***Alert***

I will be unable to post for the next couple of days. Sorry for the inconvenience. I am still 100% net long.

Monday Watch

Weekend Headlines
Bloomberg:
- Russia and Iran reached a preliminary agreement on a joint-venture that would allow Russia to enrich uranium for the Islamic Republic and then send it back to the country, citing Iranian Vice President for Atomic Energy Aqazadeh.
- Wal-Mart Stores(WMT) said February same-store sales rose about 3.2%, within its forecast range.
- Dubai’s DP World will start talks with US government agencies about security at six ports it plans to take over, the company’s CEO said, in a bid to address congressional and state opposition to its $6.8 billion purchase of the harbors’ UK parent.
- Google(GOOG) must aid the government in its quest to prevent Internet pornography from reaching minors, the Justice Dept. said in a court filing.
- The US dollar is rising to an almost two-month high against the euro on speculation US reports this week will continue to show US economic strength.
- Crude oil is falling in NY after an attack on a Saudi Arabian oil plant failed to cut exports and Iran said it may let Russia process its uranium.

Barron’s:
- Apple Computer(AAPL) taking over Walt Disney(DIS) may make sense as Apple would be able to meld its media-delivery products with Disney’s “distressed” content and entertainment business, citing Christopher Whalen, an analyst at Institutional Risk Analysis.

NY Times:
- More than a dozen US schools are enrolling only high-school-age basketball players who are performing poorly in academic subjects, to enable them to compete in college sports.
- Former Enron Corp. Chairman Ken Lay’s wealth has diminished since the collapse of the energy trader to less than $650,000 from more than $400 million, citing personal financial records.
- Toshiba Corp. is gaining on Sony Corp.(SNE) in a race to develop the next generation of DVD players, a rivalry that some compare to Sony’s failed bid decades ago for support of its Betamax video format.

AP:
- John Bolton, US Ambassador to the United Nations, said that the UN “is deeply troubled by bad management, by sex and corruption and by a growing lack of confidence in its ability to carry out missions that are given to them.”

Washington Post:
- Fraudulent e-mails that seem to be from the IRS and seek personal financial information may rise as the April 15 deadline to file tax returns approaches.
- About 1.6 million US teenagers and young adults have misused stimulants intended for people with attention-deficit hyperactivity disorder, citing a study published online in the journal Drug and Alcohol Dependence.
- Leader of Iraq’s Sunni, Shiite and Kurdish factions met yesterday to condemn recent sectarian violence in an effort to prevent the attacks from escalating.

Rocky Mountain News:
- Donald Trump is seeking to build the tallest building in Denver, a 60-story luxury hotel and condo tower.

San Francisco Chronicle:
- California corrections officials allowed contractors hired to run prison drug-abuse treatment programs to spend taxpayer money on plasma televisions, cars and other items.

Financial Times:
- Europe is paying for its miscalculations on how to co-exist with Islam amid a crisis over cartoons depicting the Prophet Muhammad, a leader of France’s Muslim community said.

Sunday Business Post:
- Elan Corp.(ELN) is confident about the outcome of trials into a drug used to treat Alzheimer’s disease, citing Lars Ekman, head of research and development.

Observer:
- BP Plc won Chinese government approval to form a joint venture with Sinopec Group, which could give BP a 25% stake worth $14 billion in the Chinese oil company.

Handelsblatt:
- DaimlerChrysler AG(DCX) is likely to introduce the Smart small car into the US market, citing an interview with CEO Zetsche.

Tagesspiegel am Sonntag:
- Amazon.com(AMZN) expects worldwide sales to grow by as much as 23% this year, citing an interview with Ralf Kleber, Amazon’s German chief.

Xinhua News Agency:
- China faces the threat of a “massive” outbreak of bird flu because of a recent increase in cases among migratory birds, citing Agriculture Minister Du Qingling.

Kyodo News:
- Japan’s Liberal Democratic Party may formulate a plan by June to legalize casinos in Japan to attract more tourists.

Weekend Recommendations
Barron's:
- Had positive comments on (RCNI), (HET), (APOL), (BDOG), (GRMN), (PBH) and (IACI).
- Had negative comments on (CLCT) and (GHL).

Goldman Sachs:
- Reiterated Outperform on (HRZ), (SPLS), (STN), (CAKE), (MSFT) and (CL).
- Reiterated Underperform on (JNY).

Night Trading
Asian indices are +.25% to +.50% on average.
S&P 500 indicated +.17%.
NASDAQ 100 indicated +.21%.

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
(CVC)/unch.
(CNO)/.45
(DY)/.08
(HRL)/.48
(LOW)/.80
(MRX)/.26
(NEM)/.36
(UHS)/.48
(WRNC).24

Upcoming Splits
- (CELG) 2-for-1
- (EXP) 3-for-1
- (PMTC) 2-for-5

Economic Releases
10:00 am EST
- New Home Sales for January are estimated to rise to 1270K versus 1269K in December.

BOTTOM LINE: Asian Indices are higher, boosted by gains in base metal shares in the region. I expect US stocks to open modestly higher and to build on gains into the afternoon. The Portfolio is 100% net long heading into the week.

Weekly Outlook

Click here for The Week Ahead by Reuters

There are a number of important economic reports of note and some significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. - New Home Sales
Tues. - Preliminary 4Q GDP, Preliminary 4Q Personal Consumption, Preliminary 4Q GDP Price Index, Chicago Purchasing Manager, Richmond Fed Index, Consumer Confidence, Existing Home Sales
Wed. - Personal Income, Personal Spending, PCE Core, Construction Spending, ISM Manufacturing, ISM Prices Paid, Total Vehicle Sales
Thur. - Initial Jobless Claims
Fri. - Univ. of Mich. Consumer Confidence, ISM Non-Manufacturing

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. - Cablevision Systems(CVC), Conseco Inc.(CNO), Hormel Foods(HRL), Lowe’s(LOW), Newmont Mining(NEM), Universal Health(UHS), Warnaco Group(WRNC)
Tues. - Autodesk(ADSK), BJ’s Wholesale(BJ), Cal Dive(CDIS), Ceradyne(CRDN), CommScope(CTV), Crown Castle(CCI), Deckers Outdoor(DECK), Eaton Vance(EV), Evergreen Solar(ESLR), HJ Heinz(HNZ), O’Reilly Automotive(ORLY), Payless ShoeSource(PSS), Scientific Games(SGMS), Staples(SPLS), Telephone & Data(TDS), Vornado Realty(VNO), Williams Cos(WMB)
Wed. - ADC Telecom(ADCT), American Eagle(AEOS), Autozone(AZ), Chico’s FAS(CHS), Copart(CPRT), Flour Corp.(FLR), Foot Locker(FL), Hovnanian Enterprises(HOV), Iron Mountain(IRM), Kroger(KR), Liz Claiborne(LIZ), McDermott Intl.(MDR), Medco Health(MHS), Omnivision Tech(OVTI), Pacific Sunwear(PSUN), Pall Corp.(PLL), Papa John’s(PZZA), Petsmart(PETM), Rowan Cos(RDC), Saks Inc.(SKS), SPX Corp.(SPW)
Thur. - Checkpoint Systems(CKP), Costco Wholesale(COST), Del Monte Foods(DLM), Novell Inc.(NOVL), Univision Communiciations(UVN)
Fri. - Serono SA(SRA), Tekelec(TKLC), Terex Corp.(TEX)

