Friday Watch

Late-Night Headlines
Bloomberg:
- The LA Times named Russ Stanton as editor, its fourth in less than three years after budget cuts drove out previous managers.
- Priceline.com(PCLN), the Internet travel agency, surged as much as 10% in Nasdaq extended trading after reporting fourth-quarter profit that rose more than analysts expected.
- DryShips Inc.(DRYS) reported the best quarter since it became a public company in 2005. The shares jumped 8.2% in after-hours trading.
- Chipotle Mexican Grill(CMG) reported fourth-quarter profit less than analysts’ estimated. Sales jumped 31% to $288.9 million, however the shares fell 13% in after-hours trading.
- Tudor Investment Corp. purchased 300,000 shares of Google Inc.(GOOG) during the fourth quarter, making it the firm’s fifth largest long position, according to a recent SEC filing.
- Citadel LP purchased 601,630 shares of Apple Inc.(AAPL) during the fourth quarter, making it the firm’s sixth largest long position, according to a recent SEC filing. The firm also purchased 162,541 shares of Google Inc.(GOOG) during the fourth quarter, making it the firm’s seventh largest long position.

Wall Street Journal:
- Bernanke Open to a Sizable Rate Cut.

MarketWatch.com:
- Video game sales managed a modest gain in January, beating the expectations of analysts who predicted a decline for the month.
- Some Yahoo(YHOO) shareholders growing impatient.

CNBC.com:
- Bond Insurers MBIA, Ambac Dismiss Bailout Need.

NY Times:
- In figures released on Thursday covering 150 metropolitan areas, the National Assoc. of Realtors said that median home prices were falling in 77 markets – but still rising in 73.

BusinessWeek.com:
- Google’s(GOOG) Wireless Auction Play. Its apparent withdrawal from the wireless auction leaves the coveted C block to Verizon(VZ) and AT&T(T). They could all prove to be winners.
- The eagerly anticipated “God game” is almost ready, and Electronic Arts(ERTS) is finally taking the wraps off the title’s numerous innovations.
- Couples today are meeting, dating, and mating online, and using increasingly sophisticated matchmaking services to find the perfect spouse.

CNNMoney.com:
- Nanopants that might power an iPod.

Forbes.com:
- Best Cities for Bargain House-Hunters.

IBD:
- Merged Microsoft-Yahoo Would Still Struggle Vs. Google.

USA Today.com:
- Fed Chairman Ben Bernanke said Thursday that the USA will avoid a recession and suggested more interest rate cuts are likely.

Reuters:
- Fidelity parent buys Ambac(ABK), MBIA(MBI) stakes.
- Former Fed Chairman Greenspan told an energy conference on Thursday that high oil prices are harming the economy, but that the economy does not face stagflation.

Financial Times:
- Eliot Spitzer, NY governor, gave bond insurers three to five business days to find fresh capital, or face a potential break-up by state regulators who want to safeguard the municipal bond markets.

Mercury:
- The Australian Securities Exchange yesterday signaled that it would investigate allegations that hedge funds are colluding to push down the shares of major Australian companies. ASX head of supervision Eric Mayne yesterday said he would be investigating market rumors that hedge funds were working together in packs to target specific companies. Mr. Mayne also signaled that the ASX was keen for more regulation of the increasingly common practice of short-selling in the market, and would be looking at greater regulation of company directors who had big margin loans against their shares.

Economic Times:
- The New York Stock Exchange will buy a 5% stake in the Multi Commodity Exchange of India Ltd., the nation’s biggest commodity bourse.

Late Buy/Sell Recommendations
Citigroup:
- Maintained Buy on (GME), target $65.
- Maintained Sell on (FRO), target $25.
- Reiterated Buy on (GTIV), target $26.
- Reiterated Buy on (BRCD), added to Top Picks Live list, target $10.
- Reiterated Buy on (HS), target $29.

Night Trading
Asian Indices are -1.50% to -.50% on average.
S&P 500 futures -28%.
NASDAQ 100 futures -.43%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
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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
- (ANF)/2.36
- (B)/.38
- (CPB)/.70
- (HRL)/.58
- (SJM)/.77
- (RDN)/-2.38
- (PPP)/.35

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- The Import Price Index for January is estimated to rise .5% versus unch. in December.
- Empire Manufacturing for February is estimated to fall to 6.5 versus 9.0 in January.

9:00 am EST
- Net Long-term TIC Flows for December are estimated at $73.5 billion versus $90.9 billion in November.

9:15 am EST
- Industrial Production for January is estimated to rise .1% versus unch. in December.
- Capacity Utilization for January is estimated to fall to 81.3% versus 81.4% in December.

10:00 am EST
- Preliminary Univ. of Mich. Consumer Confidence for February is estimated at 76.0 versus 78.4 in January.

Other Potential Market Movers
- The Fed’s Mishkin speaking, (KMT) analyst meeting and Deutsche Bank Small/Mid-cap Growth Conference could also impact trading today.

