Economic Releases

- None of note

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Wednesday Watch

Late-Night Headlines
Bloomberg:
- Australia’s economy grew .2% in the third quarter, the slowest pace in a year, as the government cut spending and exports fell.
- Microsoft was found to have breached antitrust rules by South Korea, a ruling that may encourage regulators in Asia to challenge the company’s practice of selling programs in bundles.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on GNW, MUR, BLS and BEN.
- Reiterated Underperform on GM.

Night Trading
Asian Indices are +.25% to +.50% on average.
S&P 500 indicated -.02%.
NASDAQ 100 indicated +.06%.

Morning Preview
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Earnings of Note
Company/EPS Estimate
CENT/.30
DCN/-.02
HOV/2.42
TTC/.10
VTS/.20

Upcoming Splits
- None of note

Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude drawdown of 1.9 million barrels. Gasoline inventories are estimated to rise 1.05 million barrels and distillate supplies are expected to rise 1.75 million barrels. Finally, refinery utilization is expected to rise .5%.

3:00 pm EST
- Consumer Credit for October is estimated to rise to $5.0 billion versus -$.1 billion in September.

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

Stocks Close Modestly Higher after Late-day Profit-taking

Indices
S&P 500 1,263.70 +.13%
DJIA 10,856.86 +.20%
NASDAQ 2,260.76 +.14%
Russell 2000 687.58 +.15%
DJ Wilshire 5000 12,644.00 +.12%
S&P Barra Growth 604.90 +.13%
S&P Barra Value 654.42 +.12%
Morgan Stanley Consumer 593.16 +.09%
Morgan Stanley Cyclical 784.26 +.64%
Morgan Stanley Technology 533.89 +.49%
Transports 4,128.49 +1.02%
Utilities 404.06 -.04%
Put/Call .78 -8.24%
NYSE Arms .82 -11.92%
Volatility(VIX) 11.52 -.69%
ISE Sentiment 187.00 -1.58%
US Dollar 91.40 -.04%
CRB 324.29 -.40%

Futures Spot Prices
Crude Oil 60.03 +.15%
Unleaded Gasoline 158.35 unch.
Natural Gas 13.54 +.38%
Heating Oil 177.60 +.23%
Gold 514.60 +.16%
Base Metals 151.11 -.32%
Copper 198.90 +.10%
10-year US Treasury Yield 4.49% +.17%

Leading Sectors
Gold & Silver +2.80%
Airlines +2.0%
Computer Hardware +1.37%

Lagging Sectors
Biotech -.55%
Drugs -.56%
I-Banks -.63%

Evening Review
Detailed Market Summary
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Market Wrap CNBC Video(bottom right)
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GuruFocus.com
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In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on HRZ, KR and IMCL.

Afternoon/Evening Headlines
Bloomberg:
- Saddam Hussein said the Baghdad Court trying him for a massacre is “unjust” and he won’t return when it reconvenes tomorrow.
- Carina Perelli, the head of the United Nations’ elections assistance agency, has been fired for what the organization’s leaders described as “sexual and professional harassment” of her staff.
- Apple Computer started selling “Law & Order” and other top-rated NBC shows on its iTunes online store to help fuel sales of its iPod video players.
- Rupert Murdoch’s News Corp. forecast a sixfold annual increase in sales at its Internet businesses, driven by more than $1 billion in acquisitions including MySpace.com.
- Research In Motion isn’t negotiating to settle a patent lawsuit that may shut down its BlackBerry e-mail service in the US.
- US Treasuries rallied, sending the 10-year note to its biggest gain in three weeks, after a government report showing labor costs fell for the second consecutive quarter.

AP:
- Most Americans and a majority of people in the UK, France and South Korea said torturing those suspected of terrorism is justified in certain cases, citing an AP-Ipsos poll.

Asahi:
- Japan will lift its two-year-old ban on US and Canadian beef as early as Dec. 12.

BOTTOM LINE: The Portfolio finished higher today on gains in my Semi longs, Computer longs, Retail longs and Medical longs. I did not trade in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market was slightly positive today as the advance/decline line finished modestly higher, sector performance was mixed and volume was about average. Measures of investor anxiety were mostly lower into the close. Overall, today’s action was neutral given the afternoon profit-taking. According to N.Y. consulting firm Strategic Insight, new inflows into international stock funds are projected at $150 billion this year, boosting assets above the $1 trillion mark. To put this in perspective, this would be a 41% increase above last year's record of $106 billion. Moreover, the last mania for international stocks peaked in 1994 and saw inflows of only $66 billion. Between the mania for negatively correlated/low-correlation U.S. strategies -- such as commodity and market neutral funds -- and the flood of money into international funds, there has been relatively little interest in U.S. stocks. Don't be surprised to see these trends reverse over the intermediate term, pushing investors back into more positively correlated U.S. stock funds. As well, a slowing housing market should boost interest in U.S. equities.

Stocks Sharply Higher Mid-day as Largest Component of Inflation Declines for 2nd Straight Quarter

Indices
S&P 500 1,271.63 +.76%
DJIA 10,914.57 +.74%
NASDAQ 2,276.27 +.83%
Russell 2000 692.68 +.89%
DJ Wilshire 5000 12,722.30 +.74%
S&P Barra Growth 608.77 +.78%
S&P Barra Value 658.84 +.81%
Morgan Stanley Consumer 596.04 +.57%
Morgan Stanley Cyclical 788.71 +1.24%
Morgan Stanley Technology 538.51 +1.36%
Transports 4,163.53 +1.88%
Utilities 405.00 +.19%
Put/Call .84 -1.18%
NYSE Arms .56 -39.91%
Volatility(VIX) 10.99 -5.26%
ISE Sentiment 201.00 +5.79%
US Dollar 91.47 unch.
CRB 325.09 -.15%

Futures Spot Prices
Crude Oil 60.35 +.73%
Unleaded Gasoline 158.55 -.27%
Natural Gas 13.73 +.51%
Heating Oil 177.90 -.59%
Gold 513.50 +.18%
Base Metals 151.11 -.32%
Copper 198.90 -.92%
10-year US Treasury Yield 4.48% -1.77%

Leading Sectors
Airlines +2.93%
Semis +2.34%
Retail +1.53%

Lagging Sectors
Foods -.05%
Drugs -.16%
Oil Tankers -.18%

BOTTOM LINE: The Portfolio is substantially higher mid-day on gains in my Internet longs, Computer longs, Semi longs, Retail longs and Medical longs. I have not traded this morning, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, almost every sector is higher and volume is about average. Measures of investor anxiety are lower. Overall, today’s market action is positive considering investors are rewarding positive news notwithstanding recent gains. The Johnson Redbook same-store sales index rose 3.3% year-over-year last week vs. a 3.9% rise the prior week. This week's gain is up from a 1.5% increase in late April, and it's the 31st week in a row that the index has risen 3% or more. This measure has been much more accurate than other gauges of retail activity I follow. The Morgan Stanley Retail Index (MVRX) has returned 12.0% since around mid-October. I continue to believe retailers will outperform through year-end. I expect US stocks to trade mixed-to-higher into the close on short-covering, more optimism and falling long-term rates.