Other events that have market-moving potential this week include:

Mon. - CIBC Israeli Tech Conference, Citigroup Global Healthcare Conference, Bear Stearns Media Conference, Goldman Sachs Tech Symposium
Tue. - Citigroup Global Healthcare Conference, CSFB Networking Conference, Wachovia Homebuilding Conference, Goldman Tech Symposium, Jeffries Internet Conference, Bear Stearns Media Conference, Merrill Lynch Internet Conference, Merrill Lynch Global Communications Forum
Wed. - Goldman Tech Symposium, CIBC Gaming Conference, CSFB Networking Conference, Citigroup Global Healthcare Conference, Merrill Global Communications Forum, Bear Stearns Media Conference, Jeffries Wireless Broadband Conference, Merrill Lynch Internet Conference, Wachovia Homebuilders Conference
Thur. - CSFB Networking Conference, CSFB Truck Builders Conference, Merrill Lynch Internet Conference, Citigroup Utilities Conference, CIBC Gaming Conference
Fri. - Citigroup Utilities Conference, UBS Defense IT Conference

BOTTOM LINE: I expect US stocks to finish the week modestly higher on mostly positive economic data, good earnings reports, lower energy prices and short-covering. My trading indicators are still giving mixed signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,289.43 unch.*



Click here for the Weekly Wrap by Briefing.com.

BOTTOM LINE: Overall, last week's market performance was slightly bullish considering the mostly positive economic data, above-expectations CPI, modest rise in long-term rates and increase in energy prices. The advance/decline line was about even, most sectors rose and volume was below average on the week. Measures of investor anxiety were mostly higher. However, the AAII % Bulls rose to 43.21%, but is still only around average levels, which is a positive. The average 30-year mortgage rate fell to 6.26% which is only 105 basis points above all-time lows set in June 2003. The benchmark 10-year T-note yield rose 3 basis points on the week as the CPI rose above estimates and economic data was mostly positive.

Unleaded Gasoline futures bounced for the week, but have collapsed 47% from September highs even as refinery utilization remains below normal as a result of the hurricanes last year, 24% of Gulf of Mexico oil production remains shut-in and fears over Iranian/Nigerian production disruptions persist. Natural gas inventories fell slightly more than expected this week. However, supplies are now 48.0% above the 5-year average, approaching an all-time record high for this time of year, even as 15% of daily Gulf of Mexico production remains shut-in. Natural gas prices have plunged 55% in 10 weeks. Many oil bulls point to the potential for a supply disruption as the main reason oil prices remain extremely elevated while fundamentals for the commodity deteriorate. I would point out that natural gas bulls used the same rationale before the historic supply disruptions related to the hurricanes. This did not prevent a collapse in the price of natural gas. I expect deteriorating fundamentals for oil to trump fear over the intermediate-term, thus sending prices substantially lower. Gold rose modestly on the CPI report and increase in energy prices.

Small-caps continue to outperform as the Russell 2000 has already gained almost 10% for the year. Technology stocks underperformed for the week on worries over slowing growth at Intel(INTC) and Dell(DELL). However, more signs of increased corporate spending on tech were evident in this week’s economic data. S&P 500 earnings growth for the fourth quarter was up about 15.0% year-over-year, more than double the long-term average. This is the 15th consecutive quarter of double-digit profit growth, the best streak since record-keeping began in 1936. Moreover, companies have sufficiently lowered the bar as to allow for better-than-expected 1Q results. As of now, analysts are projecting 9.8% earnings growth for the first quarter, still very good by historic standards. I continue to believe the S&P 500’s forward p/e multiple will expand back to around 19 by year-end, thus helping to push the index about 15% higher for the year. The ECRI Weekly Leading Index rose and is still forecasting healthy, but decelerating, US economic activity. I expect US GDP growth to peak for the year this quarter, rising a brisk 4-4.5%. Growth should moderate to more average levels of around 3% the remainder of the year.

*5-day % Change

Chart of Interest

BOTTOM LINE: The CPI should realign itself with the Core CPI as commodity prices fall from current elevated levels. I expect the secular trend of disinflation to reassert itself over the intermediate-term.

Weekly Scoreboard*

Indices
S&P 500 1,289.43 unch.
DJIA 11,061.85 -.53%
NASDAQ 2,287.04 -.33%
Russell 2000 736.60 +.64%
Wilshire 5000 12,990.60 +.17%
S&P Equity Long/Short Index 1,157.04 +.72%
S&P Barra Growth 609.82 -.21%
S&P Barra Value 676.08 +.22%
Morgan Stanley Consumer 604.78 +.09%
Morgan Stanley Cyclical 792.81 -.98%
Morgan Stanley Technology 532.03 -1.74%
Transports 4,435.59 +.48%
Utilities 411.98 +1.38%
S&P 500 Cum A/D Line 8,526 unch.
Bloomberg Crude Oil % Bulls 32.65 +14.28%
Put/Call .89 +25.35%
NYSE Arms 1.06 +76.66%
Volatility(VIX) 11.46 -.17%
ISE Sentiment 179.00 -10.50%
AAII % Bulls 43.21 +7.54%
AAII % Bears 28.40 -20.47%
US Dollar 90.61 -.01%
CRB 328.90 +1.95%
ECRI Weekly Leading Index 137.40 +.44%

Futures Spot Prices
Crude Oil 62.91 +3.98%
Unleaded Gasoline 155.06 +9.58%
Natural Gas 7.31 -.50%
Heating Oil 172.67 +5.61%
Gold 561.00 +1.06%
Base Metals 166.11 +3.06%
Copper 221.20 +1.42%
10-year US Treasury Yield 4.57 +.66%
Average 30-year Mortgage Rate 6.26 % -.32%

Leading Sectors
Gold & Silver +2.28%
Steel +2.28%
Defense +2.09%
Oil Service +2.06%
I-Banks +1.71%

Lagging Sectors
Telecom -1.32%
Retail -1.35%
Computer Hardware -2.29%
Disk Drives -2.56%
Semis -3.92%

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

*5-Day % Change

Stocks at Session Highs into Final Hour as Bears Fail Again to Capitalize on Morning Weakness

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Biotech longs, Semi longs and Networking longs. I exited my IWM and QQQQ shorts, thus leaving the Portfolio 100% net long. The tone of the market is slightly positive as the advance/decline line is modestly higher, most sectors are higher and volume is below average. Natural gas closed floor trading at session lows, down about 5% to $7.05. Recently, oil bulls have been saying to ignore supply/demand fundamentals and focus on potential production disruptions. Natural gas bulls said the same thing before last year's hurricanes. Not only did we get disruptions, they were historic in magnitude. Meanwhile, natural gas supplies are 48% above the five-year average with 16% of production still shut-in. Natural gas has collapsed 55% from highs. Deteriorating oil fundamentals will trump fear over the intermediate-term. I expect US stocks to trade modestly higher into the close from current levels on short-covering.

