Weekly Outlook

Click here for Wall St Week Ahead by Reuters.

Click here for Stocks in focus Monday by MarketWatch.

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

Economic reports for the week include:

Mon. – New Home Sales

Tues. – Durable Goods Orders, S&P CaseShiller Home Price Index, Consumer Confidence, FOMC Meeting, weekly retail sales reports

Wed. – Weekly MBA Mortgage Applications report, weekly EIA energy inventory report, ADP Employment Change, Advance 4Q GDP, Advance 4Q Personal Consumption, Advance GDP Price Index, Advance 4Q Core PCE, FOMC Rate Decision

Thur. – Personal Income, Personal Spending, PCE Core, Initial Jobless Claims, 4Q Employment Cost Index, Chicago Purchasing Manager

Fri. – Change in Non-farm Payrolls, Unemployment Rate, Average Hourly Earnings, Univ. of Mich. Consumer Confidence, ISM Manufacturing, Construction Spending, Total Vehicle Sales

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

Mon. – Energizer(ENR), McDonald’s(MCD), Stanley Works(SWK), Halliburton(HAL), SYSCO Corp.(SYY), Black & Decker(BDK), Corning(GLW), Verizon(VZ), Tyson Foods(TSN), Atheros(ATHR), SanDisk(SNDK), VMware(VMW), American Express(AXP), XM Satellite(XMSR)

Tues. – Valero(VLO), Corinthian Colleges(COCO), Eli Lilly(LLY), 3M Co(MMM), Cardinal Health(CAH), Unisys Corp.(UIS), Lexmark Intl(LXK), Polaris(PII), Dow Chemical(DOW), Burlington Northern(BNI), Countrywide(CFC), Sherwin Williams(SHW), Allstate Corp.(ALL), Yahoo!(YHOO), Chubb Corp.(CB), Centex Corp.(CTX), Flextronics(FLEX), Robert Half(RHI), Travelers(TRV), US Steel(X), Zimmer Holdings(ZMH), EMC Corp(EMC), Occidental Petroleuam(OXY)

Wed. – Kellogg(K), Baker Hughes(BHI), Legg Mason(LM), Kraft Foods(KFT), Eastman Kodak(EK), Boeing Co(BA), Hess Corp.(HES), United Parcel Service(UPS), Illinois Tool Works(ITW), Starbucks(SBUX), Pulte Homes(PHM), MBIA Inc.(MBI), Altria Group(MO), Estee Lauder(EL), Royal Caribbean(RCL), Novellus Systems(NVLS), Aflac(AFL), Amazon.com(AMZN), Merck(MRK)

Thur. – Starwood Hotels(HOT), Bristol-Myers(BMY), Burger King(BKC), Mastercard(MA), Goodrich(GR), L-3 Communications(LLL), American Superconductor(AMSC), Mattel(MAT), CVS Caremark(CVS), Lear Corp.(LEA), Under Armour(UA), Raytheon(RTN), Hologic(HOLX), McKesson(MCK), Verisign(VRSN), CA Inc.(CA), Omnicell Inc.(OMCL), Stanley Inc.(SXE), Dolby Labs(DLB), Electronic Arts(ERTS), Monster Worldwide(MNST), Digital River(DRIV), YRC Worldwide(YRCW), Massey Energy(MEE), Google Inc.(GOOG), Trident Microsystems(TRID), Cerner Corp.(CERN), Altera(ALTR), Bebe Stores(BEBE), Safeco(SAF), JDS Uniphase(JDSU), ImClone Systems(IMCL), Apache Corp.(APA), Colgate-Palmolive(CL), Anheuser-Busch(BUD), Intuitive Surgical(ISRG), Procter & Gamble(PG), IntercontinentalExchange(ICE), Wyeth(WYE), Avid Technology(AVID), Celgene(CELG)

Fri. – Chevron(CVX), Arch Coal(ACI), Automatic Data(ADP), Tidewater(TDW), Ryder System(R), Nymex Holdings(NMX), Manpower(MAN), Cummins(CMI), Exxon Mobil(XOM), Gannett(GCI)

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

Mon. – (YRCW) analyst meeting

Tue. – Wachovia Healthcare Conference, Banc of America Gaming Conference, Citigroup Financial Services Conference, (NNDS) investor day, (BLC) analyst meeting, (VDSI) investor conference, (CLWR) investor day

Wed. – Wachovia Healthcare Conference, Banc of America Gaming Conference, Citigroup Financial Services Conference, (TEC) analyst meeting

Thur. – Raymond James Growth Airline Conference, Wachovia Healthcare Conference, Banc of America Gaming Conference

Fri. – None of note

BOTTOM LINE: I expect US stocks to finish the week modestly higher on a firmer US dollar, mostly positive earnings reports, less economic pessimism, more constructive Fed commentary, bargain hunting and short-covering. My trading indicators are giving mixed signals and the Portfolio is 75% net long heading into the week.

