Today's Headlines

Bloomberg:
- Bloomingdale’s employees outnumbered lunchtime shoppers in the New York store’s main floor cosmetic department yesterday as the city’s first full-scale transit strike in 25 years kept customers away.
- The trial of ousted dictator Saddam Hussein resumed in Baghdad today after a two-week break due to Saddam’s refusal to attend court on Dec. 7.
- Allergan, maker of the Botox anti-wrinkle treatment, agreed to buy Inamed for $3.42 billion in cash and stock, adding Inamed’s wrinkke-smoothing Juvederm and saline breast implants.
- IBM agreed to buy Micromuse, a provider of network management software, for about $865 million in cash.
- President Bush accused Senate Democrats of “inexcusable” obstruction for failing to extend provisions of the USA Patriot Act that are scheduled to lapse at year’s end.
- The US Senate approved a package of $39.7 billion in spending cuts with Vice President Chaney casting the tie-breaking vote.
- US Senate Democrats blocked a bid to allow oil drilling in Alaska.
- Boeing may boost annual output of the new 787 plane because of strong demand and is considering another long-range version of the aircraft.

Wall Street Journal:
- China wants to use its enormous appetite for raw materials to screw down prices paid to suppliers.
- Seagate Technology, a California-based maker of computer disk drives, agreed to buy Maxtor for $1.9 billion in stock.
- Bank of America will tie up with American Express to issue a new range of credit cards as it seeks to win more big spenders.
- Toyota Motor is using automotive components and technologies to develop products including wheelchairs and orthopedic mattresses for Japan’s elderly.
- General Electric is in advanced talks with unidentified partners to buy Arden Realty, a southern California real-estate investment trust worth more than $3.1 billion.
- Thomas H. Lee Partners LP, one of the world’s biggest private-equity firms, has been thrown into turmoil by the departure of its founding partner, after whom it’s named.
- GMAC, which has been the subject of takeover interest, is being targeted by companies including Wachovia and JPMorgan Chase.
- Time Warner Executive Vice President Olaf Olafsson took control of negotiations over the sale of a stake in AOL after AOL executives expressed reservations about Microsoft’s technology.

NY Times:
- Sling Media’s Slingbox has the potential to further fragment the television-viewing audience.

AFP:
- OPEC will let the world’s leading industrial nations build up their stockpiles of oil during the next three months.

Detroit News:
- Hyundai Motor, South Korea’s largest automaker, will invest $94 million and add 600 jobs to expand a new technical center near Ann Arbor, Michigan.

LA Times:
- Crime in Los Angeles has fallen by about 10% this year and is on target for a third consecutive year of significant decline, citing Police Chief William J. Bratton.

CNBC:
- Billionaire Kirk Kerkorian may restore his stake in GM to 9.9%.

US Economic Growth Streak Best Since 1986

- Final 3Q GDP rose 4.1% versus estimates of a 4.3% gain and prior estimates of a 4.3% increase.
- Final 3Q Personal Consumption rose 4.1% versus estimates of a 4.2% gain and prior estimates of a 4.2% increase.
- Final 3Q GDP Price Index rose 3.3% versus estimates of a 3.0% increase and prior estimates of a 3.0% gain.

BOTTOM LINE: The US economy grew at a 4.1% annual rate in the third quarter, substantially higher than the 20-year average of 3.1%, Bloomberg reported. The economy has now grown by 3% or more for 10 straight quarters, the best streak since 1986. I expect US growth to slow to average levels next year, which will be viewed positively by equity investors.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
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Option Dragon
Real-time Intraday Chart/Quote

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Chevron said hurricanes in the Gulf of Mexico that shut oil wells and the company’s biggest refinery probably cut fourth-quarter profit by more than $600 million.
- Crude oil in NY is little changed, after rising yesterday for the first day in five, on expectations a US government report will show supplies dropped.
- Billionaire investor Kirk Kerkorian, GM’s third-biggest shareholder, sold almost a fifth of his 9.9% stake in the company after the investment lost one-third of its value.
- Time Warner agreed to sell Google a stake in AOL to help revive the Web unit’s sales.
- Calpine, the US power plant owner saddled with more than $17 billion in debt, filed for bankruptcy protection after soaring natural gas prices left it unable to make loan and bond payments.
- Citigroup is leading a bid of at least $2.7 billion for 85% of Guangdong Development Bank, the first state-owned Chinese lender to offer investors a majority stake.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on TYC and GOOG.

Night Trading
Asian Indices are +.50% to +1.0% on average.
S&P 500 indicated +.09%.
NASDAQ 100 indicated +.18%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
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CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
BBBY/.45
BMET/.43
KMX/.212
CMC/1.18
FDO/.31
FDX/1.40
MLHR/.39
JOYG/.45
MU/.11
PAYX/.29
RHAT/.09

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Final 3Q GDP is estimated at 4.3% versus prior estimates of 4.3%.
- Final 3Q Personal Consumption is estimated at 4.2% versus prior estimates of 4.2%.
- The Final GDP Price Index is estimated at 3.0% versus prior estimates of 3.0%.

