Thursday Watch

Late-Night Headlines
Bloomberg:
- The Senate Finance Committee adopted a one-year extension of tax credits for renewable electricity production as part of an economic stimulus measure approved today.
- An economic-stimulus plan approved by a US Senate committee would provide a windfall worth millions of dollars to the same banks, lenders and homebuilders that some say helped cause the subprime-mortgage crisis.
- S&P lowered or may cut ratings on $534 billion of residential mortgage securities and collateralized debt obligations.
- Amazon.com(AMZN), the world’s largest Internet retailer, said fourth-quarter profit more than doubled on higher holiday sales of electronics, video games and toys. The shares fell 12% in late US trading after it forecast operating income that trailed analysts’ estimates.
- Goldman Sachs(GS) and Fidelity Intl. will need to pare holdings in India’s commodity exchanges after the government dropped plans to allow overseas investors to own larger stakes.
- Crude oil fell for the first time in six days after a US government report showed that gasoline demand fell to its lowest in two years.
- Japan’s wages fell at the fastest pace in more than three years in December as bonuses plunged.
- Lenovo Group Ltd., Asia’s second-largest maker of personal computers, tripled profit after increasing sales to customers in the US, India and China.
- Barack Obama said his party needs to select a presidential nominee who will break with the past, in a veiled swipe today at his leading opponent for the Democratic Party’s nomination, Hillary Clinton.
- Romney Questions McCain’s Conservative Credentials in Debate.

CNBC:
- Latest Rate Cut Could Energize Housing Market.
- US Mortgage Applications Near 4-Year High: MBA

CNNMoney.com:
- More than half of the respondents in a recent survey said that prices for gasoline and home heating oil were their number one economic concern for 2008, topping recession, foreclosure, and unemployment.
- Survey: 49% of US tweens buy music on iTunes.

Forbes.com:
- America’s Fastest-Growing Metros.

USA Today.com:
- 58% of delinquent homeowners don’t know their lenders may offer ways to help them keep their homes, and 56% don’t know that free counseling exists to help them, a survey found.

Financial Times:
- John Thain, Merrill Lynch’s(MER) new CEO, said he expected individual credit insurers would receive capital infusions from investors, but that it would be difficult to craft an “industry-wide” bail-out for the beleaguered guarantors.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (OI), target $55.

Night Trading
Asian Indices are -.50% to +1.5% on average.
S&P 500 futures -.36%.
NASDAQ 100 futures -.87%.

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Earnings of Note
Company/EPS Estimate
- (MA)/.73
- (MAT)/.73
- (LEA)/.67
- (GR)/.92
- (BMY)/.34
- (LLL)/1.61
- (CVS)/.55
- (HOT)/.66
- (BKC)/.32
- (UA)/.31
- (RTN)/.91
- (ATK)/1.59
- (HOLX)/.49
- (MCK)/.80
- (VRSN)/.29
- (CA)/.26
- (DRIV)/.53
- (MNST)/.38
- (ISRG)/1.05
- (CERN)/.51
- (OMCL)/.27
- (DLB)/.34
- (GOOG)/4.45
- (ERTS)/.91
- (ICE)/.92
- (GMCR)/.11
- (ACS)/.83
- (SAF)/1.44
- (BTU)/.79
- (WYE)/.79
- (MBI)/-2.98
- (PG)/.97
- (ALTR)/.19
- (BUD)/.32
- (CELG)/.31
- (CL)/.89
- (IMCL)/.26

Upcoming Splits
- (PEG) 2-for-1

Economic Releases
8:30 am EST
- Personal Income for December is estimated to rise .4% versus a .4% gain in November.
- Personal Spending for December is estimated to rise .1% versus a 1.1% increase in November.
- The PCE Core for December is estimated to rise .2% versus .2% gain in November.
- Initial Jobless Claims for this week are estimated to rise to 320K versus 301K the prior week.
- Continuing Claims are estimated to rise to 2675K versus 2672K prior.
- The 4Q Employment Cost Index is estimated to rise .8% versus a .8% gain in 3Q.

9:45 am EST
- The Chicago Purchasing Manager report for January is estimated to fall to 52.0 versus 56.4 in December.

