Bear Radar

Style Underperformer:

Mid-cap Value (-1.54%)

Sector Underperformers:

Retail (-4.34%), Airlines (-3.93%) and Homebuilders (-3.63%)

Stocks Falling on Unusual Volume:

DTG, ASF, VVI, MSTR, RYAAY, MASI, BPHX, ZOLT and NTG

Factory Orders Rise Again, Gauge of Future Business Spending Jumps

- Factory Orders for December rose 2.3% versus estimates of a 2.5% gain and an upwardly revised 1.7% gain in November.

BOTTOM LINE: Orders to US factories rose in December by the most since July, indicating business spending on new equipment is accelerating, Bloomberg reported. The 2.3% gain is the fourth consecutive increase and follows a revised 1.7% rise the prior month. The increase in factory orders was led by a 5% surge in demand for durable goods, such as airplanes and computers. Orders for non-defense capital goods excluding aircraft, a gauge for future business spending, jumped 4.5% versus a .1% decline the prior month. Computer orders rose 4.6% in December and machinery orders jumped 7.3%, the most since December 2006. Factories had enough goods on hand to last 1.24 months, up from the record 1.22 months set in November. I continue to believe manufacturing will help keep the overall US economy growing as companies rebuild depleted inventories from booming exports.

Bull Radar

Style Outperformer:

Mid-cap Growth (-.52%)

Sector Outperformers:

Utilities (+1.3%), Alternative Energy (+1.08%) and Oil Service (+.83%)

Stocks Rising on Unusual Volume:

GBX, R, KWK, OMRI, NVEC, YHOO, COIN, UDRL, SILC, INSP, ARAY, ARII, JRJC, SCSC, CTCM, LSTR, SNCR, HERO, JOYG, DRIV, NTLS, SNP, PDC, PTEN, BZP, PTR, EDE, WYE, SWC, CLWR, HSTX, OFG, SIRF and FRME

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
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Dow Jones Hedge Fund Indexes

Monday Watch

Weekend Headlines
Bloomberg:
- US stocks rose the most in five years after the Fed’s second interest rate cut in nine days boosted banks, homebuilders and retailers.
- Asian Stocks Advance on Merger Speculation; Rio, Samsung Gain.
- Some Microsoft Corp.(MSFT) shareholders say the software maker’s $44.6 billion bid for Yahoo! Inc.(YHOO) may backfire and reduce its ability to compete with Google Inc.(GOOG) in Internet consumer services and advertising.
- Democratic presidential candidates Hillary Clinton and Barack Obama are statistically tied for voter support nationwide, a Washington Post/ABC News poll found.
- Hillary Clinton said that if she’s elected president, she would make the decisions and that her husband, former President Bill Clinton, would play a supporting role.
- Ben S. Bernanke’s decision to lower interest rates 1.25 percentage points last month will end the dollar’s two-year slide, according to the world’s biggest currency traders.
- Presidential candidate Barack Obama said he can win votes in the November general election that Hillary Clinton, his Democratic opponent, can’t get.
- The yen fell against 15 of the 16 most-active currencies as a rally in Asian stocks prompted investors to purchase higher-yielding assets funded in Japan.
- Sharp Corp., Japan’s biggest maker of liquid-crystal displays, rose the most in more than six years in Tokyo trading after the company reported a record third-quarter profit, led by earnings from flat panels.
- The NY Giants beat New England 17-14 to win the Super Bowl and end the Patriots’ run at an undefeated season.

Wall Street Journal:
- Google(GOOG) Offers to Help Yahoo Fight Off Microsoft(MSFT).
- How to Lose $7.2 Billion: A Trader’s Tale. Kerviel Cooked Books, Skipped His Holidays; Calling in a Doctor.
- Goldman Hedges Political Bets. Executives Shelled Out For Clinton, Obama; Lesser Sums for GOP.

Barron’s:
- A recent study from the Treasury Department shows that there’s been a great and continuing degree of income mobility and income growth over the last two decades. Almost 58% of those in the lowest income quintile(the lowest 20% of returns) in 1996 were in a higher quintile by 2005. Almost half of them had moved up two or more quintiles, and 5% had moved into the top quintile. The middle quintile also did well. One-third stayed there, and 42% moved up, almost 13% to the top quintile. Just 7% moved to the bottom. The top quintile from 1995 saw almost one-third of its members drop to a lower income group.(And 58% of those in the top one percent had fallen to a lower income quintile in 2005.) Overall, 56% of the studied returns changed income quintiles in 10 years. Households didn’t just move relative to each other. Incomes increased 24% overall and increased across the income spectrum – except at the very top end. The increases were most dramatic in the lowest quintile. Their median real income increased by 90%, almost doubling in ten years. In the top quintile, median real income increased by 10% and decreased by almost 26% for the top one percent. Finally, every group’s median income increased more than in the previous decade – going up 30.2% from 1996-2005 versus a gain of 11.1% from 1987-1996.
- Yahoo(YHOO)-Microsoft(MSFT) May Lose Market Share.

