Thursday Watch

Late-Night Headlines
Bloomberg:
- Time Warner’s CNN said anchor Aaron Brown will leave the company and Anderson Cooper will take over his time slow, extending a series of “staffing changes” CNN has made to regain viewers lost to Fox News Channel. CNN averaged 1 million US primetime viewers last month, compared with 1.9 million for Fox News, according to Nielsen Media Research.

Futures Daily:
- China will release copper supplies from its official stockpiles to ease a domestic shortage.

Financial Times:
- The US government may today say it will change how it defines control of an airline to make it easier for US carriers to access foreign finance.

AFP:
- Gangs of youths clashed with French police for a seventh night as violence spread in Paris suburbs.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on MYOG.
- Reiterated Underperform on MHX, BMC and IHR.

Night Trading
Asian Indices are -.25% to +.75% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated -.06%.

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Earnings of Note
Company/EPS Estimate
AMT/-.03
ABC/.93
BDX/.70
BYD/.51
CELG/.12
CLX/.70
CMCSA/.14
CSC/.67
CVS/.30
HET/.99
SLE/.27
SINA/.23
WMB/.25

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Preliminary 3Q Non-farm Productivity is estimated to rise 2.6% versus a 1.8% rise in 2Q.
- Preliminary 3Q Unit Labor Costs are estimated to rise 1.8% versus a 2.5% gain in 2Q.
- Initial Jobless Claims for last week are estimated to rise to 330K versus 3228K the prior week.
- Continuing Claims are estimated to fall to 2898K versus 29024K prior.

10:00 am EST
- ISM Non-Manufacturing for October is estimated to rise to 57.0 versus a reading of 53.3 in September.
- Factory Orders for September are estimated to fall 1.0% versus a 2.5% rise in August.
- Pending Home Sales for September are estimated to fall 1.8% versus a 3.2% rise in August.

BOTTOM LINE: Asian indices are mostly higher on strength in technology companies in the region after Samsung boosted forward guidance. I expect US equities to open mixed and to rise modestly later in the day. The Portfolio is 100% net long heading into the day.

Stocks Finish Sharply Higher as Irrational Pessimism Recedes

Indices
S&P 500 1,214.76 +1.0%
DJIA 10,472.73 +.63%
NASDAQ 2,144.31 +1.43%
Russell 2000 657.05 +2.18%
DJ Wilshire 5000 12,144.03 +1.14%
S&P Barra Growth 579.53 +.91%
S&P Barra Value 631.07 +1.08%
Morgan Stanley Consumer 584.91 +.21%
Morgan Stanley Cyclical 730.15 +1.55%
Morgan Stanley Technology 504.96 +1.21%
Transports 3,928.04 +2.29%
Utilities 393.02 +.64%
Put/Call .68 -29.17%
NYSE Arms .69 -44.09%
Volatility(VIX) 13.48 -9.23%
ISE Sentiment 177.00 +7.27%
US Dollar 89.71 -.01%
CRB 316.45 +.20%

Futures Spot Prices
Crude Oil 59.89 +.23%
Unleaded Gasoline 157.50 +.38%
Natural Gas 11.65 +.53%
Heating Oil 178.85 +.31%
Gold 464.50 -.02%
Base Metals 134.72 +.70%
Copper 182.70 -.19%
10-year US Treasury Yield 4.60% +.89%

Leading Sectors
Homebuilders +3.55%
Airlines +3.43%
Disk Drives +3.34%

Lagging Sectors
Drugs -.11%
HMOs -.68%
Software -1.83%

Evening Review
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In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on TEN.
- Reiterated Underperform on CHTR, BMC, MERQE and MKL.

Afternoon/Evening Headlines
Bloomberg:
- US Supreme Court nominee Samuel Alito, meeting with lawmakers on Capitol Hill, won praise from moderate Democratic Senator Ben Nelson of Nebraska, who said he is reassured the judge wouldn’t be an activist.
- Wal-Mart Stores is putting a top US executive in charge of Seiyu Ltd. to turn around the ailing Japanese retailer as it seeks to boost overseas growth.
- Soccer’s World Cup telecasts in the US will remain on ABC, ESPN and Univision through 2014 under a record $425 million package awarded by the sport’s worldwide governing body.
- The cost of renting oil-drilling rigs probably will drop from record highs in the next two to three years as more are built, according to the head of development at Exxon Mobil.
- The SEC is investigating whether insiders had confidential information when they bought Placer Dome securities days before Barrick Gold made an unsolicited $9.2 billion bid for the company.
- US Treasuries fell today as stocks soared and traders bet economic reports would exceed estimates.