Other Potential Market Movers
- The weekly EIA natural gas inventory data, NAPM-Milwaukee, Help Wanted Index, (TEC) Analyst Meeting, Wachovia Healthcare Conference, Banc of America Gaming Conference and Raymond James Growth Airline Conference could also impacting trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and automaker 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 Slightly Lower on Profit-taking, Bond Insurer Worries

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In Play

Stocks Higher into Close on 50 Basis Point Fed Rate Cut

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Computer longs, Retail longs, Internet longs and Biotech longs. I added to my (GILD) long and took profits in a trading long today, thus leaving the Portfolio 75% 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 slightly above average. Today’s overall market action is very bullish. Technology and financial shares are especially strong. The financials ability to build on recent gains despite news that a bond insurer will be downgraded today is very impressive. I suspect this is mainly due to the fact that it is very likely the most heavily shorted sector in US history. I also suspect the many bears will begin to switch their arguments again to a focus on inflation and away from a recession over the coming months. We will also likely hear more stagflation talk even though data are no where near stagflation levels. There remain a very large number of investors still on the sidelines who believe a complete retest or new market lows are a certainty. I continue to believe this should keep pullbacks in the major averages relatively mild and short-term in nature. The VIX is falling 5.0% today, but remains high at 26.0. Nikkei futures indicate an +300 open in Japan and DAX futures indicate an +125 open in Germany. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic pessimism and bargain-hunting.

Today's Headlines

Bloomberg:
- The Fed lowered its benchmark interest rate by half a percentage point to 3%, the second cut in as many weeks.
- David Dreman Sees ‘Major Opportunity’ in Financials.
- Fed Cuts May Prevent Subprime Shock, Analysts Say.
- Mortgage applications in the US increased last week, led by a surge in refinancing as borrowing costs hovered near two-year lows.
- Qatar Energy Minister Abdullah bin Hamad al-Attiyah says OPEC may consider an output cut.
- Yahoo! Inc.(YHOO) may be a takeover target following a 40% drop in its stock price.
- Ten-year Treasury notes fell a third day as a private report indicated US job growth accelerated this month, demonstrating strength in the job market.

Wall Street Journal:
- Big Investors Intrigued by Retail Stocks.
- US legislators may raise the amount of cash states can borrow to finance housing projects, as a way of helping homeowners who need refinancing.
- US Government Awards $114M To 4 Companies For Cellulosic Ethanol Projects.

NY Times:
- Rule Change to Help Smaller Companies Raise Funds.

Wired:
- One company looks particularly well-positioned to weather a potential economic downturn. Google’s(GOOG) focus on highly targeted, measurable advertising makes it more recession-proof than many other businesses in tech.

Barron’s:
- Investors Use Options to Hedge Before Fed Move.

USA Today:
- Nearly five years after the US-led invasion of Iraq, allied countries have paid 16% of what they pledged to help rebuild the war-torn country.

ZDNet:
- iPhone to Provide Access to Corporate Emails.

Washingtonpost.com:
- Sprint(S) Tries to Connect With Other Firms. Talks on National Network Includes Intel(INTC), Google(GOOG), Clearwire(CLWR).

Bear Radar

Style Underperformer:

Small-cap Growth (-.72%)

Sector Underperformers:

Oil Service (-2.07%), Homebuilders (-1.92%) and Drugs (-1.52%)

Stocks Falling on Unusual Volume:

STE, IFF, AMAG, HWAY, HTCH, NATI, CYMI, ALGN, YHOO, FDRY, MELI, CLWR, HANS, TRMB and STL

4Q GDP Rises Less-Than-Estimates, Mortgage Applications Surge Again, ADP Employment Above Estimates

- Advance 4Q GDP rose .6% versus estimates of a 1.2% gain and a 4.9% increase in 3Q.

- Advance 4Q Personal Consumption rose 2.6% versus estimates of a 2.0% gain and a 2.8% increase in 3Q.

- Advance 4Q GDP Price Index rose 2.6% versus estimates of a 2.6% increase and a 1.0% gain in 3Q.

- Advance 4Q Core PCE rose 2.7% versus estimates of a 2.5% increase and a 2.0% gain in 3Q.

BOTTOM LINE: The US economy grew less-than-expected in the fourth quarter, Bloomberg reported. Home construction fell 24% last quarter, the eighth consecutive drop, which subtracted 1.2 percentage points from growth. The GDP deflator rose 2.5% versus a 1.0% increase the prior quarter. Consumer spending contributed 1.4 percentage points to growth during the fourth quarter. Business spending rose at a 7.5% pace. An unexpected drop in inventories was one of the main reasons growth wasn’t stronger during the quarter. Inventories fell at a $3.4 billion annual rate, the largest drop in almost six years, which subtracted 1.3 percentage points from growth. For all of 2007, international trade contributed .55 percentage points to growth, the greatest since 1991. I expect GDP growth this quarter to accelerate modestly on inventory rebuilding and a smaller increase in the deflator.

MBA mortgage applications jumped another 7.5% this week, led by a 22.2% surge in re-financings. The four-week average of re-financings is at the highest level since April 2004 as mortgage rates continue to plunge. The ADP Employment change for January was +130,000 jobs versus estimates of +40,000 and +37,000 in December. I suspect this Friday’s January employment report will modestly exceed estimates of +65,000. According to Intrade.com, the odds the US enters recession this year have fallen from 77.5% to 59.9% over the last week. I continue to believe the overwhelming majority of investors have already priced a recession into most stocks, despite the fact that most datapoints indicate slow growth, not a recession. Fed fund futures now imply a 74.0% chance for a 50 basis point rate cut and 26.0% chance for a 25 basis point cut today.