NY Times:
- Bankers for Yahoo!(YHOO), the target of a $44.6 billion takeover bid by Microsoft(MSFT), are seeking other suitors, including AT&T(T) and News Corp.(NWS/A).
- The Iranian government barred a majority of opposition politicians from next month’s parliamentary elections in reaction to increasing protests against the regime because of a weak economy.
- Amid growing recession fears, it’s only natural that US investors are a little spooked. But how do you explain that foreign stocks are off to an even worse start in 2008?
- With the help of resources that have emerged online in recent years, investing in commercial real estate is easier and far more transparent than a decade ago.

CNBC.com:
- Extra Payments Can Trim Decade Off Your Mortgage.
- Internet Stocks Click, Says Analyst.
- Icahn Builds Big Stake in JC Penney(JCP): Report.
- Health Care Stocks: Whose Rx is Best?

MarketWatch.com:
- MBIA(MBI) shares rise; says it will keep AAA rating. CFO says bond insurer won’t go bankrupt, highlights liquidity.
- Exxon(XOM) profit builds on oil-patch blueprint. Replenishing reserves defines the bottom line.
- Storms suspend China’s fight against inflation. Central bank orders lenders to loosen credit as blizzards disrupt economy.

IBD:
- To ‘Google It’ Is To Search The Internet.

Business Week:
- 21 Names with Big Potential.
- Myths About Implantable Chips.
- Fueling the Solar Energy Boom.
- Japan Carmakers Ask: What Recession? Subprime, a rising yen, shrinking sales at home, and high oil prices aren’t hurting earnings at Honda, Nissan, and other Japanese auto companies.

AP:
- Wind Farms Need Techs to Keep Running.

USA Today:
- OPEC will not increase oil output as economy weakens.
- GM(GM) to show off hybrid pickup, concept truck.

CNNMoney.com:
- Here comes merger mania! Microsoft’s(MSFT) stunning $44.6 billion bid for Yahoo! Is just the beginning.

SmartMoney.com:
- Even if we are in a recession, the outlook for stocks remains good.
- Don’t Count Out the Stock Market.

Reuters:
- A long anticipated deal by Altria Group(MO) to buy smokeless tobacco company UST Inc.(UST) could be reached within months, but the price remains the toughest sticking point.
- Yahoos fear loss of fun-loving culture.
- Rio Tinto’s(RTP) chief waits for richer BHP(BHP) offer.
- Yahoo(YHOO) said it may take “quite a bit of time” to weigh its strategic options, including keeping the company independent, following Microsoft’s(MSFT) $45 billion offer to buy the company.
- Intel(INTC) poised for growth: Barron’s.
- Top-20 selling vehicles in US through January.

Financial Times:
- More than half of the UK’s richest people are planning to leave or cut their investments in the country, citing a report based on a poll of advisers to the wealthy. The report by the Society of Trust and Estate Practitioners say 2,741 of their clients want to leave the UK or sell their investments to escape new taxes to be introduced by the government in April targeting 5,200 so-called super rich with investable assets of more than $29.5 million.
- Banks link to solve bond insurers crisis.
- The US presidential candidates are heading towards the $1 billion mark in campaign fundraising, shattering records as Wall Street and corporate America pump cash into a race that started-early and has produced at least eight viable candidates.

Il Sole 24 Ore:
- Edison SpA, Italy’s second-biggest utility, plans to bid for a license to develop the Akkas gasfield in Iraq and has already submitted the necessary documentation for pre-selection.

Al-Watan:
- Agility, the Kuwait-based Middle East’s largest storage and logistics company, plans to start a new company in Iraq with local partners.

Weekend Recommendations
Barron's:
- Made positive comments on (DYN), (RJF) and (MTN).

Citigroup:
- Semi capex cuts have been in-line w/expectations; better than many feared – We now see C08 capex ~$54B or -13% Y/Y and actually slightly better than the $53.5B we saw coming into earnings season. DRAM capex has been about as expected but NAND has come in slightly higher than out model. Lastly despite big capex cuts many memory companies like Hynix are still claiming significant ’08 capacity growth. We think however there remains a big disconnect between these capacity plans and industry capex plans. We therefore think many memory companies will fall well short of capacity goals through the year which should yield better memory pricing.

Night Trading
Asian indices are +1.0% to +3.0% on avg.
S&P 500 futures +.11%.
NASDAQ 100 futures -.01%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
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Before the Bell CNBC Video(bottom right)
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Commodity Movers
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Today in IBD
In Play
Bond Ticker
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Macro Calls
Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/Estimate
- (BEAV)/.44
- (HUM)/1.32
- (ADM)/.71
- (WEN)/.24
- (NWS/A).28
- (RMBS)/.06
- (CSC)/.99
- (APC)/.76
- (SIRF)/.32
- (EFX)/.57
- (TMA)/.27
- (PPS)/.08
- (SOHU)/.34
- (SPF)/-1.02
- (YUM)/.42
- (ILMN)/.24
- (SNCR)/.20
- (LVS)/.34
- (CLX)/.58
- (AES)/.33

Upcoming Splits
- (MCRS) 2-for-1
- (CJR) 2-for-1
- (JASO) 3-for-1

Economic Data
10:00 am EST
- Factory Orders for December are estimated to rise 2.5% versus a 1.5% increase in November.

