Weekly Outlook

There are some important economic reports and many significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. - Empire Manufacturing
Tues. - Producer Price Index, Net Foreign Security Purchases and NAHB Housing Index
Wed. - Housing Starts, Fed’s Beige Book
Thur. - Initial Jobless Claims, Leading Indicators and Philly Fed.
Fri. - None of note

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

Mon. - Citigroup(C), General Motors(GM), IBM(IBM), Mattel(MAT), Novellus Systems(NVLS),Wachovia(WB)
Tues. - Fifth Third Banc(FITB), Freeport-McMoRan(FCX), Genzyme Corp.(GENZ), Intel Corp.(INTC), Johnson & Johnson(JNJ), Kraft Foods(KFT), Merrill Lynch(MER), Motorola(MOT), Ryland Group(RYL), Seagate Technology(STX), State Street(STT), Wells Fargo(WFC) and Yahoo! Inc.(YHOO)
Wed. - Abott Labs(ABT), Altria Group(MO), Amgen(AMGN), Bank of America(BAC), Eastman Kodak(EK), eBay Inc.(EBAY), Electronic Arts(ERTS), EMC Corp.(EMC), General Dynamics(GD), Juniper Networks(JNPR), MBNA Corp.(KRB), Office Depot(ODP), United Technologies(UTX)
Thur. - Allstate(ALL), Broadcom(BRCM), Coca-Cola(KO), Eli Lilly(LLY), Ford Motor(F), Google Inc.(GOOG), Ingersoll-Rand(IR), McDonald’s(MCD), Pfizer Inc.(PFE), SBC Communications(SBC), Scientific-Atlanta(SFA), Southwest Airlines(LUV), United Parcel Service(UPS), Whirlpool Corp.(WHR), Xilinx(XLNX)
Fri. - Amazon.com(AMZN), Caterpillar(CAT), Guidant Corp.(GDT), Maytag Corp.(MYG), Royal Caribbean(RCL), Schlumberger(SLB), Wyeth(WYE)

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

Mon. - Fed’s Greenspan speaks, Fed’s Santomero speaks
Tue. - Fed’s Ferguson speaks, Semi Book-to-Bill
Wed. - BIO InvestorForum, Fed’s Geithner speaks, Fed’s Kohn speaks, Fed’s Kohn speaks, Fed’s Pinalto speaks
Thur. - Fed’s Lacker speaks, Fed’s Poole speaks, BIO InvestorForum
Fri. - Fed’s Poole speaks

BOTTOM LINE: I expect US stocks to finish the week modestly higher on a bounce after recent losses. I continue to believe stocks will trade mixed-to-higher until closer to month’s end. Subsequently, I expect a strong year-end rally to begin, led by the technology, retail, biotech, I-Banking, restaurant, gaming and airline sectors as earnings exceed lowered expectations and the energy price downtrend accelerates. My trading indicators are still giving bearish signals and the Portfolio is 75% net long heading into the week.

***Alert***

The Economic Week in Review is canceled for the next few weeks due to a scheduling conflict.

Market Week in Review

S&P 500 1,186.57 -.78%



Click here for the Weekly Wrap by Briefing.com.

BOTTOM LINE: Overall, last week's market performance was negative considering the rise in long-term rates, mixed economic data and mostly lower energy prices. The advance/decline line fell, almost every sector declined and volume was above average on the week. Measures of investor anxiety were mostly higher. Moreover, the AAII % Bulls fell sharply for the week and is now below average levels, which is a big positive. One more short period of weakness for equities is possible, however stocks have likely seen their lows for the year. I continue to believe the major averages will finish the year strongly. The average 30-year mortgage rate rose to 6.03%, but is still only 82 basis points above all-time lows set in June 2003 and slightly lower than 2005 highs of 6.04% set in April. The benchmark 10-year T-note yield rose 11 basis points on the week as investors worried high energy prices would eventually lead to higher inflation. I continue to believe it is very reckless for the Fed to speak incessantly about inflation considering it is only near average levels by historic standards and a large component of inflation is expectations. There is little evidence that companies are able to pass along higher raw materials prices to consumers at this point. The US dollar rose on the week, spurred by expectations of higher interest rates. The strength in the dollar led to profit-taking in gold. Unleaded Gas futures have now plunged almost 45% since September highs even as refinery utilization remains well below normal. Moreover, natural gas saw another inventory build this week even as a substantial amount of daily Gulf of Mexico production remains shut-in. Natural Gas supplies are now about 2% above the five-year average for this time of the year heading into the winter. I continue to believe global energy demand destruction, which began a number of months ago, has accelerated meaningfully over the last few weeks and will send energy prices substantially lower over the intermediate-term.