Market Week in Review

S&P 500 1,330.61 -.19%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 1,330.61 -.19%
DJIA 12,207.17 +.39%
NASDAQ 2,326.20 -.88%
Russell 2000 688.60 +1.18%
Wilshire 5000 13,361.93 +.16%
Russell 1000 Growth 549.17 -.52%
Russell 1000 Value 727.80 +.72%
Morgan Stanley Consumer 671.84 -1.9%
Morgan Stanley Cyclical 918.46 +4.94%
Morgan Stanley Technology 535.22 -1.94%
Transports 4,474.82 +8.1%
Utilities 484.14 -5.33%
MSCI Emerging Markets 134.79 -.90%

Sentiment/Internals
NYSE Cumulative A/D Line 56,575 -2.2%
Bloomberg New Highs-Lows Index -347
Bloomberg Crude Oil % Bulls 18.0 +83.7%
CFTC Oil Large Speculative Longs 200,595 -11.98%
Total Put/Call 1.05 -28.1%
NYSE Arms 2.09 +22.08%
Volatility(VIX) 29.08 +2.2%
ISE Sentiment 101.0 +66.67%
AAII % Bulls 25.1 +3.6%
AAII % Bears 59.0 +8.4%

Futures Spot Prices
Crude Oil 90.60 +1.47%
Reformulated Gasoline 231.82 +2.29%
Natural Gas 7.97 -1.66%
Heating Oil 251.91 +.85%
Gold 913.90 +4.03%
Base Metals 222.98 +1.21%
Copper 317.85 +.77%

Economy
10-year US Treasury Yield 3.56% -7 basis points
4-Wk MA of Jobless Claims 314,800 -4.3%
Average 30-year Mortgage Rate 5.48% -21 basis points
Weekly Mortgage Applications 981,500 +8.3%
Weekly Retail Sales +.8%
Nationwide Gas $2.99/gallon -.04/gallon
US Heating Demand Next 7 Days 5% below normal
ECRI Weekly Leading Economic Index 135.8 -1.2%
US Dollar Index 75.96 -.26%
CRB Index 361.64 +.06%

Best Performing Style
Small-cap Value +2.2%

Worst Performing Style
Large-cap Growth -.52%

Leading Sectors
Homebuilders +16.3%
Road & Rail +10.2%
Banks +9.8%
Retail +9.1%
REITs +7.4%

Lagging Sectors
Hospitals -3.65%
Utilities -5.3%
Drugs -7.1%
HMOs -7.8%
Biotech -8.7%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Lower into Final Hour on Profit-taking, Shorting, Higher Energy Prices

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Biotech longs, Computer longs and Medical 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 mildly negative as the advance/decline line is slightly lower, most sectors are declining and volume is above average. Investor anxiety is high again. Today’s overall market action is just mildly bearish. The VIX is rising 7% today to a very high 29.65. The total put/call is an above average 1.05 and the ISE Sentiment Index hit a very low 87.0 today. As well, the NYSE Arms has been high all day. This morning’s gains left the major averages very extended short-term. Microsoft’s(MSFT) immediate weakness this morning following such a stellar quarter was a tell. Moreover, there are many hedge fund blow-up rumors swirling today. Many stocks are higher on the day, despite the losses in the major averages. Weakness is the most pronounced in the retailers and financials, which have had humongous gains in a very short period. Economically sensitive small-caps and cyclicals are outperforming substantially today. I still seriously doubt a full retest of recent lows will occur, as so many expect. Given how extended Asian indices are, I would expect to see weakness there Sunday night, which could further pressure US shares Monday morning. Nikkei futures indicate a -200 point decline on the open in Japan Sunday night. Fed fund futures now imply a 72.0% chance for a 50 basis point cut and a 28.0% chance for a 25 basis point cut at the Jan. 30^th meeting. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking, higher energy prices and more shorting.

Today's Headlines

Bloomberg:
- The risk of European companies defaulting headed for the biggest weekly decline in almost two months amid speculation bond insurer Ambac Financial Group(ABK) will be bought by billionaire Wilbur Ross.
- Biofuels made from biomass and waster are “very promising,” because their feedstock doesn’t compete with food crops for agricultural land, according to a fund manager at ABN Amro Asset Management.
- The bipartisan agreement on an economic stimulus package reached by House leaders and President Bush was immediately undermined by senators intent on ensuring that their ideas get a hearing before any bill becomes law.
- Merrill Lynch(MER) is “very well positioned” to grow in 2008, CEO Thain said.
- US homebuilder shares are poised for their biggest weekly gain since 1995, as investors and analysts say the market for new homes may have hit bottom.
- The SEC wants to wrap its sweeping probe into whether companies improperly backdated stock options by the end of this year, the agency’s enforcement chief said.

Wall Street Journal:
- Lobbyists Smoothed the Way For a Spate of Foreign Deals. Two yeas ago, the US Congress pressured the Arab emirate of Dubai to back out of a deal to manage US ports. Today, governments in the Persian Gulf, China and Singapore have snapped up $37 billion of stakes in Wall Street, the bedrock of the US financial system.
- The Tax Threat to Prosperity.
- The Bill & Melinda Gates Foundation plan to donate $306 million to six farming organizations to boost agricultural productivity in developing countries.

CNBC:
- Nestle SA, the world’s largest food company, expects less commodity cost pressure this year than in 2007, Chairman Peter Brabeck-Letmathe said.

USA Today:
- President Bush plans to propose doubling the funding to combat HIV/AIDS overseas in his last State of the Union address next week.

CNNMoney.com:
- Treasuries advance amid hedge fund rumors.

Telegraph:
- Bernanke calms fears of a credit bloodbath.