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

Stocks Finish Near Session Lows, Weighed Down by Tech, Retail, Airline and Financial Shares

Evening Review
Market Summary
Top 20 Biz Stories
Today’s Movers
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
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After-hours Movers
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In Play

Stocks Lower into Final Hour on Rise in Oil, Profit-taking

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Semi longs, Software longs and Gaming longs. I added (IWM)/(QQQQ) hedges and added to my (EEM) short today, thus leaving the Portfolio 75% net long. The overall tone of the market is very negative as the advance/decline line is substantially lower, almost every sector is declining and volume is above average. Investor anxiety is above average. Today’s overall market action is bearish. The VIX is rising 2% today and remains high at 25.4. The ISE Sentiment Index is a very low 84.0 and the total put/call is an above-average .99 today. Tech stocks are under pressure on worries that PC growth is slowing after Goldman made negative comments on the industry and removed (INTC) from its Conviction Buy list. However, Goldman maintained its Buy rating on the stock. I think these worries are overdone at this point as most of these stocks’ valuations already reflect a significant slowdown. Today's tech sector weakness is likely more the result of profit-taking after recent sharp gains in many tech stocks. Retailers and airlines are under pressure from the jump in oil. Oil continues to move back near recent highs on massive investment fund speculation, despite a firmer dollar, decelerating global demand and record global production. Moody’s downgraded FGIC’s financial strength to A3 from Aaa. Moody’s still has (ABK) and (MBI) under review. However, they did say that in contrast to XL Capital Assurance and FGIC, MBIA and Ambac are better positioned from a capitalization and business franchise perspective. This may imply a downgrade is not forthcoming. (MBI)/(ABK) are soaring 10% and 17%, respectively. The AAII % Bulls fell to 33.3% this week, while the % Bears fell to 41.9%. Investor sentiment remains at historically depressed levels, which bodes very well for outsized gains over the intermediate-term. Nikkei futures indicate a down -106 open in Japan and DAX futures indicate an up +23 open in Germany. I expect US stocks to trade modestly higher into the close from current levels on bargain-hunting, less economic pessimism and short-covering.

Today's Headlines

Bloomberg:
- Bernanke Pledges ‘Adequate Insurance’ Against Risks.
- MBIA Inc.(MBI), the world’s biggest bond insurer, said it is equipped to survive the slump in prices of mortgage securities and dismissed suggestions that the industry needs a rescue or stronger federal oversight.
- Treasury two-year notes are yielding the least compared with 10-year debt since 2004.
- Total rail freight volume on US railroads was up during the first week of February in comparison with the same week last year, the Association of American Railroads reported. Total volume was estimated at 32.7 billion ton-miles, up 2.5% from last year.
- The risk of companies defaulting fell the most in two weeks after US retail sales unexpectedly gained and Japan’s economy grew at twice the pace economists forecast, according to traders of credit-default swaps. Contracts on the Market CDX North American Investment Grade Index, tied to the debt of 125 companies in the US and Canada, declined 2.75 basis points to 135.25, according to Deutsche Bank AG. The European benchmark Markit iTraxx Crossover index dropped 19 basis points to 529, according to JPMorgan Chase. The Markit iTraxx Japan index fell 4 basis points to 85, Morgan Stanley said.
- Brett Jefferson, formerly managing director at Marathon Asset Management LLC, is starting a hedge fund to buy distressed collaterialized debt obligations and asset-backed securities. The firm, called Hildene Capital Management LLC, aims to raise $1 billion and plans to start by April. Hildene has also hired John Scannell, a former vp in the CDO structuring group at Citigroup Inc.(C), as COO.
- Morningstar, Inc.(MORN), a leading provider of independent investment research, today launched the Morningstar Rating for hedge funds as well as the Morningstar 1000 Hedge Fund Index and 17 indexes based on the Morningstar Hedge Fund Categories.
- Freddie Mac(FRE), the second-largest provider of money for US home loans, will purchase loans covered by mortgage insurers that don’t meet the company’s standards for the amount of capital backing their policies.
- Treasury Secretary Henry Paulson reiterated his call for Congress to follow up on the economic stimulus package approved last week by passing legislation aimed at slowing a surge in foreclosures.
- President Bush urged the House to extend a law allowing electronic eavesdropping of suspected terrorists and said he may delay his scheduled trip to Africa tomorrow if needed to complete the measure.
- Crude oil is rising $1.78/bbl.to a one-month high as economic indicators from Asia and the US allayed concern that a global recession is imminent. Japan expanded 3.7% last quarter, twice the pace economists forecast, triggering the biggest increase for the country’s stock market in six years. A government report showed that US jobless claims fell last week. The US and Japan are responsible for about 30% of global oil consumption.
- Republican Mitt Romney will endorse John McCain in the Republican presidential race, citing people familiar with the plan.

Wall Street Journal:
- Ambac’s(ABK) Callen in Talks to Raise Cash, Keep Rating.
- ETF Industry Produces New Power Brokers.
- Bill Clinton to End Ties to Yucaipa as Scrutiny Grows.
- Comcast(CMCSA) to Deploy New High-Speed Internet Technology.

NY Times:
- NY Times to Eliminate 100 Newsroom Jobs.

PC World:
- Google(GOOG) to Enter China Online Music Market.

Morningstar:
- Brazil’s Petrobras(PBR) To Build Large New Biodiesel Plant.

Financial Times:
- European companies are increasingly being forced to turn to the US dollar markets to raise funding as the credit crunch makes it almost impossible for them to launch deals in the euro-denominated market. A gap between the two markets has opened up with US investment grade issuance at a record high for a January, while Europe slumped to a record low, according to Dealogic.

