Today's Headlines

Bloomberg:
- The Federal Reserve cut the benchmark interest rate by three quarters of a percentage point, its first emergency reduction since 2001, after stock markets tumbled from Hong Kong to London.
- The European Central Bank and the Bank of England may have to follow the Federal Reserve and cut interest rates.
- The Bush administration today left the door open for a larger stimulus package than the $150 billion plan the president already has outlined to avert a recession.
- Ambac Financial Group(ABK), the first bond insurer to lose its AAA credit rating because of subprime mortgages, is considering “strategic alternatives” after posting its biggest-ever loss. The shares soared as much as 52% on optimism the company may be sold.
- DuPont Co.(DD), the third-biggest US chemical maker, said fourth-quarter profit rose as increase sales of seeds and chemicals in emerging markets more than made up for weak demand from domestic homebuilders and automakers.
- Fastenal Co.(FAST) the largest US retailer of nuts, bolts and other fasteners, rose the most in more than five years in NY treading after posting fourth-quarter earnings that outpaced analysts’ estimates.
- Countrywide Financial(CFC), the US mortgage lender being purchased by Bank of America(BAC), rose as much as 17% in NY trading as concern eased that the takeover may be revised or aborted.
- Investors should buy US stocks in the ongoing market sell-off, according to UBS AG and Bank of America(BAC) strategists, because share prices already reflect a slowdown in earnings growth.
- Roche Holding AG, the world’s biggest maker of tumor treatments, agreed to buy Ventana Medical Systems(VMSI) with an increased offer of $3.4 billion, ending a seven-month effort to acquire the US cancer test manufacturer.
- The CEO of the NYSE does not “see any evidence” that the US economy is headed into recession.
- The Bank of China, the nation’s second largest lender, on Tuesday denied reports that it might post sharply lower profits or even a loss in 2007 due to investments in securities linked to US subprime mortgages. “The reports were groundless,” said a statement from the bank.
- The International Swaps and Derivatives Assoc. said global losses on credit-default swaps will be nearer $15 billion than the $250 billion forecast by PIMCO’s Bill Gross.
- Google Inc.(GOOG), owner of the world’s most popular Internet search engine, is the best US company to work for, according to a Fortune Magazine survey.
- Crude oil fell to a six-week low in NY on worries over global demand, record production, a rising US dollar and less investment fund speculation.
- First Quantum Minerals Ltd., owner of the Kanshanshi mine in the Democratic Republic of Congo, said production of the metal will jump 37% this year as new mines build up to full capacity.

Wall Street Journal:
- Bill Clinton, the former US president, will gain about $20 million as he wraps up his business relationship with billionaire Ron Burkle’s Yucaipa Cos.
- Clinton, Obama Exchange Harsh Words In South Carolina Debate.

NY Times:
- Online Reviews of Hotels and Restaurants Flourish.
- US housing-market turmoil has set off a multitude of lawsuits as homeowners sue mortgage lenders, mortgage lenders sue banks, banks sue loan specialists and investors sue everyone.

BostonHearald.com:
- Raytheon Co.(RTN) is selling microwave technology to Schlumberger Ltd.(SLB), which hopes someday to be a key tool in unlocking the vast but hard-to-extract oil reserves in the West’s underground shale deposits.

US News:
- 4 Ways Consumers Will Feel the Fed Cut.

TimesOnline:
- Hedge funds to set up industry watchdog.

Bull Radar

Style Outperformer:

Small-cap Growth (+3.03%)

Sector Outperformers:

Banks (+5.46%), Retail (+5.32%) and I-Banks (+4.09%)

Stocks Rising on Unusual Volume:

PWY, HGR, VMSI, PTEC, FAST, VCBI, WGOV, PETS, BBBY, FMER, SHLM, SHLD, CVCO, BJRI, WFSL, WFMI, PCLN, IBKC, KEY, LOW, NCC, WFC, HD, KSS, BSC, BAC, PTEC, PGI, IWA, PBR and HES