Bull Radar

Style Outperformer:

Large-cap Growth (+.15%)

Sector Outperformers:

I-Banks (+1.36%), Airlines (+.77%) and Restaurants (+.43%)

Stocks Rising on Unusual Volume:

FPO, TUP, BCA, CGX, OPY, FTD, JLL, UDR, WBSN, EGLT, BBOX, NETL, KNSY, SLAB, ZINC, CYBS, INFA, FLEX, JBHT, HLIT, UTEK, QMAR, RMBS, JRJC, ERTS, CHRW, IBCP, GILD, DSPG, ACV, ESRX, MHS, BA, SU, CLWR, DCM and DLLR

Links of Interest

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Dow Jones Hedge Fund Indexes

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Andrew Liveris, CEO of Dow Chemical(DOW), Doesn’t See Recession for US in 2008. (video)
- Copper Jumps the Most in Three Weeks as US Growth Concerns Ease.
- Uranium fell to a three-month low after Australia and Kazakhstan, two of the world’s three-biggest producers, reported higher output.
- Lehman Brothers Holdings(LEH) boosted the dividend on its stock by 13%, extending a 12-year streak of increases after posting smaller mortgage losses than rivals.
- The FBI is investigating 14 corporations for possible accounting fraud and other crimes related to the subprime lending crisis, officials said.
- Yahoo! Inc.(YHOO) said fourth-quarter profit fell 23% and projected revenue that missed some estimates after some customers switched to Google Inc.(GOOG) for online searches. The shares fell 10% in extended trading.
- JB Hunt Transport Services(JBHT) reported fourth quarter revenue rose 11% from year ago levels. The stock jumped 6.1% in after-hours trading.
- China deployed half a million soldiers to help restore transport links, power supplies and clear debris as the nation’s worst snowstorms in 50 years stranded migrant workers before the Lunar New Year holidays.

Wall Street Journal:
- Ford Motor(F) plans to bring its European commercial van, known as Transit Connect, to the US.
- The SEC and the China Banking Regulatory Commission will sign an agreement to allow Chinese banks to develop US mutual funds. The agreement is expected to be signed in the next few days and will let Chinese citizens invest savings in US markets.
- Arizona Sen. John McCain won Florida’s presidential primary, according to media projections, thrusting him into the forefront of the Republican race.

MarketWatch.com:
- The NY Insurance Department said on Tuesday that it hopes to have enough time to resolve bond insurer problems, ahead of possible decisions by rating agencies S&P and Moody’s Investors Service to downgrade leading companies in the $2.4 trillion industry.

CNBC:
- French Trader: Bosses Knew About Risky Trades.

Forbes.com:
- WaMu CEO Sees Boost From Fed Rate Cuts.

MSNBC.com:
- Former NYC mayor Rudy Giuliani will endorse Senator John McCain as the Republican nominee for president on Wednesday.

USA Today.com:
- Independent hotels cater to elite business travelers.
- Airlines blame fuel prices for losses but see solid demand.

Australian:
- Rio Tinto Group’s(RTP) advisers say BHP Billiton(BHP) can afford to increase its takeover offer to as much as five shares for one.

Business Times:
- Government of Singapore Investment Corp. could still invest in another distressed bank if the deal is worthwhile, citing Tony Tan, deputy chairman of the fund.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (LEA), target $42.
- Reiterated Buy on (GKSR), target $49.
- Reiterated Buy (STLD), target $66.

Night Trading
Asian Indices are -1.0% to unch. on average.
S&P 500 futures -.27%.
NASDAQ 100 futures -.30%.

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
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Earnings of Note
Company/EPS Estimate
- (D)/.55
- (AGN)/.58
- (BHI)/1.28
- (SEE)/.43
- (RCL)/.34
- (NCR)/.52
- (K)/.44
- (CEG)/1.42
- (WWW)/.44
- (MRK)/.73
- (KFT)/.44
- (EK)/.50
- (HES)/1.72
- (SO)/.24
- (BA)/1.33
- (UPS)/1.13
- (ITW)/.84
- (PHM)/-.76
- (SBUX)/ .27
- (AFL)/.80
- (NVLS)/.37
- (MUR)/1.24
- (ADS)/.68
- (AMZN)/.47
- (MBI)/-2.98
- (OI)/.42
- (MO)/.97

Upcoming Splits
- (KWK) 2-for-1

Economic Releases
8:30 am EST
- Advance 4Q GDP is estimated to rise 1.2% versus a 4.9% gain in 3Q.
- Advance 4Q Personal Consumption is estimated to rise 2.6% versus a 2.8% gain in 3Q.
- Advance 4Q GDP Price Index is estimated to rise 2.6% versus a 1.0% gain in 3Q.
- Advance 4Q Core PCE is estimated to rise 2.5% versus a 2.0% gain in 3Q.

