Stocks Lower into Final Hour on Weakness in Market Leaders

Bottom Line: Overall, today's market action was bearish as the major averages are finishing mostly lower with slightly negative breadth. Market leading stocks substantially underperformed the broad market today. The underlying tone of the market wasn't very good. The fact that the broad market couldn't generate a better bounce on unexpected strength in financial shares is a bad sign. It still looks as though we need to see a capitulation day to provide a better bottom and set the stage for a strong rally into year-end. I am finishing the day 50% net long.

Today's Headlines

Bloomberg:
- Gold fell 3.2%, the most in 13 months, after the yen strengthened against major currencies, slowing the pace of investment in the precious metal and other commodities.
- Crude oil is falling $2/bbl. as investment funds reduce speculative positions on global growth worries.
- The US dollar rose the most against the euro since July 2006 as credit-market losses pushed investors to reduce holding of assets in higher-yielding currencies.
- IBM(IBM) to buy Cognos for $2.9 billion, its largest acquisition, to compete with Oracle Corp.(ORCL) and SAP AG(SAP) in providing software that tracks corporate performance.
- Al Gore, who won a Nobel peace prize for his global warming campaign, will join venture capital firm Kleiner Perkins Caufield & Byers to find investments in green businesses.

Wall Street Journal:
- MGM(MGM) Seeks Help With Big Plan. Partnership Deals Are Forged For Push Into New Markets.

NY Times:
- Wireless networks may open up and follow lead of the Internet, which once was dominated by closed communities such as AOL, citing Shahid Khan, a partner at the IBB Consulting Group.

CNNMoney.com:
- A single hedge fund has made a gain of more than $3 billion at the expense of investment banks be betting on the subprime crisis.

Advertising Age:
- IAC/InterActiveCorp(IACI) CEO Barry Diller said he would consider buying AOL if Time Warner’s(TWX) new CEO, Jeffrey Bewkes, decides to sell.

Economic Releases

- None of note

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:
- China ordered banks to put aside more reserves for the ninth time this year to cool an economy that expanded 11.5% in the third quarter and to damp speculation in stocks and real estate.
- Canada’s dollar fell, snapping its longest streak of weekly gains in 10 years, as Canadian officials said they were concerned over the currency’s climb to a record high.
- President Bush said Pakistan’s President Pervez Musharraf has assured the US he will take the “positive steps” of relinquishing his post as head of the army and holding parliamentary elections.
- Boeing Co.(BA) won an order for 12 of its 777 aircraft valued at $3.2 billion from Emirates as the biggest Arab airline expands long-haul routes.
- Democratic presidential candidate Barack Obama said he would raise the cap on Social Security payroll taxes to fix what he called the single most important social program in the US. Obama said he would be reluctant to back any plans for keeping Social Security solvent by cutting benefits or raising the retirement age.
- Pakistan’s President Pervez Musharraf said general elections will be held by Jan. 9 and emergency rule will continue in order to help fight terrorism after a deadly bomb attack on his opposition last month.
- Spanish King Tells Venezuela’s Chavez to ‘Shut Up’.

Wall Street Journal:
- Honeywell Intl.(HON) is developing technology that lets computers monitor the brainwaves of analysts viewing US surveillance images.
- Saudi Aramco is on track to raise crude oil output to 12 million barrels per day by 2009.
- Intel(INTC) Shifts From Silicon To Lift Chip Performance.

NY Times:
- The Federal Communications Commission has determined the cable industry has grown too large and plans to impose new regulations to open the market for independent programmers and video services.
- US Banks Agree on Credit Backup Fund.
- Giving to Charity, Through Real Estate. A way to help a cause, save on taxes and maybe still get a monthly check.

MarketWatch.com:
- Investors who believe that China’s soaring stock market is due for crash now have a new tool to put their money where their mouth is.

IBD:
- Clinical Trial Firms Pass Test on Wall Street.

Washington Post:
- High oil prices are fueling one of the biggest transfers of wealth in history. Oil consumers are paying $4 billion to $5 billion more for crude oil every day than they did just five years ago, pumping more than $2 trillion into the coffers of oil companies and oil-producing nations this year alone.
- The Newest Bubble: Oil. The fact is that supply of known reserves is 1.4 trillion barrels, which is larger than it has been at any time in the last 30 years. And thanks to improved technology, the recovery rate from reservoirs has already increased from 20 to 35%, on is way to 50%. According to industry estimates, demand actually fell in the United States last year and is growing globally by less than 1%. Since the summer, open crude oil futures contracts held by financial players are up 50%.