Other Potential Market Movers
- The Fed’s Kroszner speaking, Challenger Job Cuts report, (JAVA) analyst meeting, (MSFT) strategic update, Thomas Weisel Tech/Telecom/Internet Conference and CSFB Energy Conference could also impact trading today.

BOTTOM LINE: Asian indices are sharply higher, boosted by technology and mining shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the week.

Weekly Outlook

Click here for the weekly market preview by MarketWatch.

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. – Challenger Job Cuts, Factory Orders

Tues. – ISM Non-Manufacturing, weekly retail sales

Wed. – Weekly EIA energy inventory data, weekly MBA Mortgage Applications report, 4Q Non-farm Productivity, 4Q Unit Labor Costs

Thur. – Initial Jobless Claims, Pending Home Sales, ICSC Chain Store Sales, Consumer Credit

Fri. – Wholesale Inventories

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

Mon. – Humana Inc.(HUM), Wendy’s Intl.(WEN), Archer-Daniels-Midland(ADM), News Corp.(NWS/A), Rambus Inc.(RMBS), Computer Sciences(CSC), Standard –Pacific(SPF), Post Properties(PPS), Equifax(EFX), Las Vegas Sands(LVS), Yum! Brands(YUM), Synchronoss Tech(SNCR), SiRF Tech(SIRF), Anadarko Petroleum(APC), Sohu.com(SOHU), Illumina(ILMN), Thornburg Mortgage(TMA), Clorox(CLX), AES Corp.(AES)

Tues. – NYSE Euronext(NYX), Tyco Intl.(TYC), CME Group(CME), Louisiana-Pacific(LPX), Boston Scientific(BSX), Whirlpool(WHR), Duke Energy(DUK), Walt Disney(DIS), THQ Inc.(THQI), CB Richard Ellis(CBG), Nabors Industries(NBR), Infospace(INSP), Riverbed Tech(RVBD), Cheesecake Factory(CAKE), Annaly Capital(NLY), Avon Products(AVP), Nuance Communications(NUAN), Emerson Electric(EMR), JDS Uniphase(JDSU)

Wed. – IAC/InterActiveCorp(IACI), Time Warner(TWX), Biogen Idec(BIIB), Cigna Corp.(CI), ITT Corp.(ITT), Polo Ralph Lauren(RL), Sara Lee(LEE), WMS Industries(WMS), Cisco Systems(CSCO), Alcon Inc.(ACL), Electronic Data(EDS), Akamai Technologies(AKAM)

Thur. – Expedia Inc.(EXPE), International Paper(IP), Gartner Inc.(IT), DR Horton(DHI), Energy Conversion(ENER), Diamond Offshore(DO), Aetna Inc.(AET), PepsiCo(PEP), Apache Corp.(APA), McAfee Inc.(MFE), BMC Software(BMC), AGCO Corp.(AG), Pitney Bowes(PBI), Omniture Inc.(OMTR), Corrections Corp.(CXW), Sina Corp.(SINA), Express Scripts(ESRX), Weyerhaeuser(WY)

Fri. – Southern Copper(PCU), Tribune(TRB)

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

Mon. – Fed’s Kroszner speaking, (JAVA) analyst meeting, (MSFT) strategic update, Thomas Weisel Tech/Telecom/Internet Conference, CSFB Energy Conference

Tue. – Fed’s Lacker speaking, (UAUA) analyst meeting, (STT) analyst meeting, (JAVA) analyst meeting, CSFB Energy Conference, Cowen Aerospace/Defense Conference, Thomas Weisel Tech/Telecom/Internet Conference, Merrill Global Pharma/Biotech/Medical Device Conference

Wed. – Fed’s Lacker speaking, Fed’s Plosser speaking, (CTXS) analyst day, (AXP) financial community meeting, (JAVA) analyst meeting, Merrill Global Pharma/Biotech/Medical Device Conference, CSFB Energy Conference, CSFB Financial Services Forum, Thomas Weisel Tech/Telecom/Internet Conference

Thur. – Fed’s Lockhart speaking, Fed’s Fisher speaking, Fed’s Yellen speaking, (ELY) analyst meeting, (PETD) analyst meeting, Thomas Weisel Tech/Telecom/Interest Conference, CSFB Energy Conference, CSFB Financial Services Forum, Merrill Global Pharma/Biotech/Medical Device Conference

Fri. – (STJ) analyst meeting, (SRVY) investors meeting, (GLW) investor meeting, CSFB Energy Conference

BOTTOM LINE: I expect US stocks to finish the week mixed as a firmer US dollar, mostly positive earnings reports, tech sector strength, lower energy prices, less economic pessimism and constructive Fed commentary offset profit-taking and shorting. My trading indicators are giving mostly bullish signals and the Portfolio is 100% net long heading into the week.