Frankfurter Allgemeine Zeitung:
- Cisco Systems(CSCO) expects “ardent growth” of video data on the World Wide Web to boost investment in Internet infrastructure, fueling the company’s long-term growth, citing Europe’s Cisco’s Europe head, Chris Dedicoat. The number of video streams broadcast on the Web amounted to 250 million in 2007, exceeding a forecast of as many as 70 million broadcasts, Dedicoat said.

globeandmail:
- Iraq expects to increase oil production this year to 3.7 million barrels per day and hopes to sign contracts to boost the output from oil fields that aren’t production to capacity, Iraq’s oil minister said. “We have increased our production by 400,000 barrels a day over the last three months,” he said. “This has been a very big increase…from 1.9 million barrels a day to 3.3 million. The Iraqi minister said the recent rise in oil prices was not a result of a shortage of crude oil. “On the contrary, there is as much crude oil on the market as people want,” he said. “It has been gambling by speculators, just betting on the prices really, disregarding the fundamentals of the oil markets.”

AAII % Bears 59.0, Still Highest Since October 18, 1990 After Iraq’s Invasion of Kuwait and During Peak of Recession

* Notwithstanding historical individual investor pessimism, corporate insiders continue to buy their own stocks.

The AAII percentage of bulls rose to 25.1% this week from 24.3% the prior week. This reading is still at a very depressed level. The AAII percentage of bears rose to 59.0% this week from 54.4% the prior week. This reading is still at an extraordinarily elevated level. The last time the AAII % Bears was this high was October 18, 1990 after Iraq’s invasion of Kuwait and before Operation Desert Storm began on January 17, 1991. The peak of the 1990-1991 recession also occurred during 4Q 1990 as GDP fell 3.0%. The S&P 500 rose 65% over the next three years after this peak in bearishness. Moreover, the 10-week moving average of the percentage of bears is currently at 50.9%, also an extraordinarily elevated level. It has only been higher one other period in its history, which was September 1990-December 1990. Moreover, the 10-week moving average of the percentage of bears peaked at 43.0% right near the major bear market low during 2002. It is astonishing that the 10-week moving average of the % bears is currently 7.9 percentage points greater than at any time during the bubble bursting meltdown of 2000-2003, which was arguably the worst stock market decline since the Great Depression.

Furthermore, the 50-week moving average of the percentage of bears is currently 40.7%, also an extraordinarily elevated level seen during only one other period since tracking began in the 80s. That period was December 1990-April 1991, right near another major stock market bottom. The extreme reading of the 50-week moving average of the percentage of bears during that period peaked at 41.6% on Jan. 31, 1991. The current reading of 40.7% is above the peak in the % bears during the 2000-2003 bear market, which was 38.1% on April 10, 2003. I find this even more astonishing, notwithstanding the recent pullback, given that the S&P 500 is currently 86.3% higher from the October 2002 major bear market lows and 13.0% off its recent record high.

Individual investor pessimism towards US stocks remains deep-seated and historical in nature, which bodes very well for further outsized gains over the intermediate-term. This is just more evidence of the current “US negativity bubble.” It is also noteworthy that as investor pessimism grows ever thicker as short interest soars to new record highs, corporate insiders continue to display downright giddy behavior with their recent stock activity during this pullback. The retail sector saw substantial insider buying over the last six weeks, notwithstanding the current extreme investor pessimism towards the prospects for consumer spending. The Morgan Stanley Retail Index is up 14.0% over the last ten days. During the 2000 economic downturn after the bursting of the 90s technology stock bubble, insiders were bailing in droves. I still expect US stocks to rise sharply later this year as the undying belief in an imminent recession begins to fade and the uncertainty currently surrounding the financial sector continues to lift substantially.

Bear Radar

Style Underperformer:

Large-cap Value (-.01%)

Sector Underperformers:

Airlines (-2.92%), Retail (-2.28%) and Utilities (-1.61%)

Stocks Falling on Unusual Volume:

TPX, CYN, TGI, ING, DV, SYNA, DROOY, VSEA, IBKR, NTLS and AEG

Bull Radar

Style Outperformer:

Small-cap Growth (+.78%)

Sector Outperformers:

Alternative Energy (+2.35%), Oil Service (+2.14%) and Homebuilders (+2.09%)

Stocks Rising on Unusual Volume:

TDK, FDG, GBX, ROL, PKI, ITF, KWR, NSH, SCSC, VPRT, BLOG, ABFS, SPWR, JRCC, JRJC, VARI, FRME, RAIL, ROCM, ENOC, ODFL, BRCM, MCHP, EZPW, EPAY, MSCC, TASR, AMGN, WG, ALY, WNR, NTG, SNP, RTP, PCU, PTR, AXS, ABK and PETS