2:15 pm EST
- The FOMC is expected to lower the benchmark fed funds rate to 3.0% from 3.5%.

Other Potential Market Movers
- The ADP Employment Change report, weekly EIA energy inventory report, weekly MBA mortgage applications report, (NNDS) Investor Day, (BLC) Analyst Meeting, (VDSI) Investor Conference and (CLWR) Investor Day could also impacting trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by shipbuilding and utility 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 Near Session Highs, Boosted Again by Financials, Homebuilders, Retailers

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
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GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Stock Quote
In Play

Stocks Higher into Final Hour on Less Economic Pessimism

BOTTOM LINE: The Portfolio is mixed into the final hour as gains in my Computer longs, Retail longs and Commodity shorts offset losses in my Internet longs and Medical longs. I added (IWM)/(QQQQ) hedges, added (ISRG) puts and added to my (EEM) short today, thus leaving the Portfolio 75% net long. The overall tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is about average. Investor anxiety is above average again. Today’s overall market action is bullish. Cyclicals, specifically transports, are especially strong. The heavily shorted and beaten-up financials, retailers and homebuilders are also strong again today. These groups have become very extended and short-term traders will likely take profits on tomorrow’s economic data and FOMC announcement. I wouldn't be surprised to see 4Q GDP and ADP Employment, which are released before the open tomorrow, surprise on the upside. This could also lead to weakness in the broad market, as traders cut expectations for a 50 basis point cut in the afternoon. I still sense there are a very large number of investors still on the sidelines who believe a complete retest or new lows are a certainty. This should keep pullbacks in the major averages relatively mild and short-term in nature. The VIX is falling 3.0% today, but remains high at 27.0. Weekly retail sales rose .7% this week, which is sluggish, but not recessionary. GM’s CFO said this afternoon that he does not see the US economy sliding into recession, as well. Fed fund futures now imply a 74% chance of a 50 basis point rate cut and a 26% chance for a 25 basis point cut tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering and bargain-hunting.

Today's Headlines

Bloomberg:
- Goldman Sachs Group’s(GS) Global Alpha hedge fund, once the firm’s biggest, fell about 40% last year because of wrong-way bets on currencies, equities and bonds worldwide, according to a report sent to investors.
- The European benchmark speculative grade credit default swap index is falling 17 basis points today to 438, down from 530 a week ago.
- Travelers Cos.(TRV), the second-largest US commercial insurer, increased its holdings of securities backed by subprime mortgages in the fourth quarter. The company “took advantage of favorable pricing” to purchase the securities, an executive said.
- Ethanol tariffs will be addressed in the 2009 budget, Energy Secretary Samuel Bodman said. The ethanol industry is “close,” to being able to stand on its own, he said.
- Turkey plans to develop a wind-turbine industry worth as much as $15 billion alongside a new wind energy market, Energy Minister Hilmi Guler said. Record demand for wind turbines has companies like General Electric(GE), the world’s second-biggest turbine marker, sold out through 2009 and has driven the cost of the equipment higher.
- Clearwire Corp.(CLWR), the wireless Internet company founded by mobile-phone pioneer Craig McCaw, rose as much as 23% in Nasdaq trading after the Wall Street Journal said talks about a venture with Sprint Nextel(S) have restarted.
- NYC traffic and pedestrian fatalities dropped to a record low in 2007, Mayor Bloomberg said.
- Unisys Corp.(UIS) climbed the most in five years in NY trading after fourth-quarter revenue and profit topped some analysts’ estimates.
- Lexmark Intl.(LXK), the second-biggest US printer maker, posted fourth-quarter earnings that beat analysts’ estimates on record sales to business clients and new, more profitable products.
- Bank of America(BAC) said its purchase of Countrywide Financial(CFC) is proceeding and the bank doesn’t need more capital.
- The IMF cut its forecast for global growth this year to a still healthy 4.1%, down from 4.9% in 2007.

Wall Street Journal:
- Despite calls by the Bush administration and European governments for OPEC to pump more oil, the cartel may actually look to cut output this spring if signs continue to point to increasing oil supplies and diminishing demand.
- Studies Cite Head Injuries As Factor in Some Social Ills.

Forbes.com:
- Abengoa SA unit Abengoa-Solar expects solar panels to be available for every Spanish home within 5-10 years.

USA Today:
- Governor Kathleen Sebelius on Tuesday endorsed Barack Obama for president, a Super Tuesday boost in a GOP-leading state that Democrats hope to reclaim in the White House campaign.

