Year-end Scoreboard*

Indices
S&P 500 1,468.36 +5.49%
DJIA 13,264.82 +8.88%
NASDAQ 2,652.28 +10.66%
Russell 2000 766.03 -1.24%
Morgan Stanley Consumer 737.78 +8.29%
Morgan Stanley Cyclical 1,001.73 +14.72%
Morgan Stanley Technology 622.51 +10.24%
Transports 4,570.55 +1.43%
Utilities 532.53 +20.11%
NYSE Cum A/D Line 60,403 +4.0%
Volatility(VIX) 22.50 +94.6%
AAII % Bulls 30.0 -34.8%
AAII % Bears 50.0% +38.9%
US Dollar 76.63 -7.9%
CRB 358.71 +16.75%
10-year yield 4.03% -67 basis points

Style Performance
Large-cap Growth 611.94 +11.81%
Large-cap Value 796.04 -.18%
Mid-cap Growth 453.10 +11.42%
Mid-cap Value 1,085.23 -1.42%
Small-cap Growth 421.17 +7.05%
Small-cap Value 1,059.69 -9.76%

This Year’s Winners
This Year’s Losers

*1 Year Total Return

Stocks Finish Near Session Lows on Year-end Profit-taking in Best Performing Sectors

Market Summary
Today’s Movers
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Stock Quote
In Play

Stocks Lower into Finaly Hour as Profit-taking Offsets Short-covering

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Semi longs and Internet longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is mildly negative today as the advance/decline line is slightly lower, most sectors are declining and volume is light. Investor anxiety is above average again. Today’s overall market action is slightly bearish. The VIX is surging 7% to 22.2 and the ISE Sentiment Index remains low at 129.0. For the fourth day in a row, the NYSE Arms hit a high 1.74 this morning. It appears to me many short-term trading oriented funds are taking profits in winners today, both long and short. The NYSE short interest ratio just hit another new record high. The (XLF) is at session highs, rising 1.3%. As well, broad market weakness over the last few days looks more like a function of a year-end “buyers strike” rather than meaningful selling as volume has remained very light with high NYSE Arms readings. Gauges of credit market angst continue to decline. The TED spread is falling another 12 basis points to 147 basis points today, which is down 74 basis points in less than 3 weeks and down 93 basis points from August highs. As well, the 30-day US asset backed commercial paper yield is plunging 38 basis points today and is down 74 basis points in less than three weeks and down 89 basis points from September highs. I wouldn’t be surprised to see many of the beaten up and heavily shorted stocks continue to rise through week’s end, which should boost the broad market. I still believe market leading growth stocks will substantially outperform the broad market again next year as economic growth remains modestly below trend, interest rates remain low and inflation decelerates. I expect US stocks to trade modestly higher into the close from current levels on diminishing credit market angst, a firmer US dollar, seasonal strength, bargain-hunting and short-covering.

Today's Headlines

Bloomberg:
- Nasdaq Stock Market(NDAQ) obtained clearance from the Committee on Foreign Investment in the US for Borse Dubai to take a stake in the company, paving the way for its acquisition of OMX AB.
- Pakistan’s Election Commission will announce tomorrow whether the Jan. 8 parliamentary vote should be delayed in response to rioting that erupted after last week’s assassination of main opposition leader Benazir Bhutto.
- Copper is falling 1.0% today, heading for the smallest annual gain since 2001.
- Europe’s Dow Jones Stoxx 600 Index posted its first annual decline since 2002, as benchmarks in the UK and France dropped on the last day of trading in 2007.
- Borrowing costs for Citigroup, AT&T and hundreds of US investment-grade corporate bond issuers may fall next year as they refinance about $557 billion of bonds, according to data compiled by Bank of America.
- Delta Petroleum(DPTR), the US oil and gas producer that has posted five straight quarterly losses, said billionaire Kirk Kerkorian’s Tracinda Corp. will buy 35% of the company for $684 million.

Wall Street Journal:
- A veteran space scientist turned entrepreneur is making a big bet that a new generation of small, low-cost satellites can revolutionize the collection of weather and environmental data used to track storms and monitor climate shifts.
- Celanese Corp., Dow Chemical and Anglo American Plc are among Western companies seeking to profit from a Chinese boom in coal-to-chemicals projects.

NY Times:
- Disney(DIS) Expands Virtual Games for Children.
- Google’s(GOOG) Market Share Grows and Grows and Grows.
- Mac owners more likely to download music.

LA Times:
- Feds aid TV viewers’ move to digital. Agency will start taking requests for discounts on converter boxes Tuesday. In 2009, analog will be history.

iLounge:
- Apple readying HD Radio push for Macworld.

Houston Chronicle:
- President Bush signed legislation Monday to allow states and local governments to cut investment ties with Sudan because of the violence in Darfur.

Bear Radar

Style Underperformer:

Small-cap Growth (-.97%)

Sector Underperformers:

Gold (-1.81%), Alternative Energy (-1.74%) and Papers (-1.54%)

Stocks Falling on Unusual Volume:

PZE, COGT, FRP and GROW

Existing Home Sales Rise

- Existing Home Sales for November rose to 5.00M versus estimates of 4.97M and an upwardly revised 4.98M in October.

