Weekly Scoreboard*

Indices
S&P 500 1,330.63 -1.66%
DJIA 12,266.39 -.93%
NASDAQ 2,271.48 -1.38%
Russell 2000 686.18 -1.33%
Wilshire 5000 13,398.02 -1.55%
Russell 1000 Growth 551.92 -1.18%
Russell 1000 Value 728.55 -2.10%
Morgan Stanley Consumer 681.10 -1.47%
Morgan Stanley Cyclical 929.04 -1.92%
Morgan Stanley Technology 529.68 -1.69%
Transports 4,550.58 -2.79%
Utilities 477.50 -4.03%
MSCI Emerging Markets 141.70 +.80%

Sentiment/Internals
NYSE Cumulative A/D Line 59,824 +2.95%
Bloomberg New Highs-Lows Index -184
Bloomberg Crude Oil % Bulls 18.0 -37.9%
CFTC Oil Large Speculative Longs 257,989 +11.0%
Total Put/Call 1.23 +7.89%
ISE Sentiment 75.0 -7.54%
NYSE Arms 2.75 +394.44%
Volatility(VIX) 26.54 +10.31%
G7 Currency Volatility (VXY) 10.94 +11.52%
AAII % Bulls 34.3 +3.4%
AAII % Bears 45.3 +1.25%

Futures Spot Prices
Crude Oil 101.74 +2.56%
Reformulated Gasoline 266.26 -.86%
Natural Gas 9.36 +1.14%
Heating Oil 280.50 +1.98%
Gold 975.20 +2.94%
Base Metals 270.22 +5.74%
Copper 383.0 +1.18%

Economy
10-year US Treasury Yield 3.51% -29 basis points
10-year TIPS Spread 2.44% +8 basis points
TED Spread 1.22 +34 basis points
Investment Grade Credit Default Swap Index 151.26 -1.30%
Fed Fund Futures 70.0% chance of 75 cut, 30.0% chance of 50 cut on 3/18
Iraqi 2028 Govt Bonds 73.45 +.34%
4-Wk MA of Jobless Claims 360,500 -.4%
Average 30-year Mortgage Rate 6.24% +20 basis points
Weekly Mortgage Applications 665,100 -19.2%
Weekly Retail Sales +.6%
Nationwide Gas $3.16/gallon +.03/gallon.
US Heating Demand Next 7 Days right at normal
ECRI Weekly Leading Economic Index 132.40 +.15%
US Dollar Index 73.75 -2.39%
CRB Index 412.76 +3.52%

Best Performing Style
Small-cap Growth -.87%

Worst Performing Style
Mid-cap Value -2.11%

Leading Sectors
Computer Services +2.82%
Energy +1.73%
Oil Service +1.37%
Biotech +1.01%
Medical Equipment unch.

Lagging Sectors
Utilities -4.03%
Gaming -5.48%
I-Banks -5.52%
Banks -6.39%
Airlines -10.66%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Finish Near Session Lows, Weighed Down by Financial, Homebuilding, Commodity Shares

Evening Review
Market Summary
Top 20 Biz Stories
Today’s Movers
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
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GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
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In Play

Stocks Sharply Lower into Final Hour on Financial Sector Worries, Economic Concerns

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Software longs, Medical longs and Computer longs. I added (IWM)/(QQQQ) hedges and added to my (EEM) short this morning, thus leaving the Portfolio 75% net long. The overall tone of the market is very negative as the advance/decline line is substantially lower, every sector is declining and volume is about average. Investor anxiety is high again. Today’s overall market action is very bearish. The VIX is rising 10.5% today to a high 26.0. The ISE Sentiment Index is a very low 77.0 and the total put/call is a high 1.23 again today. Finally, the NYSE Arms has been running high all day and is currently 1.71. Today’s losses are mainly the result of ongoing worries over the financial sector and concerns that the bubble in commodities will prevent the Fed from acting in a more aggressive way if necessary. Considering how much US manufacturing is outsourced to emerging market countries, I suspect we will begin to see further signs of slowing in the growth rates of those countries over the coming weeks, which should provide the catalyst for a reversal lower in most commodity prices, thus giving the Fed more leeway. Google(GOOG) is trading relatively well today after comScore clarified its recent data that had pressured GOOG shares. They said that a careful analysis of the data doesn’t support inventors’ concerns that the economy is hurting Google’s biz. They also said, as I pointed out right after the release of the data, that Google’s quality initiatives drove down clicks. I suspect another surge in Google shares is in the offing on any signs of broad market stabilization. The Baltic Dry Index surged 3.8% today, the biggest gain this month. The JPMorgan Emerging Market Bond Index and Bear Stearns High Yield Index are .7% higher for the week. The Investment Grade Credit Default Swap Index is 1.3% lower for the week, which is also a positive. The Fed’s Evans said this afternoon that “fast moving events call for fast moving policy,” which could be an indication of another surprise rate cut before the March 18^th meeting. Nikkei futures indicate a -285 open in Japan and DAX futures indicate a -17 open in Germany on Monday. I expect US stocks to trade modestly higher into the close from current levels on short covering, lower long-term rates, Fed rate cut speculation and bargain hunting.