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:
- Ambac Financial Group(ABK) rose in extended NY trading on speculation billionaire Wilbur Ross may buy the company.
- Former Federal Reserve Chairman Alan Greenspan said the US housing slump, which fueled fears of a possible recession, may soon be over.
- Buffett, Flowers Purchases May Mean Bottom Is Near for Insurers.
- Wal-Mart Stores(WMT) CEO Scott discussed with automakers the possibility of selling gasoline-electric hybrid cars and plug-in automobiles at the retailer’s stores.
- Microsoft Corp.(MSFT), the world’s largest software maker, posted a second-quarter profit that surpassed analysts’ estimates and raised forecasts for the year after selling more Xbox 360 games and Windows programs.
- Jane Snorek, who helps manage more than $70 billion in assets at First American Funds, recommends Microsoft(MSFT), Apple(AAPL). (video)
- Federal Reserve policy makers didn’t know about a $7.2 billion trading loss at Societe Generale SA prior to their Jan. 21 decision to reduce interest rates, said a Fed official.
- South Korea’s economy expanded a faster than expected 1.5% in the fourth quarter, stoked by the biggest increase in exports in four years and a pickup in business investment.
- Renesas Technology Corp., the world’s largest privately held chipmaker, plans to boost sales of semiconductors used to control power flow and convert sound into data, helped by demand from carmakers. Sales of so-called discrete and analog chips will probably rise 70% to $1.6 billion in the 12 months ending March 2011.
- The yen headed for a weekly decline against all of the world’s 16 most-active currencies after global stocks gained, encouraging investors to add to holdings of higher-yielding assets funded in Japan.
- IndyMac Bancorp. Inc.(IMB), the second-biggest US mortgage company, has a “good shot” at profitability this year, CEO Perry said. The shares soared 25% in after-hours trading.
- Broadcom(BRCM) reported net revenue for the fourth quarter rose 11.2% from year ago levels. The shares surged 13.3% in after-hours trading.
- Microchip Tech(MCHP) reported net sales rose .6% over the year ago quarter. The shares jumped 6.4% in extended trading.
- ScanSource(SCSC) said second quarter sales rose 17%, led by “record results in our North American and International POS/Bar code units.” The shares rocketed 27% higher in after-hours trading.
- LG Electronics, Asia’s second-largest mobile-phone maker, rose for a third day in Seoul trading after Morgan Stanley and Goldman Sachs Group(GS) raised their price estimates, citing the earnings outlook for 2008.
- Asian stocks advanced, led by technology companies and miners, after US lawmakers agreed on a plan to boost spending and South Korea’s economy grew faster than economists had expected.

Wall Street Journal:
- Washington Sets $150 Billion Plan To Jolt Economy. Package Includes Boost For Big Mortgages, Rebates for Taxpayers.
- Leading Republican presidential contenders agreed in a campaign debate Thursday night that a newly minted agreement on an economic stimulus package marks a good start, but does not do enough to cut taxes.

MarketWatch.com:
- Thousands of dollars may be heading your way. A family of five could collect as much as $2,100 thanks to stimulus package.
- Societe Generale’s letter to customers, investors.

CNBC:
- Highest Yielding Stocks On The Dow.
- Jobs Report Signals Stronger Economy.

NY Times:
- The FDA intends to post inspectors to embassies and consulates in the developing world in hopes of improving the quality of imported food and medicines.

BusinessWeek.com:
- S&P’s latest screen finds five names with eye-popping return on equity – and strong buy ratings from its analysts.
- Google’s(GOOG) Big Mobile Move in Japan.

CNNMoney.com:
- Stop whining about sovereign wealth funds.

Forbes.com:
- The 100 top tech deal makers.
- The Golden Google(GOOG) Touch.

MSNBC.com:
- This week’s surprise rate cut by the Federal Reserve not only held Wall Street and investors in thrall, it’s also kicked into high gear a rush by homeowners across the country to refinance their mortgages at today’s lower rates. In general, a mortgage is deemed "refinanceable" if it is 0.40 percentage point above current average mortgage rates. And the recent drops in mortgage rates have made up to 7 million mortgages, or more than 70 percent of U.S. mortgages, eligible for refinancing, according to Tony Crescenzi, a fixed-income analyst at Miller Tabak.

USA Today.com:
- A shortage of long-haul drivers is spurring trucking companies across the USA to try to recast trucking’s nomadic image and recruit more women, minorities, retired military veterans and those who want a second career.
- Researchers at the Venter Institute in Rockville, Md., have completed phase two of a three-part plan to create synthetic life.
- Rival predicts Delta will likely merge.

Reuters:
- Battered tech darlings look cheap.
- Romney questions McCain’s wisdom on US economy.

Financial Times:
- Private equity firms that are considering setting up their own credit insurers have been studying the experience of competitor Warburg Pincus, which invested $1 billion in troubled MBIA(MBI) late last year.

TimesOnline:
- Did rogue trader set off world market panic?

China Daily:
- Industrial and Commercial Bank of China, China’s largest bank, is prepared to acquire more foreign banks, possibly this year. ICBC will continue its global hunt for new acquisitions in the coming years, with an emphasis on emerging markets. US financial institutions may also be on the ICBC’s shopping list.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (PTV), target $35.
- Maintained Buy on (TER), target $17.
- Reiterated Buy on (MSFT), target $41.
- Reiterated Buy on (MHP), target $59.

CSFB:
- Maintained Outperform on NUE, target $75.

Night Trading
Asian Indices are +1.0% to +3.5% on average.
S&P 500 futures +.24%.
NASDAQ 100 futures +.79%.

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
- (CAT)/1.50
- (FO)/1.43
- (HOG)/.82
- (HON).91
- (IDXX)/.40
- (WFT)/.96
- (GWW)/1.27

Upcoming Splits
- (BTJ) 3-for-2

Economic Releases
- None of note

Other Potential Market Movers
- None of note

BOTTOM LINE: Asian indices are sharply higher, boosted by technology and mining stocks in the region. I expect US equities to open modestly higher and to maintain gains into the afternoon. The Portfolio is 100% net long heading into the day.