Caijing Magazine:
- Citic Securities and Bear Stearns(BSC) may lift their stakes in each other now that both their shares have fallen. The new plan may be announced in April if US and Chinese regulators approve it.

Bear Radar

Style Underperformer:

Small-cap Growth -1.93%

Sector Underperformers:

Airlines (-3.82%), Retail (-2.94%) and Banks (-2.05%)

Stocks Falling on Unusual Volume:

HPY, DVA, LIZ, ESI, LAZ, BBW, BYI, NHWK, MDRX, ATRO, NTGR, SBNY, ECLP, GPRO, SUNH, KNOT, CPLA, TASR, NVDA, TECD, PVA and UBS

Trade Deficit Shrinks as US Exports Set Record for 10th Consecutive Month, Jobless Claims Fall

- The Trade Deficit for December shrank to -$58.8 billion versus estimates of -$61.5 billion and -$63.1 billion in November.

- Initial Jobless Claims for this week fell to 348K versus estimates of 347K and 357K the prior week.

- Continuing Claims fell to 2761K versus estimates of 2759K and 2770K prior.

BOTTOM LINE: The US trade deficit narrowed more than forecast in December as exports surged to another record, Bloomberg reported. The gap between imports and exports shrank 6.9% in December, the most in more than a year. As well, the trade deficit for all of 2007 fell 6.2%, the largest decline since 1991. Exports rose 1.5% in December, setting a record for a 10^th consecutive month and reflecting strong demand for US-made capital equipment and industrial goods. For the year, exports soared 12% to a record $1.622 trillion. Imports in December fell 1.1%, led by a 14% decline in purchases from China, which helped shrink the month’s trade gap with China by 22%. Petroleum imports rose 4.2% to a record $36 billion. For all of last year, trade contributed .55 percentage point to GDP growth, the most since 1991. A better-than-expected trade deficit and inventory rebuilding in December should lead to an upward revision to 4Q GDP. I expect the US trade deficit to continue to improve over the intermediate-term.

The number of Americans filing first-time claims for unemployment benefits fell for a second week, Bloomberg reported. The four-week moving average of claims rose to 347,250 from 335,350. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, remained steady at a historically low 2.1%. Fed fund futures now imply an 80.0% chance for another 50 basis point rate cut at the March 18 meeting and a 20.0% chance for a 75 basis point rate cut. Fed Chairman Bernanke said today that the Fed will act in a “timely manner” to help growth. He also said price expectations are “reasonably well anchored” and that he sees stronger growth “starting later this year.” Finally, he said if housing improves, some bank writedowns will reverse. Treasury Secretary Hank Paulson said tax rebate payments will start in early May and that the Treasury is “actively” monitoring the bond insurers. According to Intrade.com, the odds of a US recession this year have declined to 65.3% from 77.5% a few weeks ago. The 10-year TIPS spread is falling to 2.27% today, despite the rise in oil. I expect the US job market to improve back to very healthy levels over the intermediate-term without generating substantial unit labor cost increases.

Bull Radar

Style Outperformer:

Large-cap Value (-.15%)

Sector Outperformers:

Steel (+1.27%), Energy (+1.16%) and Biotech (+.39%)

Stocks Rising on Unusual Volume:

ANL, LBY, WWE, SIE, EQIX, AMKR, STRA, FARO, ALXN, RBCN, VCLK, WABC, ASYS, BIDU, SDXC, CRVL, JRCC, CMCSA, TDSC, OCNF, NAVG, SPWR, FSLR, GTIV, COG, AWC, CCJ, TWC, EQIX, CN, BRKS, ITT and NVS

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:
- Japan’s economy grew 3.7% last quarter, twice the forecast, as exports to Asia and emerging markets helped companies weather the US slowdown.
- Yahoo Inc.(YHOO), which rejected a $44.6 billion bid from Microsoft(MSFT) two days ago, sent a letter to shareholders defending the decision. The offer “substantially undervalues” the company, said Yahoo, which projects the online advertising market to grow to $75 billion by 2010.
- Morgan Stanley(MS) recommended investors scrap bets on the yen rising and buy the Australian dollar, because too many speculators are betting on Japan’s currency strengthening. Futures traders increased their bets to the highest since February 2004 that the yen will strengthen, the CFTC showed recently.
- Baidu.com Inc.(BIDU), operator of China's most used Internet search site, reported profit and sales that topped analysts' estimates after new services helped win users from rival Yahoo! Inc.(YHOO) The shares rose 7.2% in extended trading.
- ValueClick(VCLK) announced fourth quarter revenue rose 14% from year ago levels, exceeding previously issued guidance. The share jumped 7.7% in after-hours trading.
- Equininx(EQIX) reported fourth quarter revenue rose 46% from year-ago levels and boosted 2008 guidance. The stock gained 7.1% in extended trading.
- US Secretary of State Condoleezza Rice said Russian threats toward Ukraine are “unacceptable” and President Vladimir Putin’s government should know it can no longer intimidate former Soviet republics.
- News Corp.(NWS/A), Yahoo(YHOO) in Talks Over Combination, WSJ says.
- Billionaire Nelson Peltz’s Trian hedge funds disclosed a stake in restaurant chain Cheesecake Factory(CAKE). Trian owns 3.46 million shares, or just under 5%, of the casual dining chain, according to regulatory filings made today.
- Wachovia Corp.(WB), the fourth-largest US bank by assets, said investors are exaggerating concern about the company’s home loan defaults as lower interest rates reduce pressure on borrowers. Mortgages still contribute “significant profits” at the Charlotte, North Carolina-based bank and will continue making money even if losses from bad loans quadruple from current levels, Chief Risk Officer Donald Truslow said in a conference call. Lower interest rates are curbing payment increases on adjustable-rate mortgages, which will reduce delinquencies and charge-offs, Truslow said.
- Wheat growers in Australia, the world’s sixth-largest exporter of the commodity, may plant their biggest crop ever to benefit from record prices and improved growing conditions.
- MBIA Completes $1 Billion Common Stock Offering. Shares rise 4.5% in after-hours trading.