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

Tuesday Watch

Weekend Headlines
Bloomberg:
- Asian stocks tumbled, extending a global sump that has wiped more than $5 trillion from stock markets this year, on concern world economic growth is faltering.
- US Energy Secretary Samuel Bodman said a rise in OPEC production would be a “constructive response” to the short-term impact high oil prices are having on the US economy.
- It’s only a matter of time before the euro starts to imitate the dollar, thanks to train engineers and ticket-takers.
- The euro fell to a five-month low against the yen as European stocks plunged by the most since 2001 on concern the global economy is slowing.
- Gold fell to a two-week low in London as the US dollar strengthened and investors sold commodities to cover losses in equities.
- Oil fell $2/bbl. to $88.57/bbl. on a strengthening US dollar, worries over global demand, record global production and less speculation by investment funds.
- Cia. Vale do Rio Doce said it held talks to buy Xstrata Plc, a takeover that would be worth at least $60.5 billion at current prices, making it the second-largest mining acquisition ever.
- Venture capitalists pumped a record $9.1 billion into privately held US biotechnology and medical device companies last year, in hopes of making discoveries they can sell to larger drugmakers.
- President Bush urged Congress to work with his administration to enact an economic stimulus plan “as soon as possible” to counter growing threats to an economic expansion that is now in its seventh year.
- Venezuelan President Hugo Chavez raised the regulated price for unprocessed milk and threatened to seize dairies that try to charge more as he attempts to increase supply amid widespread shortgages.
- ACA Capital Holdings(ACA) convinced its trading partners to give the bond insurer more time to get out of $60 billion in credit-default swap contracts that it can’t pay.
- Microsoft Corp.(MSFT) bought Calista Technologies and expanded a partnership with Citrix Systems(CTRX) to compete in the growing market for so-called virtualization technology.
- The decline in Iraq violence following an increase in US forces has opened a “window of opportunity” for political gains, the top UN envoy to the country said.
- Democratic presidential candidate Barack Obama said former President Bill Clinton is making misleading statements and carrying his support for Hillary Rodham Clinton to a “troubling” level.
- The yen declined, erasing gains, on speculation an advance to the strongest in 2 ½ years against the dollar was excessive.

Wall Street Journal:
- Investor Edward Lampert, who runs Sears Holdings Corp.(SHLD), plans to change the business structure of the retailer.
- Los Angeles Times editor James O’Shea was fired just 14 months after he assumed the post.
- The average US-stock mutual fund held 7.3% of assets in cash through the end of last year, the highest year-end figure since 2000, according to Morningstar Inc.
- The supply shortages in the liquid-crystal-display market may well last throughout the remainder of this year, forcing some of Asia’s biggest panel manufacturers to fast-forward their capital-spending plans to meet demand, analysts say.

NY Times:
- Foreign investors, including sovereign wealth funds in China and the Middle East, bought a record $414 billion in American assets last year, and are buying more in 2008, citing Thomson Financial.
- Too much caffeine during pregnancy may increase the risk of miscarriage, a new study says, and the authors suggest that pregnant women may want to reduce their intake or cut it out entirely.
- Getty Images(GYI) Up for Sale, Could Fetch $1.5 Billion.

MarketWatch.com:
- The global-market sell-off spread Monday as indexes in Canada and Latin America plunged, following routs in Europe and Asia, and setting the stage for sharp declines when the US reopens Tuesday.

Dow Jones:
- Venezuelan Oil and Energy Minister Rafael Ramirez said he sees no reason for OPEC to increase output to lower oil prices.

ZDNet:
- Social-network software maker Slide said on Friday it had closed a $50 million institutional financing round, marking the rising valuations of start-ups riding fast-growing Facebook’s wave of popularity.

Business Week:
- The iPhone: Going Corporate?

CNNMoney.com:
- Venture capital at 6-year high. Investments rise to $29.4 billion in 2007, indicating optimism in the face of recession fears.

SmartMoney.com:
- Sifting Market Wreckage for Tech Bargains.
- Two value hunters with sterling records share their top picks.

Reuters:
- Qatar’s $60 billion sovereign wealth fund is looking at possibly buying into financial services and construction companies in the United States and Europe.

Financial Times:
- Israel will set out plans on Monday to cut drastically its dependence on oil imports, with a private-sector initiative for a nationwide electric car network.

TimesOnline:
- BHP Billiton(BHP) has called on seven global banks to provide the crucial $70 billion needed to fund its planned merger with Rio Tinto(RTP), a deal that would create a global mining powerhouse.

Bangkokpost.com:
- Advanced Info Service has joined with strategic partner Singapore Telecom to bring Apple’s(AAPL) much-touted iPhone to the region, including Thailand.

Xinhua:
- The number of China’s online gamers is expected to surpass 59 million in 2008, up 20% from last year’s 48 million, according to a nationwide survey.

Al Arabiya TV:
- Qatar’s oil minister said there is no need for OPEC to raise output when it meets Feb.1 in Vienna.

Emirates Business 24/7:
- Tatweer, a unit of government-owned Dubai Holding LLC, may buy a stake in DreamWorks Animation SKG, citing Mohammed al-Habbai, Tatweer’s vp of entertainment and leisure.

Weekend Recommendations
Barron's:
- Made positive comments on (ACOR), (IHP) and (MBI).

Citigroup:
- Maintained Buy on (DE), target $92.

Night Trading
Asian indices are -5.0% to -2.75% on avg.
S&P 500 futures -4.3%.
NASDAQ 100 futures -4.0%.

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
- (ADTN)/.27
- (PCP)/1.72
- (ETN)/1.71
- (WB)/.33
- (JEC)/.71
- (BAC)/.21
- (UAUA)/-.97
- (RF)/.29
- (BJS)/.59
- (JNJ)/.86
- (UNH)/.92
- (KEY)/-.03
- (CSX)/.64
- (ABK)/-3.86
- (DD)/.50
- (TLAB)/.01
- (FAST)/.36
- (AKS)/.58
- (DOX)/.56
- (CREE)/.11
- (TXN)/.52
- (ACF)/.24
- (NSC)/.90
- (AAPL)/1.61
- (WAT)/1.06
- (FIC)/.46
- (NWK)/.06

Upcoming Splits
- (MHS) 2-for-1

Economic Data
- None of note

Other Potential Market Movers
- The Richmond Fed Manufacturing report, JPMorgan High Yield Conference and weekly retail sales reports could also impact trading today.