Today's Headlines

Bloomberg:
- NBC Universal’s Olympics television coverage isn’t only losing out to “American Idol” and “Desperate Housewives.” The No. 3 US network, owned by GE(GE), is getting beaten by its own Web site.
- The UK has placed a $58 million order with Baxter International(BAX) and Chiron Corp.(CHIR) for 3.5 million doses of avian influenza vaccine.
- New Jersey may become the second US state to allow gay marriage, and the first to allow homosexuals living outside the state to wed, because of a case heard this month by the state’s highest court.
- Time Warner(TWX) said Ted Turner and Carla Hills will step down from the board of directors after the company’s annual shareholders meeting.
- The IRS found a “disturbing” amount of political activity before the 2004 elections among non-profit organizations in violation of rules on tax-exempt entities.
- Chicago had the biggest surge in hotel acquisitions among US cities last year, pushing it ahead of Washington and Miami as investors headed for a market where demand outpaced construction.
- Crude oil is jumping more than $2/bbl. after Saudi Arabian forces repelled a suicide attack on the Abqaiq processing center, which handles about 7% of world supply.
- A judge considering a halt in US BlackBerry e-mail service criticized both sides in the case for not settling their patent dispute and said he will rule later on a shutdown.

Wall Street Journal:
- National Grid Plc has offered to acquire NY utility and natural-gas distributor KeySpan Corp.(KSE) for about $7.3 billion in an effort to increase business in the northeastern part of the US.
- Hard Rock Hotel’s $1.2 billion plan to add condominiums and hotel rooms to its Las Vegas property has been postponed because of offers to buy the site.
- Chicago Mercantile Holdings is seeking to start trading of products in the credit derivatives field.
- Goldman Sachs(GS), Bank of America(BAC) and Bear Stearns(BSC) may buy a minority stake in the Chicago Stock Exchange.
- More and more mutual funds classified as US stocks funds are investing in companies abroad, which complicates portfolio planning for investors.

Business Week:
- Advance Publications’ GQ magazine plans to encourage readers of the mean’s monthly to subscribe to a text messaging service that may transmit notes about events, private sales and giveaways to cell phones.

LA Times:
- The Univ. of Southern California announced yesterday it received a $25 million donation from billionaire Eli Broad’s Broad Foundation to construct a stem cell research facility.

NY Times:
- The US’s largest companies expect a $4 billion subsidy for their retiree health plans over the next four years under Medicare’s new prescription drug benefit, citing a study by Credit Suisse First Boston.

Durable Goods Orders Fall on Volatile Airplane Orders

- Durable Goods Orders for January fell 10.2% versus an upwardly revised 2.5% increase in December.
- Durables Ex Transportation for January rose .6% versus an upwardly revised 1.9% gain in December.

BOTTOM LINE: A decline in commercial aircraft demand last month caused a large drop in Durable Goods Orders, even as factories reported stronger sales of business equipment. The third straight gain in orders excluding autos and commercial planes was the best stretch since July through Sept. 2004. Orders for non-defense capital goods excluding aircraft, a gauge of future business spending, fell .4% versus a .5% increase the prior month. However, unfilled orders of business equipment rose .6% and communications equipment orders soared 16.7% in January. Orders for appliances and electrical equipment increased 2.7% in January. Economists expect the US economy to grow 4% this quarter versus a historical average of 3.1%. The headline Durable Goods number was due for a fall after airline production soared last quarter. I expect a nice rebound this month. Overall, it appears business spending is accelerating and should add meaningfully to US growth this year helping to offset a slowing housing market.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
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 two-year notes tumbled, pushing yields to the highest since 2001, after the Yomiuri newspaper said the central bank may shift its five-year deflation-fighting policy as early as next month.
- Oil prices may fall as rising US inventories temper concern about unrest in Nigeria and a possible disruption of Iranian exports, a Bloomberg survey shows.

Wall Street Journal:
- China may allow appreciation of the yuan to accelerate rather than implementing a sudden revaluation, citing foreign-exchange traders including Shanghai-based Kenneth Poon at ABN Amro Holding NV.

Business Week:
- Home Depot(HD) CEO Nardelli is using military-style management to centralize operations at the world’s third-largest retailer.

AP:
- DP World has offered to delay part of a $6.8 billion acquisition that would give it operational control of six US ports.

Chosun Ilbo:
- South Korea’s Kia Motors Corp. may build its US plant in Georgia.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (OXY), (MRVL) and (MYL).
- Reiterated Underperform on (NFS), (MCCC), (WGR) and (CBS).

Business Week:
- GlaxoSmithKline’s(GSK) revenue and earnings, plus its eight medicines in late-stage testing, may make it a better performer than other big drugmakers facing generic competitors.
- Zonagen Inc.(ZONA) may be bought by a larger drugmaker such as Pfizer Inc. or Wyeth, citing Mark Lappe of Efficacy Capital Ltd.
- Research in Motion’s(RIMM) shares may rise as much as 30% within the next year on a potential settlement with NTP Inc., which has a patent-infringement claim against the company’s BlackBerry device, citing Morgan Keegan’s Tavis McCourt.

Night Trading
Asian Indices are -.25% to +.50% on average.
S&P 500 indicated +.05%.
NASDAQ 100 indicated +.18%.

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
- (AMT)/-.03
- (CZN)/.14
- (HDL)/.93
- (KSE)/.70
- (NOV)/.62
- (PIXR)/.18
- (SNDA)/.27

Upcoming Splits
- (CELG) 2-for-1
- (EXP) 3-for-1

Economic Releases
8:30 am EST
- Durable Goods Orders for January are estimated to fall 2.0% versus a 1.8% increase in December.
- Durables Ex Transportation for January are estimated to rise .5% versus a 1.7% gain in December.

BOTTOM LINE: Asian indices are mostly higher, led by indsutrial shares in the region. I expect US equities to open modestly lower and to rise slightly into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Close Near Session Lows on Profit-taking

Indices
S&P 500 1,287.79 -.38%
DJIA 11,069.22 -.61%
NASDAQ 2,279.32 -.17%
Russell 2000 732.45 -.15%
Wilshire 5000 12,965.80 -.31%
S&P Barra Growth 609.10 -.33%
S&P Barra Value 675.15 -.42%
Morgan Stanley Consumer 605.57 +.03%
Morgan Stanley Cyclical 798.52 -.70%
Morgan Stanley Technology 530.58 -.61%
Transports 4,430.79 -.41%
Utilities 410.39 -.50%
Put/Call .83 +18.57%
NYSE Arms 1.27 +17.55%
Volatility(VIX) 11.87 -.08%
ISE Sentiment 182.00 +30.94%
US Dollar 90.39 -.31%
CRB 324.11 -.59%

Futures Spot Prices
Crude Oil 60.76 +.36%
Unleaded Gasoline 152.00 +.44%
Natural Gas 7.29 -2.21%
Heating Oil 166.50 +.14%
Gold 551.30 +.07%
Base Metals 164.80 -1.59%
Copper 219.60 -.41%
10-year US Treasury Yield 4.55% +.74%

Leading Sectors
Steel +1.81%
Hospitals +.78%
Internet +.39%

Lagging Sectors
Computer Hardware -1.07%
Semis -1.19%
Gold & Silver -3.32%

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 Underperform on (CYT).

Afternoon/Evening Headlines
Bloomberg:
- Apple Computer(AAPL) just sold its 1 billionth song.
- Nordstrom(JWN) said fourth-quarter profit rose 36%, exceeding analysts’ estimates, as demand for full-prices cosmetics and accessories drove holiday sales.