MarketWatch.com:
- Soaring and volatile prices took their toll on demand for gold in the fourth quarter, particularly in the jewelry and retail-investment sectors, an industry report said Wednesday.

CNBC.com:
- Tech Stock Renaissance: What to Buy.
- Treasury’s Paulson Gives Timeframe on Rebate Checks. US Treasury Secretary Henry Paulson on Wednesday repeated his view that the US economy will avoid recession this year and grow at a slower pace, and that the Treasury will act quickly to distribute tax rebate payments.

NY Times:
- Genetically engineered agriculture is spreading worldwide, and its biggest growth in 2007 was in the developing world.

SmartMoney.com:
- Clothing Chain Aeropostale(ARO) Popular With Teens, Investors.
- Stocks to Help You Save the Planet and Make Money.
- In Surprise, Small-Cap Profits Beating Big Caps.

USA Today.com:
- Google(GOOG) Apps can be a small firm’s best friend. Google doggedly pursues Microsoft’s(MSFT) Office business.
- President Bush, flanked by Congressional leaders of both parties, signed a $168 million economic stimulus package Wednesday that he called “a booster shot for our economy.” The package, aimed at heading off a serious downturn in the economy, will send rebate checks ranging from $300 to $1,200 to 130 million Americans. It also provides tax breaks for businesses.

Reuters:
- MBIA Inc.(MBI), the world’s biggest bond insurer, plans to tell a congressional panel tomorrow that regulators should limit the actions and statements of short sellers, citing a copy of written testimony. The prepared testimony said short sellers’ “unscrupulous and dangerous market manipulation” and their spreading of “half-truths and misleading information” should be curbed. Short sellers like Bill Ackman, founder of Pershing Square Capital Management, have worked hard to undermine market confidence in the bond insurers, wrote MBIA. MBIA said lawmakers should help restore confidence in the bond insurers, because their failure could have far-reaching effects on the US and global economies.
- Bookseller Borders Group(BGP) unveiled a new concept on Wednesday – a store where shoppers can mix and burn CDs, explore their genealogies and even publish their own novels.
- Morgan Stanley(MS) and Bear Stearns(BSC) issued the first commercial mortgage-backed securities deal of the year on Wednesday after agreeing to sweeten yields on a $1.2 billion issue.
- Hedge fund ups Countrywide(CFC) stake, attacks merger.

Financial Times:
- A Singapore sovereign wealth fund is expected to be the lead investor in a $6 billion fund that TPG, the private equity firm, is raising to invest in troubled financial firms.

TimesOnline:
- Google(GOOG) triggers handset battle over Gphone.

Business Standard:
- Air India, Jet Plan to Buy 60 Boeings.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (VCLK), target $30.
- Reiterated Buy on (CHKP), target $29.
- Reiterated Buy on (URBN), target $35.
- Reiterated Buy on (ANF), target $97.
- Maintained Buy on (DTV), target $30.
- Reiterated Buy on (ATI), target $100.
- Maintained Buy on (ERTS), target $69
- Reiterated Buy on (AGU), target $82
- Reiterated Buy on (HPQ), target $60.
- Reiterated Buy on (IGT), target $52.
- Upgraded (MDCO) to Buy, target $29.

Night Trading
Asian Indices are +.75% to +3.50% on average.
S&P 500 futures +.18%.
NASDAQ 100 futures +.38%.

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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Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
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Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (CMCSA)/.17
- (MAR)/.62
- (FCL)/.18
- (GT)/.45
- (CCU)/.43
- (CPKI)/.17
- (CMG)/.56
- (N)/-.01
- (BRCD)/.15
- (PCLN)/.84
- (APPB)/.27
- (CKFR)/.53
- (TASR)/.07
- (CKP)/.52
- (IR)/.99
- (PTEN)/.52

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- The Trade Deficit for December is estimated to shrink to -$61.5 billion versus -$63.1 billion in November.
- Initial Jobless Claims for this week are estimated to fall to 347K versus 356K the prior week.
- Continuing Claims are estimated to fall to 2759K versus 2785K prior.

Other Potential Market Movers
- The Fed’s Bernanke speaking, Fed’s Evans speaking, weekly EIA natural gas inventory data, (SE) analyst meeting, (PNX) investor day, CSFB Software Conference, BB&T Capital Markets Transport Services Conference and Deutsche Bank Small/Mid-cap Growth Conference could also impact trading today.