BOTTOM LINE: Asian indices are sharply lower, weighed down by automaker and commodity shares in the region. I expect US stocks to open sharply lower and to rally into the afternoon, cutting losses meaningfully. In my opinion, there was already enough “fear and panic” evident in the pricing of US securities, before the global stock rout of the last two days, to provide the necessary foundation for at the very least a tradable bottom and very likely a significant market low. If the major average do in fact open down as much as they are now indicated, I plan to take more profits in my (TLT) long and put the proceeds to work in some of my highest quality stocks that can grow earnings at a significant rate, notwithstanding slower global growth. Fed fund futures now imply a 72% chance for a 75 basis point cut and a 28% chance for a 50 basis point cut at the January 30^th meeting. The Portfolio is 100% net long heading into the week.

Weekly Outlook

Click here for the US Market Preview by MarketWatch.com.

Click here for Tuesday’s US Equity Movers by Bloomberg.com.

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

Economic reports for the week include:

Mon. – US Markets Closed

Tues. – Richmond Fed Manufacturing Index, weekly retail sales reports

Wed. – Weekly MBA Mortgage Applications report

Thur. – Initial Jobless Claims, Existing Home Sales, Weekly EIA energy inventory report

Fri. – None of note

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

Mon. – US Markets Closed

Tues. – Precision Castparts(PCP), Bank of America(BAC), Eaton Corp(ETN), Wachovia Corp.(WB), United Healthcare(UNH), Keycorp(KEY), Regions Financial(RF), Johnson & Johnson(JNJ), Jacobs Engineering(JEC), Adtran(ADTN), BJ Services(BJS), UAL Corp.(UAUA), Du Pont(DD), CSX Corp.(CSX), AMBAC Financial(ABK), Tellabs Inc.(TLAB), Fastenal(FAST), Amdocs(DOX), Cree Inc.(CREE), Norfolk Southern(NSC), Apple Inc.(AAPL), Texas Instruments(TXN), Waters Corp.(WAT), Regis Corp.(RGS), Fair Isaac Corp.(FIC)

Wed. – Coach Inc.(COH), SLM Corp.(SLM), Freeport-McMoRan(FCX), Pfizer(PFE), SunTrust Banks(STI), Parametric Technology(PMTC), Abbott Labs(ABT), Brinker Intl.(EAT), Ethan Allen(ETH), United Technologies(UTX), Piper Jaffray(PJC), Checkpoint Software(CHKP), Praxair(PX), Rockwell Automation(ROK), St. Jude Medical(STJ), ConocoPhillips(COP), Qualcomm Inc.(QCOM), Stryker Corp.(SYK), Capital One Financial(COF), Gilead Sciences(GILD), Teradyne Inc.(TER), Ryland Group(RYL), F5 Networks(FFIV), QLogic Corp.(QLGC), Noble Corp.(NE), Western Digital(WDC), NetFlix(NFLX), WellPoint(WLP), Exelon Corp.(EXC), AllianceBernstein(AB), Raymond James(RJF), Delta Air(DAL), Southwest Airlines(LUV), Symantec Corp.(SYMC), eBay Inc.(EBAY), Kimberly-Clark(KMB), General Dynamics(GD), Jeffries Group(JEF), Allegheny Technologies(ATI), Motorola(MOT)

Thur. – AmerisourceBergen(ABC), Deluxe Corp.(DLX), Lennar Corp.(LEN), Northrop Grumman(NOC), Hershey Co.(HSY), Xerox Corp.(XRX), Ford Motor(F), Rockwell Collins(COL), AT&T(T), Franklin Resources(BEN), Kla-Tencor(KLAC), E*Trade Financial(ETFC), Juniper Networks(JNPR), Microsoft(MSFT), Amgen Inc.(AMGN), Broadcom(BRCM), Microchip Tech(MCHP), Sybase Inc.(SY), Baxter International(BAX), National City(NCC), Consolidated Edison(ED), MEMC Electronics(WFR), Emulex Corp.(ELX), Becton Dickinson(BDX), Lockheed Martin(LMT), Nucor Corp.(NUE), Lam Research(LRCX)

Fri. – Honeywell(HON), Harley-Davidson(HOG), Caterpillar(CAT), Southern Copper(PCU), Dow Jones(DJ), Microstrategy(MSTR), Legg Mason(LM), Fortune Brands(FO), ImClone Systems(IMCL)

