Economic Releases

- None of note

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Friday Watch

Late-Night Headlines
Bloomberg:
- Australia won’t withdraw its troops from Iraq prematurely, Australian Foreign Minister Alexander Downer said in response to a new terrorism threat against Australia in a videotape found in Indonesia.
- China may default on money-losing copper trades because the country doesn’t have enough of the metal to make good on delivery commitments next month, said Mark Topfer, the former No. 2 lawyer at the London Metal Exchange.
- Public approval of Congressional Democrats has fallen to 25% and Republicans to 27% in the most recent Harris Interactive poll.
- Shares of Toyota Motor, the world’s largest automaker by market value, surged to their highest level since being listed in 1949, making the company 14 times bigger than General Motors.

Business Week:
- Interpublic Group, the world’s third largest advertising company, may have to sell assets as part of a plan to reorganize the company.

AFP:
- The UN General Assembly adopted a resolution expressing concern over North Korea’s human rights record.

Daily Deal:
- Kohlberg Kravis Roberts is leading a group of private investors that may bid for General Motor’s residential mortgage finance unit.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on GILD.
- Reiterated Underperform on PSS and MESA.

Business Week:
- Shares of Laserscope(LSCP), the maker of lasers used to treat enlarged prostates, may rise because some investors sold too many shares.
- SBA Communications(SBAC) shares are worth as much as $27, citing William Harnisch, CEO of hedge fund Peconic Partners.

Night Trading
Asian Indices are +.75% to +1.25% on average.
S&P 500 indicated -.02%.
NASDAQ 100 indicated -.12%.

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Earnings of Note
Company/EPS Estimate
ANN/.37
DDS/-.22
URI/.27

Upcoming Splits
TRID 2-for-1

Economic Releases
- None of note

BOTTOM LINE: Asian indices are higher, boosted by exporters in the region after oil fell below $56/bbl. I expect US equities to open mixed and to trade modestly higher later in the day. The Portfolio is 100% net long heading into the day.

Stocks Finish Sharply Higher on Falling Energy Prices, Lower Long-term Rates and Increasing Optimism

Indices
S&P 500 1,242.80 +.94%
DJIA 10,720.22 +.43%
NASDAQ 2,220.46 +1.49%
Russell 2000 667.14 +1.91%
DJ Wilshire 5000 12,415.41 +1.07%
S&P Barra Growth 595.45 +.72%
S&P Barra Value 643.02 +1.15%
Morgan Stanley Consumer 592.93 +.56%
Morgan Stanley Cyclical 757.79 +1.44%
Morgan Stanley Technology 525.30 +2.05%
Transports 4,082.39 +2.02%
Utilities 397.53 +1.55%
Put/Call .71 -7.79%
NYSE Arms .67 -21.11%
Volatility(VIX) 11.25 -8.24%
ISE Sentiment 182.00 +21.33%
US Dollar 91.88 -.49%
CRB 313.21 -.67%

Futures Spot Prices
Crude Oil 56.49 +.27%
Unleaded Gasoline 146.20 +.17%
Natural Gas 11.92 -.14%
Heating Oil 170.20 +.29%
Gold 486.70 -.04%
Base Metals 139.01 +.14%
Copper 187.60 -.16%
10-year US Treasury Yield 4.45% -.31%

Leading Sectors
Airlines +3.50%
Homebuilders +3.12%
Networking +2.75%

Lagging Sectors
Foods +.42%
Energy +.10%
Tobacco -.27%

Evening Review
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In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on GILD.

Afternoon/Evening Headlines
Bloomberg:
- DaimlerChrysler’s Chrysler will offer free gasoline and maintenance for two years and extended warranties on most new 2005 and 2006 models to win back buyers.
- Crude oil fell to a five-month low after an Energy Department report showing an increase in inventories of natural gas eased concern that heating-fuel supplies would be low this winter.
- Warren Buffett’s Berkshire Hathaway bought 20 million Wells Fargo shares in September.
- GM CEO Wagoner told employees that the automaker doesn’t intend to file for bankruptcy and has “a robust balance sheet.”
- Wal-Mart will be the first participant in a new Salvation Army holiday fund-raising program where companies and groups can put a virtual version of the charity’s red kettle on their Internet site.
- The Environmental Protection Agency will issue new rules next month to reduce parasites in the nation’s drinking water.

BOTTOM LINE: The Portfolio finished substantially higher today on gains in my Internet longs, Retail longs, Medical longs, Medical Information Systems 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 above average. Measures of investor anxiety were lower into the close. Overall, today's market action was positive. The homebuilders and airlines, arguably the two most hated sectors, led all gainers, both rising over 3%. I especially like the way stocks ground higher throughout the day rather than gapping up on the open. Today's action bodes well for further gains over the near-term and a successful breakout to new highs for the year in the major averages.