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 Building on Recent Gains into Final Hour on Less Economic Pessimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Software longs, Internet longs, Semi longs, Gaming longs and Biotech longs. I added to my (ILMN) and (NUAN) longs and took profits in a trading long today, thus leaving the Portfolio 100% net long. The overall tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is heavy. Investor anxiety is above average. Today’s overall market action is very bullish, considering the sharp gains of the last two days. Many of yesterday’s laggards are rising substantially today and yesterday’s large winners aren’t giving back much, which is a very positive sign. Homebuilders and banks are even building on recent sharp gains. The MS Tech Index is substantially outperforming, rising 2.1%. The VIX is falling 4% today, but remains high at 27.70. I still think there are many other potential positive catalysts that could materialize at any time. The US equity markets continue to trade as if a meaningful bottom is now in place. While we are becoming a bit extended on a short-term basis, I seriously doubt a full retest of recent lows will occur as so many expect. I will closely monitor MSFT’s likely positive earnings report and conservative guidance and the market’s reaction to it. Apple Inc.(AAPL) is weak again today and I view the current price as an excellent entry point for both long and short-term investors. I will add again to my long position on any further meaningful weakness from current levels. Nikkei futures indicate another 160 point gain on the open in Japan tonight. I expect US stocks to trade modestly higher into the close from current levels on short-covering, less economic pessimism, gains in overseas markets and bargain hunting.

Today's Headlines

Bloomberg:
- The Bush administration and House lawmakers announced agreement on an economic stimulus package that would distribute rebate checks to 117 million families and give businesses incentives to invest in equipment.
- Societe Generale SA said unauthorized bets on stock index futures by a rogue trader caused a $7.2 billion trading loss, the largest in banking history.
- NY’s insurance regulator said a plan to have US banks aid bond insurers will “take some time to finalize.”
- Dow Chemical(DOW) CEO Andrew Liveris said financial markets are overreacting to the prospect of the US entering a recession.
- Short-term debt backed by assets such as mortgages and auto loans expanded for a fourth straight week as the Fed cut its target rate the most in 23 years, pushing borrowing costs to the lowest since July 2005.
- The risk of companies defaulting fell after NY regulators urged Wall Street firms to bail out bond insurers including MBIA Inc.(MBI) and Ambac Financial Group(ABK) to avert worsening credit-market turmoil.

Wall Street Journal:
- Some of Mike Huckabee’s top advisers are working pay and some field directors have been let go entirely, the campaign said today, as money woes have taken hold.
- The Wall Street Journal’s Web site, WSJ.com, will keep a significant portion of its content behind its paid-subscription wall, News Corp. Chairman Rupert Murdoch said.

NY Times:
- Jeffries Cuts Hedge Fund Investment Amid Loss.

NY Post:
- Sharks Circle Yahoo!(YHOO). LBO, Media Bigs Attracted to Battered Stock.

Reuters:
- OPEC doesn’t need to raise its output because recent declines in prices show there is enough supply, citing Abdullah bin Hamad al-Attiyah, Qatar’s oil minister.
- Spanish Economy Minister Pedro Solbes said the European Central Bank is debating whether to cut interest rates amid market turmoil.

Financial Times:
- One of the most controversial figures in world shipping markets has denied playing a pivotal role in the past few weeks’ decline of dry bulk shipping rates, saying it results from fundamental market changes.
- French Prime Minister Francois Fillon said he expects the European Central Bank to act to cushion the economy against market turbulence and slowing growth.

globeandmail:
- Smiles disappearing in hedge fund land.

Cbichina.com:
- China’s copper output rose 17% to 302,200 metric tons in December, compared with a year earlier, citing figures form the National Bureau of Statistics.

Bear Radar

Style Underperformer:

Small-cap Value (-1.17%)

Sector Underperformers:

Airlines (-2.92%), Retail (-2.28%) and Utilities (-1.61%)

Stocks Falling on Unusual Volume:

DLX, CNH, CY, OREX, THQI, DGII, MTSC, SPWR, EBAY, NFLX, VARI, CVCO, SOLF, IRBT, PSSI, AVID, PETM and VRTX

Jobless Claims Still Low, Continuing Claims Fall Substantially, Existing Home Sales Fall, Home Inventories Decline

- Initial Jobless Claims for this week fell to 301K versus estimates of 320K and 302K the prior week.

- Continuing Claims fell to 2672K versus estimates of 2720K and 2747K prior.

- Existing Home Sales for December fell to 4.89M versus estimates of 4.95M and 5.0M prior.