*5-day % Change

Weekly Scoreboard*

Indices
S&P 500 1,186.57 -.78%
DJIA 10,287.34 -.05%
NASDAQ 2,064.83 -1.22%
Russell 2000 633.15 -1.73%
DJ Wilshire 5000 11,823.35 -.99%
S&P Equity Long/Short Index 1,060.16 -1.19%
S&P Barra Growth 571.57 -.15%
S&P Barra Value 610.78 -1.38%
Morgan Stanley Consumer 579.30 +.14%
Morgan Stanley Cyclical 690.69 -2.14%
Morgan Stanley Technology 489.63 -1.10%
Transports 3,638.61 -1.09%
Utilities 394.06 -4.77%
S&P 500 Cum A/D Line 6,198.00 -8.84%
Bloomberg Crude Oil % Bulls 47.0 +75.37%
Put/Call 1.05 +12.90%
NYSE Arms .67 -41.23%
Volatility(VIX) 14.87 -.60%
ISE Sentiment 159.0 -.63%
AAII % Bulls 38.96 -22.08%
US Dollar 89.46 +.44%
CRB 327.64 +.75%

Futures Spot Prices
Crude Oil 62.63 +1.34%
Unleaded Gasoline 174.86 -4.19%
Natural Gas 13.22 -.08%
Heating Oil 195.00 -.76%
Gold 471.90 -1.25%
Base Metals 131.68 -1.44%
Copper 176.30 -2.35%
10-year US Treasury Yield 4.48% +2.52%
Average 30-year Mortgage Rate 6.03% +.84%

Leading Sectors
Airlines +1.13%
Restaurants +.50%
Software +.45%

Lagging Sectors
Utilities -4.77%
Gold & Silver -5.24%
Alternative Energy -6.57%

One-Week High-Volume Gainers
One-Week High-Volume Losers

*5-Day % Change

***Alert***

Due to market volatility, I am unable to post the Mid-day Scoreboard. I will post the Weekly Scoreboard this evening. I am 75% net long and expect stocks to maintain gains into the close. Have a great weekend.

Today's Headlines

Bloomberg:
- A global effort to stem the spread of the deadly bird flu virus may help prevent an influenza pandemic, the World Health Organization said.
- Saddam Hussein’s trial on charges of crimes against humanity will start on time next week after his lawyers failed to get the proceedings delayed.
- GE’s third-quarter earnings climbed 15%, bolstered by higher demand for products ranging from credit cards to jet engines and the sale of a stake in a mortgage- and life-insurance company.
- Genentech’s Avastin, a drug intended for colon, lung and other cancers, may become more widely used as a treatment for a common cause of blindness.
- Electronic Arts signed film director Steven Spielberg to help create three games as the company tries to revive sales.
- Occidental Petroleum’s agreement to buy Vintage Petroleum values Vintage’s oil and gas fields between $8.50 and $9 a barrel versus $10.15 a barrel that Chevron paid for Unocal and $10.66 that China National Petroleum plans to spend for PetroKazakhstan, according to analysts.
- Bill Dudley said today that he is stepping down as chief US economist for Goldman Sachs at the end of next month.
- Crude oil is falling and gasoline is plunging to a 12-week low on indications that near-record prices are reducing fuel consumption in the US.

Wall Street Journal:
- EMC and other data storage companies are reaping a bonanza as large amounts of data overwhelm computers.
- Verizon Communications has been under pressure from cable companies’ Internet-based phone services, and if a joint venture of Google and Comcast acquires a minority stake in AOL, it will make matters worse.

ABC News:
- Saudi Arabia is pumping more than 10 million barrels of crude oil a day this month versus 9.58 million barrels/day during September, citing the nation’s leader King Abdullah.

NY Times:
- Five robots completed a 132-mile course in the Nevada desert in a milestone for artificial-intelligence research.
- Anadarko Petroleum is leading a number of companies that are seeking to find more oil and natural gas in the deep waters of the Gulf of Mexico.

Reuters:
- The Chicago Board of Trade still plans to proceed with its IPO next week even as futures brokerage Refco faces greater scrutiny and customers defect.