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

Mon. – US Markets Closed

Tue. – JPMorgan High Yield Conference

Wed. – JPMorgan High Yield Conference, (HS) investor day, (SPW) investor meeting

Thur. – (CRXX) analyst meeting, (KMP) analyst meeting

Fri. – None of note

BOTTOM LINE: I expect US stocks to finish the week modestly higher on a firmer US dollar, lower energy prices, mostly positive earnings reports, bargain hunting and short-covering. My trading indicators are giving mixed signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,325.19 -5.41%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 1,325.19 -5.41%
DJIA 12,099.30 -4.02%
NASDAQ 2,340.02 -4.09%
Russell 2000 673.18 -4.47%
Wilshire 5000 13,258 -5.3%
Russell 1000 Growth 551.22 -4.81%
Russell 1000 Value 715.23 -6.06%
Morgan Stanley Consumer 680.48 -4.63%
Morgan Stanley Cyclical 878.66 -3.93%
Morgan Stanley Technology 547.39 -2.14%
Transports 4,179.70 -.19%
Utilities 503.92 -7.27%
MSCI Emerging Markets 136.61 -7.46%

Sentiment/Internals
NYSE Cumulative A/D Line 55,625 -6.2%
Bloomberg New Highs-Lows Index -1,235
Bloomberg Crude Oil % Bulls 9.8 -57.6%
CFTC Oil Large Speculative Longs 227,907 -5.9%
Total Put/Call 1.31 +43.96%
NYSE Arms .84 -44.29%
Volatility(VIX) 27.2 +14.78%
ISE Sentiment 79.0 -11.2%
AAII % Bulls 24.26 +23.6%
AAII % Bears 54.4 -7.5%

Futures Spot Prices
Crude Oil 90.58 -2.47%
Reformulated Gasoline 230.55 -.99%
Natural Gas 7.95 -2.94%
Heating Oil 251.0 -1.48%
Gold 883.50 -1.43%
Base Metals 220.32 -1.19%
Copper 323.10 -2.03%

Economy
10-year US Treasury Yield 3.63% -15 basis points
4-Wk MA of Jobless Claims 328,500 -3.5%
Average 30-year Mortgage Rate 5.69% -18 basis points
Weekly Mortgage Applications 906,400 +28.39%
Weekly Retail Sales +.9%
Nationwide Gas $3.03/gallon -.06/gallon
US Heating Demand Next 7 Days 13.0% above normal
ECRI Weekly Leading Economic Index 137.40 +.88%
US Dollar Index 76.43 +.53%
CRB Index 360.87 -1.17%

Best Performing Style
Small-cap Value -4.05%

Worst Performing Style
Large-cap Value -6.06%

Leading Sectors
Airlines +4.5%
Computer Services +2.98%
Semis +2.79%
Retail +1.14%
Foods -1.1%

Lagging Sectors
Banks -7.67%
Insurance -8.24%
Energy -8.57%
Gold -9.05%
Oil Service -9.9%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Lower into Final Hour on Weakness in Telecom, Insurance and Financial Shares

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Software longs and Semi 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, most sectors are declining and volume is heavy. Investor anxiety is high again. Today’s overall market action is bearish. The total put/call hit a high 1.33 and the ISE Sentiment Index hit a very low 66.0 today. For the second day in a row, the Morgan Stanley Tech sector index is substantially outperforming. Large and mid-cap “growth” stocks are also substantially outperforming “value” stocks. Steel, Computer Hardware, Semi, Computer Service, Construction, Homebuilding, Retail, Restaurant, Airline, Railroad, Software and Energy stocks are all higher or just slightly lower on the day. Cyclical stocks are slightly higher on the day, as well. A number of market leading stocks continue to trade as though they are “washed out” and are under accumulation even as the major averages tick lower. The ECRI Weekly Leading Index has bounced strongly the last two weeks from 134.60 to 137.40. I expect US stocks to trade modestly higher into the close from current levels on short-covering and bargain hunting.

Leading Indicators Fall Slightly, Consumer Confidence Jumps

- Leading Indicators for December fell .2% versus estimates of a .1% decline and a .4% decline in November.

- Preliminary Univ. of Mich. Consumer confidence

BOTTOM LINE: The Index of US leading economic indicators fell more than forecast in December, Bloomberg reported. However, the Conference Board’s index of coincident indicators, a gauge of current economic activity, rose .1% in December for a second month. The index tracks payrolls, incomes, sales and production. Over the last six months, the leading indicators index has dropped at an annual pace of 1.6%, below the 4-4.5% drop that signals recession. I continue to believe US GDP growth will average about 2% for the year. Growth should pick up in the second half of the year on inventory rebuilding as exports remain at record levels and as the deflator subtracts less on a meaningful deceleration in inflation. This would provide a very positive macro backdrop for true "growth" stocks.

Confidence among US consumers unexpectedly jumped in January despite a rise in gas prices, Bloomberg reported. The Expectations component rose to 69.1 from 65.6 in December. The Present Situation component jumped to 98.1 from 91.0 the prior month. The average 30-year mortgage rate has plunged 48 basis points so far this month to 5.69%. This is also down 105 basis points from June 07 highs. As a result, mortgage refinancings are soaring, which may behind the surge in consumer confidence. A decline in the average 30-year mortgage rate below 5.5%, which I expect over the coming weeks, should greatly help with the mortgage reset situation and prevent many foreclosures that the market currently expects. This would be a large positive surprise for the economy and stock market, in my opinion.