The Hindu:
- The US offered to provide technical support and equipment to fight an outbreak of avian influenza in India. Drugs such as Tamiflu will be made available and the US will assist West Bengal state with diagnosing potential cases of human infection.

Nikkei English News:
- Sanyo Electric Co. will increase production of digital cameras 60% to 15 million units this business year.

Bear Radar

Style Underperformer:

Large-cap Growth (+.72%)

Sector Underperformers:

Coal (-3.13%), Oil Service (-1.26%) and Internet (-1.24%)

Stocks Falling on Unusual Volume:

ALB, SII, CCU, EMC, ICUI, NHWK, ZRAN, JDAS, EWBC, AMLN, OXPS, CBST and PBG

Durable Goods Orders Very Strong, Overall Consumer Sentiment Slightly Better-Than-Expected, Present Situation Component Rises

- Durable Goods Orders for December rose 5.2% versus estimates of a 1.6% increase and an upwardly revised .5% gain in November.

- Durables Ex Transports for December rose 2.6% versus estimates of a .1% increase and an upwardly revised .4% decline in November.

- Consumer Confidence for January fell to 87.9 versus estimates of 87.0 and an upwardly revised 90.6 in December.

BOTTOM LINE: Orders for US durable goods rose substantially more than forecast in December, indicating business investment remains healthy. Bloomberg reported. The 5.2% surge in demand for computers, aircraft and other items made to last several years was the largest since July 2007. Bookings for non-defense capital goods excluding aircraft, a gauge of future business investment, jumped 4.4%, the most since March of last year. Shipments of those items, used in determining GDP, rose 2%, the most since March of 2006. The rise in total orders was led by the largest gain in machinery bookings since December 2006, a jump in commercial aircraft and a 12% surge in communications gear. Shipments to international buyers set a ninth consecutive monthly record. To put today’s 5.2% jump in Durable Goods Orders in perspective, March 1993-February 1996, Sept. 1998-November 1999 and August 2002-February 2004 were periods in which Durable Goods Orders never rose above 5%. We were told by the many bears that the US economy was plunging into recession in 3Q when the credit turmoil began to intensify, but in actuality US GDP was rising at a very powerful 4.9% rate. The bears were even more certain that 4Q growth would be negative, however that now appears unlikely. Growth should come in around 1.5%. Now there doesn’t even seem to be a debate in many quarters, it is just assumed that we are now in a recession, which is defined as two consecutive quarters of GDP contraction. I continue to see little data to indicate we are now in a recession even as this is priced into stocks at current levels. I still expect US growth to average around 2% for the year.

Consumer confidence fell in January less than economists expected, Bloomberg reported. The Present Situation component rose to 115.3 from 112.9 the prior month. The Expectations component fell to 69.6 from 75.8 in December. The share of consumers who said jobs are plentiful rose to 23.9% versus 23.6% the prior month. The percentage of people that said jobs are hard to get fell to 20.1% from 22.7% in December. The percentage of consumers planning to buy an automobile rose to 6.7% from 6.3% the prior month. Those planning to buy an appliance rose to 30.5% from 28.1% prior. There remains a historically wide gap between consumers’ perceptions of their current financial situation and their views of the future. This is a direct result of the current “US negativity bubble,” in my opinion. Consumers have been told by so many high profile market participants, with negative political and/or financial agendas, for so many years that an imminent economic collapse is just around the corner that when we get a slowdown it is just assumed by most that the collapse in finally occurring, even though they don’t see it in their own finances. I suspect we have now seen the lows for the year in consumer sentiment gauges as economic pessimism begins to wane, home sales bounce unexpectedly, interest rates remain low, inflation decelerates, stocks rise and the job market remains healthy.

Bull Radar

Style Outperformer:

Large-cap Value (+1.11%)

Sector Outperformers:

Telecom (+1.96%), Airlines (+1.75%) and Computer Hardware (+1.32%)

Stocks Rising on Unusual Volume:

CXG, TAR, ZMH, KFN, AXE, FTO, SMG, CR, CNW, LXK, CHTT, QMAR, NNDS, ENDP, SMTS, GASS, MATR, SONC, ALGN, CENX, RATE, TECH, NICE, IBKR, ALDN, DBTK, ABK, THG, TNE, GEOY, EE, KFN and JOE

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

Late-Night Headlines
Bloomberg:
- VMware Inc.(VMW) said fourth-quarter profit more than doubled. Sales missed analysts’ estimates, sending the shares down 24% in late trading.
- California Governor Arnold Schwarzenegger’s $15 billion plan to provide health insurance for everyone in the most populous US state was rejected by a Senate committee on concerns it would cost too much.