BOTTOM LINE: The Portfolio finished higher today on gains in my Internet longs, Software longs, Networking longs and Retail longs. I added (IWM) and (QQQQ) shorts in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was slightly negative today as the advance/decline line finished modestly lower, most sectors fell and volume was below average. Measures of investor anxiety were mixed into the close. Overall, today's market action was slightly bearish. However, today's losses were relatively mild considering recent gains.

Stocks Mixed into Final Hour as Falling Energy Prices offset Rising Long-term Rates

BOTTOM LINE: The Portfolio is substantially higher into the final hour on gains in my Internet longs, Software longs, Networking longs and Retail longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly positive as the advance/decline line is modestly higher, sector performance is mixed and volume is below average. The AAII % Bulls rose to 43.21% this week from 40.18% the prior week. This reading is now around average levels. The AAII % Bears fell to 28.40% this week from 35.71% the prior week. This reading is now also around average levels. I expect bullish sentiment to rise again next week. These numbers are still not near levels associated with short-term tops. Since the average stock is already up about 6.2% for the year, these numbers bode well for a continuation of recent strength. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering and lower energy prices.

Today's Headlines

Bloomberg:
- The median net worth of Americans rose to an all-time record of $93,100 in 2004.
- Hewlett-Packard(HPQ) entered the retail photo-printing market with kiosks it says will produce better prints than those from Eastman Kodak.
- Research In Motion’s(RIMM) BlackBerry scored lower than Palm’s(PALM) Treo in a survey of customer satisfaction.
- Fed Vice Chairman Ferguson’s resignation may help new Fed chief Ben Bernanke win support at the central bank for a numerical inflation goal.
- Texas Pacific Group, the buyout firm that owns stakes in Burger King and China’s Lenovo Group, formed a venture to invest in securities of troubled companies.
- 71% of Americans expect Democratic Senator Hillary Clinton of New York to run for president in 2008 and lose, a poll by the Marist College Institute for Public Opinion found.
- Iraqi Foreign Minister Zebari said insurgents are trying “everything” to foment civil war as reprisal attacks followed yesterday’s bombing of the Golden Mosque in Samarra, sacred to Shiite Muslims.
- US Treasuries declined after an unexpected drop in the number of claims for jobless benefits added to evidence the economy is strengthening.
- Wal-Mart Stores(WMT) will reduce the time part-time employees must wait to get health insurance and provide coverage to their children.
- Wal-Mart(WMT) said today it will expand coverage for workers and build more than 50 health clinics in its stores.
- Crude oil is falling more than $1/bbl. in NY on speculation that US fuel supplies are sufficient to meet demand.

Wall Street Journal:
- Officials in President Bush’s administration obtained special security pledges from Dubai Ports World before approving its bid to take over a company which owns some US ports.
- IBM(IBM), Texas Instruments(TXN), Exxon Mobil(XOM) and other US companies are boosting their donations to career-oriented summer camp for US youth in order to create an active worker pool for future retirement.
- The NYSE wants by the end of this year to create a joint venture with the National Association of Securities Dealers to regulate brokerages.
- Nintendo’s Brain Age videogame with word and math problems is intended for older people who never played videogames.
- Fannie Mae’s(FNM) former finance chief J. Timothy Howard is held largely responsible for the company’s accounting policies and problems by a report to be released today.
- More individual investors are putting their money in stocks as the market improves and short-term interest rate increases weaken returns from real estate and bonds. Trades by individual investors at discount brokerage firms increased 30% to 40% in January from December.

NYPost:
- Mario Gabelli’s Gamco Investors may set up a hedge fund that abides by Islamic law to attract Middle Eastern investors.

CNET News.com:
- IBM(IBM) will unveil software called “Octopiler” to help developers write code for products like video games.

AP:
- Lenovo Group Ltd., the world’s third-biggest PC maker, plans to start selling own-brand computers outside its home market of China.
- The US government demanded assurances of cooperation with future investigations from the Dubai company that is acquiring six US ports before approving the takeover.
- America’s Second Harvest, a nonprofit organization representing 80% of US food banks, shelters and soup kitchens, said its members served 25 million people in 2005, an increase of 9% from 2001.

Job Market Still Healthy

- Initial Jobless Claims for last week fell to 278K versus 300K the prior week.
- Continuing Claims rose to 2495K versus a downwardly revised 2454K prior.

BOTTOM LINE: The number of Americans filing first-time claims for unemployment benefits unexpectedly fell last week, a further sign the labor market is gaining strength, Bloomberg said. The four-week moving-average of claims fell to 281,750 from 283,250 the prior week. Moreover, the four-week moving-average of continuing claims fell to the lowest in five years. I continue to believe the labor market will remain healthy over the intermediate-term without generating significant unit labor cost increases.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
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:
- US prosecutors told lawyers Steven Schulman and David Bershad, partners in NY’s Milberg Weiss Bershad & Schulman, that they’ll be charged with participating in a scheme to pay kickbacks to clients.
- Saudi Arabia’s chief diplomat said an incoming Hamas-led government in the Palestinian territories should continue to be funded, putting the kingdom at odds with the US view that the Islamic group should be cut off.
- General Motors(GM) said sales growth at its Shanghai venture will slow this year as China’s auto market cools and competition increases.
- Japan had a trade deficit in January, its first in five years, after the Chinese Lunar New Year holiday curbed exports of electronics to Asia and imports surged 27%.

Wall Street Journal:
- Boeing Co.(BA) is working on a verbal agreement to sell 80 of its 737 planes to China, which agreed to buy 70 of the jetliners in November.
- China plans to change regulations to require overseas banks to incorporate operations in the mainland. Within the next few months, the commission will ask foreign banks to become China-registered companies and make accounting and management changes to conform to the way Chinese banks are structured.
- Lehman Brothers(LEH) is in talks with some mutual-fund firms about separating stock-trading and research fees.

Xinhua:
- Arab League Secretary-General Amr Moussa on Wednesday renewed the call for the recognition of Israel by Hamas.

AFP:
- Nearly all of China’s fast-rising number of skyscrapers are filled with excessive air pollutants that could cause serious harm to office workers.

Economic Daily News:
- Sony Corp.(SNE) plans to place $6 billion of orders for products such as notebook computers, liquid-crystal displays and LCD televisions from Taiwan this year.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (S).
- Reiterated Underperform on (ELNK) and (ESRX).

Night Trading
Asian Indices are -.25% to +1.0% on average.
S&P 500 indicated -.05%.
NASDAQ 100 indicated -.09%.

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
- (BEAS)/.12
- (CBS/A)/.40
- (CKP)/.36
- (ESV)/.59
- (GPS)/.39
- (GSF)/.56
- (HRB)/.26
- (KSS)/1.07
- (CLI)/.32
- (MVL)/.31
- (MRVL)/.41
- (MGM)/.33
- (MHK)/1.50
- (NTES)/.88
- (JWN)/.68
- (PWR)/.07
- (TOL)/.92
- (WYNN)/.08

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to rise to 300K versus 297K the prior week.
- Continuing Claims are estimated to fall to 2500K versus 2511K prior.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude build of 1,200,000 barrels. Gasoline inventories are estimated to rise 1,000,000 barrels, and distillate supplies are expected to decrease by 1,500,000 barrels. Refinery utilization is expected to fall .2%. Finally, Natural Gas supplies are estimated to fall 110 bcf.