Personal Incomes, Spending Rise More Than Estimates, PCE Core at Estimates, Chicago PMI Contracts, Consumer Confidence Inches Above Estimates

- Personal Income for January rose .3% versus estimates of a .2% increase and a .5% gain in December.

- Personal Spending for January rose .4% versus estimates of a .2% increase and an upwardly revised .3% gain in December.

- PCE Core for January rose .3% versus estimates of a .3% gain and a .2% increase in December.

- The Chicago Purchasing Manager for February fell to 44.5 versus estimates of 49.5 and a reading of 51.5 in January.

- The final Univ. of Mich. Consumer Confidence reading for February rose to 70.8 versus estimates of 70.0 and prior estimates of 69.6.

BOTTOM LINE: Consumer spending in the US rose more than forecast in January, Bloomberg reported. The Fed’s favorite inflation gauge, the Core PCE, rose 2.2% from year ago levels. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 8 basis points today to 2.39%. It has declined 17 basis points from its highs of two days ago at 2.56%. Personal incomes rose 4.9% from year ago levels. Spending on services, which account for about 60% of total spending, rose .4%. Private/Household Debt as a % of personal income continued its recent downtrend, falling to 21.1% from a high of 22.3% in August 2005. Consumers will likely take on more debt in the short term, which will help keep spending from slowing too much. Incomes will likely remain relatively healthy over the intermediate-term and inflation should decelerate meaningfully.

The Chicago Purchasing Manager Index fell more than economists expected in February, Bloomberg reported. The Prices Paid component fell to 79.4 from 81.7 the prior month. The New Orders component of the index rose to 48.8 from 44.7 the prior month. The Inventories component fell to 46.0 from 51.1 the prior month. I expect the Chicago PMI to bounce back next month on inventory rebuilding.

Consumer confidence fell less in February than previously though, Bloomberg reported. The Expectations component of the index fell to 62.4 from 68.1 the prior month. The Current Conditions component fell to 83.8 from 94.4 the prior month. Fed fund futures now imply a 44.0% chance for a 50 basis point cut at the March 18^th meeting. The odds for a 75 basis point cut are up to 56.0% today from 36.0% yesterday. As I said earlier, I suspect consumer confidence gauges are making major lows right now.

Bear Radar

Style Underperformer:

Large-cap Value -2.21%

Sector Underperformers:

Coal (-3.57%), Homebuilders (-3.44%) and Oil Service (-2.94%)

Stocks Falling on Unusual Volume:

TIE, DECK, CMED, GFIG, HANS, CAVM, HMSY, ADSK, DRQ, MSA, UNS, NFP, DF and MYE

Bull Radar

Style Outperformer:

Large-cap Growth (-1.75%)

Sector Outperformers:

Retail (-.53%), Restaurants (-.79%) and Medical Equipment (-.89%)

Stocks Rising on Unusual Volume:

GXDX, JRJC, OVTI, ENOC, IART, SGMS, ESEA, GILD, LIHR, MGLN, AKAM, HWAY, ATAC, SIGM, FELE, GPS, INT, SWC, AWI, FCN, HLX, UHS and CTV

Links of Interest

Market Snapshot Commentary
Market Performance Summary
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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
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NASDAQ 100 Heatmap
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Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes

Friday Watch

Late-Night Headlines
Bloomberg:
- Most asset-backed securities containing subprime auto loans will be able to maintain an investment-grade credit rating even if they lose guarantees from bond insurers, according to Citigroup analysts. “The vast majority of subprime auto transactions are built to weather the storm,” the analyst said.
- Senate Republicans defeated a Democratic effort to advance a housing bill that included a provision that would let judges modify mortgage terms in bankruptcy proceedings. Industry groups including the Mortgage Bankers Assoc. said the legislation would drive investment from mortgage-backed securities and increase borrowing costs for consumers.
- Gap Inc.(GPS), the largest US clothing retailer, said fourth-quarter profit rose for the first time in three years and forecast further gains this year after it sold more full-prices sweaters and jeans during the holiday season. Gap shares jumped 5.9% in after-hours trading.
- Omnivision Technologies(OVTI) surged 6.2% in extended trading. The maker of image sensors for camera phones said that it earned 55 cents a share in the third quarter versus analysts’ estimates of 47 cents a share.
- FTI Consulting(FCN), the global business advisory firm, announced fourth quarter revenue rose 29%. The stock rose 6.0% in after-hours trading.
- CommScope Inc.(CTV), a global leader in infrastructure solutions for communications networks, reported fourth quarter revenue gained 17%. The stock surged 6.0% in extended trading.
- Deckers Outdoor(DECK) reported fourth quarter sales gained 56.2%, however the stock fell 9.9% in after-hours trading.
- Dell Inc. reported an unexpected drop in fourth quarter profit after an expansion into retail failed to ignite sales. The stock fell .30 to $20.50 in after-hours trading.
- Farmland values in five Midwest states jumped 16% last year, the most in three decades, as demand for crop-based fuel and livestock feed sent corn and soybeans to records, the Federal Reserve Bank of Chicago said.