S&P 500 1,395.42 +4.87%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 1,395.42 +4.87%
DJIA 12,743.19 +4.39%
NASDAQ 2,413.36 +3.75%
Russell 2000 730.50 +6.1%
Wilshire 5000 14,039.72 +5.1%
Russell 1000 Growth 571.23 +4.02%
Russell 1000 Value 773.51 +6.3%
Morgan Stanley Consumer 697.48 +3.82%
Morgan Stanley Cyclical 984.19 +7.2%
Morgan Stanley Technology 560.49 +4.72%
Transports 4,807.35 +7.43%
Utilities 510.05 +5.35%
MSCI Emerging Markets 138.45 +2.75%

Sentiment/Internals
NYSE Cumulative A/D Line 59,990 +6.0%
Bloomberg New Highs-Lows Index -342
Bloomberg Crude Oil % Bulls 20.0 +11.1%
CFTC Oil Large Speculative Longs 211,680 +5.5%
Total Put/Call .82 -21.9%
NYSE Arms .70 -66.5%
Volatility(VIX) 24.02 -17.4%
ISE Sentiment 125.0 +23.8%
AAII % Bulls 30.1 +19.7%
AAII % Bears 48.9 -17.2%

Futures Spot Prices
Crude Oil 88.82 -2.03%
Reformulated Gasoline 228.40 -3.04%
Natural Gas 7.72 -2.95%
Heating Oil 244.90 -2.06%
Gold 908.90 -1.03%
Base Metals 234.83 +5.3%
Copper 326.80 +3.04%

Economy
10-year US Treasury Yield 3.58% +2 basis points
4-Wk MA of Jobless Claims 325,800 +3.3%
Average 30-year Mortgage Rate 5.68% +20 basis points
Weekly Mortgage Applications 1,054,900 +7.48%
Weekly Retail Sales +.7%
Nationwide Gas $2.99/gallon unch.
US Heating Demand Next 7 Days 19% below normal
ECRI Weekly Leading Economic Index 131.1 -3.4%
US Dollar Index 75.49 -.69%
CRB Index 364.34 +.75%

Best Performing Style
Mid-cap Value +7.04%

Worst Performing Style
Large-cap Growth +4.02%

Leading Sectors
Airlines +15.9%
Homebuilders +14.0%
I-Banks +11.6%
Banks +11.2%
Retail +11.4%

Lagging Sectors
Drugs +1.1%
Restaurants +.64%
Oil Service -.94%
Software -1.59%
Gold -2.36%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Rising Again into Final Hour on Gains in Technology, Airline, REIT and Construction Shares

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Software longs, Semi longs and Biotech longs. I added a bit to my (GOOG) long and took some profits in another long today, thus leaving the Portfolio 100% net long. The overall tone of the market is very positive as the advance/decline line is higher, almost every sector is rising and volume is heavy. Investor anxiety is slightly above average, despite today’s gains. Today’s overall market action is very bullish given the jobs report, more news of impending subprime-related downgrades and recent sharp gains. Small and mid-caps are really flying today. The S&P 500 is now just 4.9% lower for the year and is massively outperforming almost every other global market. I suspect investment manager performance anxiety is coming into play again with so many proclaiming a new bear market had begun and short interest making new record highs right at the lows. The big story today is the monster gain in the semis. The (SMH) is 7% higher on the day, which is a significant new positive. The VIX is falling 7.0% today, but remains fairly high at 24.0. The ISE Sentiment Index is still below average at 124.0. Despite today’s jobs report the 10-year yield is rising slightly, the US dollar is surging and the odds for a recession this year are falling. Fed fund futures now imply a 70% chance for another 50 basis point rate at the March 18 meeting. I still believe the Fed is now “ahead of the curve” and it appears the market seems to agree. While the (MSFT)/(YHOO) deal is a short-term psychological negative for (GOOG), I suspect it will be viewed as a large positive over the intermediate-term. I also think the main causes for Google’s slight miss are temporary in nature and the company continues to build the foundation for stellar growth for much longer than most investors perceive. I view the stock as extremely attractive at current valuation levels given its prospects. Nikkei futures indicate an +253 open in Japan and DAX futures indicate an +58 open in Germany on Monday. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic pessimism, lower energy prices and bargain-hunting.

Today's Headlines

Bloomberg:
- OPEC decided to keep oil production targets unchanged at its meeting in Vienna today.
- Crude oil is falling $2.50/bbl., despite OPEC saying it will not increase output, on a rise in the US dollar, less speculation by investment funds, decelerating global demand and record global production.
- Microsoft’s(MSFT) $44.6 billion unsolicited bid to buy Yahoo!(YHOO) signals a revival of mergers and acquisitions as corporate buyers exploit falling stock prices and fill a void left by private-equity firms.
- NY Insurance Superintendent Eric Dinallo is trying to organize a bank-led rescue of Ambac Financial(ABK) to prevent downgrades of the bond insurer that may roil credit markets. Ambac is soaring 16% on the news.
- Deutsche Bank AG, Germany’s largest bank, said it purchased US hedge fund administrator HedgeWorks, LLC.
- Republic of Iraq 1/15/2028 government bonds have risen from a low of 56.18 in August of last year to 69.75 today.
- Exxon Mobil(XOM), the world’s largest oil company, said fourth-quarter profit rose 14% amid the biggest increase in crude prices in the 148-year history of the petroleum industry.