Bear Radar

Style Underperformer:

Large-cap Value (-1.47%)

Sector Underperformers:

Telecom (-4.57%), Insurance (-3.61%) and Oil Service (-2.57%)

Stocks Falling on Unusual Volume:

SLB, ACO, AZZ, IEZ, ZGEN, HSII, ATPG, TTGT, WCBO, LULU, LBAI, HNSN, AMSF, ATNI, NCTY, AGO, DFG, CCOI and MXIM

Bull Radar

Style Outperformer:

Mid-cap Growth (+1.32%)

Sector Outperformers:

Retail (+3.1%), Computer Services (+2.64%) and Semis (+2.37%)

Stocks Rising on Unusual Volume:

PXQ, CXW, XSD, CH, RZV, JKJ, WL, DPZ, FMR, PFGC, LCRD, GFIG, CEDC, FAST, RRGB, LMIA, XLNX, SRCL, XNPT, MELI, QMAR, MICC, ROST, SCSC, PCLN, IRBT, WGOV, GLNG, OMTR, RTP, CHA, BPHX, CLF, TKC, GE, STO, EMR, SU, LFC, AZN, SGP, WHQ, WG, HBC, FNF and MFC

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:
- IBM Corp.(IBM), the biggest computer services company, forecast 2008 profit that beat analysts’ estimates. The shares surged 4.9% in after-hours trading.
- Advanced Micro Devices(AMD), the second largest maker of personal computer processors, reported a smaller loss than analysts estimated after it sold more higher priced chips. The shares jumped 5.5% in extended trading.
- The Bush administration is close to completing an economic-stimulus proposal that will include $800 rebates for individuals and $1,600 for households as well as tax breaks for businesses.
- BP Plc(BP), Europe’s second-largest oil company, said the world is producing “all the oil it needs” and consumption may fall in the future because of the environmental pressure to cut greenhouse gas emissions. “People will run out of demand before they run out of oil,” Davies said. World oil production rose by about .2% last year to 85.5 million barrels a day. Production recently hit a new record of 87.3 million barrels per day, according to the Energy Intelligence Group. Production of 100 million barrels per day “is achievable,” Davies said. “An imminent peak in oil production is not likely in the near term,” he said.
- China’s copper consumption will grow 8% this year, after jumping 22% in 2007, as credit tightening policies curb demand in the world’s biggest user of the metal, Maike Metal International Group said.
- Alliance Data Systems Inc.(ADS) said there had been no change in its agreement to be acquired by Blackstone Group Inc.(BX).
- NYSE Euronext(NYX), owner of seven securities markets in Europe and the US, agreed to buy the American Stock Exchange for $260 million to capture a bigger share of the fast-growing options and fund-trading businesses.
- The US dollar is rising tonight against the euro and the yen on speculation an economic-stimulus proposal being prepared by President Bush will support growth in the world’s largest economy.
- Richard Branson plans to establish a company in China to help the world’s biggest emitter of greenhouse gases develop clean energy and cut emissions.

MarketWatch.com:
- China became the world’s largest gold producer last year, helped by Canadian- and Australian-led projects that aim to add millions in ounces to the world gold supply.
- Video game sales see December blowout.
- More employers seeking 50+ workers.

CNBC:
- Seagate(STX) Profit Triples, Disks in Tight Supply.

NY Times:
- Google(GOOG) Offers a Map for Its Philanthropy.
- BlackRock Inc.(BLK) posted a 90% jump in fourth-quarter profit on Thursday, handily beating estimates, as it benefited form the credit market turmoil and acquisitions.

CNNMoney.com:
- Buffett boosts railroad stake. Berkshire Hathaway increase ownership of nation’s second largest railroad to 17.8%.

Forbes.com:
- Hedge funds have been strong net sellers of equity markets since July of last year, preferring energy and commodities, according to Societe Generale Cross Asset Research. They are particularly long on gold and oil and have reopened longs on soft commodities.

IBD:
- While Venture Capital Shines On Solar, Focus Moves To Energy Alternatives.

Wired:
- High Gas Prices Truly Cut Dependence on Foreign Oil. It’s a 58-page doorstop, but a new study from the Congressional Budget Office shows consumer response to higher gas prices. The study began looking at trends beginning in 2003. Here are its key findings:

Financial Times:
- Goldman Sachs(GS) raised $7 billion for its latest hedge fund, making GS Investment Partners the largest fun launch ever and securing the US investment bank’s reputation as a powerhouse in the hedge fund industry.

TimesOnline:
- Doom-laden forecasts that world oil supplies are poised to fall off the edge of a cliff are wide of the mark, according to leading oil industry experts who gave warning that human factors, not geology, will drive the oil market. A landmark study of more than 800 oilfields by Cambridge Energy Research Associates has concluded that rates of decline are only 4.5% a year, almost half the rate previously believed, leading the consultancy to conclude that oil output will continue to rise over the next decade.