BOTTOM LINE: Sales of existing homes in the US unexpectedly rose in November, Bloomberg reported. The median home price fell 3.3% from year ago levels to $210,200. The number of homes for sale fell 3.6% to 4.27 million. At the current sales pace, that represents 10.3 months’ supply versus 10.7 months worth in October. The increase in purchases was led by a 10% rise in the West. Sales were unch. in the Midwest. Sales fell 3.3% in the Northeast and 2% in the South. I expect existing home sales to bounce further next month.

Bull Radar

Style Outperformer:

Mid-cap Growth(-.39%)

Sector Outperformers:

Airlines (+.29%), Restaurants (-.28%) and Semis (-.40%)

Stocks Rising on Unusual Volume:

FF, GLT, DPTR, CALM, EMKR, CSUN, AMIE, BPHX, CBEY, MBLX and PTNR

Links of Interest

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
Movers & Shakers
Upgrades/Downgrades
In Play
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes

Monday Watch

Weekend Headlines
Bloomberg:
- James Halloran, who helps oversee $35 billion at National City Private Client Group, sees ‘downside’ risks for oil is 2008. (video)
- Richard DeKaser, chief economist at National City Corp., sees ‘better times’ for the US housing market in 2008. (video)
- US and Canadian theaters this weekend set a record for yearly ticket sales, taking in an estimated $9.59 billion.
- The Pakistan Peoples Party named Benzir Bhutto’s son Bilawal as its new leader and said it would participate in parliamentary elections next month.
- President Bush said he is committed to making sure the US economy grows next year, and pledged to work with Congress to see that it happens.
- China, the world’s biggest grain producer, will tax exports of wheat, corn and rice to increase domestic supply and control rising food prices.
- Nickel will lead a decline in industrial metals next year as stockpiles expand and demand slows with the US housing market, a survey of analysts showed.

Barron’s:
- Using the options markets, we can infer the marketplace’s expectations for a company’s future dividend payments.

NY Times:
- The NY Times, the third-largest US newspaper by circulation, named Fox News commentator and Weekly Standard editor William Kristol as a columnist on its Op-Ed page.
- General David Petraeus, the top US commander in Iraq, said violent attacks in Iraq have declined 60% since June. He said the number of car bomb, suicide car bomb and suicide vest attacks was also down about 60% since March. Petraeus attributed the drop in violence to the increase in US and Iraqi troops and officers and more aggressive operations. General Abdul Kareem Khalaf, a spokesman for the Iraqi Interior Ministry, said in a separate briefing that 75% of al-Qaeda’s network and safe havens had been destroyed.
- A look at the winners and the losers behind the most notable mergers and acquisitions of the year.

CNBC.com:
- ‘Dogs of Dow’ Have Subpar Year, Thanks to Citibank.
- Baidu.com’s(BIDU) CFO Dies in Accident.

MarketWatch.com:
- In-vehicle technology in focus in Las Vegas. This year’s Consumer Electronics Show will highlight an unlikely innovator: the automotive industry. GM’s Rick Wagoner will be the first car chief to deliver a keynote speech.

IBD:
- Tech Firms’ Sales Keep Growing On Hot Gadgets, Business Gear. Call it the sector that saved Christmas. As the mortgage mess and higher energy prices cast a pall on Wall Street, investors are finding refuge in technology stocks, which have remained largely immune to the broader spending woes.

TheStreet.com:
- Get Your Portfolio in Shape for 2008.
- Google’s(GOOG) Grip Tightens.

SmartMoney:
- Bears Are Full of Bull. The US Economy is faring well despite the housing mess. Just look around.

Boston Globe:
- Town governments, school districts and other municipalities looking to borrow money got a new option Friday when trying to insure their bonds: billionaire investor Warren Buffett. Buffett’s formation of a bond insurance company provided some validation to an industry that has been battered by fears of collapse in recent weeks.

Business Week:
- Inside Toyota’s Hybrid Truck. The automaker is introducing a concept compact hybrid pickup designed in America, for Americans.
- Will Apple(AAPL) Upset the Rental Cart? A plan to offer online video rentals could turn up the heat on Netflix and Amazon.com – and reinvigorate interest in Apple TV.
- iRobot(IRBT): Ready to Clean Up. The Roomba maker says it’s readying more robots to do the dirty work of cleaning and the fun work of keeping people connected.

USA Today:
- Setting up your HDTV not as easy as it looks; tips to help.
- Southwest(LUV) hopes changes add up to some ch-cha-ching.

CNNMoney.com:
- Growth funds outpace value names in 2007. Funds dedicated to growth companies had surprisingly solid gains for 2007. A tally of mutual fund performance for the year by Lipper Inc. found that one of the broadest mutual fund categories – large-cap US growth funds – had an average return of 14.9% for the year versus a 2.7% gain for large-cap US value funds.
- Deutsche Bank’s Walter sees oil price dropping to $80/bbl. over the next year.
- Oil investing: 2007 a tough act to follow. It was a banner year for energy – the sector was up 30% and crude jumped 60%. But don’t count on a repeat performance in ’08.
- Real Estate: The best- and the worst – of 2007.
- Cars: Best of the best, 2007.