BOTTOM LINE: Asian indices are mostly higher, led by technology shares in the region after oil prices fell and US interest rates declined. I expect US equities to open modestly lower and to trade higher into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Near Session Highs as Energy Prices Resume Downtrend and Long-term Rates Decline

Indices
S&P 500 1,292.67 +.75%
DJIA 11,137.17 +.62%
NASDAQ 2,283.17 +.89%
Russell 2000 733.53 +.93%
Wilshire 5000 13,005.76 +.73%
S&P Barra Growth 611.14 +.69%
S&P Barra Value 678.02 +.82%
Morgan Stanley Consumer 605.37 +.57%
Morgan Stanley Cyclical 804.14 +.66%
Morgan Stanley Technology 533.85 +1.05%
Transports 4,449.17 +1.23%
Utilities 412.47 +.32%
Put/Call .70 -22.22%
NYSE Arms 1.08 +.64%
Volatility(VIX) 11.88 -4.27%
ISE Sentiment 136.00 -6.85%
US Dollar 90.63 +.10%
CRB 326.03 -1.28%

Futures Spot Prices
Crude Oil 60.83 -.33%
Unleaded Gasoline 147.00 -.31%
Natural Gas 7.25 -.38%
Heating Oil 164.90 -.19%
Gold 558.10 +.27%
Base Metals 167.46 -.19%
Copper 226.15 -.13%
10-year US Treasury Yield 4.52% -.99%

Leading Sectors
Homebuilders +2.82%
Airlines +2.29%
Banks +2.15%

Lagging Sectors
Telecom -.74%
Energy -1.68%
Oil Service -2.35%

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 (FCX).
- Reiterated Underperform on (RAI).

Afternoon/Evening Headlines
Bloomberg:
- Public-health advisers expanded the list of Americans who should get vaccinated against the flu to include healthy children ages 2 years to 5 years, an industry supported group said.
- The largest-ever lottery prize of $365 million was won by a group of eight workers from a meat processing plan in Lincoln, Nebraska, Powerball officials announced today.
- Campbell Soup(CPB) will introduce new versions of its most popular soups and beverages that contain at least 25% less sodium to appeal to health conscious consumers.
- Former Fed Chairman Greenspan told a forum organized by ABN Amro Holding NV that the US economy is in good shape, according to people present.
- US Treasuries rose after a government report on consumer prices tempered speculation that inflation is poised to accelerate.
- Merrill Lynch(MER) is paring back its bond research dept.
- UAL Corp. CEO Tilton said US airlines inevitably will find ways to merge and his company won’t sit idly by if its UAL unit would benefit.
- Crude oil fell on speculation that surging US supplies, which are 12% above the 5-year average, are sufficient to make up for any disruption in Nigerian shipments.

Pittsburgh Tribune-Review:
- The American collaborator of the South Korean scientist who faked stem cell research data used the once-vaunted results to obtain a $16 million federal science grant.

BOTTOM LINE: The Portfolio finished substantially higher today on gains in my Biotech longs, Semi longs, Computer longs, Retail longs and Energy-related shorts. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished higher, most sectors rose and volume was above average. Measures of investor anxiety were mixed into the close. Overall, today's market performance was good for the bulls. The major averages and breadth finished near session highs, while oil and the 10-year T-note yield finished near session lows. Better performance by high-growth equities is mainly a result of lower long rates. As well, I expect oil to break back below $60 on tomorrow's inventory data. Stocks should continue to build on gains in the short run as once again too many are pessimistic and underexposed on the long side. The Value Line Geometric Index, a good measure of the broad-based market, is making another cycle high and has risen 6.21% this year.

Stocks Higher into Final Hour as Long-term Rates and Energy Prices Fall

BOTTOM LINE: The Portfolio is substantially higher into the final hour on gains in my Biotech longs, Semi longs, Computer longs, Retail longs and Energy-related shorts. I exited my (IWM)/(QQQQ) shorts, added to my (RACK) long and added to my (VLO) short today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is about average. After the bubble burst in 2000, the U.S. was swimming in overcapacity in multiple sectors and many companies lost pricing power, thus sending earnings plunging at a historical rate. Most recent inflation data show prices increasing at above-average rates vs. long-term averages. However, current readings are not high for prior expansionary periods. There is little evidence that some inflation is bad for equities. In fact, modest inflation has historically been a positive for stocks as companies regain some pricing power. I continue to believe measures of inflation are peaking for the year this quarter as commodities continue to weaken through year-end. I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower commodity prices, lower long-term rates and bargain hunting.

Today's Headlines

Bloomberg:
- US spending for health care may double to $4 trillion by 2015, propelled by an aging population using more drugs, hospital care and technology.
- Borrowing costs for European and US utilities are at their lowest this year, helping companies including E.ON AG that aim to pay for acquisitions using debt.
- The Fed gave investors evidence to back up bets for two more rate hikes in coming months.
- Bill Miller, holder of the longest streak of beating the S&P 500 Index in mutual fund history, is calling on Tyco Intl.(TYC) to buy back shares as its stock trades near a two-year low.
- US Treasuries rose after a government report on consumer prices tempered speculation that inflation is poised to accelerate.
- Fed Vice Chairman Roger Ferguson, the last governor who wasn’t placed on the board by President Bush, resigned less than a month after Ben Bernanke succeeded Alan Greenspan as chairman.
- Shares of Intel(INTC) fell below $20 for the first time in more than a year after ThinkEquity Partners LLC’s Eric Ross said the company may miss profit estimates.
- The FCC plans sanctions against television stations or affiliates for violating decency standards, signaling a renewed effort to crack down on the broadcasting of material unfit for children.
- Energy futures are falling on speculation that a government report tomorrow will show that US inventories rose for an eighth straight week, indicating that supplies are sufficient to meet demand.

Wall Street Journal:
- James Gorman, who formerly ran Merrill Lynch’s(MER) private-client operations, has been assigned to boost profit and lower costs at Morgan Stanley’s(MWD) individual-investor brokerage business.
- Sales of cheap Canadian drugs to US citizens have fallen by as much as 30%, after elderly and disabled people became eligible for drugs through Medicare, citing the Canadian International Pharmacy Agency.
- US conservation banks that allow developers to expand construction in exchange for setting aside land for endangered species are increasing nationwide.
- Internet name snatchers are building a growing business by grabbing Web addresses that have expired and reselling them at a profit.

Washington Post:
- The Bush administration said the press can be tried under espionage laws for gathering and publishing classified information that could hurt national security.

San Jose Mercury News:
- Google(GOOG) and Earthlink(ELNK) combined to submit one of six bids to provide wireless Internet service to San Francisco.

NY Times:
- The controversy over the cartoons of the Prophet Muhammad, typically defined as a struggle between Islam and the West, has an intra-Muslim side too. Eleven Muslim journalists in five countries are facing prosecution for reprinting some of the cartoons originally published in a Danish newspaper.
- The amount of mail sent by Iraqis has risen 46% since the American-led liberation in 2003, offering evidence of recovery.
- Electronic Arts(ERTS) plans to sell its video game based on the “Godfather” movies and book for $39.95, which is 20% less than it usually retails new games.
- Silvercup Studios in Queens, NY, home to such television shows as “The Sopranos,” plans to build a $1 billion complex featuring soundstages, commercial space and housing.