Wall Street Journal:
- Bush’s Aim Is to Reassure a Worried Country.
- Liberty Media Corp., the media company controlled by billionaire John Malone, is trying to force Barry Diller out of IAC/InteractiveCorp.

NY Times:
- The credibility of Societe Generale’s management came under fresh scrutiny Monday after Jerome Kerviel told French prosecutors that his fictitious trading started as far back as 2005 – a year earlier than the bank had acknowledged.
- Edward S. Lampert has a new strategy for Sears(SHLD): less Edward S. Lampert.
- Good News in the 1 Million Missing iPhones.

BusinessWeek.com:
- Cisco Systems(CSCO) revealed a major offensive today in its ongoing assault on the data center market.
- Top Tech Trends in ’08.
- Broadband’s Growing ‘Need for Speed’

CNNMoney.com:
- Bush hammers home on economy. Bush lobbies for enactment of $150 billion stimulus plan ‘as soon as possible’ and calls for permanent extension of tax cuts.

Forbes.com:
- America’s Richest Counties.
- iPhone Apps In The Works.

Reuters:
- US Treasury Assistant Secretary Anthony Ryan said on Monday there were signs that market liquidity was starting to return but it won’t happen overnight and requires greater investor caution in future.
- JPMorgan(JPM) disclosed on Monday that it has raised its stake in bond insurer AMBAC Financial Group(ABK) to 7.7% from 5.4%.

Financial Times:
- Efforts to shore up US bond insurers gathered pace yesterday as NY state regulators appointed investment bankers to advise on a rescue plan that could include back-up credit lines for the troubled guarantors.

TimesOnline:
- Hedge funds worldwide are heading for their worst monthly performance in almost ten years amid signs that the credit crunch is claiming fresh victims across the investment markets.
- India’s love affair with gold is waning as high prices deter casual buyers in the world’s largest gold importer and savvy housewives try to sell their spare jewelry to capitalize on rocketing prices.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (CBG), target lowered to $31.
- Downgraded (DIS) to Sell, target $26.
- Reiterated Buy on (ACV), target raised to $30.
- Reiterated Buy on (MCD), target lowered to $64.
- Raised (GASS) to Buy, target $20.
- Reiterated Buy on (VZ), target $45.

Night Trading
Asian Indices are +.25% to +2.0% on average.
S&P 500 futures -.04%.
NASDAQ 100 futures -.44%.

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
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Earnings of Note
Company/EPS Estimate
- (NNDS)/.61
- (X)/2.22
- (CAH)/.88
- (LLY)/.89
- (COCO)/.10
- (DOW)/.80
- (ENR)/2.21
- (OXY)/1.69
- (TRV)/1.61
- (UIS)/.14
- (CNX)/.34
- (LXK)/.56
- (VLO)/.59
- (SII)/.88
- (MMM)/1.17
- (PII)/1.04
- (CFC)/-.28
- (BNI)/1.39
- (SHW)/.85
- (ALL)/1.34
- (YHOO)/.11
- (CB)/1.47
- (ZMH)/1.04
- (CTX)/-1.06
- (JBHT)/.40
- (EMC)/.22
- (FLEX)/.26
- (PPC)/.38
- (RHI)/.47
- (HTCH)/.35

Upcoming Splits
- (BTJ) 3-for-2
- (KWK) 2-for-1

Economic Releases
8:30 am EST
- Durable Goods Orders for December are estimated to rise 1.6% versus a -.1% decline in November.
- Durables Ex Transports for December are estimated to rise .1% versus a -.8% decline in November.

8:30 am EST
- Consumer Confidence for January is estimated to fall to 87.0 versus a reading of 88.6 in December.

Other Potential Market Movers
- The S&P/CS Home Price Index, weekly retail sales reports, Wachovia Healthcare Conference, Banc of America Gaming Conference and Citigroup Financial Services Conference could also impacting trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and automaker 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 at Session Highs, Despite Overseas Weakness

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Stocks Higher into Final Hour, Boosted by Financial and Homebuilding Shares

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Retail longs, Healthcare longs and Medical longs. I covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short this morning, 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 about average. Investor anxiety is above average. Today’s overall market action is bullish. Considering the outsized losses overseas last night and this morning, today’s action is impressive. Small-caps are especially strong. The only real areas of weakness are the restaurant sector and large-cap growth stock leaders. The rotation into the most heavily-shorted and beaten up sectors remains pronounced. I suspect this will last a bit longer, but is not the beginning of a longer-term trend of outperformance by these groups. The VIX is falling 2.75% today, but remains high at 28.3. Insider buying was brisk again last week. GE, PH, MON, TIE, JCI, T and CHK all saw meaningful insider purchases. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering and bargain-hunting.