Xinhua:
- Iran held constructive talks with China and agreed the issue over its nuclear program should be resolved peacefully through negotiations, citing Iran’s nuclear negotiator Saeed Jalili.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (UA), target $65.
- Reiterated Buy on (PPG), target $78.
- Upgraded (PCLN) to Buy, target $124.
- Maintain Buy on (STX), target $30.
- Our top three internet picks are #1 (EXPE), #2 (GOOG) and #3 (MNST).

Night Trading
Asian Indices are -1.5% to -.25% on average.
S&P 500 futures +.67%.
NASDAQ 100 futures +.85%.

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
- (GE)/.68
- (JCI)/.37
- (SLB)/1.13
- (RMBS)/-.06

Upcoming Splits
- (FWLT) 2-for-1

Economic Releases
10:00 am EST
- The Univ. of Mich. preliminary January confidence reading is estimated at 74.5 versus 75.5 in December.
- Leading Indicators for December are estimated to fall .1% versus a .4% decline in November.

Other Potential Market Movers
- The Fed’s Lacker speaking, Bear Stearns Mortgage Servicer Conference and Wachovia Healthcare Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity 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 Near Session Lows on Weakness in Financial and Cyclical Shares

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 Sharply Lower into Final Hour as Extreme Pessimism Builds

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Software longs and Semi longs. I covered my (QQQQ)/(IWM) hedges and took profits in some existing shorts today, thus leaving the Portfolio 100% net long. The overall tone of the market is very negative today as the advance/decline line is substantially lower, most sectors are declining and volume is heavy. Investor anxiety is very high again. Today’s overall market action is bearish. The total put/call hit a very high 1.48 and the ISE Sentiment Index hit a record low 23.0 today. The VIX is finally spiking today, rising 11%, to a relatively high 27. There are some bright spots today despite the headline losses. The Morgan Stanley Tech sector index is only .2% lower on the day. Computer services, biotech, retail, restaurants, networking, semis, software and computer hardware are all higher or just slightly lower on the day. As well, a number of market leading stocks are being accumulated today on every tick lower in the averages and others trade as though they are “washed out.” There are also an unusual number of stocks rising on volume today given the losses in the major averages. I will monitor the close today and decide whether or not to further shift market exposure. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain hunting and lower energy prices.

Housing Starts Fall Again, Jobless Claims Plunge, Philly Fed Contracts More Than Expected

- Housing Starts for December fell to 1006K versus estimates of 1145K and 1173K in November.

- Building Permits for December fell to 1068K versus estimates of 1135K and 1162K in November.

- Initial Jobless Claims for this week fell to 301K versus estimates of 331K and 322K the prior week.

- Continuing Claims rose to 2751K versus estimates of 2705K and 2685K prior.

- The Philly Fed for January fell to -20.9 versus estimates of -1.0 and -5.7 in December.

BOTTOM LINE: Housing starts were lower than expected in December as homebuilders try to pare down inventory, Bloomberg reported. For all of 2007, housing starts fell 25%. I continue to believe new home construction will remain muted over the intermediate-term as homebuilders continue to work down inventories. With home sales stabilizing over the last three months near mid-1995 levels and mortgage rates plunging recently, I wouldn’t be surprised to see home sales surprise on the upside over the coming months on some pent up demand.

The number of Americans filing first-time claims for unemployment benefits unexpectedly plunged to a three-month low last week, Bloomberg reported. The four-week moving average of claims fell to a two-month low of 328,500, from 340,250 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, rose back to 2.1% from 2.0% the prior week, which is still a historically low level. With all the housing-related job losses that have already occurred over the last two years, continuing record US exports and the impending retirement of millions of baby-boomers, it is very possible the job market is stabilizing at still healthy levels.

Manufacturing in the Philly region contracted more than expected in January, Bloomberg reported. The New Orders component fell to -15.2 from 12 the prior month. The Inventory component fell to -11.7 from -6.5 the prior month. The Employment component fell to -1.5 from 3.8 in December. The Future Expectations component fell to 5.2 from 11.1. While this number is surprisingly negative, it is important to note that it averaged -15.1 for four months during the 1995 mid-cycle slowdown, hitting a low of -21.0 during that period, and the US economy, which was more dependent on manufacturing then than now, never tipped into recession. I expect this indicator to improve next month on inventory rebuilding.

ISE Sentiment Index(ISEE) Makes New Record Low

Bottom Line: The ISE Sentiment Index(ISEE) made a new record low this morning of 23.0. This is well below the prior record of 36.0 on July 3, 2006. This contrary indicator has had a very good track record in the past for marking meaning market bottoms.