AP:
- Osama bin Laden warned Iraq’s Sunni Arabs not to join tribal councils opposed to the terrorist group al-Qaeda, citing an internet audiotape released today. He also told Sunnis not to support a unified government in Iraq. US and Iraqi officials want to establish a “national unity government” to join Sunnis, Shiites and Kurds. “Our duty is to foil these dangerous schemes, which try to prevent the establishment of an Islamic state in Iraq,” he said.

Reuters:
- Bin Laden remarks make Gulf dollar peg likelier. Gulf Arab oil producers may be less likely to drop their currency pegs to the US dollar after Al Qaeda leader Osama bin Laden criticized dollar pegs as “unjust and arbitrary,” economists said. The Saudi-born militant leader urged Muslims in a video recording on Saturday to support militants so they can “preserve your oil and wealth and protect your money that is slipping between your fingers due to the unjust and arbitrary dollar pegs.” “Your support to sincere mujahideen (holy fighters) … guarantees all aspects of your security,” bin Laden said.

Newsday.com:
- Wall Street gurus optimistic for ’08.

Financial Times:
- Equity capital markets may receive a boost next year as financial institutions seek to repair their balance sheets.
- Just an illusion? British business looks bright even as consumers fret. Mario Thomas, managing director of Chapter Eight, says his Bradford-based website design company has full order books and is still taking on staff. “I’ve never seen an economy like this before, with all the doom and gloom. But it hasn’t let up for us at all – with existing customers commissioning work and new business flooding in.”

TimesOnline:
- Google Inc.(GOOG) is in talks with newspaper publishers about selling advertising space in their pages to the company’s online clients, citing comments from Google. Google, based in Mountain View, California, plans to use a bidding system to sell newspaper advertising space, and it will earn commission on the deals. Google’s UK advertising revenue rose 40% this year to $2.49 billion.

Economist.com:
- China’s markets flashing red. Sooner or later, the world’s hottest market will burn up.

Guardian:
- Nanosolar Inc., a privately held California-based solar-panel maker, has started production of wafer-thick solar cells printed on aluminum film.
- Merrill Lynch(MER) is in talks with Chinese and Middle Eastern sovereign-wealth funds to raise capital through selling another “big” stake in the company, citing London and NY sources.

Auto Motor und Sport:
- General Motors Corp.s(GM) Chevrolet brand sales in Europe increased to a record in 2007, boosted by purchases of cars in Russia and eastern European countries, citing Chevrolet Europe chief Wayne Brannon. Sales may double to 900,000 vehicles by 2018.

Kyodo News:
- Japan aiming for 30% of households to have solar panels by 2030.

Nihon Keizai:
- Hitachi Ltd. will stop producing small hard-disk drives for use in video cameras and music players as manufacturers increasingly favor flash memory chips as a means of data storage.

Sankei newspaper:
- Mitsubishi Heavy Industries Ltd., France’s Areva SA and Japan Nuclear Fuel Ltd. will form a joint venture in the US to focus on building fast reactor nuclear plants and fuel reprocessing.

Middle East News Agency:
- President Nicolas Sarkozy said France will have no contact with Syria until it allows Lebanon to end a political crisis and appoint a new president.

Weekend Recommendations
Barron's:
- Made positive comments on (BK) and (LTR).
- Made negative comments on (COGT).

Citigroup:
- Reiterated Buy on (LM), target $108.

Night Trading
Asian indices are unch. to +.75% on avg.
S&P 500 futures +.06%.
NASDAQ 100 futures unch.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Macro Calls
Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/Estimate
- None of note

Upcoming Splits
- (CMI) 2-for-1
- (GHM) 5-for-4

Economic Data
10:00 am EST
- Existing Home Sales for November are estimated at 4.97M versus 4.97M in October.

Other Potential Market Movers
- Early close for financial futures and options at 1 pm EST.

BOTTOM LINE: Asian indices are higher, boosted by technology and commodity shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the week.

Weekly Outlook

Click here for the weekly market preview by MarketWatch.com.

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

Economic reports for the week include:

Mon. – Existing Home Sales, NAPM-Milwaukee

Tues. – US Markets Closed

Wed. – ISM Manufacturing, ISM Prices Paid, Construction Spending, FOMC Minutes

Thur. – MBA Mortgage Applications report, EIA Energy Inventory report, Challenger Job Cuts, ADP Employment Change, Initial Jobless Claims, Factory Orders, Total Vehicle Sales

Fri. – Change in Non-farm Payrolls, Average Hourly Earnings, Unemployment Rate, ISM Non-Manufacturing

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

Mon. – None of note

Tues. – US Markets Closed

Wed. – Immucor(BLUD)

Thur. – Monsanto(MON), Texas Industries(TXI), Bed Bath & Beyond(BBBY), Finish Line(FINL), Global Payment(GPN), Sonic(SONC), Merix(MERX)

Fri. – None of note

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

Mon. – None of note

Tue. – US markets closed

Wed. – None of note

Thur. – None of note

Fri. – The Fed’s Kohn speaking

BOTTOM LINE: I expect US stocks to finish the week modestly higher on a firmer US dollar, lower energy prices, seasonal strength, less economic pessimism, diminishing credit market anxiety, bargain hunting and short-covering. My trading indicators are still giving mostly bullish signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,478.48 +1.26%*

Click here for the Weekly Wrap by Briefing.com.