BOTTOM LINE: Asian indices are sharply higher, boosted by technology and financial 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.

Stocks Finish at Session Highs, Boosted by Technology, Telecom, Energy Shares

Evening Review
Market Summary
Top 20 Biz Stories
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
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After-hours Real-Time Stock Bid/Ask
After-hours Stock Quote
After-hours Stock Chart
In Play

Stocks Surging into Final Hour on Less Economic Pessimism, Bargain-Hunting, Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Software longs, Computer longs, Medical longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is rising and volume is about average. Investor anxiety is above average. Today’s overall market action is very bullish. The VIX is falling 5% today, but remains high at 25.0. The ISE Sentiment Index hit a very depressed 48.0 and the total put/call hit an above-average 1.06 today. Growth stocks are substantially outperforming value stocks, with many posting huge gains relative to the broad market. Today’s overall market action is even more impressive considering there really isn’t any meaningfully positive news to account for the strong move in the major averages and financials began the day under duress. I suspect the large short/sell every rally crowd is beginning to get a bit worried by this action. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 8 basis points today to 2.26%, which is down from 2.48% in late November. Inflation expectations remain muted and stable, despite the recent rebound in commodity prices. Fed fund futures now imply a 68.0% chance, down from 80.0% yesterday, for a 50 basis point rate cut at the upcoming meeting and a 32% chance for a 75 basis point cut, which is up from 20% yesterday. The US dollar is breaking out of its recent trading range versus the yen, which is also a positive. One of my longs I recently added to, (AMSC), is surging 8% today on strength in other alternative energy stocks and conference call comments. The company said its expects revenues to exceed $150M in FY08 and that it sees a huge growth opportunity in China’s power grid and it expects a lot more business in China in the future. This stock is volatile and high risk, but should be a huge winner long-term. Nikkei futures indicate an +270 open in Japan and DAX futures indicate a +70 open in Germany. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, less economic pessimsim and short-covering.

Today's Headlines

Bloomberg:
- First Solar(FSLR), the largest US maker of solar power-modules, said fourth-quarter profit rose almost eightfold on surging demand for its thin-film technology. First Solar shares are soaring 27% on the report.
- Students in the US are Becoming Better Prepared for College. Almost 30% more US public high school seniors passed at least one advanced placement exam in 2007, showing they’re better prepared for college than five years ago, the College Board said. About 15.2% of seniors scored 3 or better on a 5-point scale in at least one advanced placement exam, up from 11.7% in 2002, according to a report released today. The improved scores reflect growing efforts to prepare high school students for college and reduce the need for remedial courses. More than 3,600 of the world’s colleges and universities accept AP credit. The 3 score makes them “qualified” to receive college credit, though some colleges require a 4 to offer credit.
- Bethune of Global Insight Says US Economy Will Improve in Second Half. (video)
- The portion of newsletter writers who were bullish on stocks slid to 36.7% in the five days ended February 8 from 41.6%, the largest decline in almost five years, the NY-based Investors Intelligence said today.
- NY Attorney General Andrew Cuomo will sue UnitedHealth Group(UNH) and subpoena 16 other insurers to investigate reimbursement practices.
- Iraq Lawmakers, Sidelining Disputes, Pass Budget, Other Bills.
- Yen Falls as Gain in US Retail Sales Signals Continued Growth.
- OPEC may add 840,000 barrels a day to its oil production capacity this year, boosting the group’s available spare volumes, the International Energy Agency said.

Wall Street Journal:
- Norfolk, CSX Boost Spending to Improve Rail Lines.
- Iran Avoids Sanctions, Strengthens Ties With Neighbors.
- Hershey(HSY), Mars Offer Caffeinated Candy to Boost Sales.
- Big Clinton Fund-Raisers May Run Their Own Ads. Rich Backers Huddle With Lawyers to Help Cash-Strapped Effort.

CNBC:
- Turnaround specialist Wilbur Ross said Wednesday he does not expect Warren Buffett’s offer to reinsure $800 billion of municipal bond debt to succeed. “If it went through, it would be the best deal since the Dutch bought Manhattan Island from the Indians,” Ross said.

BusinessWeek:
- Rupert Murdoch’s New Startup Incubator. The SlingShot Labs venture is designed to spawn Internet startups for News Corp. and also likely to help MySpace compete with Facebook.

TechCrunch:
- Yahoo(YHOO) And News Corp.(NWS/A) Continue Marathon Discussions; Possible Bid To Counter Microsoft(MSFT).

Washington Post:
- Lawmakers and the American public should support US-Iraqi talks on establishing a “status of forces” agreement, Secretary of State Condoleezza Rice and Defense Secretary Robert Gates wrote. The agreement would include helping Iraqis fight al-Qaeda, developing security forces and stopping the flow of weapons from Iran, Rice and Gates wrote. The accord wouldn’t authorize permanent US bases there.

Financial Times:
- Google(GOOG) homes in on revenue from phones. Google on Wednesday said it had seen 50 times more searches on Apple’s(AAPL) iPhone than any other mobile handset, adding weight to the group’s confidence at being able to generate significant revenues from the mobile internet.

Actualidad Economica:
- Banco Santander SA, Spain’s biggest bank, would like a “significant position” in the US, CEO Alfredo Saenz said.

