO.
- Reiterated Underperform on ESRX, JNY, RAI and CR.

Night Trading
Asian Indices are -.50% to unch. on average.
S&P 500 indicated -.35%.
NASDAQ 100 indicated -.32%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
AET/1.17
APA/2.31
AVID/.46
ABX/.13
BEBE/.16
BDK/1.67
CMI/2.60
DOW/.75
XOM/1.38
IMCL/.29
KLAC/.39
MSO/-.30
MXIM/.39
MSFT/.30
PD/4.01
TDW/.59
VZ/.64
WDC/.29
WMI/.33
WEN/.57
XMSR/-.66

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Durable Goods Orders for September are estimated to decline 1.5% versus a 3.4% gain in August.
- Durables Ex Transportation for September are estimated to rise .8% versus a 4.2% increase in August.
- Initial Jobless Claims for last week are estimated to fall to 340K versus 355K the prior week.

10:00 am EST
- New Home Sales for September are estimated to rise to 1250K versus 1237K in August.

BOTTOM LINE: Asian indices are mostly lower, dragged down by losses in Taiwan and Korea. I expect US equities to open modestly lower. The Portfolio is 75% net long heading into the day.

Stocks Finish at Session Lows as Long-term Rates Rise

Indices
S&P 500 1,191.38 -.43%
DJIA 10,344.98 -.32%
NASDAQ 2,100.05 -.45%
Russell 2000 638.41 -.67%
DJ Wilshire 5000 11,889.46 -.47%
S&P Barra Growth 571.52 -.56%
S&P Barra Value 615.69 -.31%
Morgan Stanley Consumer 582.39 -.19%
Morgan Stanley Cyclical 705.00 +.52%
Morgan Stanley Technology 494.77 -1.23%
Transports 3,735.29 -.04%
Utilities 392.11 -1.33%
Put/Call .91 +3.41%
NYSE Arms .91 -7.45%
Volatility(VIX) 14.59 +.41%
ISE Sentiment 136.00 -27.66%
US Dollar 89.54 +.34%
CRB 324.23 -1.51%

Futures Spot Prices
Crude Oil 60.92 +.43%
Unleaded Gasoline 159.00 +.35%
Natural Gas 14.03 -.11%
Heating Oil 186.00 +.21%
Gold 472.60 -.08%
Base Metals 133.08 -.46%
Copper 181.45 -.19%
10-year US Treasury Yield 4.59% +1.25%

Leading Sectors
Airlines +.93%
Oil Tankers +.92%
Computer Services +.91%

Lagging Sectors
Gold & Silver -2.57%
HMOs -2.71%
Gaming -3.29%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on MNST, ADP, AMLN and PAYX.

Afternoon/Evening Headlines
Bloomberg:
- Research in Motion lost a US Supreme Court bid to block proceedings that might result in a nationwide shutdown of its BlackBerry e-mail service.
- EnCana, Canada’s largest natural-gas producer, said third-quarter profit slid 32% because of hedging contracts that locked in fuel sales before prices surged to a record.
- US Treasuries fell, pushing the 10-year note’s yield to the highest since its peak this year in March.

span style="font-weight:bold;">BOTTOM LINE: The Portfolio finished higher today on gains in my Internet longs, Medical longs and Airline longs. I added IWM and QQQQ shorts in the afternoon, thus leaving the Portfolio 75% net long. The tone of the market was negative today as the advance/decline line finished lower, most sectors declined and volume was slightly above average. Measures of investor anxiety were mixed into the close. Oil closed floor trading at session lows, down $1.78. I expect the contango in the crude futures market to dissipate over the next few weeks, further pressuring demand for the commodity.

Stocks Mixed Mid-day as Energy Prices Fall and Long-term Rates Rise

Indices
S&P 500 1,197.46 +.11%
DJIA 10,398.21 +.20%
NASDAQ 2,107.83 -.08%
Russell 2000 641.32 -.22%
DJ Wilshire 5000 11,948.69 +.02%
S&P Barra Growth 574.57 -.02%
S&P Barra Value 619.10 +.26%
Morgan Stanley Consumer 585.33 +.35%
Morgan Stanley Cyclical 708.62 +1.05%
Morgan Stanley Technology 497.54 -.67%
Transports 3,751.08 +.38%
Utilities 396.01 -.35%
Put/Call .91 +3.41%
NYSE Arms .77 -21.83%
Volatility(VIX) 14.24 -2.0%
ISE Sentiment 146.00 -22.34%
US Dollar 89.52 +.31%
CRB 325.47 -1.10%