BOTTOM LINE: The number of Americans filing first-time claims for unemployment benefits unexpectedly dropped for a fourth straight week, indicating companies may be in better shape than believed, Bloomberg reported. The four-week moving average fell to a three-month low of 314,750 versus 328,750 the prior week. The unemployment rate among those eligible to collect benefits, which tracks the US unemployment rate, fell to 2% from 2.1% the prior week and remains at historically low levels. The recent decline in jobless claims is a major positive and they are no where near the 360,000+ usually associated with recessions, notwithstanding the overwhelming majority of pundits that claim we are already in one. CNBC just asked why so many talk as if we are already in a recession when the data clearly do not indicate such. It is due to the record number of stock market participants that perceive it is in their own political and financial interest to see a bear market and recession. We are in an election year with historically bitter political rhetoric. As well, there has been an explosion in the number of low correlation/negative correlation investment funds and all the businesses that cater to them since the bursting of the internet bubble and bear market of 2000-2003. These vocal individuals perceive a strong secular bull market as their enemy and they are the main reason for the current “US negativity bubble” and the parabolic rise in short interest, in my opinion. They believe the more they talk as if a recession and a bear market are inevitable the more likely they become as scared consumers, businesses and investors retrench. Many are quick to dismiss any positive analysis from long only managers, saying they are just talking their book. However, one could make the same argument regarding the analysis of investment managers that benefit from a poor market and economy. I continue to believe the job market will remain healthy over the intermediate-term, notwithstanding slower economic growth, as companies remain very slow to let go of workers before the historic exodus of baby boomers from the labor force over the coming years.

Sales of existing homes in the US fell slightly more than forecast in December and inventories fell, Bloomberg reported. For all of last year, prices of existing homes fell 1.8%. Over the prior six years, the Case-Shiller home price index rose 103.3%. The number of homes for sale at the end of December fell 7.4% to 3.91 million. At the current sales pace, that equates to 9.6 months’ supply, down from 10.1 months in November. Builders broke ground in December on the fewest new homes since 1991. I continue to believe the recent plunge in mortgage rates and pent-up demand will lead to a modest unexpected bounce in home sales over the coming months, which should bring down inventories meaningfully as builders continue to break ground on fewer homes. Fed fund futures now imply a 64.0% chance for a 50 basis point rate cut and 36% chance for a 25 basis point rate cut at the January 30th FOMC meeting. According to data released today, the average 30-year fixed mortgage rate is 5.48%, down 21 basis points over the last week and down 126 basis points from June 07 highs.

Bull Radar

Style Outperformer:

Mid-cap Growth (+1.24%)

Sector Outperformers:

Steel (+5.2%), Wireless (+3.20%) and Networking (+3.05%)

Stocks Rising on Unusual Volume:

EMM, WNS, BCA, EMG, ITB, FDG, SCX, GBX, DSG, HTZ, ESI, BRNC, MHGC, FFIV, EXPO, SASR, EURX, PLXS, PLCM, ALDN, TRMB, COIN, SMTS, MOLX, DROOY, SYMC, PRXL, RRGB, ASML, ACGY, SNCR, FDRY, COF, DLLR, BPFH, PCU, FCX, PBR, REP, BBV, TKC, PHI and DLR

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:
- Saudi Arabia, the world’s biggest oil producer, plans to start its first sovereign wealth fund with about $6 billion, channeling surplus crude-oil revenue into investments in foreign companies.
- Newcrest Mining Ltd., Australia’s largest gold mining company, said second-quarter output of the precious metal from its mines in Australia and Indonesia rose 19%.
- The yen fell against 14 of the 16 most-active currencies after Asian stocks rose, making investors more confident to hold higher-yielding currencies funded in Japan.
- Qualcomm Inc.(QCOM), the second-biggest maker of chips that run mobile phones, said first-quarter profit rose 18% and boosted its revenue forecast for 2008, sending the shares up as much as 6.5% in after-hours trading.
- Western Digital(WDC), the second-largest maker of computer hard-disk drives, said second-quarter profit more than doubled as orders increased for notebooks and electronics. The shares rose 6.9% in late trading.
- Symantec Corp.(SYMC), the world’s biggest maker of security software, reported earnings and gave a forecast that beat analysts’ estimates, sending the shares up 9.3% in extended trading.
- F5 Networks announced revenue grew 28% from the first quarter of last year and authorized a $200 million share repurchase program. The shares soared 19% in after-hours trading.
- EBay Inc.(EBAY) fell 4.7% in US trading after it forecast 2008 sales and profit that missed some analysts’ estimates and said john Donahoe will succeed Meg Whitman as CEO.

MarketWatch.com:
- Homeowners facing resets on their adjustable-rate mortgages or hoping to refinance into less-burdensome loans may be the biggest beneficiaries of the Federal Reserve’s surprise rate cut this week as mortgages continue to get cheaper. Consider what's happened since September's rate cut for creditworthy Schwab borrowers. A 5-1 adjustable rate mortgage of $350,000 carried a 6.52% interest rate, assuming a 20% down payment, on Oct. 7. The rate this week for that same loan was 5.04%. That translates into an annual mortgage payment that's $5,100 cheaper.
- “Refinance applications are up 92% since the beginning of November and purchase applications are up 7%,” said Jay Brinkmann, the MBA’s vp of research and economics. Interest rate on 15-year fixed-rate mortgage falls below 5%.

CNBC:
- Bond Insurers Soar on Report of Possible Bailout.
- Congressional Budget Office Doesn’t Foresee Recession.

BusinessWeek.com:
- Are Investors Unfairly Sour on Apple?

USA Today.com:
- Jobs, iPhone have Skyhook pointed in right dirction.

Reuters:
- Managers confront baffling array of hedge funds.
- Prominent hedge funds nurse heavy losses in 2008.

Late Buy/Sell Recommendations
Citigroup:
- Upgraded (CNH) to Buy, target $55.
- Maintain Buy on (UTX), target $86.
- Maintain Buy on (VAR), target $61.
- Maintain Buy on (GILD), target $56.
- Maintain Buy on (SPX), target $115.