London-based Times:
- The SEC may approve a merger between the NYSE and Archipelago Holdings within two days.

Iran Daily:
- Iran’s oil exports fell 3.9% to 2.46 million barrels a day in 2005.

Core Consumer Prices Remain Subdued

- The Consumer Price Index for January rose .7% versus estimates of a .5% increase and a .1% decline in December.
- The CPI Ex Food & Energy for January rose .2% versus estimates of a .2% increase and a downwardly revised .1% rise in December.

BOTTOM LINE: Overall, prices paid by US consumers rose in January by the most in four months, while core prices remained subdued, Bloomberg reported. Energy prices rose 5% in January, the most since September. However, energy has fallen substantially in February. Medical costs rose .1% in January versus a .2% increase in December. A record warm January prevented retailers from discounting as sales accelerated. I expect measures of inflation to decelerate throughout most of the remainder of the year. I also continue to believe we are experiencing a cyclical bout of modest inflation within a secular period of disinflation. This will become quite apparent the next time the U.S. enters recession. Commodity prices have had a significant impact on most inflation measures. I strongly disagree with those who think these prices will remain historically elevated during a recession. Thus, in my opinion, the bond market is looking forward, not back.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
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:
- Hong Kong’s economy grew last year at the second-fastest pace since 2000, powered by rising exports and consumer spending.

Wall Street Journal:
- Boeing Co.(BA) is working on a verbal agreement to sell 80 of its 737 planes to China, which agreed to buy 70 of the jetliners in November.

Fox News:
- The Organization of the Islamic Conference rejected calls in Pakistan for the death of the Danish cartoonist who depicted the prophet Muhammad.

Tex Report:
- Posco, a South Korean steelmaker, may revise its domestic steel prices lower in March amid competition from cheaper Chinese imports.

Digitimes:
- Sony Corp.(SNE) pushed back the debut of its PlayStation 3 game console until August because of high component prices and inadequate levels of copy protection.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (WEC), (TYC), (MRVL) and (HRZ).
- Reiterated Underperform on (SAH), (FSS) and (MRK).

Night Trading
Asian Indices are -1.50% to unch. on average.
S&P 500 indicated -.02%.
NASDAQ 100 indicated -.03%.

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
- (ARW)/.58
- (ESRX)/.75
- (GRMN)/.70
- (HET)/.56
- (HSIC)/.58
- (JLG)/.48
- (MSO)/.15
- (OMX)/.07
- (RHD)/.86
- (CRM)/.05
- (SINA)/.22
- (S)/.34
- (TK)/1.80
- (TJX)/.44
- (UNT)/1.61
- (VIA)/.47

Upcoming Splits
- (CCJ) 2-for-1
- (BTU) 2-for-1

Economic Releases
8:30 am EST
- The Consumer Price Index for January is estimated to rise .5% versus a .1% decline in December.
- The CPI Ex Food & Energy for January is estimated to rise .2% versus a .1% gain in December.

BOTTOM LINE: Asian indices are mostly lower, weighed down by exporters in the region after the US Fed minutes led traders to conclude more rate hikes were forthcoming. I expect US equities to open modestly lower and to trade modestly higher into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Finish Lower as Fed Signals More Rate Increases Necessary

Indices
S&P 500 1,283.03 -.33%
DJIA 11,069.06 -.42%
NASDAQ 2,262.49 -.87%
Russell 2000 726.78 -.57%
S&P Barra Growth 606.97 -.42%
S&P Barra Value 672.52 -.23%
Morgan Stanley Consumer 601.91 -.40%
Morgan Stanley Cyclical 798.84 -.43%
Morgan Stanley Technology 528.31 -1.40%
Transports 4,395.22 -.21%
Utilities 411.14 +.36%
Put/Call .90 +11.11%
NYSE Arms 1.07 -11.24%
Volatility(VIX) 12.41 +3.33%
ISE Sentiment 146.00 -15.61%
US Dollar 90.60 +.20%
CRB 330.26 +1.09%

Futures Spot Prices
Crude Oil 62.50 -.38%
Unleaded Gasoline 147.00 -.39%
Natural Gas 7.77 +.50%
Heating Oil 166.10 -.32%
Gold 556.30 -.05%
Base Metals 167.79 +1.65%
Copper 226.95 -.18%
10-year US Treasury Yield 4.56% +.61%

Leading Sectors
Oil Service +3.77%
Oil Tankers +1.81%
Coal +1.80%

Lagging Sectors
Networking -1.55%
Computer Hardware -1.99%
Semis -2.17%

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 (HD), (TRI) and (FD).

Afternoon/Evening Headlines
Bloomberg:
- Level 3 Communications(LVLT) bonds are trading at their highest price in more than two years on prospects its cash flow will increase, two months after the long-distance phone operator defaulted on debt.
- Medtronic(MDT) said fiscal third-quarter profit rose 23% on sales of defibrillators as its biggest competitor struggled to shake off the effects of product recalls.


San Francisco Chronicle:
- California officials are working with Norcal Waste Systems, chemists and farmers to examine ways that animal waste can be transformed into methane energy.

Nikkei English News:
- Honda Motor may start selling a hybrid model of its Fit subcompact car around the world by fiscal 2007.

BOTTOM LINE: The Portfolio finished lower today on losses in my Biotech longs, Semi longs, Networking longs and Energy-related shorts. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was negative today as the advance/decline line finished lower, most sectors fell and volume was below average. Measures of investor anxiety were mostly higher into the close. Overall, today's performance was moderately bearish. However, it was a positive that the bears were unable to gain traction on the downside. As well, the homebuilders (HGX), which have been the source of recent angst, finished near session highs, rising .23% for the day. I will closely watch the market's reaction to tomorrow's CPI report before further shifting market exposure.

Stocks Lower into Final Hour, Pressured by Tech Shares

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Biotech longs, Semi longs, Networking longs and Energy-related shorts. I added IWM and QQQQ shorts today, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is average. The CFO of Boston Scientific (BSX) and two directors recently purchased 215,000 shares at around $22.40/share. The stock is down about 45% since its high in April 2004. I expect US stocks to trade modestly higher into the close from current levels on short-covering and bargain hunting.

Today's Headlines

Bloomberg:
- Time Warner’s(TWX) agreement to increase its share buyback to $20 billion as part of a settlement with billionaire Carl Icahn may help boost the shares of the world’s largest media company.
- The LAPD will become the first department in the US to adopt a GPS device to track fleeing drivers. The gadget, manufactured by StarChase LLC, will be fired onto a suspect car, then will transmit location information to officers who can stay a safe distance behind.
- Dubai’s royal family sent a delegation to the US today to meet officials to allay concerns about the emirate’s control of US ports as part of its $6.8 billion buyout of the UK’s Peninsula & Oriental Steam Navigation Co.
- Blackstone Group LP, which is raising the world’s biggest buyout fund, agreed to acquire hotel owner MeriStar Hospitality Corp. for about $2.6 billion.
- Citigroup Global Markets, which a month ago predicted the Fed would be done raising rates at this point, and Bear Stearns increased their forecasts for how high the central bank will lift interest rates.
- Harvard Univ. President and former Treasury Secretary during the Clinton administration Lawrence Summers resigned as head of the oldest higher-education institution in the US after a five-year tenure marked by clashes with professors.
- Crude oil is rising in NY after rebel attacks on Nigeria’s oil facilities halted almost 20% of the output from the country.