Wall Street Journal:
- Societe Generale SA has stopped paying Jerome Kerviel, the trader whose unauthorized bets led to the biggest trading loss in history, yet it hasn’t been able to fire him.
- A Chicago-based hedge fund plans to launch a proxy fight Friday designed to force apartment real-estate investment trust Post Properties(PPS) to consider offers to sell itself.
- Anheuser-Busch(BUD) and InBev NV, the world’s largest brewer by volume, have talked about merging and may do so this year.
- Billionaire investor Carl Icahn has amassed “a big stake” in JC Penney(JCP), the third-largest US dept.-store chain. Icahn’s stake may be among his top five holdings and be worth hundreds of millions of dollars.

NY Times:
- Law Firm Helped Bundle Home Loans Into Securities.
- Having failed in recent year to impeach President Bush and stop the war in Afghanistan, members of the Berkeley, California City Council approved a resolution that encourages people to nonviolently “impede, passively or actively,” the work of military recruiters.

USA Today:
- State and local government workers are enjoying major gains in compensation, pushing the value of their average wages and benefits far ahead of private workers, a survey shows.

NY Daily News:
- The laptop Apple’s(AAPL) billion as the “world’s thinnest” could be in stores as early as today.

Non-Farm Payrolls Below Estimates, Unemployment Falls, Confidence Bounces, Manufacturing Expanding, Construction Declines

- The Change in Non-farm Payrolls for January was -17K versus estimates of 70K and an upwardly revised +82K in December.

- The Unemployment Rate for January fell to 4.9% versus estimates of 5.0% and 5.0% in December.

- Average Hourly Earnings for January rose .2% versus estimates of a .3% gain and a .4% rise in December.

- Final Univ. of Mich. Consumer Confidence for January fell to 78.4 versus estimates of 79.0 and a prior estimate of 80.5.

- ISM Manufacturing for January rose to 50.7 versus estimates of 47.3 and a reading of 48.4 in December.

- ISM Prices Paid for January rose to 76.0 versus estimates of 68.0 and a reading of 68.0 in December.

- Construction Spending for December fell 1.1% versus estimates of a .5% decline and a .4% decline in November.

BOTTOM LINE: Non-farm payrolls unexpectedly declined for the first time in more than four years, increasing the odds the Federal Reserve will cut rates another half point next month, Bloomberg reported. However, the unemployment rate unexpectedly fell back to 4.9% from 5.0% the prior month. Moreover, December’s job gains were revised higher from +18,000 to +82,000. Service industries, which include banks, insurance companies, restaurants and retailers, actually added 34,000 workers in January. Government payrolls shrank by 18,000, the first decrease in six months and builders trimmed payrolls by 27,000. Wages rose a healthy 3.7% from year ago levels. Today’s report runs counter to the ADP Employer Services report released Wednesday that showed a 130,000 gain in jobs during January. I expect January non-farm payrolls to be revised higher and a bounce-back in job creation in February.

Confidence among US consumers rose in January from a month earlier, the first increase in six months, as Americans’ sentiment about their economic prospects improved, Bloomberg reported. The Expectations component of the index rose to 68.1 from 65.5 in December. The Current Conditions component, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items such as cars, rose to 94.4 from 91.0 in December. I expect Consumer Confidence to rise again this month on less economic pessimism, lower interest rates, lower energy prices and a rising stock market.

Manufacturing in the US unexpectedly expanded in January, showing business investment is rising, Bloomberg reported. International sales and a backlog of orders may continue to help support manufacturing. The Employment component fell to 47.1 from 48.7 the prior month. The Prices Paid component rose to 76 from 68 in December. The New Orders component rose to 49.5 from 46.9 the prior month. The Production gauge jumped to 55.2 from 48.6 prior. The Inventory component rose to 49.1 from 45.4. The Export Orders component surged to 58.5 from 52.5 in January. I continue to expect manufacturing to help boost overall US growth over the intermediate-term as record low inventories are rebuilt and exports continue to boom.

Spending on US building projects fell more than forecasts in December, reflecting homebuilders’ attempts to pare down inventories, Bloomberg reported. Private residential construction fell 18% for all of 2007. Non-residential construction was unch. for the month and jumped 16% for the year. Private non-residential construction rose 1.3%, reflecting increases in factory and communications facilities. Overall construction activity will remain muted over the intermediate-term as homebuilders continue to bring down inventories.