Oppenheimer:
- Rated (SCOR) Outperform, target $35.
- Rated (OMTR) Outperform, target $34.

CSFB:
- Reiterated Outperform on (GILD), target $54.
- Reiterated Outperform on (UTX), target $84.

Night Trading
Asian Indices are +.75% to +2.0% on average.
S&P 500 futures +.10%.
NASDAQ 100 futures +.25%.

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
- (NOC)/1.31
- (ED)/.59
- (LEN)/-2.05
- (BDX)/1.02
- (CPS)/.41
- (KMB)/1.11
- (BTU)/.79
- (NUE)/1.21
- (BAX)/.74
- (HSY)/.55
- (ABC)/.62
- (DLX)/.78
- (LMT)/1.70
- (F)/-.24
- (T)/.71
- (BEN)/1.90
- (KLAC)/.71
- (BRCM)/.31
- (MCHP)/.37
- (WFR)/.96
- (AMGN)/.97
- (JNPR)/.24
- (JAVA)/.31
- (MSFT)/.46
- (SY)/.56
- (LRCX)/.99

Upcoming Splits
- (BTJ) 3-for-2

Economic Releases
8:30 am EST
- Initial Jobless Claims for this week are estimated to rise to 320K versus 301K the prior week.
- Continuing Claims are estimated to fall to 2720K versus 2751K prior

10:00 am EST
- Existing Home Sales for December are estimated to fall to 4.95M versus 5.0M in November.

Other Potential Market Movers
- The weekly EIA energy inventory data and JPMorgan High Yield Conference could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by real estate 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 at Session Highs on Heavy Volume

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

Stocking Soaring into Final Hour on Strength in Financials, Retail, Homebuilding and Airlines

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Computer longs, Internet longs and Biotech longs. I added (IWM)/(QQQQ) hedges on the bounce earlier today and then covered them, thus leaving the Portfolio 100% net long. The overall tone of the market is slightly positive as the advance/decline line is mildly higher, sector performance is mixed and volume is heavy. Investor anxiety is high again. Today’s overall market action is very bullish after the key reversals seen yesterday in many stocks. “Value” stocks are substantially outperforming today. The beaten-up and heavily shorted financials, retailers, airlines and homebuilders are rising significantly. The total put/call hit a very high 1.57 and the VIX hit a very high 34.42 today. The average 30-year mortgage rate plunged to 5.31% this week from 5.69% last week. About 70% of conventional mortgages are now able to be refinanced, according to CNBC. Mortgage rates are now at levels that will greatly alleviate the mortgage reset situation that has been weighing so heavily on the market. As I said yesterday, we are going to see a significant amount of stimuli in a short period of time, which will move the Fed closer to being “ahead of the curve,” rather than behind it. Moreover, there are still many other potential positive catalysts that could materialize at any time. With today’s market rebound and recent losses overseas, the S&P 500 is significantly outperforming most other global markets year-to-date. Moreover, the US market is trading again as if a meaningful bottom is now in place. I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower energy prices, less economic pessimism and bargain hunting.

Bull Radar

Style Outperformer:

Small-cap Value (+1.89%)

Sector Outperformers:

Banks (+4.52%), Homebuilders (+3.53%) and Retail (+2.69%)

Stocks Rising on Unusual Volume:

XSD, EMV, SGK, SMTS, CREE, CPKI, FSNM, LIHR, AVTR, CVBF, PTEC, PSMT, FULT, LSTR, CVCO, FAST, RRGB, IBKC, WTFC, HMIN, EXLS, COLB, WERN, BBT, EWBC, WFC, WB, CUZ, PPS, NSC, GWR, KSS, SHLD, GEOY, SNP and PFE

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

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Timken Co. Chairman Ward Timken said he expects large takeover deals in the US steel industry this year after smaller companies were bought last year.
- Lawyers Embrace US Climate Practice at $700 an Hour.
- Dartmouth College, following moves by Harvard and Yale universities to make their schools more affordable, said students from families earning $75,000 or less won’t have to pay tuition, starting in the next academic year.
- Texas Instruments(TXN), the biggest market of mobile-phone chips, said profit climbed 13% and projected results this quarter that topped some analysts’ estimates as demand holds up better than anticipated. The shares rose 3.2% in extended trading.
- Hong Kong’s stocks jumped, lifting the benchmark index to its biggest advance in nine years, after the city followed an interest-rate cut by the US Fed.

MarketWatch.com:
- Fortune’s 100 Best Places to Work.
- Apple Inc.(AAPL) on Tuesday reported a first-quarter profit that rose 58% from a year ago, but the company’s shares tumbled in after-hours trading as the consumer electronics maker gave an earnings outlook that fell short of Wall Street analysts’ forecasts.

CNBC:
- Apple(AAPL): The LIVE Blog From Tuesday’s Earnings Call.