Wall Street Journal:
- Overall revenue from US digital video recorder sales will rise to $5.5 billion in the next few years from $1.01 billion in 1999.
- A startup company backed by Time Warner’s(TWX) AOL and Barry Diller, chairman and CEO of IAC/InteractiveCorp.(IACI), is trying to become a middleman in distributing Web videos.
- Julius Baer Holding AG’s GAM, Allianz Global Investors and Alliance Capital Management’s AllianceBerstein are among mutual funds that are asking shareholders for permission to use tactics often found in hedge funds.

- CEOs are increasingly having strings attached to their remuneration packages amid rising complaints about excessive pay.
- Warnaco Group’s(WRNC) Speedo body-length swimsuits are being worn by US Olympic bobsled and skeleton competitors.

CNBC:
- Triarc Cos.(TRY) CEO Peltz may be considering a takeover of HJ Heinz(HNZ).

Advertising Age:
- Wal-Mart Stores(WMT) will expand its marketing department by as much as 30% as it seeks to compete more effectively with Target Corp.(TGT) and other retailers.

NY Daily News:
- Ron Insana, who anchors financial news network CNBC’s “Street Signs” program, plans to leave the network after almost 15 years to start a monthly financial newsletter and his own business.

NY Times:
- The American Medical Association agreed with US Congress to develop about 140 specific performance measures by the end of the year to help the US create pay standards for Medicare.
- US college e-mail, designed to make professors more accessible, is erasing healthy boundaries between students and their lecturers, breaking down the prudent conventions of student/professor communication, citing professors from across the US.
- US hedge funds are getting into the business of small loans, attracted by the prospect of being able to charge sky-high interest rates.
- The Port Authority of NY and New Jersey is spending $73 million on turnstile scanners and vending machines that will allow Path train riders to use fare cards with embedded computer chips.

USA Today:
- Some affluent US communities, including Aspen, Colorado, and Arlington County, Virginia, are passing laws limiting the size of new houses.

Iran Daily:
- Ayatollah Ali Khamenei, Iran’s Supreme Leader, encouraged Palestinian group Hamas to continue not to recognize the state of Israel and refuse negotiations with its government.

Leading Indicators Forecast Strong US Economic Growth

- Leading Indicators for January rose 1.1% versus estimates of a .6% increase and a .3% rise in December.

BOTTOM LINE: An index of US leading indicators rose for a fourth straight month as the labor market improved further and manufacturing strengthened, pointing to faster economic growth, Bloomberg reported. The fall in jobless claims contributed the most to the increase in the index. Morgan Stanley raised its estimate for 1Q US growth to 5.9% from a prior estimate of 5.5% growth. I expect very strong US economic growth in the first quarter of around 4.5-5.0%. However, growth should decelerate back to average levels of around 3.0% for the remainder of the year.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
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

Tuesday Watch

Weekend Headlines
Bloomberg:
- The United Arab Emirates reassured US senators that Dubai’s takeover of the US port assets of Peninsula & Oriental Steam Navigation Co. is not a threat to national security.
- NBC Universal, the no. 3 US network, may be forced to give advertisers free or discounted air time to make up for low viewership after its Olympic coverage twice failed to gain top ratings this week.
- Abu Dhabi’s Mubadala Development Co. will partner with Dubai Aluminum Co. Ltd. to build the world’s largest aluminum plan for $6 billion.
- Pakistani cleric Mohammed Yousaf Qureshi offered a $1 million bounty to 1,000 people for killing the Denmark cartoonist who drew caricatures of the prophet Mohammad.
- Harvard University President Lawrence Summers may be on the way out, as the governing board considers calls for his resignation.
- The virus that causes bird flu hasn’t become more easily transmissible to humans as the disease spreads in birds across Europe, the World Health Organization said.
- President Bush said the US needs to reduce crude oil imports and diversify its energy consumption so the world’s largest economy isn’t “held hostage” by oil-rich countries that may not be allies.
- Oil rose the most in 4 weeks in NY as Nigerian rebels threatened more attacks after cutting output from Africa’s largest producer by about 20%.

Wall Street Journal:
- McDonald’s(MCD) more expensive items such as the $4.50 California Cobb salad have been helping the company’s earnings by increasing customers’ average bill.
- McDonald’s(MCD) had at least three lawsuits filed against it after it disclosed last week its French fires contain wheat and milk ingredients that may cause problems for people sensitive to these substances.
- Coca-Cola(KO) is headed for a legal battle with 54 of its bottlers over a new distribution system at Wal-Mart(WMT).
- Fidelity Investments and a hedge fund group last week offered to buy any shares in USG’s(USG) proposed $1.8 billion stock offering not purchased by current shareholders, underbidding Warren Buffett’s Berkshire Hathaway.

Barron’s:
- Retail investor assets rose 18% to $678 billion last year in separately managed accounts, customized investment vehicles that permit direct ownership of a bundle of securities.

Institutional Investor.com:
- Here is a list of America’s most shareholder-friendly companies for 2006.

NY Times:
- Temporary diabetes among pregnant women, known as gestational diabetes, has increased almost 50% in the past decade in New York.
- The newfound wealth coming to the African nation of Chad from a $2.4 billion oil pipeline, backed by the World Bank to fight poverty, is being diverted by the government in part to the army.
- American Indians are becoming increasingly involved in trafficking high-potency marijuana, Ecstasy, cocaine and methamphetamine on US reservations, citing court records, federal and local prosecutors and tribal members.
- Day-trading, the fad that contributed to the bubble in the 1990s, is becoming popular in Japan, embraced by students, and housewives.
- US suburban homeowners doubled their expenditure on garage organizing products to $800 million last year compared with 2000.

LA Times:
- The FDIC’s boost in insurance coverage may help make bank accounts an attractive choice for retirement funds.

AP:
- Nigerian protests over caricatures of the prophet Mohammad erupted into violence that killed 15 people and resulted in at least 15 Christian churches being burned.
- Louisiana Governor Kathleen Blanco laid out a $7.5 billion plan to fund rebuilding, moving or buying out residents whose homes were destroyed or remain damaged by hurricanes Katrina or Rita.

Seattle Times:
- Microsoft’s executive in charge of its MSN online division is taking a leave of absence and may or may not return to the company.

Financial Times:
- Sony Corp.(SNE) may have to delay the introduction of its new PlayStation 3 video game console by six to 12 months, citing Merrill Lynch analysts.
- The European Union will introduce anti-dumping tax duties of around 20% on shoe imports from China and Vietnam.
- US companies have so far borrowed $98.5 billion with investment grade bonds this year to fund an increase in mergers and acquisitions.
- National Grid Plc, manager of the UK power grid, may buy KeySpan Corp.(KSE), the biggest natural-gas seller in the US north east.

Sunday Telegraph:
- The UK should introduce Sharia law in some parts of the country, according to 40% of British Muslims surveyed.

