Thursday, January 10, 2008

Friday Watch

Late-Night Headlines
- Bank of America(BAC) is in talks to acquire Countrywide Financial Corp.(CFC), the biggest US mortgage lender, a person with knowledge of the discussions said.
- Clients of James Siomon’s Renaissance Technologies Corp. withdrew $4 billion from the firm’s largest hedge fund in the past four months after returns trailed peers.
- The number of individual investors who are bearish on US equities exceeds those who are bullish by the most since November 1990, a signal to some investors that stocks may be poised to rebound. The percentage of AAII respondents who are bearish has exceeded those who are bullish by more than 33 percentage points only three other times since 1990 – in October 1992, February 2003 and July 2006. In the 12 months that followed those periods, the S&P 500 rose 14%, 35% and 24%, respectively. Assets in US money-market funds increased by $61.3 billion during the week ended Jan. 8, the sixth-largest increase on record, to an all-time high of $3.15 trillion, according to iMoneyNet.
- PIMCO’s Bill Gross, manager of the world’s biggest bond fund, reduced some of the pool’s cash and bought investment-grade corporate debt last month, pushing holdings to the highest since September 2003.

- Intel Corp.(INTC) former CEO Andy Grove plans to give as much as $40 million from his estate to the Michael J. Fox Foundation, a group devoted to Parkinson’s disease research.
- The yen fell against all 16 of the most-active currencies on speculation central banks will ease a credit crunch, giving traders confidence to resume buying higher-yielding investments funded in Japan.

Wall Street Journal:
- Kenneth Lewis’s move to buy hobbled mortgage lender Countrywide Financial Corp.(CFC) is a bullish bet on Bank of America’s own future and that of the battered financial system.
- Republicans Back Tax, Spending Cuts in Debate.
- Fed Chief Opens the Door To ‘Substantive’ Rate Cuts.
- Older adults eager to volunteer have their pick of a growing number of innovative new options, with many nonprofits trying to meet volunteers halfway by giving them flexibility, new challenges and, in some cases, a nominal paycheck in exchange for their skilled work.

NY Times:
- A huge underwater oil field discovered late last year has the potential to transform South America’s largest country, Brazil, into a sizable exporter and win it a seat at the table of the world’s oil cartel.
- Merrill Lynch(MER) is expected to suffer $15 billion in losses stemming from soured mortgage investments.
- Marcial: Inside Wall Street. This week, Gene Marcial looks at DryShips, Microchip Technology, and Chicago Bridge & Iron.
- S&P Picks and Pans: Delta, UPS, Intel, Citi, Merrill, Tata.
- Tata unveils world’s cheapest car.
- Here come the hot IPOs of ’08.

- AU Optronics Corp.(AUO), Taiwan’s largest liquid-crystal display maker, and four rivals will earn a combined record profit of $6.2 billion this year as tight supplies prevent prices from falling.

- Tech, toy giants join discussion over kids’ cyber-centered lives.
- The average 30-year mortgage rate plunged 20 basis points to 5.87% this week, the lowest level in more than two years.

- Delta wants merger talks with UAL, Northwest: report.
- Third Avenue Mgmt. has 10.9% stake in MBIA Inc.(MBI).

Financial Times:
- Americans bought more Toyota Prius hybrid petrol-electric hatchbacks in 2007 than Ford Explorer sports utility vehicles, the top selling SUV for more than a decade.

Commercial Times:
- Taiwan Semiconductor Manufacturing may report record quarterly sales in the second half of 2008 because of increased demand for chips used in handsets with more advanced features.

Late Buy/Sell Recommendations

- Upgraded (NUAN) to Buy, target $23.
- No Visible Warning Flags. We hosted 10 software co’s at Citi’s San Francisco office on Thursday 1/10. Key takeaways include: co’s are not seeing any weakness though we think there is still risk + we face seasonal headwinds in 1H; on-demand sector (CRM) sounded most confident; large diversified businesses are also relatively defensive (ADBE ADSK); (BEAS) may yet get acquired.
- We favor Hologic(HOLX) as our top pick in the Emerging Medtech sector followed by Spectranetics(SPNC) and Varian Medical(VAR). We expect strong upcoming quarters from all three companies and are increasing our price targets for (HOLX) to $81 from $74 and on (VAR) to $62 from $51.
- Reiterated Buy on (DPZ), target $20.

Night Trading
Asian Indices are -1.25% to +.50% on average.
S&P 500 futures -.54%.
NASDAQ 100 futures -.50%.

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
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- None of note

Upcoming Splits
- None of note

Economic Releases
8:30 am EST

- The Trade Deficit for November is estimated to widen to -$59.5 billion versus -$57.8 billion in October.
- The Import Prices Index for December is estimated to rise .1% versus a 2.7% rise in November.

2:00 pm EST
- The Monthly Budget Surplus for December is estimated to rise to $50.0 billion versus $42.0 billion in November.

Other Potential Market Movers
- The Needham Growth Conference could also impact trading today.

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

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