Briefing.com:
- Apple(AAPL) Conference Call Summary:

• iMac sales continue to be robust and Leopard launch has been very successful.
• iPod market share in US remained steady with previous year results; saw market share gains in European and Asian countries
• Total company gross margin was 34.7%; stronger than expected due to a more favorable commodity environment, stronger software sales, higher overall revenue and a weaker US dollar.
• Apple said they have reasonable confidence in achieving their guidance and that guidance at 29% is actually up from a year ago MarQ when they grew 21%.
• Ended quarter below Mac channel inventory target and said generally the Macintosh business has “been on fire.”
• Said traffic growth in US stores has been amazing.
• Company now has $18 billion in cash and no debt.
• Apple is thrilled with results they have seen from Best Buy(BBY).
• Orders are very strong for the new MacBook Air.
• Saw strong demand for new software.
• Half of Macs sold at retail to first-time buyers.
• Confident in selling 10 million iPhones in 2008.
• Plans to sell iPhone in Asia and added European cities in 2008.
  

USA Today.com:
- Rate cut should help borrowers, ease credit tightness.
- Gas prices fall to one month low.

Reuters:
- Short interest jumped 8.7% on the NYSE in mid-January, rising to another all-time high, the exchange said on Tuesday. Short interest soared 41% in shares of Washington Mutual(WM), 96% in shares of Sallie Mae(SLM), 40% in shares of Target(TGT) and 23% in shares of Wachovia(WB).
- Biggest changes in NYSE short interest.

Independent:
- BHP Billiton(BHP) is preparing a hostile $127 billion bid for rival Rio Tinto Plc(RTP).

Late Buy/Sell Recommendations
Citigroup:
- Upgraded (EXC) to Buy, target $85.
- Upgraded (EIX) to Buy, target $59.
- Upgraded (FE) to Buy, target $81.
- Upgraded (DTE) to Buy, target $48.
- Raised (PNM) to Buy, target $23.50.
- Raised (FPL) to Buy, target $74.
- Raised (AEP) to Buy, target $50.
- Maintain Buy on (DOX), target $46.

Bank of America:
- Upgraded (WYNN) to Buy.

Night Trading
Asian Indices are unch. to +4.5% on average.
S&P 500 futures -1.2%.
NASDAQ 100 futures -2.0%.

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/EPS Estimate
- (ABT)/.92
- (WLP)/1.50
- (COH)/.68
- (EAT)/.31
- (ROL)/.11
- (PX)/.96
- (PFE)/.47
- (SLM)/.55
- (GD)/1.40
- (KMB)/1.11
- (FCX)/1.73
- (UTX)/1.06
- (PJC)/.56
- (LUV)/.10
- (DAL)/-.18
- (STI)/.31
- (CHKP)/.44
- (EEXC)/1.02
- (ETH)/.69
- (PMTC)/.23
- (ATI)/1.41
- (ROK)/1.00
- (MOT)/.13
- (STJ)/.49
- (COP)/2.40
- (QCOM)/.52
- (SYK)/.66
- (GILD)/.43
- (COF)/.60
- (NFLX)/.14
- (QLGC)/.26
- (EBAY)/.41
- (CTXS)/.43
- (AB)/1.08
- (VAR)/.40
- (SYMC)/.29
- (FFIV)/.21
- (WDC)/1.04
- (NE)/1.30
- (RYL)/-.47
- (RDN)/-1.76

Upcoming Splits
- (FWLT) 2-for-1

Economic Releases
- None of note

Other Potential Market Movers
- The JPMorgan High Yield Conference, Sidoti Emerging Growth Forum, (HS) investor day, (SPW) investor meeting, weekly MBA mortgage applications report and weekly retail sales reports could also impact trading today.

BOTTOM LINE: Asian indices are sharply higher, boosted 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 Near Session Highs on Rebound in Financial, Homebuilding and Retail Shares

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 Cutting Losses Substantially on Strength in Financial and Retail Shares

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Retail longs, Gaming longs and Semi longs. I took some more profits in my (TLT) long and added to my (GOOG), (AAPL) and (ISRG) longs today, thus leaving the Portfolio 100% net long. The overall tone of the market is negative today as the advance/decline line is lower, most sectors are declining and volume is heavy. Investor anxiety is high again. My (TLT) long, which had been a large position several months ago, is now a small one. Today’s overall market action is bullish. Small-caps and cyclicals are substantially outperforming today. The total put/call hit a very high 1.57 and the VIX spiked to a very high 37.6(highest since October 2002) today. E*Trade Financial(ETFC) said customers logging into their accounts at any one time today hit a five year high. Mortgage rates continue to plunge with about 50% of conventional mortgages now able to be refinanced, according to CNBC. Plunging mortgage rates is a huge positive that continues to be mostly ignored by investors and the press. Despite today’s aggressive Fed move, the 10-year TIPS spread, a good gauge of inflation expectations, is falling to 2.2%, down from 2.38% one week ago. Fed fund futures now imply a 78.0% chance for another 50 basis point cut at the Jan. 30 meeting and a 22% chance for another 75 basis point cut. I strongly disagree with those that say the Fed’s actions don’t matter. We are going to see a significant amount of stimuli in a short period of time, which will move the Fed closer to being “ahead of the curve,” rather than behind it. With today’s market rebound and recent losses overseas, the S&P 500 is beginning to significantly outperform many global markets. I continue to believe developed markets will outperform emerging markets and commodities substantially over the next five years. It is very interesting to note that despite today’s key reversals in many stocks, almost nobody thinks today’s action marks an important low, which is another large positive. Nikkei futures are indicating a +500 open in Japan tonight. If we can hold onto today’s rebound or improve from current levels into the close I would expect to see significant gains in Asia tonight. I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower energy prices, less economic pessimism and bargain hunting.