Asharq al-Awsat:
- Arab states approved a law giving them the power to cancel permits for Arab news channels that are deemed to broadcast offensive material. The law, which was adopted by all Arab states except Qatar, calls on Arab satellite channels to respect Arab tradition, leaders, religion and culture and has the power to ban channels, suspend their licenses and reject renewing their licenses.

Bear Radar

Style Underperformer:

Mid-cap Value +1.13%

Sector Underperformers:

HMOs (-1.51%), Utilities (+.15%) and REITs (+.22%)

Stocks Falling on Unusual Volume:

NILE, HCSG, DAKT, ATAC, WERN, WYNN, RECN and UNH

Retail Sales Exceed Estimates, Business Inventories Rise

- Advance Retail Sales for January rose .3% versus estimates of a .3% decline and a .4% decline in December.

- Retail Sales Less Autos for January rose .3% versus estimates of a .2% gain and an upwardly revised .3% decline in December.

- Business Inventories for December rose .6% versus estimates of a .5% increase and a .4% gain in November.

BOTTOM LINE: Retail sales in the US unexpectedly rose in January, easing concern that the US economy is slipping into recession, Bloomberg reported. The gain was led by spending on autos, clothes and gasoline. Sales at automobile dealerships and parts stores jumped .6% versus a 1.1% decline in December. Sales at clothing retailers surged 1.4% and purchases at non-store retailers, which include online and catalog sales, gained .5%. Sales at building materials stores fell 1.7%. I expect retail sales to continue to improve back to more average rates over the intermediate-term on historically low interest rates, decelerating inflation, improving consumer confidence, fiscal stimulus, pent-up demand, rising stock prices, a more healthy job market and subsiding housing fears.

Inventories at US businesses in December rose more than expected and sales fell at the end of last year, Bloomberg reported. Sales fell .5% after a 1.4% gain in November. The amount of goods on hand at the current sales pace rose to 1.26 months’ worth. Inventories at retailers actually fell .1% and auto dealers saw a 1.6% decline in supplies. Inventories at building materials retailers rose .3%. Falling inventories were the main reason 4Q GDP rose a less-than-estimated .6%, subtracting 1.3 percentage points from growth. Inventory rebuilding this quarter should help add to growth.

Bull Radar

Style Outperformer:

Small-cap Growth (+.93%)

Sector Outperformers:

Alternative Energy (+3.71%), Computer Hardware (+2.20%) and Semis (+2.18%)

Stocks Rising on Unusual Volume:

ARP, BGC, GNA, ABD, ORB, JNY, GWR, ACOR, WSPI, MDCO, BWLD, SPSS, VOLC, VRTX, CEPH, FSLR, OCNF, PNRA, GXDX, AMAT, ECOL, KNSY, PFCB, BOBE, VLCCF, HOFT, MICC, CSIQ, ALY, UDRL, INT, CLMS, CLWR, ITU, OFG and ARGN

Links of Interest

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Wednesday Watch

Late-Night Headlines
Bloomberg:
- The euro will decline to its lowest level against the US dollar since October over the next three months as the European economy slows and the European Central Bank is forced to reduce its main interest rate, according to Credit Suisse Group.
- US farmers will produce more core per acre in the next decade as improved seed technology boosts yields enough to meet food and fuel needs, even as ethanol consumers about a third of the crop. Yields will rise 13% to 173.3 bushels per acre by 2017, compared with 153 bushels projected for this year, the Dept. of Agriculture said in a report.
- Wheat fell 3.9%, capping the biggest two-day loss since 2003, on speculation that farmers will increase planting.
- The Senate passed legislation to extend the Bush administration’s authority to eavesdrop on suspected terrorists and shield phone companies from privacy lawsuits for cooperating with the program.
- The Genentech Inc.(DNA), the largest US maker of anti-cancer drugs, said its Avastin treatment helped slow the spread of breast tumors in a clinical trial.
- Buffalo Wild Wings Inc.(BWLD) jumped as much as 15% in after-hours trading after the company reported fourth-quarter profit that beat the average estimate of analysts.
- Applied Materials(AMAT), the largest maker of semiconductor-production machines, reported a 35% drop in fiscal first-quarter profit after filling few orders from memory chipmakers. The stock rose 4.6% in after-hours trading.
- Wynn Resorts(WYNN) fell 4.2% in trading after the close following a decline in earnings at its Las Vegas property.
- The International Energy Agency will lower its forecast for global oil demand tomorrow, Executive Director Nobuo Tanaka said.

Wall Street Journal:
- Obama, McCain Sweep In Potomac Primaries.
- Sprint Nextel(S) director Ralph Whitworth may push for the sale of the Nextel network or the whole company.
- Morgan Stanley’s(MS) Jerker Johansson is the leading candidate to become head of UBS AG’s investment banking business.

MarketWatch.com:
- The world oil market is poised to ease over the next two years with production increases offsetting moderate growth in oil demand, the US Energy Information Administration said. Surplus production capacity is projected to grow from the current level of less than 2 million barrels a day to more than 4 million barrels a day by the end of 2009. World oil consumption is expected to grow by 1.4 million barrels a day in 2008, about 200,000 barrels lower than last month’s assessment.