CNBC.com:
- Take-Two Interactive(TTWO) said on Thursday it has received informal inquiries but not written offers concerning potential business combinations since Electronic Arts(ERTS) proposed a $1.9 billion acquisition.

SmartMoney:
- Blu-ray DVD Chip Maker Offers Risk, Reward.
- Insider-Buying Screen Delivers FedEx(FDX), 7 Others.
- Marvell Technology(MRVL) Can Soar if Problems Are Resolved.

BusinessWeek.com:
- Apple(AAPL) Buy Back This Stock. It’s sitting on a huge pile of cash. Eighteen-and-a-half billion dollars is a lot of money.
- Ever since Google(GOOG) bought the wiki-based online application startup Jotspot in late 2006, people have been wondering if it had disappeared forever inside the bowels of the search giant. Tonight, Google’s launching Google Sites, using Jotspot’s technology to create free group collaboration service that will be part of its online software suite Google Apps.

CNNMoney.com:
- Electric carmaker Think hits the accelerator.

Forbes.com:
- The Brazilian Sugarcane Industry Assoc. applauded today’s remarks by US fed Chairman Ben Bernanke favoring a reduction in tariffs on Brazilian ethanol to help take pressure off food prices in the US as a positive approach that goes far beyond economics.
- Vast fortunes await makers of next-generation batteries.

IBD:
- Railroads On Track With Profits Despite Economic Concerns.

MSNBC.com:
- Democratic House Speaker Nancy Pelosi has asked for a grand jury investigation into whether White House chief of staff Josh Bolten and former counsel Harriet Miers should be prosecuted for contempt of Congress.

Portfolio.com:
- Six-figure jobs on Wall Street and elsewhere just aren’t enough for “Millennial” workers, who want their work to have “meaning” too.

USA Today.com:
- Farm suppliers’ profits bloom as commodity prices jump.

Automotive News:
- Kia Motors Corp., South Korea’s second-largest automaker, will produce transmissions at an auto-assembly plant it’s building in Georgia and also supply them to affiliate Hyundai Motor. Kia will make the components in West Point, Georgia, when the Seoul-based company’s first US In exchange, Hyundai’s Montgomery, Alabama, plan, 80 miles from West Point, will supply the Kia factory with engines. factory opens late next year.

Financial Times:
- Leading private equity firms, including Apollo Management LP and Kohlberg Kravis Roberts, are continuing to raise billions of dollars for new funds.
- London’s edge over New York eroded. Proposed changes to the UK’s tax system will make London less attractive as a financial center, according to a survey of international business professionals.
- Google(GOOG) reveals plans for health database. Google on Thursday laid out plans for one of its most anticipated new services, a digital health records system meant to give users more control over their personal healthcare.
- The most disturbing aspect of the US primary season is the Democratic consensus that liberal trade is opposed to the national interest. The next Democratic administration promises to repair US alliances and standing in the world. A worthy aim. Yet its first act, the party says, will be to tell its closest neighbors that the rules they are all agreed to are defunct – and if they do not like it, tough luck.

Late Buy/Sell Recommendations
Citigroup:
- Buy (SCHW) and (AMTD) for pure play exposure to retail brokerage.
- Maintained Buy on (GILD), target $55. Abacavir’s link to increased myocardial infraction risks and poor efficacy in the DAD and ACTG 5202 studies provide substantial backwind to Gilead’s(GILD) tenofovir-based regimens (Viread Truvada and Atripla) in HIV. We see attractive leverage with any potential market share gains. IMS prescription data also suggest of better than consensus Q1 sales. Our analysis suggests that every 10% market share gain from abacavir to Truvada in the US and every 15% gain in Europe should boost EPS by .05 and our target price by $1, respectively. This suggests that our $4.1 billion vs. consensus $4.0 billion ’08 HIV sales estimates could have upside.
- Reiterated Buy on (GPS), target $23.

CSFB:
- Reiterated Outperform on (GILD), target $53.
- Reiterated Outperform on (FLR), target $185.

Night Trading
Asian Indices are -1.50% to unch. on average.
S&P 500 futures -.42%.
NASDAQ 100 futures -.21%.

Morning Preview
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Earnings of Note
Company/EPS Estimate
- (CIEN)/.35
- (SUP)/.15

Upcoming Splits
- (NJR) 3-for-2
- (PRXL) 2-for-1

Economic Releases
8:30 am EST
- Personal Income for January is estimated to rise .2% versus a .5% gain in December.
- Personal Spending for January is estimated to rise .2% versus a .2% gain in December.
- The PCE Deflator for January is estimated to rise .3% versus a .2% increase in December.