BOTTOM LINE: Asian indices are higher, boosted by exporters in the region after the US dollar rose. I expect US equities to open mixed and to trade modestly higher into the afternoon. The Portfolio is 75% net long heading into the day.

Stocks Finish Slightly Lower on GM Worries and a Bounce in Energy Prices

Indices
S&P 500 1,259.62 -.02%
DJIA 10,805.55 -.29%
NASDAQ 2,222.42 -.01%
Russell 2000 672.78 +.08%
DJ Wilshire 5000 12,580.03 +.02%
S&P Barra Growth 603.35 -.09%
S&P Barra Value 651.84 +.05%
Morgan Stanley Consumer 599.25 -.21%
Morgan Stanley Cyclical 778.43 -.23%
Morgan Stanley Technology 524.81 -.20%
Transports 4,103.12 -.12%
Utilities 413.22 +.26%
Put/Call 1.14 +22.58%
NYSE Arms 1.13 +25.54%
Volatility(VIX) 11.19 -1.67%
ISE Sentiment 247.00 +6.01%
US Dollar 90.79 +1.02%
CRB 325.81 -.09%

Futures Spot Prices
Crude Oil 58.18 +.15%
Unleaded Gasoline 151.32 +.29%
Natural Gas 14.12 +.30%
Heating Oil 172.20 +.10%
Gold 494.90 -.42%
Base Metals 151.09 -.68%
Copper 202.00 unch.
10-year US Treasury Yield 4.46% +.49%

Leading Sectors
Oil Service +2.07%
Gaming +1.75%
HMOs +1.37%

Lagging Sectors
Disk Drives -.79%
Networking -1.19%
Gold & Silver -1.39%

Evening Review
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Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
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After-hours Movers
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In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on S.

Afternoon/Evening Headlines
Bloomberg:
- The Transport Workers Union may try to take over its striking NY Local 100 and seek a settlement with the Metropolitan Transport Authority.
- Richard McCabe is retiring as chief market analyst at Merrill Lynch after 43 years with the NY-based company. Mary Ann Bartels, Merrill’s equity-trading strategist, will succeed him.
- Electronic Arts cut its sales and profit forecasts for this quarter and next.
- Gold fell to $495 an ounce, down $50 in just over a week, after US producer prices tumbled in November by the most since April 2003, reducing the appeal of the precious metal as a hedge against inflation.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Energy-related shorts. I did not trade in the afternoon, thus leaving the Portfolio 75% net long. The tone of the market was slightly negative today as the advance/decline line finished lower, sector performance was mixed and volume was average. Measures of investor anxiety were mixed into the close. Overall, today's action was mildly bearish. Investors likely need to see GM stabilize, natural gas fall further, some more positive holiday shopping data points and a quick end to the NY transit strike before a meaningful push higher in stocks can occur.

Stocks Mixed Mid-day as Bounce in Energy Prices Offsets More Positive Economic Data

Indices
S&P 500 1,260.17 +.02%
DJIA 10,813.79 -.21%
NASDAQ 2,224.70 +.09%
Russell 2000 675.49 +.48%
DJ Wilshire 5000 12,589.06 +.09%
S&P Barra Growth 603.67 -.04%
S&P Barra Value 652.05 +.08%
Morgan Stanley Consumer 599.76 -.12%
Morgan Stanley Cyclical 780.01 -.03%
Morgan Stanley Technology 524.68 -.23%
Transports 4,117.59 +.24%
Utilities 413.59 +.35%
Put/Call 1.13 +21.51%
NYSE Arms 1.14 +24.91%
Volatility(VIX) 11.15 -1.85%
ISE Sentiment 252.00 +8.15%
US Dollar 90.84 +1.07%
CRB 325.74 -.11%

Futures Spot Prices
Crude Oil 57.90 +.98%
Unleaded Gasoline 151.40 -.84%
Natural Gas 13.98 -.45%
Heating Oil 172.20 +1.10%
Gold 495.80 -2.0%
Base Metals 151.09 -.68%
Copper 202.10 +.40%
10-year US Treasury Yield 4.46% +.53%

Leading Sectors
Oil Service +2.13%
Gaming +1.87%
HMOs +1.68%

Lagging Sectors
Disk Drives -.84%
Telecom -.89%
Gold & Silver -1.94%

BOTTOM LINE: The Portfolio is slightly lower mid-day on losses in my Energy-related shorts. I covered some of my IWM and QQQQ shorts this morning and added to my ELOS, ANF and BRCM longs, thus leaving the Portfolio 75% net long. The tone of the market is slightly positive as the advance/decline line is slightly higher, most sectors are higher and volume is about average. Measures of investor anxiety are mixed. Overall, today’s market action is neutral considering more positive economic data and the bears inability to extend yesterday’s sell-off. The Johnson Redbook same-store sales index rose 3.4% year-over-year last week vs. a 3.3% rise the prior week. This week's gain is up from a 1.5% increase in late April, and it's the 33rd week in a row that the index has risen 3% or more. The Morgan Stanley Retail Index (MVRX) has returned 14.3% since late October vs. a 7.6% gain for the S&P 500. I expect US stocks to trade mixed-to-higher into the close on short-covering.