CNBC.com:
- Bernanke Expects Housing Recovery by Year End.
- Apple(AAPL): On The Road(Back) To Respect?
- Long-Term Investing’s Other Benefit: Better Tax Rates.

NY Times:
- Businesses, large and small, will be directly helped by the new economic stimulus legislation passed by Congress last week, But small businesses, in particular, may get the biggest lift indirectly – from consumers spending their tax rebates.

BusinessWeek.com:
- Standard & Poor's expects the S&P 500 to post a 23.2% decline in earnings for the 2007 fourth quarter. But, excluding the financial sector, S&P projects a 13.7% gain in earnings.

CNNMoney.com:
- Despite widespread public perception that speculative investing is to blame for high oil prices, big investors distanced themselves from it Tuesday, saying the recent run up has more to do with strong demand, tight supply, and a desire to diversify instead of trading momentum. “It’s pure speculation,” longtime Oppenheimer oil analyst Fadel Gheit said recently.
- Berkshire Hathaway’s(BRK/A) offer to the troubled bond insurers is presented as a rescue, but its terms may be too tough for the companies’ shareholders to accept.

SmartMoney.com:
- Microsoft’s(MSFT) Drop Offers Tempting Entry Point.

Portfolio.com
- Why Google(GOOG) Might Want a Microsoft(MSFT)-Yahoo(YHOO) Merger.
- Illumina(ILMN) C.E.O. Jay Flatley is moving fast to outmaneuver rivals in a futuristic industry that stands to make billions of dollars off your DNA.

IBD:
- Sharp Steepening Of Yield Curve Shows Means To Refuel Growth.
- Chipmaker Nvidia(NVDA) Makes A Big Leap Into Smart Phones.

USA Today.com:
- Fed lends banks another $30 billion to keep credit flowing.

Reuters:
- Carrie McCabe, among the most prominent women executives in the hedge fund industry, is launching a new hedge fund investment firm backed by General Electric’s(GE) asset management division.
- Venezuela halts oil supplies to Exxon Mobil(XOM).

Late Buy/Sell Recommendations
Citigroup:
- Maintained Buy on (GME), target $65.
- Reiterated Buy on (HS), target $29.
- Maintained Buy on (MCD), target $64.
- Reiterated Buy on (GM), target $35.
- Maintained Buy on (AMAT), raised target to $26.
- Reiterated Buy on (TWTC), target $25.

Night Trading
Asian Indices are -.5% to +1.75% on average.
S&P 500 futures -.30%.
NASDAQ 100 futures -.14%.

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Earnings of Note
Company/EPS Estimate
- (KO)/.55
- (DE)/.78
- (GBE)/.22
- (MTG)/-8.13
- (JNY)/.06
- (DTV)/.29
- (GENZ)/.92
- (DF)/.30
- (PFCB)/.31
- (FSLR)/.53
- (VCLK)/.18
- (A)/.41
- (BYI)/.39
- (NTAP)/.34
- (CAR)/.18
- (VMC)/1.09
- (MHK)/1.53
- (AAP)/.38
- (BIDU)/4.98
- (CLB)/1.35
- (NVDA)/.47
- (IM)/.14
- (TIE)/.30
- (JASO)/.13

Upcoming Splits
- (WGOV) 2-for-1

Economic Releases
8:30 am EST
- Advance Retail Sales for January are estimated to fall .3% versus a .4% decline in December.
- Retail Sales Less Autos for January are estimated to rise .2% versus a .4% decline in December.

10:00 am EST
- Business Inventories for December are estimated to rise .5% versus a .4% gain in November.

Other Potential Market Movers
- The weekly EIA energy inventory data, weekly MBA Mortgage Applications report, BB&T Transports Conference, Merrill Insurance Investors Conference, Citigroup Retail Conference, BIO CEO & Investor Conference, Lehman Industrial Select Conference, Deutsche Bank Small/Mid-cap Growth Conference and UBS Global Healthcare Services Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by shippling and commodity 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 Higher, Boosted by REIT, Insurance, Telecom, Healthcare, Bank Shares

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In Play

Stocks Higher into Final Hour on Short-Covering, Lower Energy Prices, Bernanke Comments

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Gaming longs, Software longs, Semi longs, Medical longs and Biotech longs. I have not traded 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 about average. Investor anxiety is above average. Today’s overall market action is bullish. The VIX is falling 4.8% today, but remains high at 26.3. The ISE Sentiment Index is a very low 80.0 and the total put/call is an above-average 1.06. The JPMorgan G-7 Currency Vix is falling 4% today and appears to be rolling over, which is also positive. Fed Chairman Bernanke said earlier today that inflation won’t prevent any needed cuts and that he is “ready to move if he needs to move.” He was also “very upbeat” about the prospects for avoiding recession. He said he sees very slow growth this quarter and just slow growth next quarter, before growth picks up in the second-half of the year. Fed fund futures now imply an 82% chance for a 50 basis point rate cut at the upcoming meeting and an 18% chance for a 75 basis point cut. It may just be profit-taking, but today’s oil/gold weakness is noteworthy considering emerging market stock gains and US dollar weakness. Many investors are worried about how much Shanghai re-opens lower tonight after its holiday break. This could be one of the reasons for today’s commodity weakness and above-average investor angst readings, despite nice stock gains. I still sense very few investors believe the lows for the major averages are in, which is a large positive. One of my longs, Nuance Communications(NUAN) is jumping 13% today on large volume after reporting solid 1Q results and boosting 2Q revenue guidance. I plan to add to this long position on any meaningful pullback from current levels and still see significant upside in the shares over the intermediate-term. The only real negative I see in today’s action is the relative weakness in some large-cap leaders. However, many of these stocks have posted pretty good gains over the last few days so I am not reading too much into it at this point. Nikkei futures indicate an +230 open in Japan and DAX futures indicate a +13 open in Germany. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, lower energy prices, constructive Fed comments and short-covering.