Today's Headlines

Bloomberg:
- US stocks rose, extending the market’s first weekly gain this year, as odds increased that the Fed will cut its benchmark lending rate by half a percentage point this week.
- The risk of SLM Corp.(SLM) defaulting on its debt fell to the lowest in almost two weeks after the biggest US student lender received $31 billion in new bank financing needed to keep the company running.
- Subprime-Loan Contracts May Rally on Fed Cuts, JPMorgan(JPM) Says.
- How to survive the fortune you made shorting subprime.
- Intel Corp.(INTC), the world’s biggest computer-chip maker, will buy renewable energy certificates form solar power generators and wind farms equal to the electricity needed to power 130,000 average US homes a year.
- NASDAQ Short Interest by Industries. Total Nasdaq short interest surged 7.24% during the first two weeks of January.
- CME Group(CME), the world’s largest futures exchange, is in talks to acquire Nymex Holding(NMX) for more than $11 billion to gain the biggest energy-trading market.
- Current Media(CRTM), the television new network co-founded by former US VP Al Gore, plans to raise as much as $100 million in an IPO.

Wall Street Journal:
- AMD(AMD) Graphics Card May Test Nvidia(NVDA).

NY Times:
- LeapFrog(LF) Hopes for Next Hit With Interactive Reading Toy.

Reuters:
- The rally in sugar prices is likely to end because of a record cane crop coming out of Brazil and high global stockpiles, citing the International Sugar Organization.
- A hefty Federal Reserve rate cut and a stimulus plan that would expand the availability of home loans may reinvigorate the beleaguered U.S. housing market and help the broader economy along with it.

Financial Times:
- French CEOs are best paid in Europe. Total US pay for CEOs is two and a half times that of European CEOs, but most of that is in bonuses and long-term incentives. Basic salaries of European CEOs on average exceed US base salaries by 20%.

Bear Radar

Style Underperformer:

Large-cap Growth (+.72%)

Sector Underperformers:

Restaurants (-4.39%), Software (-.55%) and Defense(-.33%)

Stocks Falling on Unusual Volume:

ADS, MCD, FDG, MOH, MELI and YRCW

New Home Sales Below Estimates

- New Home Sales for December fell to 604K versus estimates of 647K and 634K in November.

BOTTOM LINE: Purchases of new homes in the US fell more-than-expected in December, Bloomberg reported. The median price of a new home fell to $219,200 during the month. At the current sales pace, inventories rose to 9.6 months worth of new homes. The average 30-year mortgage rate has plunged 70 basis points over the last month to a historically low 5.48%. It has also dropped 127 basis points from the middle of last year. Fed fund futures now imply an 84% chance for a 50 basis point cut at the upcoming meeting and a 14% chance for a 25 basis point cut. I continue to believe home sales will surprise on the upside over the coming months on pent-up demand, less economic pessimism and very low rates.

Bull Radar

Style Outperformer:

Large-cap Value (+.91%)

Sector Outperformers:

Airlines (+1.96%), Retail (+1.56%) and Banks (+1.58%)

Stocks Rising on Unusual Volume:

WMS, TPL, LNY, ACV, NMX, KWD, BKD, KTC, ACOR, MATR, MDVN, SILC, PTRY, AUXL, POOL, ATHR, ABFS, JRCC, ZINC, ENOC, SPWR, RGLD, MASI, PRXL, ICFI, LPHI, CPTS, TKLC, VCBI and CSTR

Links of Interest

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Monday Watch

Weekend Headlines
Bloomberg:
- President Bush said the bipartisan economic stimulus package worked out by lawmakers and his administration will provide direct tax relief to working Americans and urged Congress to pass it as quickly as possible.
- Deutsche Ttelekom AG’s T-Mobile unit has sold more than 70,000 iPhones in Germany since introducing the combination handset and digital music player in November, CEO Obermann said. Subscribers spent three times as much as other T-Mobile clients on average every month, and more than half of the customers are new uses.
- After the best annual start for Treasuries since 1998, investors are betting the highest-rated mortgage and corporate bonds will outperform as the Federal Reserve cuts interest rates.
- Democratic Senator Ed Kennedy will announce his endorsement of Illinois Senator Barack Obama’s presidential campaign tomorrow.

Wall Street Journal:
- State Street(STT), Franklin Resources(BEN) and Janus Capital(JNS) are among the money managers vying for potentially billions of dollars in fees to manage sovereign wealth investments.
- Obama Scores South Carolina Win, Defeating Clinton by Wide Margin.
- Tony Blair cautioned US presidential candidates not to lock themselves into damaging protectionist or isolationist policies they could have a tough time walking away from once in office.

Forbes.com:
- America’s 25 Fastest-Growing Tech Companies.