Futures Spot Prices
Crude Oil 61.65 -1.35%
Unleaded Gasoline 161.25 -2.65%
Natural Gas 14.14 -1.35%
Heating Oil 188.00 -.52%
Gold 473.00 -.36%
Base Metals 133.08 -.46%
Copper 181.80 -.36%
10-year US Treasury Yield 4.57% +1.03%

Leading Sectors %
I-Banks +1.29%
Oil Tankers +1.12%
Papers +.98%

Lagging Sectors
Networking -1.78%
HMOs -2.28%
Gaming -2.69%

BOTTOM LINE: The Portfolio is substantially higher mid-day on gains in my Internet longs, Medical longs and Computer longs. I added PLAY long this morning and took profits in an existing long, thus leaving the Portfolio 100% net long. The tone of the market is slightly negative as the advance/decline line is modestly lower, sector performance is mixed and volume is slightly above average. Measures of investor anxiety are mixed. Today’s overall market action is neutral considering the rise in long-term rates and fall in energy prices. Trim Tabs is now estimating international funds will take in $87.5 billion this year, the most since they began keeping track in 1985. I continue to believe the mania for international stocks will end badly in the coming months. It will likely coincide with the accelerated downward move in commodity prices that I envision. I expect US stocks to trade modestly higher from current levels into the close on falling energy prices.

Today's Headlines

Bloomberg:
- US demand for international stocks this year may be the highest in more than 20 years, based on mutual-fund flows. The growth has led to concern that gains in markets worldwide have peaked.
- Shares of Doral Financial, Puerto Rico’s largest mortgage lender, plunged after the company disclosed late yesterday that the SEC is conducting a formal probe into an earnings restatement.
- CBS News President Andrew Heyward will step down after almost 10 years and will be replaced by CBS Sports chief Sean McManus.

Wall Street Journal:
- Lockheed Martin is part of a group of companies that may make a takeover offer for Computer Sciences.
- EarthLink and SK Telecom, South Korea’s leading wireless provider, plan to start a cell-phone and data service in the US.
- Ford Motor is trying to improve its internal knowledge of gasoline-electric engine technology so it can ensure its ability to produce hybrid engines to compete against Toyota Motor, maker of Prius hybrid cars.
- The Gulf Coast hurricane season, which has left hundreds of thousands of US citizens homeless, means a bonanza for makers of motorized mobile homes.

NY Times:
- There has been a “significant” increase in the number of first-time buyers of commercial real estate in the US as people seek higher return on investment.
- Billionaire investor Wilbur Ross plans to take advantage of cheaper prices to acquire ailing auto-parts businesses and combine them into a stronger company.

Washington Post:
- The US State Department issued final rules for putting electronic identification chips into all US passports.

Boston Globe:
- The median price of a single-family home in Massachusetts fell 4% to $360,000 in September, the first monthly decline since February.

AP:
- Democratic Senator Jon Corzine’s New Jersey gubernatorial campaign ad that features a paralyzed man criticizing Republican Doug Forrester for his views on stem-cell research has drawn negative comments.

Al-Ahram:
- Egypt has started pumping oil from one of three offshore fields in the Gulf of Suez that have reserves of up to 70 million barrels, citing Petroleum Minister Sameh Fahmy.

INA:
- Iranian President Mahmoud Ahmadinejad called Israel’s withdrawal from Gaza a “trick” and said the Islamic world would “wipe Israel away.”

Economic Releases

- The EIA just reported that crude oil inventories rose 4.41 million barrels vs. estimates of a 2.0 million barrel rise. Gasoline inventories rose 159,000 barrels vs. estimates of a 1.5 million barrel rise. Distillate supplies fell 1.62 million barrels vs. estimates of a 1.3 million barrel fall.

BOTTOM LINE: The EIA data was moderately bearish for oil, however the commodity is rising slightly on continued speculation that demand is accelerating from Sept. The overall trend in demand is lower and will remain so over the intermediate-term.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Australia’s consumer prices increased less than economists expected in the third quarter as the price of TVs, DVDs, stereos and medicines declined.
- Japan’s exports rose 8.8% to a record in September on higher demand from the US and China.
- Crude oil is falling for a sixth day in seven before a report today that may show US stockpiles increased for a third week on higher imports and weaker demand.

Financial Times:
- Sealed indictments in the CIA leak probe are expected to be filed tomorrow and released later this week.

AFP:
- Laser printers made by Xerox Corp. and other companies produce a secret code that can help the US Secret Service track down currency counterfeiters.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on GNW and CVS.
- Reiterated Underperform on EW and CR.