Today's Headlines

Bloomberg:
- Billionaire investor Warren Buffett said he offered to shore up $800 billion of municipal bonds guaranteed by troubled MBIA Inc.(MBI), Ambac Financial(ABK) and FGIC Corp. in a bid to gain 33% of the debt insurance market.
- Bank of America(BAC), Citigroup(C) and four other US lenders agreed with Treasury Secretary Henry Paulson to take new steps to help borrowers in danger of foreclosure stay in their homes.
- Bill Miller Says Microsoft(MSFT) Will Need to ‘Enhance’ Yahoo(YHOO) Offer.
- Boeing Co.(BA), the world’s second-biggest maker of commercial aircraft, said its planes may be flying on a mix of biofuel and jet kerosene within five years. A Virgin Atlantic Airways Ltd. Boeing 747 is scheduled to make the first biofuel-powered test flight for a commercial plane later this month. Boeing is focusing on so-called second-generation biofuels such as algae, oil from Babassu nuts and the hardy Jatropha bush.
- Genworth Financial(GNW), the insurer divested by GE, expects its US mortgage insurance business to rebound next year.
- AIG(AIG) Credit-Default Swap Losses Won’t Be ‘Material’.
- Monsanto Co.(MON), the world’s biggest seed producer, raised its 2008 profit forecast because of demand for week killer and genetically modified corn and soybeans.
- Julius Baer Group rose the most in 10 days in Zurich trading on speculation that Goldman Sachs(GS) may be interested in taking over Switzerland’s biggest independent money manager.
- Legg Mason Capital Management raised its stake in Countrywide Financial(CFC), the biggest US mortgage lender, to 15% and said it hasn’t decided whether to vote for Bank of America’s(BAC) $4 billion takeover.
- Nuance Communications(NUAN), the biggest maker of speech-recognition software, surged the most in a year after forecasting second-quarter sales that beat estimates on rising demand for its mobile-phone products.
- Nokia(NOK) will offer Google’s(GOOG) search engine on some handsets and will work with Orange SA to promote its Internet services and boost sales of devices with Web access.
- Danish police arrested three suspects in an alleged plot to murder one of 12 cartoonists whose caricatures of the Prophet Muhammad in 2005 sparked riots in Muslim communities around the world.
- Citigroup(C) has never been held in such low esteem by debt investors, and that’s why Prince Alwaleed bin Talal isn’t the only one in love with the bank whose looks are deceiving.

Wall Street Journal:
- H&R Block(HRB) Seen by Some as Well on Road to Recovery.

NY Times:
- US Immigration Rules Eased to Cope With Backlog.
- More Hedge Funds Likely to Fail as Losses Mount.

ZDNet:
- Google ‘Android’ Phones Debut at Barcelona Show.

news-journalonline.com:
- Officials tout alternative fuel to aid state farmers.

NY Sun:
- Applications for admission skyrocket at NYU.
- Quinn to Propose Incentive Pay for Some Teachers.

Washington Post:
- The European Union may fingerprint foreign travelers arriving and leaving the area and transfer the information to databases that could be shared with friendly nations.

Reuters:
- America Movil SAB, the biggest mobile-phone carrier in Latin America, will make videos from Google’s(GOOG) YouTube Web site available on its phones.
- Alternative investments firm First Avenue Partners said on Monday it planned to raise up to $750 million for a portfolio that will invest with start-up hedge funds, as well as funds that have seen heavy outflows.

Financial Times:
- Hedge funds investing in emerging markets pick London as their domicile more often than any other location, citing Hedge Fund Research. According to Hedge Fund Research, there are more than 950 hedge funds specializing in emerging markets, with a total of $110 billion under management.

YLE TV:
- Nokia(NOK) phones are being rejected by Germans following the announcement that the company would close its factory in the German town of Bochum. Nokia has also lost favor with consumers interviewed in market surveys, citing research firm Psychonomics AG.

El Universal:
- Supporters of Venezuelan President Hugo Chavez asked federal investigators to examine programming at privately-owned news channel Globovision, which they say has “slandered” the president.

Xinhua:
- China’s natural gas output rose 23% to 69.3 billion cubic meters in 2007, citing the China Petroleum and Chemical Industry Association. Production in 2008 may reach 76 billion cubic meters.

Bear Radar

Style Underperformer:

Mid-cap Growth +.57%

Sector Underperformers:

Coal (-3.08%), Gold (-1.81%) and Airlines (+.03%)

Stocks Falling on Unusual Volume:

DY, MAS, ZOLT, CYNO, HWAY, VRTX, BRKS, EXPD, WINN and ANR