Bull Radar

Style Outperformer:

Large-cap Growth (-.76%)

Sector Outperformers:

Homebuilders (+1.38%), Networking (+1.12%) and Computer Hardware (+.93%)

Stocks Rising on Unusual Volume:

CGV, ELY, PENN, LCRD, COGO, HMSY, ICLR, URBN, VRUS, MATR, JASO, ASML, LULU, GENZ, CVCO, ULBI, AKAM, NUVA, TRMB, ADCT, OMCL, TIF, CN, WSM, BRP, FELL, HMC, MO, PPG, BK, ROC, AFSI, BCS and AZN

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Thursday Watch

Late-Night Headlines
Bloomberg:
- Fisker Automotive Inc., a startup planning to build rechargeable hybrid luxury cars, will be able to begin sales by 2009 because it’s using a power system already developed for military vehicles, a company director said.
- The International Monetary Fund predicted economic growth in Iraq will accelerate this year to the fastest pace since 2004 as security improves and crude oil output climbs. Iraq’s economy will expand 7.1% this year. Growth is expected to pick up to 10.4% by 2010, the IMF said.
- Harvard University received a record number of applicants for the next freshman class after the end of the school’s early-admissions program gave officials more time to recruit a broader array of students.
- “American Idol,” the most-popular show on primetime television, attracted 33.4 million viewers in its seventh-season debut on the Fox network.
- Ambac Financial Group Inc.(ABK) is being reviewed by Moody’s Investors Service for a possible downgrade.
- Sharp Corp., Japan’s biggest liquid-crystal display maker, climbed the most in more than a month after Goldman Sachs Group(GS) raised the rating on the stock, citing demand for panels.

Wall Street Journal:
- JPMorgan(JPM) CEO Is Hunting In the Credit-Crunched Jungle. It’s time to pounce for JPMorgan CEO James Dimon and other top bosses of financial companies that have avoided a serious battering from the credit crunch.
- Will Silicon Valley Deals Kick Into Overdrive?
- President Bush says “there’s a hope” that, after his talks with Saudi King Abdullah seeking to restrain oil prices, OPEC “would be encouraged to authorized an increase in production,” a White House official said.

MarketWatch.com:
- US lawmakers on Wednesday debated ways to juice a languishing US economy with tax cuts or rebates.
- Wall Street losing its own confidence game.

CNBC:
- US mortgage applications surged last week, with demand hitting its highest in nearly four years as interest rates plunged, an industry group said Wednesday.
- Intel(INTC) Earnings: Is Wall Street Overreacting to Shortfall?

BusinessWeek.com:
- Wall Street is speculating WaMu(WM) will go the way of Countrywide Financial(CFC) and be acquired by a larger player, perhaps JPMorgan Chase(JPM).
- Bank of America’s(BAC) CEO tell Maria Bartiromo why the bank’s acquisition of troubled Countrywide Financial is a good deal.
- A buzzy Web site brings scrutiny to the previously secretive world of VC investing.
- The Economy: Five Signposts to Recovery.

CNNMoney.com:
- The current mortgage mess requires a more intelligent approach than the buzzsaw plan floated by Hillary Clinton.

SmartMoney.com:
- What You Need to Know About Sovereign Wealth Funds.
- Herman Miller’s(MLHR) Business Built to Last.

EnergyNewsToday:
-.Valero Energy Corp.(VLO), the largest US refiner, plans to reduce its processing rate for low-sulfur crude oil by as much as 20% because of shrinking profitability. The move would follow a reduction by Tesoro Corp.(TSO), the owner of seven US refineries, which said Jan. 14 that it cut fuel production this month.

USA Today.com:
- Retirement: Why older boomers have more to lean on financially.
- Apple’s(AAPL) skinny MacBook Air is fat with features.

Reuters:
- Adidas AG, the world’s second-largest sporting-goods maker, reiterated its forecast for sales to increase in the high single-digit percentage range this year.
- Delta(DAL) in merger talks with Northwest: congressman
- Dell(DELL) seen back to strong growth.
- SAP(SAP) sees no sign of global slowdown in ’07 results.

Commercial Times:
- Hon Hai Precision Industry Co. will probably be the second contract manufacturer for Apple Inc.’s(AAPL) MacBook Air laptop computers. Taiwan’s Quanta Computer Inc. has been making the slim laptops for Apple.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (JAVA), target $29.
- Lowered (HOG) to Sell, target $36.

Night Trading
Asian Indices are -1.50% to +.25% on average.
S&P 500 futures +.36%.
NASDAQ 100 futures +.32%.

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Earnings of Note
Company/EPS Estimate
- (PH)/1.19
- (PNC)/1.07
- (CAL)/.06
- (BK)/.69
- (CMA)/1.06
- (CIT)/.27
- (BLK)/2.15
- (AMTD)/.38
- (MER)/-4.82
- (IGT)/.36
- (BBT)/.78
- (PPG)/1.12
- (AMD)/-.38
- (XLNX)/.32
- (WM)/-1.43
- (STX)/.74
- (IBM)/2.68
- (BGG)/.05
- (ORB)/.24

Upcoming Splits
- (FWLT) 2-for-1

Economic Releases
8:30 am EST
- Housing Starts for December are estimated to fall to 1145K versus 1187K in November.
- Building Permits for December are estimated to fall to 1135K versus 1162K in November.
- Initial Jobless Claims for this week are estimated to rise to 331K versus 322K the prior week.
- Continuing Claims are estimated to rise to 2705K versus 2702K prior.