Night Trading
Asian Indices are -.50% to +.75% on average.
S&P 500 indicated +.22%.
NASDAQ 100 indicated +.19%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
ADP/.35
AHC/3.30
APCC/.28
BUD/.80
BIDU/.06
BOL/.90
BIIB/.42
BA/.80
CAH/.72
COP/2.56
GLW/.21
CSX/.72
DO/.40
DBD/.27
EL/.32
ESRX/.61
KMG/2.64
LLL/1.09
MGM/.41
MNST/.24
NEM/.25
OMX/.29
PFCB/.31
PHM/1.39
RCL/1.47
S/.38
ZMH/.67

Upcoming Splits
- None of note

Economic Releases
10:30 am EST
- Platt's estimates weekly crude inventories rose 2.7 million barrels, gasoline inventories rose 2.3 million barrels, distillate inventories declined 1.1 million barrels and refinery utilization increased 4.0%.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology companies in the region. I expect US equities to open mixed and to rise modestly later in the day. The Portfolio is 100% net long heading into the day.

Stocks Rebound into Close, Finishing Slightly Lower

Indices
S&P 500 1,196.54 -.24%
DJIA 10,377.87 -.07%
NASDAQ 2,109.45 -.30%
Russell 2000 642.73 -.60%
DJ Wilshire 5000 11,945.29 -.25%
S&P Barra Growth 574.71 -.32%
S&P Barra Value 617.62 -.15%
Morgan Stanley Consumer 583.50 -.36%
Morgan Stanley Cyclical 701.35 -.15%
Morgan Stanley Technology 500.92 -.89%
Transports 3,736.74 +.32%
Utilities 397.41 +.02%
Put/Call .88 +25.71%
NYSE Arms .98 +95.11%
Volatility(VIX) 14.53 -1.42%
ISE Sentiment 197.00 -18.60%
US Dollar 89.29 -.91%
CRB 329.19 +2.44%

Futures Spot Prices
Crude Oil 62.24 -.29%
Unleaded Gasoline 165.00 -.23%
Natural Gas 14.35 +.08%
Heating Oil 188.14 -.45%
Gold 474.50 -.04%
Base Metals 133.69 +1.30%
Copper 182.95 +.27%
10-year US Treasury Yield 4.53% +1.99%

Leading Sectors
Oil Service +2.95%
Energy +2.26%
Gold & Silver +1.55%

Lagging Sectors
Gaming -1.95%
Airlines -2.23%
HMOs -4.27%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on COH and SEPR.
- Reiterated Underperform on CHTR.

Afternoon/Evening Headlines
Bloomberg:
- NBC Universal CEO Wright said the NBC television network is “desperate” and rebuilding the schedule will take more than one season.
- Google is testing a service that may let users sell products online, posing a threat to EBay.
- US Treasury notes fell on expectations the Federal Reserve will keep raising interest rates to slow the economy.
- The US Senate will debate an overhaul of US immigration laws early next year, including whether to establish a guest-worker program, Senate Majority Leader Bill Frist.
- Chipotle Mexican Grill, majority-owned by McDonald’s, filed to sell as much as $100 million in stock in an IPO so McDonald’s can focus on its hamburger business.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Retail longs and Energy-related shorts. I exited my IWM and QQQQ shorts and added to a few existing longs in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market was mildly negative today as the advance/decline line finished lower, most sectors declined and volume was about average. Measures of investor anxiety were mostly higher into the close. Overall, today's performance wasn't too bad considering yesterday's gains and the bounce in long-term rates and energy prices. I expect stocks to make another push higher before week's end.

Stocks Lower Mid-day on a Bounce in Energy Prices and Long-term Rates

Indices
S&P 500 1,190.88 -.71%
DJIA 10,332.73 -.50%
NASDAQ 2,097.08 -.88%
Russell 2000 637.56 -1.40%
DJ Wilshire 5000 11,886.40 -.74%
S&P Barra Growth 571.86 -.82%
S&P Barra Value 614.94 -.59%
Morgan Stanley Consumer 581.33 -.73%
Morgan Stanley Cyclical 698.61 -.54%
Morgan Stanley Technology 498.77 -1.31%
Transports 3,719.29 -.15%
Utilities 394.11 -.83%
Put/Call .92 +31.43%
NYSE Arms 1.19 +135.76%
Volatility(VIX) 15.18 +3.05%
ISE Sentiment 206.00 -14.88%
US Dollar 89.25 -.95%
CRB 328.02 +2.07%

Futures Spot Prices
Crude Oil 62.20 +3.20%
Unleaded Gasoline 164.50 +3.85%
Natural Gas 13.98 +7.51%
Heating Oil 188.75 +5.02%
Gold 474.70 +1.65%
Base Metals 133.69 +1.30%
Copper 182.45 +2.24%
10-year US Treasury Yield 4.49% +1.22%