Time:
- The Human Barometer. Sam Zell, chairman of Equity International. The key to housing is the employment rate, said Zell. As long as unemployment stays basically full – say, under 5.5% - I see no major crisis in the housing market. Yes, we have subprime issues. Yes, we have a lot of investors who got hung out, but I don’t see the crisis the way the media portray it. If you had to pick the next cycle change, logic would say it would be sometime in 2009 because of a new presidency and because of the various factors in the market. And that's a probability. But I don't see it as 1990 or 1974 or any of those periods where we had a real serious downturn, Zell said.

USA Today:
- China confirms toxic ‘date-rape’ substance on toys.

CNNMoney.com:
- Eni SpA(E) CEO Paolo Scaroni said he believes the oil price is more likely to fall than rise further, adding much of the recent price hikes are due to speculative pressure. ‘For each real physical barrel of oil demand, there are a hundred on paper,’ he said referring to futures market activity that is driven by investment funds.

ABCNews.com:
- Another Question Planted by Clinton Campaign. Illinois Minister Tells ABC News That Clinton Staffer Asked Him to Pose a War Question.

Financial Times:
- Super-SIV clear to sign more banks.
- Daimler and Ford to pursue fuel cell venture. The two carmakers have given the partnership momentum by buying Ballard Power Systems’ troubled automotive fuel cell business, including numerous patents and 150 employees.
- China enjoys banner year in gold production.
- US strike on Iran ‘not being prepared.’
- New Citi chief to get free hand on strategy.

Sunday Telegraph:
- Former US President Bill Clinton will travel to London for a fundraiser for his wife Hillary’s campaign next week. The fundraiser is targeted at Americans living in the UK capital. Guests will be asked to donate more than $2,090 each.

Sunday Business Post:
- Former President Bill Clinton will raise as much as $300,000 for his wife, Democratic presidential candidate Hillary Rodham Clinton, by addressing a fundraising dinner in Dublin, Ireland.

Reuters:
- There is no fundamental justification for oil at $100 a barrel and OPEC member Nigeria is assuming that prices will not last at this level, oil minister Odein Ajumogobia said on Saturday. Ajumogobia said that no-one in the oil exporters’ group would be surprised if the price fell to $80 in the next few weeks.

AFP:
- Saudi Arabia and Kuwait will discuss an increase in oil production if more output is needed to ease rising prices, citing the countries’ oil ministers. OPEC will “not hesitate to shoulder its responsibilities,” Kuwait’s acting Oil Minister Mohammed al-Aleem said.

Finanz & Wirtschaft:
- Toyota Motor’s(TM) auto-financing business in the US has a default rate of less than 1%, citing an interview with Executive VP Mitsuo Kinoshita. The US credit crisis isn’t a problem to Toyota, he said.

EFE:
- Brazilian President Luis Inacio Lula da Silva wants his country to join OPEC following a 5- to 8-billion-barrel oil discovery.

Xinhua News Agency:
- More than two-thirds of Chinese enterprises said the country has either some or serious excess capacity in their industry, citing a survey by the Development Research Center of the State Council. Textiles, pharmaceuticals and general equipment manufacturing were among the highest rates in terms of overcapacity.

Nihon Keizai:
- Walt Disney(DIS) will begin mobile phone services in Japan by next spring, leasing a network from Softbank Mobile.

China Daily:
- China is building a database of 20,000 overseas journalists who will be allowed to work in the nation next year when Beijing hosts the Olympics, citing the head of the country’s press regulator.

Haaretz:
- Israeli government officials believe that the country’s sovereign credit rating may be raised for the first time since 1995 as the nation’s ratio of debt to gross domestic product falls.

Weekend Recommendations
Barron's:
- Made positive comments on (C), (CVD), (PPDI) and (QCOM).

Citigroup:
- Upgraded (ALTR) to Buy, target $25.
- Reiterated Buy on (MON), target $114.
- Downgraded (ETFC) to Sell, target $7.50.
- Reiterated Buy on (CF), target $108.

Morgan Stanley:
- Reiterated Overweight on (MMM).

Night Trading
Asian indices are -3.25% to -1.25% on avg.
S&P 500 futures -.09%.
NASDAQ 100 futures -.43%

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
- (BX)/.30
- (TSN)/.09
- (HEW)/.36
- (BOBE)/.39

Upcoming Splits
- (MPR) 4-for-3
- (TNP) 2-for-1
- (CRS) 2-for-1
- (APAGF) 4-for-1

Economic Data
- None of note

Other Potential Market Movers
- The (CWST) analyst day, (TSN) analyst meeting, (TSS) investor presentation, (SIMG) analyst meeting, (UFI) investor meeting, Citigroup Biotech Conference, Oppenheimer Digital Media Conference, Deutsche Bank Gaming Forum and Piper Jaffray Industrial Growth & Business Services Symposium could also impact trading today.

BOTTOM LINE: Asian indices are sharply lower, weighed down by technology and financial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 50% net long heading into the week.