10:00 am EST
- The Philly Fed for January is estimated to rise to -1.0 from -5.7 in December.

Other Potential Market Movers
- The Fed’s Bernanke speaking, Fed’s Fisher speaking, Fed’s Lockhart speaking, weekly EIA natural gas inventory report, (AMAT) analyst meeting, (AEE) analyst meeting and Goldman Sachs Energy Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity 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 75% net long heading into the day.

Stocks Finish Lower on Weakness in Commodity and Tech Sectors

Evening Review

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In Play

Stocks Mostly Higher into Final Hour on Bargain-Hunting, Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Biotech longs, Software longs and Commodity shorts. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is positive today as the advance/decline line is higher, most sectors are rising and volume is heavy. Investor anxiety is high again. Today’s overall market action is bullish. The 3.4% gain in the semiconductor index(SOX), despite (INTC), is a big positive. As well, financials, retail and reits are trading substantially higher. While the VIX is only 1.6% higher, volatility in market leaders is very high today. Moreover, while we haven’t seen a “whoosh” lower in the broad market that might indicate a bottom, we did see a “whoosh” lower this morning in market leading stocks. Agriculture shares, which had previously been immune to recent selling, saw substantial drops. The total put/call hit a very high 1.45 and the ISE Sentiment Index hit a depressed 71.0 again today. The TED spread, a meaningful gauge of credit market angst, is dropping another 3 basis points today to 82 basis points. The TED spread is down 142 basis points in just over one month and is at its lowest level since August of last year. The fact that the credit markets are functioning much better is a large positive. I suspect we will see another substantial drop in mortgage rates this week. The average 30-year mortgage rate is currently 5.87%. A decline below 5.5% would greatly help the situation with upcoming mortgage resets. I expect that to occur over the next 6 weeks, which could provide a large positive catalyst for stocks. Refinancings soared 43.3% this week, according to the MBA Mortgage Applications report. I want to see how Asian stocks, which closed at their lows last night, react to our reversal today before further shifting market exposure. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, bargain hunting, diminishing credit angst and lower energy prices.

Consumer Prices Decelerate, International Demand for US Assets Stronger Than Expected, Industrial Production Higher Than Expected

- The CPI for December rose .3% versus estimates of a .2% gain and a .8% rise in November.

- The CPI Ex Food & Energy for December rose .2% versus estimates of a .2% gain and a .3% rise in November.

- Net Long-term TIC Flows for November fell to $90.9 billion versus estimates of $50.0 billion and $114.0 billion in October.

- Industrial Production for December was unch. versus estimates of a .2% decline and a .3% increase in November.

- Capacity Utilization for December fell to 81.4% versus estimates of 81.2% and 81.6% in November.

BOTTOM LINE: Consumer prices in the US rose at a slower pace in December, signaling that inflation may decelerate, Bloomberg said. Slower economic growth will make it harder for companies to pass on higher costs to consumers, economists said. Core consumer prices rose 2.4% for all of last year versus a 2.6% gain in 2006. Energy prices rose .9% in December versus a 5.7% gain the prior month. Fuel costs were up 18% in 2007, the most in 17 years. The 10-year TIPS spread, a good gauge of inflation expectations, fell to 2.18% this morning, which is the lowest level it has been since August 2003. If the commodity mania is finally ending, as I suspect, inflation expectations are about to drop dramatically. I continue to believe inflation fears have peaked for this cycle and the secular trend of disinflation remains firmly in tact.

International buying of US financial assets rose more than forecasts in November, Bloomberg reported. International holdings of US stocks rose a net $4.6 billion in November. I continue to believe international demand for US assets will remain healthy and may even strengthen over the intermediate-term as the US dollar firms.

Industrial Production in the US was greater than forecast in December as exports surged, Bloomberg reported. Record US exports and a consumer that slows, but doesn’t collapse, will help the US economy to avoid recession, economists said. Utility production fell .2% after 2 months of no change. Output of computers and peripherals rose 1.1% versus a 1.7% gain the prior month. I expect industrial production to increase slightly this month on more seasonal weather and inventory rebuilding.

Bull Radar

Style Outperformer:

Small-cap Value (+.46%)

Sector Outperformers:

Hospitals (+1.22%), HMOs (+1.15%) and Telecom (+1.14%)

Stocks Rising on Unusual Volume:

APU, CH, BEAS, NWPX, NITE, VRUS, QDEL, WOOF, RRGB, LLTC, PPDI, PENN, JAVA, FORM, IPCC, TXCO, LBTYA, LPHI, WYNN, SYMC, SCHL, CFFN, AMRI, LTC, SKS, GGP, AET and GLBC

Links of Interest

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WSJ Data Center
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In Play
NYSE Unusual Volume
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