Leading Sectors %
Gold & Silver +2.40%
Oil Service +1.80%
Energy +1.15%

Lagging Sectors
Tobacco -2.64%
Gaming -3.06%
HMOs -5.26%

BOTTOM LINE: The Portfolio is lower mid-day on losses in my Internet longs, Retail longs, Semiconductor longs and Energy-related shorts. I added IWM and QQQQ shorts and increased my OS and SCHN shorts this morning, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are falling and volume is slightly below average. Measures of investor anxiety are higher. Today’s overall market action is slightly negative considering the rise in long-term rates and energy prices. The Johnson Redbook same-store sales index rose 3.5% year-over-year last week vs. a 3.5% rise the prior week. This week's gain is up from a 1.5% increase in late April and the 25th week in a row the index has risen 3% or more. This is more evidence that investors should pay more attention to what consumers do than what they say. I continue to expect retail sales to beat lowered expectations this holiday season. I expect US stocks to trade mixed from current levels into the close as bargain-hunting offsets worries over a bounce in energy prices.

Today's Headlines

Bloomberg:
- Merrill Lynch, Man Group Plc and Leon Black’s Apollo Management LLC transformed a discreet auction for failed Refco into a worldwide free-for-all.
- The European Commission plans to cut its 2006 growth estimate for the euro region and warn the 12-nation economy may perform even worse.
- The Dolan family withdrew its offer to take Cablevision Systems private and instead suggested the board declare a special dividend of $3 billion.
- Iraqis approved a new constitution that will establish a permanent government, the next step in the country’s transition to democracy after two decades of rule by Saddam Hussein’s dictatorship.
- McDonald’s will place nutrition information on most of its packaging to attract health-conscious consumers.
- Crude oil, gasoline, heating oil and natural gas are rising on speculation that US fuel consumption will increase with the end of the Atlantic hurricane season and the beginning of winter.
- The euro gained the most in more than two weeks against the dollar after business confidence in Germany rose to a five-year high.

Wall Street Journal:
- A group led by Comcast, Cox Communications and Time Warner is near an agreement with Sprint Nextel that would allow the cable operators to sell wireless phone service.
- Property development in the Florida Panhandle after eight hurricanes struck the state in the last 14 months has spurred a boom in real estate transactions.
- The US Congress is close to agreement on $101 billion in agricultural spending.
- The European Union, Brazil, China, India and other countries have called for an international agency to regulate the Internet and replace US control of the electronic information system.
- US automakers including General Motors have gone back to offering incentives to consumers to purchase their vehicles as sales remained weak.
- Some clinical trials suggest low-dose chemotherapy over extended periods may halt the spread of breast and ovarian cancers.

NY Times:
- Wal-Mart Stores plans to announce today a program to reduce energy consumption in its stores, double the fuel efficiency of its trucks and minimize packaging, citing CEO Scott.

Interfax:
- Russia will continue to assist Iran with its nuclear energy program after the completion of a plant at Bushehr in the Middle East nation.

London-based Times:
- Ben Bernanke, named by President Bush to succeed Alan Greenspan as chairman of the US Federal Reserve, forecast that the American economy will continue to grow without fiscal inflation even as energy prices rise.

Existing Home Sales Still Strong, Sentiment Remains Weak

- Existing Home Sales for September were 7.28M versus estimates of 7.2M and 7.28M in August.
- Consumer Confidence for October fell to 85.0 versus estimates of 88.0 and a reading of 87.5 in September.

BOTTOM LINE: US previously owned home sales were unchanged in September from a month earlier, matching the second-highest level on record and suggesting the recent rise in mortgage rates and waning consumer confidence has yet to slow demand, Bloomberg said. The median price of existing homes rose 13.4% year-over-year to $212,000. Sales rose 3.7% in the South and .8% in the Northeast. They fell 4.1% in the West and 3% in the Midwest. The supply of existing homes for sale held steady at 4.7 months’ worth. The Realtors group forecasts existing home sales to reach an all-time record this year of 7.1 million. The housing market continues to show signs of slowing, not plunging, which is a big positive for the overall US economy.
Consumer confidence unexpectedly fell to a two-year-low in October as high energy prices, bird flu fears, scandals and two devastating hurricanes left Americans feeling unsettled, Bloomberg reported. The gauge of optimism about consumers’ present situation fell to 108.2 from 110.4. The share of consumers that said jobs were hard to get rose to 25.3% this month from 25% last month. However, the percentage of consumers planning to buy a car rose to 6.1% from 5.8%. I continue to believe consumer sentiment will rebound into year-end as gas prices, which are already down 45% from peak levels in Sept., continue to fall and natural gas prices begin falling meaningfully next month.

Links of Interest

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