Bear Radar

Style Underperformer:

Large-cap Value (-.14%)

Sector Underperformers:

Oil Tankers (-2.75%), Software (-2.7%) and Gold (-1.75%)

Stocks Falling on Unusual Volume:

MIL, SXE, ELY, OMCL, AVID, PFWD, CERN, DRIV, COLM, MSFT, BPHX, CAVM, GOOG, INSU, OMRI and GFI

Bull Radar

Style Outperformer:

Mid-cap Growth (+1.01%)

Sector Outperformers:

Steel (+3.2%), Semis (+3.0%) and Construction (+2.5%)

Stocks Rising on Unusual Volume:

CCO, DLB, ZZ, AGM, SWC, XSD, JCG, BBL, YHOO, SWIR, IWOV, TSRA, ONEX, SBNY, ISRG, STAR, AFFX, MCRS, LAVA, INFN, BLOG, MNST, AMAG, RADS, ALTR, INFY, ORLY, TWIN, IVN, DOV, PGI, SNP, PTR, AXA, CA, RNOW, NAK and TSCO

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:
- The Russell 2000 Index gained almost twice as much as the S&P 500 Index after JPMorgan Chase(JPM) said the measure of small US companies will surge because its members are cheap and investors are too pessimistc.
- OPEC Leaders to Keep Production Levels, Consider Cuts in March.
- Matsushita Electric Industrial, the world’s largest consumer electronics maker, climbed to the highest in a month in Tokyo trading after profit rose to a record on demand for its Lumix cameras and Viera flat-panel televisions.
- Financial Guaranty Insurance Co., the world’s fourth-largest bond insurer, lost its AAA credit rating at Standard & Poor’s, which said it may cut the top ranking on MBIA’s(MBI) insurance unit as well. Ambac Financial’s insurer unit had its AAA credit rating affirmed by S&P.
- Intuitive Surgical Inc.(ISRG) jumped 15.4%, to $293.05 in extended trading. The maker of the da Vinci Surgical System for robot-assisted surgery said fourth- quarter profit doubled on sales of new systems. Profit was $1.24 a share, beating the average $1.02 estimate of five analysts, according to a Bloomberg survey.
- Google Inc.(GOOG) dropped 6.5% percent, to $527.40 in extended trading. The owner of the most popular Internet search engine reported fourth-quarter profit and sales that trailed analysts' estimates, signaling that an economic slowdown may be cutting into online advertising.
- Motorola Inc.(MOT) climbed 10.8%, to $12.75 in extended trading. The biggest mobile-phone maker in the U.S. said it plans to review whether to split off its mobile-phone unit.
- Altera Corp.(ALTR) rose 4.2%, to $17.60 after the official close of U.S. exchanges. The world's second-biggest maker of programmable semiconductors said it expects revenue of at least $323.2 million in the first quarter. That exceeded the average estimate of $320.6 million from analysts in a Bloomberg survey.

Wall Street Journal:
- Clinton, Obama Mix Praise, Jabs in Debate.

NY Times:
- While interest in alternative energy is climbing across the US, solar power especially is risng in California, the product of billions of dollars in investment and mountains of enthusiasm.
- Google(GOOG) said it has seen no effect from a slowing economy on its advertising business, as it reported a 17% jump in profit and 51% growth in revenue in the fourth quarter.

CNNMoney.com:
- Fear! Panic! Time to buy. Wall Street is focusing only on bad news. That means there are opportunities to scoop up quality companies on sale.
- New $20 Billion subprime bailout on the table.
- Old Crocs(CROX) come back to life. The shoe company’s SolesUnited initiative recycles its used plastic footwear to provide shoes for the needy.

IBD:
- Tractor Maker Plows A Course To Growth As Agriculture Booms.

Financial Times:
- Intercontinental Exchange(ICE), owner of Europe’s largest energy market, held talks with a new futures exchange backed by some of Wall Street’s biggest banks.
- Big investors in hedge funds are banding together to produce a guide to the industry in part to head off concerns that neophyte pension fund trustees have been pushed into piling money into risky funds.
- Russia’s most likely next president has urged his country’s business people to follow the Chinese example and go on a buying spree of foreign companies to bolster the economy.
- Bank of America’s(BAC) $4.1bn offer for Countrywide Financial(CFC) was thrown into doubt on Thursday when a large shareholder in the biggest US mortgage lender said it would vote against the deal. SRM Global Fund said the offer “considerably undervalued” Countrywide.
- Cash-rich financiers including Warren Buffett, Wilbur Ross and Ron Perelman are preparing to pounce on US companies hit by the financial turmoil – moves that could herald a new era of “vulture investing.”

TimesOnline:
- Oil production in Iraq is at its highest level since 2003, reaching 2.4 million barrels a day, thanks largely to improved security measures in the north.

Australian:
- David Hicks, the first Guantanamo Bay detainee to be convicted by a US military commission, has fielded 30 offers from media companies to tell his story. The race to sign up the convicted terrorism supporter, who was released from an Australian prison on Dec. 29, involves television networks in Australia, the US and Italy, Hick’s lawyer said. Television, book and magazine rights could generate as much as $900,000 for the 32-year-old Hicks.

Late Buy/Sell Recommendations
Citigroup:
- Maintain Buy on (LLL), target $129.
- Maintained Buy on (HOLX), target $81.