Weekly Scoreboard*

Indices
S&P 500 1,478.48 +1.26%
DJIA 13,365.87 +.91%
NASDAQ 2,674.46 +1.27%
Russell 2000 771.76 +.55%
Wilshire 5000 14,847.34 +1.19%
Russell 1000 Growth 616.54 +1.13%
Russell 1000 Value 800.28 +1.28%
Morgan Stanley Consumer 744.24 +.75%
Morgan Stanley Cyclical 999.99 +1.53%
Morgan Stanley Technology 629.30 +.52%
Transports 4,625.57 +.91%
Utilities 537.17 +.09%
MSCI Emerging Markets 152.17 +2.28%

Sentiment/Internals
NYSE Cumulative A/D Line 60,357 +2.68%
Bloomberg New Highs-Lows Index -436
Bloomberg Crude Oil % Bulls 41.0 +156.2%
CFTC Oil Large Speculative Longs 219,382 +2.95%
Total Put/Call .92 +42.86%
NYSE Arms 1.10 +13.26%
Volatility(VIX) 20.71 +.68%
ISE Sentiment 169.0 +53.64%
AAII % Bulls 30.0 -16.3%
AAII % Bears 50.0 +6.0%

Futures Spot Prices
Crude Oil 96.08 +5.59%
Reformulated Gasoline 246.65 +5.54%
Natural Gas 7.36 +1.69%
Heating Oil 264.45 +1.94%
Gold 841.90 +5.07%
Base Metals 214.73 +.28%
Copper 307.70 +3.55%

Economy
10-year US Treasury Yield 4.08% -9 basis points
4-Wk MA of Jobless Claims 342,500 -.3%
Average 30-year Mortgage Rate 6.17% +3 basis points
Weekly Mortgage Applications 603.80 -7.6%
Weekly Retail Sales +1.3%
Nationwide Gas $3.00/gallon +.02/gallon
US Heating Demand Next 7 Days 2.0% below normal
ECRI Weekly Leading Economic Index 135.20 -.73%
US Dollar Index 76.20 -2.02%
CRB Index 358.51 +2.54%

Best Performing Style
Large-cap Value +1.28%

Worst Performing Style
Small-cap Value -.04%

Leading Sectors
Alternative Energy +5.7%
Steel +5.7%
Oil Service +5.6%
Telecom +3.3%
Wireless +2.4%

Lagging Sectors
REITs -.94%
Computer Services -1.23%
Hospitals -1.25%
Retail -1.77%
Airlines -5.0%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Mostly Lower into Final Hour on More Economic Pessimism, Profit-taking

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Semi longs, Software longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is mildly negative today as the advance/decline line is slightly lower, sector performance is mixed and volume is light. Investor anxiety is above average again. Today’s overall market action is neutral. The NYSE Arms hit a high 1.42 and the VIX is rising another 2.5% today, back to 21. The 10-year yield is falling another 10 basis points on another spike in economic pessimism as investors ignore today’s healthy December Chicago PMI report and chose to focus on the weaker November New Homes Sales report. Gauges of credit market angst are falling again today. The TED spread is falling 13 basis points to 158 basis points today. The 10-year swap spread is down 2.1 basis points to 64.9 basis points over Treasuries. LIBOR is dropping again and the 30-day US asset backed commercial paper yield is falling 10 basis points today. With such light volume, elevated levels of investor pessimism and high NYSE Arms readings over the last couple of days, it shouldn’t take too much buying to boost the averages by Monday’s close, which I expect. Recent long addition (SIGM) is surging 8% on above-average volume today. I still see substantial upside in the shares even after this year’s strong gains. I expect US stocks to trade mixed-to-higher into the close from current levels on diminishing credit market angst, seasonal strength, bargain-hunting and short-covering.

Today's Headlines

Bloomberg:
- A Taliban commander linked to al-Qaeda is suspected of plotting the suicide attack that killed former Prime Minister Benazir Bhutto, Pakistan’s government said.
- Macy’s Inc.(M), Best Buy(BBY) and Abercrombie & Fitch(ANF) may get a boost in store traffic and revenue in the next few weeks from the redemption of gift cards, which are growing faster than total retail sales.
- The cost of borrowing in dollars, euros and pounds fell, capping a second week of declines, as coordinated central bank action to revive money markets showed signs of success.
- Checkpoint Systems(CKP), the maker of anti-theft tags for retailers, rose the most in nine months after it named a new CEO and forecast 2008 earnings exceeding analysts’ estimates.
- Farmers in India, the world’s second-biggest wheat grower, may harvest more of the crop following early planting and “good weather” in the main growing areas, lowering overseas purchases. The country may harvest more than 75 million tons of wheat during the March-April harvest, the most since 2000, the nation’s agriculture commissioner said.
- Crude oil is rising to a one-month high on year-end investment fund mark-ups and a weaker dollar.
- Treasuries rose the most in more than two weeks and headed for the best annual returns since 2002 after a government report showed sales of new homes in the US fell more than expected.
- Democratic presidential candidate John Edwards said neither of his two major opponents would bring substantial change to the way Washington works – Hillary Clinton doesn’t want to and Barack Obama doesn’t know how.