9:45 am EST
- The Chicago Purchasing Manager report for February is estimated to fall to 49.5 versus a reading of 51.5 in January.

10:00 am EST
- Final Univ. of Mich. Consumer Confidence for February is estimated to rise to 70.0 versus a prior estimate of 69.6.

Other Potential Market Movers
- The Fed’s Evans speaking, Fed’s Poole speaking, Fed’s Lockhart speaking, Fed’s Mishkin speaking, Fed’s Rosengren speaking, (CPN) analyst meeting, Pacific Crest Data Center Conference and Wachovia Homebuilding Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by automaker 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.

Stocks Finish Lower, Weighed Down by Airline, Homebuilding, Retail and Financial Shares

Evening Review
Market Summary
Top 20 Biz Stories
Today’s Movers
Market Performance Summary
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After-hours Commentary
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In Play

Stocks Lower into Final Hour on Another Spike in Economic Pessimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs, Biotech longs and Alternative Energy longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is below average. Investor anxiety is high again. Today’s overall market action is just mildly bearish. The VIX is rising 2.2% today and remains relatively high at 23.2. The ISE Sentiment Index is a low 92.0 and the total put/call is a high 1.25 again today. Finally, the NYSE Arms has been running slightly above-average most of the day. Again, considering today’s economic data, recent stock gains, the rise in oil and fall in the US dollar, today’s action isn’t bad. There continues to be a strong bid under many market leading stocks, which is a big positive. This is much healthier, in my opinion, than a market being led by the most heavily shorted stocks with fundamental problems. Moreover, growth stocks have begun to significantly outperform value again, likely as a result of the recent drop in long-term rates and very cheap valuations. I suspect with oil solidly above $100 and interest rates falling, alternative energy stocks will begin outperforming again pretty soon. I still see substantial upside for my (AMSC) long, which is breaking back above its 50-day moving-average today. (AAPL) is trading near session highs, rising 6.3%. I continue to believe the stock, as well as (GOOG), has made a major bottom for the year. Nikkei futures indicate a -225 open in Japan and DAX futures indicate an +48 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short covering, lower long-term rates and bargain hunting.

Today's Headlines

Bloomberg:
- Crude oil is rising above $102/bbl. on a weaker dollar, a shipment disruption in Iraq and historic investment fund speculation.
- Prince Harry, third in line to the British throne, is fighting with his regiment in Afghanistan, the UK Ministry of Defense said.
- PIMCO’s Bill Gross told CNBC the firm is buying some commercial mortgage backed securities and is still buying municipal debt.
- Thornburg Mortgage’s(TMA) CEO said the common stock dividend should be safe.

Wall Street Journal:
- London-based hedge fund Richmond Capital LLP has stumbled badly this year, losing about half its money in January alone.
- Bebo.com, MySpace Turn to Videos to Gain Ads, Users.

Forbes:
- “I don’t anticipate stagflation,” Fed Chairman Bernanke said under questioning from the Senate Banking Committee. “I don’t think we’re anywhere near the situation that prevailed in the 1970s. I do expect inflation will come down,” he said.

NY Sun:
- NYC is launching a campaign to motivate public school students by giving them free cell phones and upgrading features if they do things such as show up to class and behave.

Financial Times:
- Emirates Telecommunications, is close to forming a joint venture with a mobile operator in the Kurdish region of Iraq, citing the company’s CEO.
- A hedge fund’s demise: the Peloton pile-up.

Saba:
- Yemen plans to raise its oil production by more than 50% to 500,000 barrels a day by 2010, citing the country’s oil minister. Yemen’s oil production reached 317,000 barrels a day last year.

Bear Radar

Style Underperformer:

Small-cap Value -1.91%

Sector Underperformers:

Airlines (-3.80%), Homebuilders (-3.47%) and Banks (-3.39%)

Stocks Falling on Unusual Volume:

EPL, WNR, CGV, PBKS, PDGI, LHCG, ENOC, COMV, AMAG, REXX, CRDN, COGT, EWBC, RHD, IRM, MYL, PKE, SFI, EPL and LTD

4Q GDP Rises Slightly Less Than Estimates, Initial Jobless Claims Rise More Than Estimates

- Preliminary 4Q GDP rose .6% versus estimates of a .8% gain and prior estimates of a .6% increase.

- Preliminary 4Q Personal Consumption rose 1.9% versus estimates of a 2.0% gain and prior estimates of a 2.0% increase.

- Preliminary 4Q GDP Price Index rose 2.7% versus estimates of a 2.6% gain and prior estimates of a 2.6% increase.

- Preliminary 4Q Core PCE rose 2.7% versus estimates of a 2.7% gain and prior estimates of a 2.7% increase.

- Initial Jobless Claims rose to 373K versus estimates of 350K and 354K the prior week.

- Continuing Claims rose to 2807K versus estimates of 2785K and 2786K prior.