CSFB:
- Reiterated Outperform on (GOOG). Google reported 4Q results slightly below expectations. The company posted revenue of $3.39 billion(+12.5% q/q, +52% y/y) below consensus at $3.45 billion, as the growth in paid clicks decelerated to 30% y/y from 45% in Q4, due primarily to changes in algorithms designed to improve advertisers conversion rates. Pro-operating margin fell 50 bps q/q to 49.8% due to a similar decline in gross margin as Traffic Acquisition Costs spiked 400bp due to issues with the company’s social networking inventory. This was clearly a transition quarter for Google. With the algorithm changes slowing revenue growth, though improving advertiser returns, and the lag between the development of social networking as an effective advertising medium and scheduled minimum payments, coming at the same time the impact was significant. Long term, we believe both factors will be positives for Google, the former manifesting itself in higher CPC’s and the latter targeted, high volume display inventories. With the stock trading at 25x ’08 EPS, below its long term growth rate of +30% we believe this is an extremely attractive entry point into what we believe is, by far, the strongest growth story in the sector.

Night Trading
Asian Indices are -.25% to +1.50% on average.
S&P 500 futures -.27%.
NASDAQ 100 futures -.37%.

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Earnings of Note
Company/EPS Estimate
- (GCI)/1.29
- (CVX)/2.29
- (CMI)/1.05
- (R)/1.08
- (XOM)/1.97
- (TDW)/1.52
- (NMX)/.65
- (ACI)/.47
- (MAN)/1.53
- (ADP)/.53
- (EL)/1.14

Upcoming Splits
- (PEG) 2-for-1

Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for January is estimated at +70,000 versus +14,000 in December.
- The Unemployment Rate for January is estimated at 5.0% versus 5.0% in December.
- Average Hourly Earnings for January are estimated to rise .3% versus a .4% gain in December.

10:00 am EST
- Final Univ. of Mich. Consumer Confidence for January is estimated to fall to 79.0 versus a prior estimate of 80.5.
- ISM Manufacturing for January is estimated to fall to 47.4 versus 48.4 in December.
- ISM Prices Paid for January is estimated at 68.0 versus 68.0 in December.
- Construction Spending for December is estimated to fall .5% versus a .1% increase in November.

Afternoon:
- Total Vehicle Sales for January are estimated to fall to 16.0M versus 16.3M in December.

Other Potential Market Movers
- None of note

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

Stocks Finish Sharply High on Strength in Retail, Financial, Homebuilding Shares

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In Play

Stocks Soaring on Heavy Volume into Final Hour on Less Extreme Economic Pessimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Computer longs, Retail longs, Internet longs, Semi longs and Biotech longs. I covered all my (IWM)/(QQQQ) hedges, added to my (WMS)/(PWR) longs and covered some of my (EEM) short this morning, thus leaving the Portfolio 100% net long. The overall tone of the market is very positive as the advance/decline line is higher, most sectors are rising and volume is heavy. Investor anxiety is above average, despite today’s gains. Today’s overall market action is very bullish. The VIX is falling 5.0% today, but remains high at 26.0. The total put/call hit an above average 1.14 and the ISE Sentiment Index hit a depressed 72.0 today. Moreover, the 3-month T-Bill yield is plunging 21 basis points to 1.94%, the lowest since October 2004. Short interest on the S&P 500 is at the highest level since January 2002. I still suspect a very large percentage of the investors are watching the long side from the sidelines, convinced that a complete retest of the lows or new lows are a certainty. Gartner Group said today that (AAPL) would get over 12% of the US PC market by 2011. I think that is a conservative estimate. The 30-day asset backed commercial paper yield is dropping another 22 basis points today to 3.22%, the lowest since June 2005. The 10-year/TIPS spread, a good gauge of inflation expectations, is falling 5 basis points to 2.33% today, down from 2.48% in November, despite the huge stimuli that will hit the economy over the next year. The JPMorgan Emerging Market Bond Index has risen .32% over the last five days and the Bear Stearns High Yield Index has surged 1.9% over that period. Fed fund futures imply a 74% chance for another 50 basis point rate at the March 18 meeting. In my opinion, the Fed is now “ahead of the curve.” Nikkei futures indicate an +100 open in Japan and DAX futures indicate an +100 open in Germany. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic pessimism, lower energy prices and bargain-hunting.

Today's Headlines

Bloomberg:
- U.S. stocks rose, sparing the Standard & Poor's 500 Index from its worst January ever, after the nation's largest bond insurer said it expects to keep its AAA credit rating.
- The Bush administration is looking for “additional measures” to limit foreclosures.
- President Bush said the Senate should quickly pass the $146 billion economic stimulus plan already approved by the House so there is no delay in the effort to boost a slowing US economy.
- Google Inc.(GOOG) succeeded in its push to force the winner of airwaves being sold by the US government to open its network to any mobile device.
- The series of rate cuts by the Fed will benefit companies that rely on debt based on LIBOR, including leveraged loan borrowers, according to analysts at Merrill Lynch(MER).
- Copper is rising 2.5% on speculation lower US borrowing costs will bolster economic growth.
- An Islamic Web site has announced the death of Abu Laith al-Libi, a senior al-Qaeda commander in Afghanistan.
- MasterCard Inc.(MA), the second-biggest payment-card network, said fourth-quarter profit climbed senvenfold as US consumers spent more. The shares are soaring 14.4% on the news.
- Concur Technologies(CNQR) rose the most in almost seven years on the Nasdaq after boosting its forecast as business travel exceeded its expectations.
- Sony Corp.(SNE), the world’s second-largest maker of consumer electronics, reported record quarterly earnings after the PlayStation 3 unit turned profitable.