Wall Street Journal:
- Warren Buffett, seizing a chance to profit from turmoil in the nation’s credit markets, is starting up a bond insurer that aims to make it cheaper for local governments to borrow and promises to be a tough competitor for the industry’s embattled incumbents.

NY Times:
- US companies are working with the Chinese government to design and install high-tech public surveillance systems as the country prepares for the Beijing Olympics.

NY Post:
- NY’s population stays almost unchanged.

AP:
- Google’s(GOOG) online search engine increased its lead in the US Internet search market in November over October, according to a report released Thursday by Nielsen Online.

MSNBC:
- Wind farms are popping up across the US to generate renewable electric energy, and that’s driving a large backlog of wind-tower business at Dallas-based industrial manufacturer Trinity Industries Inc.(TRN).

Information Times:
- China’s number of mobile-phone users may climb to 620 million next year, bringing the total telephone subscribers in the country to 976 million. Sales from the country’s communications industry may rise 25% to $342 billion in 2008 from a year earlier, citing comments by Wang Xudong, who heads the Ministry of Information Industry.

Bear Radar

Style Underperformer:

Small-cap Value (-.50%)

Sector Underperformers:

Airlines (-2.13%), REITs (-1.28%) and Hospitals (-.80%)

Stocks Falling on Unusual Volume:

CBK, THRX, OPTT, CWCO, NPSI and PPS

Bull Radar

Style Outperformer:

Small-cap Growth(+.69%)

Sector Outperformers:

Foods (+1.51%), Oil Service (+1.21%) and Telecom (+1.09%)

Stocks Rising on Unusual Volume:

TKF, GCO, CKP, LUB, RUK, SMA, CALM, CTDC, MELI, RICK, CRAI, DRYS, SOLF, HDNG, SIGM, SURW, SDTH, WPPGY, AMWD, FLIR, COMV, RES, OLN and UPL

Gauge of US Business Activity Jumps to 7-month High, Order Backlogs Soar to 10-year High, New Home Sales Fall

- The Chicago PMI for December rose to 56.6 versus estimates of 51.7 and a reading of 52.9 in November.

- New Home Sales for November fell to 647K versus estimates of 717K and 711K in October.

BOTTOM LINE: The Chicago PMI, a measure of US business activity, unexpectedly rose this month to the highest level since June as new orders increased and businesses reduced stockpiles of unsold goods, Bloomberg reported. Booming exports may help sustain growth in manufacturing, economists said. The New Orders component of the index rose to 58.4, the highest since August, versus 53.9 the prior month. Moreover, the Order Backlogs component soared to 60.7, the highest since January 1998, versus 45.9 in November. The Prices Paid component fell to 63.8 from 76.2 the prior month and the Employment component fell to 49 versus 54.4 in November. This report is a big positive. I continue to believe manufacturing will help boost overall US growth over the intermediate-term as companies gain confidence in the sustainability of the current expansion and rebuild depleted inventories as a result of record exports.

Sales of new homes in the US fell in November, Bloomberg reported. The median price of a new home fell .4% from year ago levels to $239,100. The number of homes for sale fell 1.8% to 505,000, the fewest in two years. The inventory to sales ratio rose to 9.3 months worth from 8.8 months worth in October. New Home Sales fell 28% in the Midwest, 19% in the Northeast and 6.4% in the South. They rose 4% in the West. I continue to believe new home construction will remain muted over the intermediate-term as builders work down inventories. I expect new home sales to bounce back next month, which should bring down inventories meaningfully with homes for sale at a 2-year low.

Links of Interest

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
Movers & Shakers
Upgrades/Downgrades
In Play
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes

Friday Watch

Late-Night Headlines
Bloomberg:
- The funeral of former Pakistani Prime Minister Benazir Bhutto was set for today after her assassination set off street protests and drew condemnations from leaders inside the country and around the world.
- France bans smoking in cafes, hotels and clubs on Jan. 1, stamping out the habit popularized by Jean-Paul Sartre puffing Gauloises in hazy brasseries.
- The perceived risk of Pakistan defaulting on its dollar-denominate debt rose to the highest in a month after former Prime Minister Benazir Bhutto was murdered at an election rally yesterday.

Wall Street Journal:
- Chinese securities regulators are preparing to outline new rules that would give global investment banks access to the country’s domestic exchanges.
- Companies in the S&P 500 paid a record $27.73 a share in dividends in 2007, and S%P expects that amount to rise 9.3% in 2008.

NY Times:
- A Post-Google Fraternity of Investors. A growing number of Google millionaires are hoping to parlay their newfound wealth into even greater riches by bankrolling technology start-ups.

CNNMoney.com:
- Beware the dreaded R word. You don’t know whether we’re in a recession until months after it starts. But investing successfully requires looking forward, not backword.
- Apple(AAPL) seen planning own Ne(x)tflix. Surging consumer tech company is developing rental components to iTunes that could dramatically boost digital movies, according to a report.