BOTTOM LINE: The US economy grew .6% in the fourth quarter, the same as initial estimates, Bloomberg reported. Consumer spending rose 1.9% in the fourth quarter. Personal Income rose at a 4.1% rate during 4Q. According to Intrade.com the odds the US slips into recession this year have fallen to 61.5% from 77.5% last month. I continue to believe the US will avoid recession as growth comes in around 1% during the first half of the year before accelerating modestly in the second half as the effects of fiscal/monetary stimulus take hold, exports continue to boom to new records, inflation decelerates and companies rebuild depleted inventories.

The number of Americans filing first-time jobless claims for unemployment benefits rose more than forecast last week, Bloomberg reported. The unemployment rate among those eligible to collect benefits, which tracks the US unemployment rate, held steady at a historically low 2.1%. The four-week moving average of claims fell to 360,500 from 361,750 the prior week. Four states and territories reported an increase in new claims, while 49 actually had a decrease. The current trend in jobless claims is still not at levels normally associated with economic contraction. Fed fund futures now imply a 68.0% chance for a 50 basis point cut at the March 18^th meeting. The odds of a 75 basis point cut have risen to 32.0% from 10.0% yesterday. I continue to believe the job market will improve to more healthy levels in the second half of the year and will remain very healthy over the intermediate-term without generating substantial unit labor cost increases, which account for about two-thirds of inflation.

Bull Radar

Style Outperformer:

Large-cap Growth (+.11%)

Sector Outperformers:

Telecom (+1.64%), Oil Service (+1.57%) and Steel (+.48%)

Stocks Rising on Unusual Volume:

EOG, ROSE, PT, WFT, DWSN, BVN, T, NG, MKTX, NDAQ, SEAB, CVA, BRKR, HURC, VISN, MIDD, DBRN, GTLS, CTRP, XNPT, ULBI, SGMO, VTIV, NFLX, VMED, JAKK, MANT, LEAP, ACAP, BLOG, CRZO, LIFC, HSP, FRE and UHT

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:
- Salesforce.com(CRM), the biggest seller of Internet-based customer-management software, reported profit and sales that topped analysts’ estimates after it added about 2,900 customers. The shares jumped 10% in after-hours trading.
- Flowserve Corp.(FLS) rose 9%, the most in more than five years in extended trading, after forecasting full-year earnings that topped analysts’ estimates.
- Dress Barn(DBRN) jumped 13% in after-hours trading. The NY-based retailer with more than 1,400 women’s clothing stores said that it earned .09/share in the fiscal second quarter versus analysts’ estimates of .06/share.
- Crude oil fell from a record after a government report showed that US inventories increased a seventh week. “Crude-oil inventories are starting to look very healthy and gasoline inventories are tremendous,” said Michael Lynch, president of Strategic Energy & Economic Research. “Demand is awful and there’s a lot of oil that’s on its way here. There is going to be serious downward pressure on this market within a few weeks.” Gasoline stockpiles rose 2.35 million barrels to 232.6 million barrels, the 16^th straight gain. Inventories of the motor fuel are the highest since 1994 and 17% above the five-year average.
- Baidu.com Inc.(BIDU) rose the most in a month on speculation the company may have acquired web browser Maxthon.
- Sanyo Electric rose the most in a week in Tokyo trading after the Nikkei newspaper reported Japan’s largest oil refiner agreed to distribute its solar-power panels to homes nationwide.
- Yahoo! Inc.(YHOO) said Microsoft’s(MSFT) unsolicited takeover bid has been a distraction to management and may require “significant” time and resources to review. The offer has also created uncertainty for employees, which may make it difficult to keep and hire new people, Yahoo said.
- NYC will require its 10,000 private limos to switch to hybrid models over the next five years, city taxi officials said.

Wall Street Journal:
- Bernanke Hints at More Rate Cuts Amid Multiple Economic Risks.

MarketWatch.com:
- Japan’s industrial output fell 2% in January from the previous month, led by a decline in the production of large passenger cars, memory chips and digital cameras.
- AIG seen easily absorbing mark-to-market hit. Insurer’s an ‘unsinkable ship,’ Friedman Billing Ramsey analysts say.
- Cerberus Capital Management may join a group of banks that are planning to help inject new capital into Ambac Financial(ABK) as the bond insurer tries to avoid losing its crucial AAA rating, CNBC reported.

BusinessWeek.com:
- Google(GOOG): Are Ad Concerns Overblown?
- Obesity Drugs: Worth a Weighty Investment.

CNNMoney.com:
- Google shares recover from sell-off. Analysts rise to the Internet search giant’s defense.

SmartMoney.com:
- Since becoming chief investment officer of Texas’ $100 billion-plus Teacher Retirement System in 2006, Britt Harris has been out front, guiding the pension plan into investments like hedge funds, private equity and real estate.

IBD:
- Atheros(ATHR) Maps Out Its GPS Chip Move.
- Netflix(NFLX) Dazzles As Competition Thins.