NY Times:
- Investor sentiment suggests that the bulk of the stock market’s decline is now behind us.
- French Bank Offers Details of Big Loss.
- The Coming Wave of Gadgets That Listen and Obey.
- Amazon’s(AMZN) new device could turn out to be the iPod of the written word.

CNBC.com:
- Paulson Pushes Senate for Stimulus Deal. President Bush’s chief negotiator on an economic aid deal said Sunday the Senate should quickly get behind a plan or risk drawing the resentment of a frustrated public.
- Warren Buffett Continues to Snap Up Burlington Northern(BNI) Shares.
- Nikkei Battered Since 2007 Peak, Dow More Resilient.
- S&P 500 Earnings Scorecard: 73% Have Met Or Exceeded Expectations To Date.

TheStreet.com:
- Top NYSE Short-Squeeze Plays.
- Juniper(JNPR) Sends Strong Signals for Cisco(CSCO).

Google Trends:
- There has been a parabolic spike in Google searches that include the word ‘recession.’ The largest volume of Google searches that include the word are coming from Washington, DC and New York, New York. (graph)

MSNBC.com:
- Price of gas falls 9 cents in last two weeks. National average for gallon of regular was $2.98 Friday.

Business Week:
- Super Sunday generates major bucks for all involved, from its host network to snackmakers, HDTV sellers, and especially the game’s host city.
- Second-year MBA students looking for full-time jobs appear to be doing as well as, if not better than, their counterparts last year, with many schools reporting increased recruiting, more job offers, and higher salaries for this year’s grads.

USA Today:
- Ford Escape plug-in prototype shows potential.
- Midsize commercial shipyards across the country can’t find enough skilled, experienced workers.

CNNMoney.com:
- 25 top-paying companies.
- 100 Best Companies to Work For By State.
- From Microsoft’s(MSFT) lofty perch, no sign of a slowdown.

Financial Times:
- Lawyers for Jerome Kerviel, the French trader accused by Societe Generale of massive fraud, hit back at the bank on Sunday, accusing it of creating a “smokescreen” to divert attention from other losses.

TimesOnline:
- As many as 10 European-based hedge funds halted redemptions after losses prompted investors to seek to withdraw their cash, citing a London prime broker.
- The BMW Hydrogen 7.

Oberver:
- Vale Is ‘Days Away’ From Agreed $80 Billion Bid for Xstrata Bid.

Sunday Telegraph:
- Companies affiliated with the Qatar Investment Authority are considering the purchase of a $3 billion stake in Credit Suisse Group.
- Hedge funds: The new global super powers.

Sunday Times:
- Alan Greenspan said there’s no evidence the US is in a recession.

Guardian:
- JPMorgan(JPM) CEO sees end in sight to housing downturn.

Le Figaro:
- European Aeronautic, Defense & Space Co., the parent of planemaker Airbus SAS, must make one acquisition in the US in 2008.
- Groupe Bollore, the investment company controlled by French billionaire Vincent Bollore, will invest $293 million to build a plan that will produce batteries for an electric car designed by Pininfarina SpA.

AFP:
- Iraqi security forces are recruiting about 9,000 militiamen to serve with the police and army after they joined the US military in fighting al-Qaeda.

La Nacion:
- Pan American Energy LLC, an Argentine oil and gas company partly owned by BP Plc, has made a new oil discovery in the south of the country. The new reserve is the largest discovered in Argentina in recent years and contains sufficient oil to double the output of Chubut province, which in 2007 totaled 60 million barrels.

Al-Alam al-Yom:
- Egypt’s daily oil production may soon reach 700,000 barrels. Egypt currently produces 670,000 barrels per day.

Iranian News Agency:
- Russia made a seventh delivery of nuclear fuel for Iran’s first reactor today, citing the Iran Atomic Energy Production and Development Company.

Weekend Recommendations
Barron's:
- Made positive comments on (HP).
- Made negative comments on (SYX).

Citigroup:
- Maintained Buy on (CAT), target $86.

Night Trading
Asian indices are -3.25% to -1.0% on avg.
S&P 500 futures -.68%.
NASDAQ 100 futures -.81%.

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Earnings of Note
Company/Estimate
- (SWK)/1.10
- (ENR)/2.22
- (HAL)/.69
- (BDK)/1.03
- (FPL)/.67
- (GLW)/.39
- (SYY)/.42
- (MCD)/.70
- (VZ)/.62
- (TSN)/.04
- (ATHR)/.30
- (AXP)/.71
- (SNDK)/.65
- (VMW)/.24
- (PAY)/.37
- (XMSR)/-.63
- (OSG)/.63

Upcoming Splits
- (BTJ) 3-for-2
- (KWK) 2-for-1

Economic Data
10:00 am EST
- New Home Sales for December are estimated to fall to 645K versus 647K in November.

Other Potential Market Movers
- The (YRCW) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are sharply lower, weighed down by financial and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.