SmartMoney.com:
- iPhone Could Give Apple(AAPL) Inroad to Enterprise Sales.

IBD:
- With Housing Down, Some Buying Spots The Boom Bypassed.
- US online retail sales from November 23 through December 24 rose 22.4% from the year-earlier figure, Mastercard(MA) Advisor’s SpendingPulse reported on Thursday. And Chase(CCF) Paymentech’s Pulse Index, which uses transaction data from 10 top online merchants, says holiday sales through December 23 were up nearly 30%.

USA Today.com:
- Nike, Coke try to inspire with New Year’s ads.

Financial Times:
- Bhutto in her own words: ‘Only democracy can defeat Pakistan’s extremists.’

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -1.25% to unch. on average.
S&P 500 futures +.26%.
NASDAQ 100 futures +.16%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Macro Calls
Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- None of note

Upcoming Splits
- (TWIN) 2-for-1
- (CMI) 2-for-1
- (GHM) 5-for-4

Economic Releases
9:45 am EST
- The Chicago PMI for December is estimated to fall to 51.7 versus 52.9 in November.

10:00 am EST
- New Home Sales for November are estimated to fall to 717K versus 728K in October.

Other Potential Market Movers
- The weekly EIA natural gas inventory report could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology shares and automaker stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish at Session Lows on Pakistan News, Profit-Taking

Evening Review
Market Summary
Today’s Movers
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Stock Quote
In Play

Stocks Lower into Final Hour on Pakistan News, Profit-taking and More Economic Pessimism

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Semi longs, Software longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is negative today as the advance/decline line is substantially lower, almost every sector is declining and volume is light. Investor anxiety is above average again. Today’s overall market action is bearish. The NYSE Arms is a very high 1.62, the VIX is surging 7% back to 20 and the total put/call is an above-average .97. Cyclicals and small-caps are under the most pressure today on another spike in economic pessimism and profit-taking after recent gains. As well, the 10-year yield is falling 8 basis points. The broad market appears to be tracking the (XLF) closely again today. Given recent gains and today’s news, weakness isn’t too surprising. With such light volume, elevated levels of investor pessimism and high NYSE Arms reading it wouldn’t take too much buying to boost the averages into the close. I am also seeing positive action today among some growth stock leaders such as (MA), (AMZN), (BIDU), (AAPL) and (DECK). I expect US stocks to trade modestly higher into the close from current levels on diminishing credit market angst, seasonal strength, bargain-hunting and short-covering.

Today's Headlines

Bloomberg:
- As the US savings and loan crisis worsened in the 1980s, analysts tried to top each other’s estimates of the debacle’s cost to the federal government. Much the same thing is happening now with losses linked to subprime mortgages, with figures of $300 billion to $400 billion being bandied about. A more realistic amount is probably half or less than those exaggerated projections – say $150 billion. That’s hardly chicken feed, though not nearly enough to sink the US economy.
- Pakistan’s Bhutto Assassinated in Attack at Rally.
- The cost of borrowing dollars, euros and pounds fell, adding to evidence that measures by central banks to east the gridlock in money markets are succeeding.
- The Fed will reduce interest rates at every policy setting meeting “for the next two to three quarters,” PIMCO’s Paul McCulley said in a note released today to clients. The central bank will act to “truncate both the length and the severity” of a contraction in lending, McCulley said.
- Crude oil is rising to a one-month high after as investment fund speculation rose after an EIA repot showed US inventories fell more than expected.
- Wheat fell to a two-week low as rising production in Argentina, the world’s fourth-largest exporter of the grain, eased speculation by investment funds for further price gains.
- Sotheby’s(BID), the world’s second-largest auction house, sold about 46% more art this year as US, Russian and Asian collectors bid up prices for contemporary artists such as Francis Bacon and Jeff Koons.
- Cirrus Logic(CRUS), the maker of computer chips for Bose Corp. and Pioneer Corp., rose more than 5% on the Nasdaq after a fund founded by billionaire George Soros boosted its stake in the company almost sevenfold.
- Pacific Crest analyst Andy Hargeaves said Apple Inc. will meet or exceed his earnings estimates, the Mac will continue to take market share and that Apple is still a good buy over $200.

Wall Street Journal:
- Even as plasma and LCD television screens flew off the shelves before Christmas, manufacturers were starting to roll out a new technology that they predict will produce the next generation of mass-market video displays.

BloggingStocks:
- Apple’s new price target: $300.

CNNMoney.com:
- Vestas Wind Systems Gets Order From AES For 52 Turbines.

AP:
- Acting New Jersey Governor Richard Codey will sign into law a bill he sponsored that restricts paroled sex offenders from surfing the Internet.

Trends-Tendances:
- European Central Bank council member Guy Quaden said the financial-market turmoil has yet to have a major effect on Europe’s economy, citing an interview.