Wall Street Journal:
- Multitouch Interface Is Starting to Spread Among New Devices.
- New research analyzing more than 22,000 US cases of aortic aneurysm repair is likely to hasten the trend toward more procedures being done with a device called a stent-graft instead of the typical surgery that requires up to eight weeks of recovery.

NY Times:
- Bill Clinton’s Ties to Kazakhstan Deal Examined.

CNNMoney.com:
- MBIA(MBI) Confident In Ability To Maintain AAA Rating. CEO Dunton mounted a spirited defense on a conference call against “fear mongering” and “distortions” by short-sellers that he said have contributed to last year’s dramatic stock-price decline. He also said that MBIA’s capital plan currently exceeds all stated rating agency requirements. The stock is soaring from morning lows on the news.

Briefing.com:
- MBIA(MBI) management again says very clearly that there is no scenario that they can identify that would result in MBI becoming insolvent, having a liquidity event, becoming intervened with, or having a default of any kind.

Mediaweek:
- News Corp.’s(NWS/A) Fox may get as much as $260 million in ad revenue for its Super Bowl programming on Feb. 3, including the broadcast of the game and the four-hour pre-game show.

Financial Times:
- OPEC policies set to ensure oil prices stay on the boil. Iran and Venezuela have injected anti-US and radical positions on to the OPEC agenda.

globeandmail:
- Kerviel made millions from mortgage meltdown.

Incomes/Spending Rise More Than Estimates, Inflation Gauge Muted, Jobless Claims Rise, Chicago PMI Falls From 6-Month High

- Personal Income for December rose .5% versus estimates of a .4% increase and a .4% gain in November.

- Personal Spending for December rose .2% versus estimates of a .1% gain and a 1.0% increase in November.

- The PCE Core for December rose .2% versus estimates of a .2% gain and a .2% increase in November.

- Initial Jobless Claims for this week rose to 375K versus estimates of 319K and 306K the prior week.

- Continuing Claims rose to 2716K versus estimates of 2685K and 2669K prior.

- The 4Q Employment Cost Index rose .8% versus estimates of a .8% gain and a .8% increase in 3Q.

- The Chicago Purchasing Manager for January fell to 51.5 versus estimates of 52.0 and a reading of 56.4 in December.

- The Help Wanted Index for December rose to 22 versus estimates of 20 and a reading of 21 in November.

BOTTOM LINE: Personal spending and income growth exceeded estimates in December, Bloomberg reported. The PCE Core, the Fed’s favorite inflation gauge, rose 2.2% year-over-year in December, the same as November. For all of 2007, spending rose 5.5%. Personal income growth of .5% is right at the 20-year average. Personal spending rose less than the long-term average, but over the last four months it is .5%, slightly above the long-term average. I expect personal spending to pick up, income growth to remain healthy and inflation to decelerate over the intermediate-term.

The number of Americans filing first-time claims for unemployment benefits rose more than forecast this week, Bloomberg reported. This week’s report was distorted by difficulties adjusting for the Martin Luther King holiday, a Labor Department spokesman said. The four-week moving average of jobless claims rose to 325,750 from 315,500 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, remained at a historically low 2.0%. Today’s report showed 50 states and territories reported a decrease in new claims, while three had an increase. The Employment Cost Index for December rose .8%, below the long-term average of .9%. Economists have increased their consensus forecast for tomorrow’s jobs report to +70,000. I suspect we will come in around or above that estimate, despite today’s jobless claims report. I expect jobless claims to fall next week and the labor market to remain healthy over the intermediate-term without generating substantial unit labor cost increases.

A measure of US business activity fell this month from a six-month high, Bloomberg said. The New Orders component of the index fell to 44.7 from 56.7 the prior month. The Prices Paid component rose to 81.7 from 67.4. The Employment component fell to 47 from 49.3. The Inventories component rose to 51.1 from 44.3. I expect the Chicago PMI to bounce higher next month on inventory rebuilding as exports continue to boom.

Bear Radar

Style Underperformer:

Mid-cap Growth (+.29%)

Sector Underperformers:

Gold (-2.15%), Oil Service (-1.63%) and Energy (-1.07%)

Stocks Falling on Unusual Volume:

CDNS, MRX, DCP, DYS, CVD, HSTX, BPHX, BLOG, SBNY, RNOW, NEWP, AWBC, LAVA, SNPS, GSOL and CAM

Bull Radar

Style Outperformer:

Small-cap Value (+1.63%)

Sector Outperformers:

Retail (+4.22%), Airlines (+2.14%) and Banks (+1.88%)

Stocks Rising on Unusual Volume:

IAT, MBR, OI, IVC, ADS, SNA, CCK, WCC, ADBL, CNQR, ODFL, TSCO, AMAG, EXPO, MLNX, WBSN, WPPGY, GMCR, ALGT, EMKR, PCCC, ININ, HINT, UFPI, RDWR, INFA, RSTI, HURC, MA, CCRT, SHLD, MI, JCP, WSBC, TLK, RTP, FCX, BZP, SFG, HP, ESV, GOLD and BP

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