Reuters:
- Apple Inc.(AAPL) affirmed on Wednesday its iPhone sales goal for this year and said it will give details next week of how outside programmers can create software for its iPhone, a move expected to spur demand for the multifunction device. The shares surged another 3.5% in after-hours trading.
- Short interest on the Nasdaq rose another 4.9% in mid-February. Short interest soared more than 25% in shares of Microsoft(MSFT) and 30% in shares of Yahoo(YHOO). Short interest also jumped 49% in share of (DRIV), 26% in (GRMN), 37% in (CDNS) and 43% in shares of (VRSN).
- Sovereign funds, Cerberus eye bond insurer stakes.

Financial Times:
- This month is set to become the first February since 1992 in which IPOs were less than those of traditionally slow January. The value of cancelled or postponed deals is the highest on record for the first two months of any year, according to Thomson Financial.
- Private equity firms are now approaching sovereign wealth funds for loans for big leveraged acquisitions, filling the gap left by investment banks struggling with the credit squeeze, leading buy-out bosses said.

TimesOnline:
- The number of new European hedge funds introduced last year dropped to the lowest in at least seven years, citing data provider EuroHedge.

Kuwait Times:
- Saudi, France ink pact to combat terrorism and money laundering.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (UTX), target $86.
- Reiterated Buy on (CRM), raised target to $70.

Night Trading
Asian Indices are -1.0% to +.75% on average.
S&P 500 futures -.35%.
NASDAQ 100 futures +.15%.

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
Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (DLM)/.25
- (BRL)/.76
- (OMG)/1.33
- (RDC)/1.18
- (FLR)/1.16
- (TK)/.38
- (SHLD)/3.34
- (SFD)/.22
- (CVC)/.11
- (FRE)/-2.06
- (S)/.18
- (FAF)/.13
- (KSS)/1.30
- (NOVL)/.05
- (GPS)/.34
- (SGMS)/.24
- (NX)/.51
- (HANS)/.39
- (AIG)/.69
- (DELL)/.36
- (CPHD)/-.08
- (OVTI)/.47
- (DECK)/2.26
- (WCG)/1.62
- (BE)/-.43
- (VIA/B)/.83

Upcoming Splits
- (NJR) 3-for-2
- (PRXL) 2-for-1

Economic Releases
8:30 am EST
- Preliminary 4Q GDP is estimated to rise .8% versus prior estimates of a .6% increase.
- Preliminary 4Q Personal Consumption is estimated to rise 2.0% versus prior estimates of a 2.0% increase.
- Preliminary 4Q GDP Price Index is estimated to rise 2.6% versus prior estimates of a 2.6% increase.
- Preliminary 4Q Core PCE is estimated to rise 2.7% versus prior estimates of a 2.7% gain.
- Initial Jobless Claims are estimated to rise to 350K versus 349K the prior week.
- Continuing Claims are estimated to rise to 2785K versus 2784K prior.

Other Potential Market Movers
- The Fed’s Bernanke speaking, weekly EIA natural gas inventory data, (EOG) analyst conference, (CAI) analyst meeting, (ETN) analyst meeting, (DTV) investor day, CSFB Specialty Pharma Conference, CSFB Aerospace/Defense Conference, CSFB Transport/Logistics Conference, Robert Baird Business Solutions Conference, Wachovia Homebuilding Conference, Goldman Sachs Tech Symposium, Pacific Crest Data Center Conference and Keefe Bruyette Regional Bank Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by automaker and financial 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 Slightly Higher, Boosted by Technology, Homebuilding and Financial Shares

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In Play

Stocks Mixed into Final Hour on Healthy Consolidation of Recent Gains

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs and Alternative Energy longs. I added to my (AAPL) long and took some profits in another long today, thus leaving the Portfolio 100% net long. The overall tone of the market is mildly negative as the advance/decline line is slightly lower, most sectors are declining and volume is about average. Investor anxiety is high, despite today’s mixed performance in the major averages. Today’s overall market action is neutral. The VIX is rising 4.0% today and remains relatively high at 23.0. The ISE Sentiment Index hit a depressed 68.0 and the total put/call hit a high 1.23 today. Finally, the NYSE Arms has been running above-average most of the day. Considering today’s economic data, recent stock gains and fall in the US dollar, today’s action is more impressive. I still think the recent parabolic rise in short interest, high cash levels at most funds, historically bearish sentiment readings and recent technical breakout in the S&P 500 should keep pullbacks relatively mild and short-lived. There looks to be a strong bid now under many market leading stocks that had been under severe pressure during this correction, which is a big positive. IBM’s(IBM) CFO said today that he feels better about their US business now than he did during the fourth quarter. (AAPL) said today that it will host a media event on March 6 and will discuss new iPhone “enterprise” features and release its software developer toolkit. MBIA’s(MBI) CEO said today that he does not expect rating agencies to take action on the companies’ ratings over the next year or longer, which is another large positive. (GS), which has recently been under significant pressure, is trading at session highs, up 4.2%. The 10-year swap spread is falling to 68.8 basis points over Treasuries today, down 13 basis points over the last week. Nikkei futures indicate a -120 open in Japan and DAX futures indicate a -5 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short covering, diminishing bond insurer angst and bargain hunting.