BOTTOM LINE: The Portfolio finished substantially higher today on gains in my Semi longs, Internet longs, Medical longs, Retail longs and Airline longs. I did not trade in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market was very positive today as the advance/decline line finished substantially higher, almost every sector rose and volume was heavy. Measures of investor anxiety were lower into the close. The major averages and breadth are finished near session highs on strong volume. A bounce in energy prices from session lows, incessant bird flu talk and higher long-term rates could not derail today's rally. It appears to me investors are finally looking at the big picture, which is much more positive than many want to recognize. Inflation will decelerate, long-term rates are low by historic standards, economic growth remains healthy, housing is not collapsing, the dollar is firm, commodity prices are falling, stock valuations are very reasonable and consumer sentiment will rise going forward.

Stocks Sharply Higher Mid-day on Less Pessimism

Indices
S&P 500 1,213.55 +.90%
DJIA 10,477.13 +.67%
NASDAQ 2,142.17 +1.31%
Russell 2000 654.62 +1.80%
DJ Wilshire 5000 12,127.95 +1.0%
S&P Barra Growth 579.03 +.83%
S&P Barra Value 630.22 +.94%
Morgan Stanley Consumer 584.40 +.12%
Morgan Stanley Cyclical 729.71 +1.49%
Morgan Stanley Technology 504.51 +1.13%
Transports 3,923.06 +2.16%
Utilities 389.85 -.17%
Put/Call .68 -29.17%
NYSE Arms .66 -46.47%
Volatility(VIX) 13.65 -8.08%
ISE Sentiment 172.00 +4.24%
US Dollar 89.74 -.38%
CRB 315.40 -.15%

Futures Spot Prices
Crude Oil 59.10 -1.25%
Unleaded Gasoline 156.20 -2.59%
Natural Gas 11.52 -2.95%
Heating Oil 176.75 -2.08%
Gold 464.60 unch.
Base Metals 134.72 +.70%
Copper 182.85 -.11%
10-year US Treasury Yield 4.60% +.98%

Leading Sectors %
Homebuilders +3.59%
Airlines +3.0%
Semis +2.75%

Lagging Sectors
Utilities -.24%
HMOs -1.06%
Software -1.94%

BOTTOM LINE: The Portfolio is substantially higher mid-day on gains in my Internet longs, Medical longs, Semi longs, Computer longs and Retail longs. I added TOL long this morning and added to my Steel shorts, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is higher and volume is heavy. Measures of investor anxiety are lower. Today’s overall market action is positive considering the shift in psychology. For the last two months, beginning around the time of Hurricane Katrina, almost every bit of news has been interpreted in a negative light by investors. In my opinion, the fundamentals dictate much higher stock prices. However, during the last couple of months, the many with negative agendas, both political and financial, have been winning the battle for investor psychology. I sense this may be changing right now. I expect US stocks to trade modestly higher from current levels into the close on more optimism.

Today's Headlines

Bloomberg:
- Bank of America and other foreign institutions that have invested a combined $13 billion in China’s banks will be required to hold their shares for at least three years and won’t be allowed to buy stakes in more than two lenders.
- Gangs of youths clashed with French police for a sixth night as violence spread in Paris suburbs, prompting President Chiraq to call for calm.
- Johnson & Johnson won clearance from US antitrust regulators for its planned $25.4 billion purchase of Guidant after agreeing to divest stent technology and blood vessel-harvesting products.
- Johnson & Johnson said it may not complete its $25.4 billion purchase of Guidant because the companies haven’t agreed on a restructuring of the transaction requested by J&J.
- Mercury Interactive said three of its top executives resigned after a company investigation found that they manipulated the value of stock options for six years.
- GE expects as much as $1.2 billion in savings next year after it consolidated operations into six business units, four times earlier estimates.
- Heating oil, crude oil and gasoline fell after an EIA report showed that US inventories of distillate fuel dropped less than expected.

Wall Street Journal:
- MBIA is close to settling federal and state investigations of its accounting, agreeing to pay less than $100 million in fines and damages and accepting a review of past practices.
- A SEC investigation into GE’s use of hedge accounting has been upgraded to a formal investigation.
- Black & Decker plans to start selling next year tools with rechargeable batteries that provide double the power of 18-volt tools commonly used by contractors.
- US regulators will ask drugmakers to submit digital versions of the labels they use to describe a treatment’s use and risks, to be included in an online archive available to the public.
- Sweeping changes to the US tax code are necessary to remove a bias against saving and investment, R. Glenn Hubbard wrote.

NY Times:
- Aetna Inc., a health insurer, plans to say today that it will pay for some depression treatment as employers cite the ailment as a frequent cause of absenteeism and low productivity.

Financial Times:
- IVillage Inc., which operates Web sites for women, may sell its operations for more than $700 million.

Oil Supplies Rise Above Estimates

- The EIA just reported that crude inventories rose 2.73M barrels versus estimates of a 2.5M barrel rise. Gasoline inventories rose 1.03M barrels versus estimates of a 700K barrel rise. Distillate supplies fell 159K barrels versus estimates of a 1M barrel fall. Refinery Utilization rose 1.76% versus estimates of a 2.28% gain.

BOTTOM LINE: This data is once again bearish for the energy complex, however oil is up slightly on the report.

Links of Interest

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