Stocks Sharply Higher Mid-day on Fall in Oil and Long-term Rates

Indices
S&P 500 1,239.11 +.64%
DJIA 10,705.65 +.29%
NASDAQ 2,209.09 +.97%
Russell 2000 664.68 +1.54%
DJ Wilshire 5000 12,377.91 +.77%
S&P Barra Growth 593.60 +.40%
S&P Barra Value 641.11 +.85%
Morgan Stanley Consumer 592.26 +.45%
Morgan Stanley Cyclical 754.87 +1.05%
Morgan Stanley Technology 522.64 +1.52%
Transports 4,064.28 +1.57%
Utilities 396.49 +1.29%
Put/Call .78 +1.30%
NYSE Arms .79 -6.72%
Volatility(VIX) 11.75 -4.16%
ISE Sentiment 180.00 +20.0%
US Dollar 91.93 -.43%
CRB 313.28 -.64%

Futures Spot Prices
Crude Oil 56.20 -2.40%
Unleaded Gasoline 145.75 -1.72%
Natural Gas 11.94 -3.16%
Heating Oil 169.50 -1.98%
Gold 486.30 +1.50%
Base Metals 139.01 +.14%
Copper 194.50 +.52%
10-year US Treasury Yield 4.45% -.39%

Leading Sectors
Homebuilders +3.14%
Airlines +2.59%
Networking +2.31%

Lagging Sectors
Oil Service -.08%
Tobacco -.48%
Energy -.58%

BOTTOM LINE: The Portfolio is substantially higher mid-day on gains in my Medical longs, Retail longs, Medical Information System longs and Internet longs. I covered the rest of my IWM and QQQQ shorts this morning and added to my PWR, BBY and MDRX longs, 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 rising and volume is slightly above average. Measures of investor anxiety are mostly lower. Overall, today’s market action is positive considering the strong breadth readings and mixed economic data. A stronger dollar, weakening commodity prices, healthy growth and lower long-term rates are boosting small-caps. The Russell 2000 has slightly underperformed over the last three months. However, the index is up 1.5% today vs. a .6% gain for the S&P 500. I expect small caps to regain their leadership role over the intermediate term on a continuation of recent trends. I expect US stocks to trade mixed-to-higher from current levels into the close as lower long-term rates and falling energy prices more than offset profit-taking.

Today's Headlines

Bloomberg:
- Don Voelte, chief executive of Australia’s Woodside Petroleum Ltd., said oil prices at $60 a barrel were unsustainable.
- GM may use up most of its $19.2 billion in cash reserves in the event of a strike at Delphi, its largest auto-parts supplier, analysts said.
- Google shares are rising above $400 for the first time, propelled by soaring growth in online advertising and investors’ expectations that the company will continue to diversify its products beyond Internet search.
- US House Republican leaders dropped some cuts to the Medicaid health program in a $50 billion plan to reduce spending.
- Hedge funds that chase macroeconomic trends by investing in the stock, bond, currency and commodity markets posted their worst returns of the year in October as managers bet wrongly that the US dollar would drop in value.
- Gold in NY is rising to a 17-year high on investor demand for alternatives to the European currency and oil.
- Pennsylvania Congressman John Murtha, the senior Democrat on the House Defense Appropriations Subcommittee, called for the immediate withdrawal of US troops from Iraq.
- Manufacturing in the Philadelphia area expanded in November as companies began rebuilding depleted inventories to meet rising consumer demand.

Wall Street Journal:
- Ranbaxy Laboratories Ltd., the Indian generic-drugmaker, is talking with Roche Holding AG about licensing the rights to make the antiviral drug, Tamiflu.
- Nestle SA is focusing on making containers easier to open in response to one of its biggest complaints from consumers.
- Stirling Energy Systems, a Phoenix-based energy company, plans to place 20,000 solar dishes over four square miles of the Mohave Desert in California to collect and ship energy 80 miles south to Los Angeles.
- Silicon Labs, Intel, Texas Instruments and other semiconductor makers are producing single chips that put the key parts of a mobile telephone into one place.
- Sprint Nextel’s music download service functions well and marks a new advance for the music industry.
- EBay aims to offer a link between people and local services of all kinds.

Cnet:
- Sony began offering a free video-phone service for Internet users yesterday.

BBC:
- Saddam Hussein, the deposed Iraqi dictator, was punched several times by two court clerks after he insulted two of Shia Islam’s saints, citing Iraqi television.

Chicago Tribune:
- Tribune’s Chicago Tribune will cut about 100 jobs and vacant positions won’t be filled to help cut costs and compensate for a decline in circulation.

NY Post:
- NY City’s Department of Transportation has installed parking meters that accept credit cards in midtown Manhattan.

Washington Post:
- A US commander in Iraq yesterday decried calls by Democratic US senators to set a deadline for troop withdrawal, saying “setting a date would mean that the 221 soldiers I’ve lost this year, that their lives will have been lost in vain.”