Today's Headlines

Bloomberg:
- Federal Reserve Chairman Ben S. Bernanke signaled the US central bank is prepared to lower interest rates again even amid signs of accelerating inflation.
- US regulators for Fannie Mae(FNM) and Freddie Mac(FRE) removed limits on the companies’ $1.5 trillion mortgage portfolios, bringing an end to a restriction that stifled their ability to provide financing for the housing market.
- The risks to European economic growth are on the ‘downside’ and the inflation rate may rise further because of higher oil and other commodity prices, European Central Bank board member Lorenzo Bini Smaghi said. He said that the US economy would not likely slip into recession.
- Prime Minister Gordon Brown’s plans to increase taxes on wealthy foreigners living in Britain may prompt hedge funds to expand operations abroad instead of in the UK, a poll by accounting firm Phoros Management showed.
- Stony Brook University, part of the State University of New York, received a $60 million donation from hedge fund manager Jim Simons, former head of the schools’ mathematics department.
- High-yield, high-risk loan prices have rebounded as interbank lending rates steadied, according to Bank of America(BAC) analysts. The average price of US leveraged loans rose to 90.45 cents on the dollar yesterday, up from a low of 86.28 on Feb. 7, citing S&P LCD data.
- The US Centers for Disease Control and Prevention recommended all children get vaccinated against influenza, expanding the number of people who should get flu shots by 50%.

NY Times:
- GM(GM) Voices Confidence in Lending Business.
- Now on the Campaign Trail, a Reined-In Bill Clinton.

Philadelphia Inquirer:
- The University of Pennsylvania and Drexel University are in serious talks with the Philadelphia School District to jointly operate two small high schools in University City – the first venture of its kind for the district at the high school level.

Bear Radar

Style Underperformer:

Mid-cap Value -.12%

Sector Underperformers:

Airlines (-4.09%), Oil Tankers (-1.86%) and Coal (-1.18%)

Stocks Falling on Unusual Volume:

ADSK, SCRX, ELN, ENOC, LAMR, OFIX, PBKS, CRI, URS and NNN

Fed Funds Futures Probabilities Graph

(Click on image to enlarge)

Durable Goods Orders, New Home Sales Below Estimates

- Durable Goods Orders for January fell 5.3% versus estimates of a 4.0% decline and a downwardly revised 4.4% gain in December.

- Durables Ex Transports for January fell 1.6% versus estimates of a 1.4% gain and a downwardly revised 2.0% increase in December.

- New Home Sales for January fell to 588K versus estimates of 600K and 605K in December.

BOTTOM LINE: Orders for durable goods fell more than forecast in January, Bloomberg reported. Bookings for non-defense capital goods excluding aircraft, a gauge for future business spending, fell 1.4%. Shipments of those items, used to compute GDP, gained .1%. Orders for military gear fell 20%. The 3-month average of Durable Goods Orders is -.1%, which isn’t near levels normally associated with economic contraction. The Morgan Stanley Cyclical Index is outperforming today, rising .6%. The 10-year yield is 2 basis points higher. I expect Durable Goods Orders to bounce back this month on inventory rebuilding as exports continue to boom at record levels.

Purchases of new homes in the US fell more than forecast in January, Bloomberg reported. The median price of a new home fell to $216,000 from $254,400 a year earlier. The supply of new homes at the current sales rate rose to 9.9 months’ worth. Sales fell 10% in the Northeast, which sales gained 2.2% in the West. After today’s data, the odds of the Fed lowering the fed funds rate at the March 18^th meeting by 50 basis points fell to 90.0% from 96.0% yesterday. The odds of a 75 basis point cut rose to 10.0% from 0.0% yesterday. I still expect home sales to surprise on the upside this spring on pent-up demand, lower prices and lower mortgage rates. This should make a meaningful dent in inventories.

Bull Radar

Style Outperformer:

Small-cap Growth (+.71%)

Sector Outperformers:

Homebuilders (+4.07%), Computer Services (+1.11%) and I-Banks (+1.11%)

Stocks Rising on Unusual Volume:

FSS, LFC, IVN, FCX, STO, BARE, CPL, LAD, HLF, RDEN, ERES, MXWL, SYNO, MASI, LKQX, CLHB, BARE, ATHN, DLTR, HWAY, CEDC, WRNC, NFLX, CRDN, CCOI, COIN, GTXI, PZZA, SSRI, ASTE, FNM, OME, DOX, CDI, SHS and HLF