Bear Radar

Style Underperformer:

Small-cap Value (-1.86%)

Sector Underperformers:

REITs (-2.49%), Airlines (-2.39%) and Coal (-2.01%)

Stocks Falling on Unusual Volume:

SLM, IFN, UCBI, FSIN, SDTH, ESLR, SWWC and UCBI

Bull Radar

Style Outperformer:

Large-cap Growth(-.89%)

Sector Outperformers:

Utilities (-.40%) Energy (-.55%) and Computer Hardware (-.54%)

Stocks Rising on Unusual Volume:

BT, TNH, EVY, ADPI, MELI, CSUN, OPTT, PANL, CWCO, FSYS, HURC, CREE, COMV, ELON, CRMT, LAYN, FTEK, MBLX, DRYS, BVN, MWA, POT, IVN and CHA

Bearish Sentiment Still Exceeds Levels Seen at Depths of 2000-2003 Bear Market

* Notwithstanding historical individual investor pessimism, corporate insiders continue to buy their own stocks hand over fist.

The AAII percentage of bulls dropped to 30.0% this week from 35.85% the prior week. This reading is now at depressed levels. The AAII percentage of bears rose to 50.0% this week from 47.2% the prior week. This reading is now at an elevated level. Moreover, the 10-week moving average of the percentage of bears is currently at 46.7%, an elevated level. It has only been higher one other period in its history, which was September 1990-December 1990. Moreover, the 10-week moving average of the percentage of bears peaked at 43.0% right near the major bear market low during 2002. It is astonishing that the 10-week moving average of the % bears is currently greater than at any time during the bubble bursting meltdown of 2000-2003, which was arguably the worst stock market decline since the Great Depression.

Furthermore, the 50-week moving average of the percentage of bears is currently 38.6%, an elevated level seen during only one other period since tracking began in the 80s. That period was October 1990-July 1991, right near another major stock market bottom. The extreme reading of the 50-week moving average of the percentage of bears during that period peaked at 41.6% on Jan. 31, 1991. The current reading of 38.6% is slightly above the peak during the 2000-2003 bear market, which was 38.1% on April 10, 2003. I find this even more astonishing, notwithstanding the recent pullback, given that the S&P 500 is currently 105% higher from the October 2002 major bear market lows and just 4.6% off a record high.

Individual investor pessimism towards US stocks is currently deep-seated and historical in nature. This is just more evidence of the current “US negativity bubble” and bodes well for further out-sized stock market gains over the intermediate-term. It is also noteworthy that as investor pessimism grows ever thicker, corporate insiders continue to display downright giddy behavior with their recent stock activity during this pullback. It is even more interesting that the retail sector is seeing substantial insider buying, notwithstanding the current extreme investor pessimism towards the prospects for consumer spending. Prior to the 2000 economic downturn, insiders were bailing in droves. I continue to believe US stocks are poised for very strong performance during the first quarter of next year as the undying belief in an imminent recession fades and the uncertainty currently surrounding the financial sector lifts substantially.

Durable Goods Orders Rise, Jobless Caims Rise Slightly, Consumer Confidence Improves

- Durable Goods Orders for November rose .1% versus estimates of a 2.0% gain and a .4% decline in October.

- Durables Ex Transports for November fell .7% versus estimates of a .5% increase and a .9% decline in October.

- Initial Jobless Claims for this week rose to 349K versus estimates of 340K and 348K the prior week.

- Continuing Claims rose to 2713K versus estimates of 2645K and 2638K prior.

- Consumer Confidence for December rose to 88.6 versus estimates of 86.5 and a reading of 87.8 in November.

BOTTOM LINE: Orders for US durable goods rose less than forecast in November, partially restrained by a drop in defense orders, Bloomberg reported. Orders for military equipment fell 24%. However, Bookings Excluding Defense Equipment rose 1.2%. Orders for non-defense capital goods excluding aircraft, a gauge of future demand, declined .4% versus a 2.9% decline in October. Shipments of those items, used in computing GDP, rose .2% versus a 1.2% drop in October. Orders for transportation equipment rose 1.9%, boosted by a 21% jump in commercial aircraft demand. I expect Durable Goods Orders Ex Transports to rebound next month on inventory rebuilding.

The number of Americans filing first-time jobless claims for unemployment insurance rose slightly last week, Bloomberg reported. However, the four-week moving-average of new claims fell to 342,500 from 343,500. As well, the unemployment rate among those eligible to collect benefits, which tracks the US unemployment rate, remained at a historically low 2%. I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

Consumer confidence in the US unexpectedly rose in December, led by a gain in optimism about the future, Bloomberg said. However, the Present Conditions component fell to 108.3 from 115.7 the prior month. The Future Expectations component rose to 75.5 from 69.1 the prior month. Those consumers expecting more jobs in the next six months rose to 11.2% from 10.6% the prior month. The percentage of consumers planning to purchase an automobile over the next six months rose to 6.1% from 4.8% in November. This month’s gain in the headline confidence index was boosted by a surge in confidence in the Southeast Central(+19.5% to 97.0) and the Northwest Central regions(+15.3% to 108.3). I expect consumer confidence to improve again next month on diminishing credit market angst, less overall economic pessimism, lower interest rates, lower energy prices, higher stock prices and a stable job market.