Business:
- Microsoft(MSFT) has developed a Skype-style free Internet voice service that challenges operators such as Vodafone Group Plc(VOD), citing CEO Ballmer.

Xinhua News Agency:
- Coca-Cola’s(KO) sales in China expanded 22% last year as the company focused on non-carbonated drinks.

China Daily:
- China’s sales conducted over the Internet rose 58% last year to $69 billion.

Times of India:
- An official in the northern Indian state of Uttar Pradesh offered $11.4 million to anyone who beheads the Denmark cartoonist who drew caricatures of the prophet Muhammad.

El Moudjahid:
- OPEC may leave its quotas for crude-oil production unchanged because prices are high, citing Algeria’s oil minister.

Middle East Economic Digest:
- Saudi Arabia will invite international companies to bid for a contract in the second quarter to build production facilities to pump 100,000 barrels a day of oil from the Nuayyim oilfield.

Weekend Recommendations
Barron's:
- Had positive comments on (TOL), (ALSK) and (TXRH).

Goldman Sachs:
- Reiterated Outperform on (K) and (EBAY).
- Reiterated Underperform on (SIRI) and (MCCC).

Night Trading
Asian indices are -.25% to +.75% on average.
S&P 500 indicated -.08%.
NASDAQ 100 indicated -.12%.

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
(ABGX)/-.44
(BIDU)/.08
(CBRL)/.59
(CEC)/.35
(CCU)/.35
(DPZ)/.42
(FD)/2.62
(FLS)/.26
(FOSL)/.39
(GPC)/.62
(HD)/.56
(LAMR)/.06
(MDT)/.55
(OII)/.68
(RRI)/-.32
(WMT)/.83

Upcoming Splits
(AET) 2-for-1
(BRCM) 3-for-2
(FCFS) 2-for-1
(IMGC) 3-for-2
(ITT) 2-for-1

Economic Releases
10:00 am EST
- Leading Indicators for January are estimated to rise .6% versus a .1% increase in December.

2:00 pm EST
- Minutes of Jan. 31 FOMC Meeting

BOTTOM LINE: Asian Indices are mostly higher, boosted by gains in financial shares in the region. I expect US stocks to open modestly lower and to rise later in the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the week.

Weekly Outlook

Click here for The Week Ahead by Reuters

There are a few economic reports of note and some significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. - US Markets Closed
Tues. - Leading Indicators, FOMC Minutes
Wed. - Consumer Price Index
Thur. - Initial Jobless Claims
Fri. - Durable Goods Orders

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. - US Markets Closed
Tues. - Abgenix(ABGX), Baidu.com(BIDU), CBRL Group(CBRL), Clear Channel(CCU), Domino’s Pizza(DPZ), Federated Department Store(FD), Home Depot(HD), Lamar Advertising(LAMR), Medtronic(MDT), Reliant Energy(RRI), Wal-Mart Stores(WMT)
Wed. - Express Scripts(ESRX), Garmin Ltd.(GRMN), Harrah’s Entertainment(HET), Henry Schein(HSIC), Martha Stewart(MSO), Novell Inc.(NOVL), OfficeMax(OMX), Salesforce.com(CRM), Sprint Nextel(S), Teekay Shipping(TK), TJX Cos.(TJX), Viacom(VIA)
Thur. - BEA Systems(BEAS), Checkpoint Systems(CKP), ENSCO Intl.(ESV), Gap Inc.(GPS), GlobalSanteFe Co.(GSF), H&R Block(HRB), Kohl’s Corp.(KSS), Limited Brands(LTD), Marvel Entertainment(MVL), Marvell Technology(MRVL), MGM Mirage(MGM), Mohawk Industries(MHK), Netease.com(NTES), Nordstrom(JWN), Toll Brothers(TOL), Wynn Resorts(WYNN)
Fri. - American International Group(AIG), American Tower Corp.(AMT), Autozone Inc.(AZO), Pixar Corp.(PIXR)

Other events that have market-moving potential this week include:

Mon. - US Markets Closed
Tue. - Wachovia Consumer Growth Conference, Morgan Stanley Basic Materials Conference
Wed. - Morgan Stanley Basic Materials Conference, JPMorgan Airline Conference, Wachovia Consumer Growth Conference
Thur. - JPMorgan Airline Conference, Wachovia Consumer Growth Conference, Morgan Stanley Basic Materials Conference
Fri. - Wachovia Consumer Growth Conference

BOTTOM LINE: I expect US stocks to finish the week modestly higher on positive economic data, good earnings reports and short-covering. My trading indicators are now giving mixed signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,287.24 +1.60%*



Click here for the Weekly Wrap by Briefing.com.

BOTTOM LINE: Overall, last week's market performance was very positive considering the mixed economic data, mostly hawkish statement’s from the Fed’s Bernanke and subdued investor sentiment. The advance/decline line was higher, most sectors gained and volume was about average on the week. Measures of investor anxiety were mostly higher. Moreover, the AAII % Bulls fell slightly to 40.18% and is still below average levels, which is a positive. The average 30-year mortgage rate rose to 6.28% which is still only 107 basis points above all-time lows set in June 2003. The benchmark 10-year T-note yield fell 5 basis points on the week as investors cheered Bernanke’s comments.

Unleaded Gasoline futures bounced slightly for the week, but have collapsed 48.2% from September highs even as refinery utilization remains below normal as a result of the hurricanes last year, 24% of Gulf of Mexico oil production remains shut-in and fears over Iranian/Nigerian production disruptions persist. Natural gas inventories fell less than expected this week. Moreover, supplies are now 44.0% above the 5-year average, approaching an all-time record high for this time of year, even as 16% of daily Gulf of Mexico production remains shut-in. Natural gas prices have plunged 55% in 9 weeks. Gold was mostly unchanged on the week as a firm US dollar offset inflation data that exceeded estimates.

The mania for many commodities waned further this week. It still appears to me that the CRB Index has made a significant intermediate-term top. I still believe prices for many commodities have been driven higher by fear and record capital inflows into commodity funds, rather than fundamentals. I continue to expect global energy demand destruction, decelerating economic growth, a firm dollar and a significant increase in supplies later in the year to push oil prices substantially lower from current levels. If in fact commodity prices have peaked, international emerging growth economies will slow, thus leading to a substantial slowdown in the demand for emerging market stocks. While this may cause some more turbulence in US markets in the short-run, it is a huge positive for US stocks longer-term.

The Telecom sector(ITH) outperformed substantially and is close to breaking out of the trading range that has contained it since 2002. An upside breakout in this sector would be a big positive for tech stocks and help further boost the broad market. S&P 500 earnings growth for the fourth quarter is now on pace to rise 15.0% year-over-year, more than double the long-term average. This would be the 15th consecutive quarter of double-digit profit growth, the best streak since record-keeping began in 1936. Moreover, companies have sufficiently lowered the bar as to allow for better-than-expected 1Q results. As of now, analysts are projecting 9.8% earnings growth for the first quarter, still very good by historic standards. I continue to believe the S&P 500’s forward p/e multiple, which is currently 15.4, will expand back to around 19 by year-end, thus helping to push the index about 15% higher for the year. The ECRI Weekly Leading Index fell and is forecasting healthy, but decelerating, US economic activity.

*5-day % Change