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
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Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Goldman Sachs(GS) advised investors to exit its trade recommendation to purchase five-year Treasury Inflation Protected Securities. The difference in yield between five-year TIPS and nominal Treasuries, known as the breakeven rate, has widened to about 2.34 percentage points from 1.95 percentage points since the recommendation was made on Feb. 6. “Since then, the market has become increasingly more concerned about inflation,” said Goldman strategists Michael Vakin, Francesco Garzarelli and Sergiy Verstyuk in a research note. Breakevens are now at “a level at which we are comfortable in taking profits.”
- Asian stocks rose for a third day, led by commodity producers and department-store operators, after raw-material prices advanced and US retailers reported an increase in earnings.
- US House Financial Services Committee Chairman Barney Frank wants to provide $35 billion in federal funds to buy homes in foreclosure and offer refinancing for “distressed” homeowners under a plan unveiled today.
- Blackstone Group LP(BX), manager of the world’s biggest private-equity fund, plans to bypass Wall Street firms and directly find lenders for leveraged buyouts, President Hamilton James said.
- Coal power investments are increasingly risky when the price of greenhouse-gas emissions is factored into fuel costs, according to a report by a consulting firm whose clients include the US Energy Dept. Proposed coal-fired generators across the US are being canceled or delayed as pending regulation of heat-trapping gases threatens investment returns, Synapse Energy Economics Inc. said.
- A new Bloomberg/LA Times survey shows Obama is preferred by Democratic primary voters 48% to 42%, the first time he has overtaken Clinton in a Bloomberg/Times poll. In a general-election match-up among registered voters, McCain is 2 points ahead of Obama and 6 points ahead of Clinton.
- McDonald’s Corp.(MCD) and Honeywell(HON) led a rush of borrowers selling $9.5 billion in US corporate bonds today, the most since January.

Wall Street Journal:
- Hillary Rodham Clinton and Barack Obama blamed each other for spreading false information about their respective health care plans Tuesday night in a high stakes debate one week before a quartet of primaries.

MarketWatch.com:
- JPMorgan(JPM) gets nod to underwrite China government bonds.
- Despite price, Visa may be a bargain.

CNBC.com:
- Private equity firms and unexposed banks have joined a group to rescue bond insurer Ambac Financial(ABK). The appearance of the private equity firms and unexposed banks indicates the bailout group thinks there is still a market for bond insurance and that Ambac “can survive in the future,” said CNBC anchor Charlie Gaspparino.
- MBIA CEO: Bond Insurer Is Done Raising Capital.
- Charting Asia: Shanghai Alert.
- Fund Manager: Buy Fast – and Buy These Names.

BusinessWeek.com:
- Earnings: A Clearer Picture Emerges.

SmartMoney.com:
- CEO Interview: Morningstar’s(MORN) Joe Mansueto.

Boston Globe:
- Hedge funds embrace Obama, donate less to Clinton.

Reuters:
- Google(GOOG) winner as Microsoft(MSFT) and Yahoo(YHOO) face off.
- Delta(DAL) says no merger yet, deal must meet conditions.

Financial Times:
- Don Kohn, Federal Reserve vice-chairman, on Tuesday indicated that he remained open to cutting US interest rates further.
- Ovation in Pyongyang is music to US ears.
- Tentative signs of an improvement in global liquidity are starting to emerge, says David Shairp, global strategist at JPMorgan Asset Management.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (FWLT), target $104.

UBS:
- Raised (XLNX) to Buy, target raised to $27.

Night Trading
Asian Indices are +1.0% to +2.25% on average.
S&P 500 futures -.02%.
NASDAQ 100 futures +.14%.

Morning Preview
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Earnings of Note
Company/EPS Estimate
- (RRD)/.73
- (MYL)/-.04
- (TOL)/-.50
- (DLTR)/1.01
- (CKP)/.52
- (DYN)/.05
- (LAMR)/.07
- (BYD)/.38
- (CRM)/.04
- (FLS)/1.22
- (LTD)/.92
- (MDR)/.67
- (TIE)/.30
- (LIZ)/.20
- (SPW)/1.68
- (PSA)/.27
- (FNM)/-1.20
- (NBL)/1.62
- (HET)/.74

Upcoming Splits
- (RBN) 2-for-1

Economic Releases
8:30 am EST
- Durable Goods Orders for January are estimated to fall 4.0% versus a 5.0% gain in December.
- Durables Ex Transports for January are estimated to fall 1.4% versus a 2.3% gain in December.

10:00 am EST
- New Home Sales for January are estimated to fall to 600K versus 604K in December.

Other Potential Market Movers
- The Fed’s Bernanke speaking, Fed’s Mishkin speaking, weekly MBA Applications report, weekly EIA energy inventory data, (JPM) investor day, (SNWL) analyst meeting, (UTX) analyst meeting, BMO Capital Markets Global Metals/Mining Conference, Goldman Sachs Technology Symposium, CSFB Global Services Conference, Robert Baird Business Solutions Conference, Keefe Bruyette Regional Bank Conference, Jefferies Internet Conference, Merrill Communications Conference and Wachovia Homebuilding Conference could also impact trading today.

BOTTOM LINE: Asian indices are sharply higher, boosted by retailer 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.