Links of Interest

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
Movers & Shakers
Upgrades/Downgrades
In Play
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes

Thursday Watch

Late-Night Headlines
Bloomberg:
- The yuan rose the most since China ended a fixed exchange rate to the dollar in 2005 as the central bank sought to curb inflation.
- Amazon.com Says 2007 Holiday Season Is ‘Best Ever.’

Wall Street Journal:
- Congress Adds $10 Billion In Earmarks to 2008 Budget.
- ‘Long-Short’ Funds Labor to Thrive.

NY Times:
- Las Vegas Wins Big. Revenues on the Vegas strip are rising, even as rival casinos struggle.
- Inside Apple(AAPL) Stores, a Certain Aura Enchants the Faithful.

MarketWatch.com:
- Apple(AAPL) driven to record by strong iPhone, Mac sales.

BusinessWeek.com:
- Semiconductors: Healthy M&A Prospects. S&P says some recent deals show that chip companies are finding attractive prices and ways to improve by combining.
- The founder of Rembrandt Venture Partners offers predictions for next year and advice for entrepreneurs seeking funding.

CNNMoney.com:
- Hiring in ’08: Slower but steady gains.

IBD:
- Social Networking Has Taken Off With Users, Investors Swelling.

Forbes.com:
- Asset-management firm Davis Selected Advisers seems to be calling a bottom in the US financial services market. On Wednesday, it said it had acquired a 5.1% stake in MBIA(MBI), the world’s largest bond insurer, just two days after it pumped $1.2 billion into Merrill Lynch(MER).
- Unprecedented losses at Bear Stearns(BSC) couldn’t shake Joseph Lewis’s interest in the troubled brokerage. The British billionaire is still buying shares even after the company’s abysmal fourth quarter.

USA Today.com:
- Publicity over Ford Flex gains muscle with leisurely test drives.

Reuters:
- Buffet bets on America with latest purchase.

Financial Times:
- Apple Inc.(AAPL) and News Corp.’s(NWS/A) Twentieth Century Fox will start a service that lets consumers download films and rent them for a limited time.

Late Buy/Sell Recommendations
Citigroup:
- 8 Plausible and Interesting 2008 Outcomes: 1) The Republicans hold on to the White House – essentially, divided government remains the desire of the American people. 2) Oil prices fall to $70-75/bbl. alongside slower growth in the US and Europe, as well as Asia. 3) The US dollar strengthens to 1.25 vs. the Euro as the ECB finally cuts rates, while the trade deficit continues to decline. 4) Best performing sector in the S&P 500 is Financials. 5) The Chinese equity bubble bursts as pressures grow to rein in inflation, pollution, corruption, misallocation of resources along with trade protectionism threats forcing a more significant revaluation of the Yuan/Dollar peg. 6) Iran backs off its aggressive nuclear program as economic pressures force a change in priorities, especially as the US and neighboring countries begin negotiating with the government over Iraq and other local issues. 7) A carbon credit cap is imposed with carbon credit trading beginning, providing a new area for investors to seek profits and investment banks to trade. 8) Hedge fund consolidation picks up in earnest, with poor performance becoming the catalyst for change.

- 8 Questions We Are Not Hearing?: 1)Where should I consider buying real estate? General agreement is that prices are headed lower but no sense of where “value” is? 2) Doesn’t the yield curve steepness mean anything anymore for Financial sector earnings? 3) Why aren’t energy companies earning more with oil near $100/bbl. 4) Whatever happened to the problems of under-funded pension programs that were supposed to be the undoing of US public companies? 5) Why doesn’t the fact that 95% or more of equity mutual fund flows going to international funds in the past few years worry more people about a new stock investing craze outside the US? 6) Why has money continued to flow into hedge funds when their returns have been mediocre? 7) Whatever happened to the avian flu pandemic fears that dominated the investment mindset a couple of years ago? Are there such global fears dominating investors that may similarly fade away from public consciousness? 8) Why does anyone try to predict what price oil has to reach to end consumer spending when every benchmark in the past five years has been wrong?

Night Trading
Asian Indices are unch. to +1.25% on average.
S&P 500 futures -.17%.
NASDAQ 100 futures -.12%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Macro Calls
Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (LUB)/.07
- (CBK)/.28
- (ACIW)/.33

Upcoming Splits
- (CAM) 2-for-1
- (TWIN) 2-for-1

Economic Releases
8:30 am EST
- Durable Goods Orders for November are estimated to rise 2.0% versus a .2% decline in October.
- Durables Ex Transports for November are estimated to rise .5% versus a .4% decline in October.
- Initial Jobless Claims for this week are estimated to fall to 340K versus 346K the prior week.
- Continuing Claims are estimated to fall to 2645K versus 2646K prior.

10:00 am EST
- Consumer Confidence for December is estimated to fall to 86.5 versus 87.3 in November.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of -1,625,000 barrels versus a -7,586,000 barrel decline the prior week. Gasoline supplies are expected to rise by 1,550,000 barrels versus a 2,980,000 barrel increase the prior week. Distillate inventories are estimated to fall by -900,000 barrels versus a -2,158,000 barrel decrease the prior week. Finally, Refinery Utilization is estimated to rise by .7% versus a -.92% decline the prior week.

Other Potential Market Movers
- The weekly MBA mortgage applications report could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology shares and commodity stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.