Today's Headlines

Bloomberg:
- Nissan Motor plans to unveil a concept car equipped with an Xbox 360 system from Microsoft that allows drivers to play video games.
- The move to online advertising is happening faster than analysts anticipated as companies devote more of their budgets to the Internet than traditional media.
- Crude oil, heating oil and gasoline rose after Iran’s deputy oil minister said OPEC should cut output next month to “keep prices stable.”
- Donald Trump’s casino company and partners today said they pan to spend $350 million to develop the TrumpStreet Casino and Entertainment Complex in Philadelphia.
- Celgene’s shares rose as much as 7.8% today after US regulators approved the company’s Revlimid capsule for a rare blood cancer.

Wall Street Journal:
- The US administration has applied sanctions against nine foreign companies for selling missile components and chemical weapons materials to Iran.
- The US government plans to spend $1 billion or more in the next ten years to construct high-security labs to study exotic and potentially lethal illnesses.

NY Times:
- More US food marketers are selling products that promise health benefits such as cholesterol reduction and improved digestion.
- Many US police departments, which are shot on staff, are seeking to boost recruitment by offering signing bonuses and other perks.

NY Post:
- New York Democratic Attorney General Eliot Spitzer should be impeached if it’s found that he personally threatened the former chairman of Goldman Sachs, John Whitehead, a Republican Assemblymen said.

CNBC:
- ShopperTrak CEO Bill Martin said unadjusted average weekly retail sales rose 7.4% in December from a year ago.

Independent:
- A daily dose of Vitamin D may cut cancers of the breast, colon and ovary by as much as half, citing a review of research published in the American Journal of Public Health.

Consumer Confidence Continues Rebound after Hurricanes

- Consumer Confidence for December rose to 103.6 versus estimates of 103.0 and a reading of 98.3 in November.

BOTTOM LINE: US consumer confidence rose in December to the highest level in four months, helped by falling gas prices and an improving labor market, Bloomberg said. The present situation component of the index jumped to 121.5 from 113.2 last month. The future outlook component rose to 91.6 versus 88.4 in November. Those consumers that said jobs are plentiful rose to 23.6% from 21.1% the prior month. I expect consumer confidence to make new cycle highs next year.

Links of Interest

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Wednesday Watch

Late-Night Headlines
Bloomberg:
- Sharp Corp., the world’s top maker of liquid-crystal display televisions, will raise panel output by at least 10% to meet demand driven by soccer’s World Cup and the Winter Olympics, according to executives.
- Growth in Australia’s economy will accelerate to 3.3% next year as exports and business investment surge, economists said.
- The board of NY’s main transit union voted tonight in favor of a contract offer to end a dispute that sparked a three-day subway and bus strike last week, the union said.

Late Buy/Sell Recommendations
Goldman Sachs:
- None of note

Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 indicated +.05%.
NASDAQ 100 indicated +.06%.

Morning Preview
US AM Market Call
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Earnings of Note
Company/EPS Estimate
- None of note

Upcoming Splits
ABC 2-for-1

Economic Releases
10:00 am EST
- Consumer Confidence for December is estimated to rise to 102.5 versus a reading of 98.9 in November.

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

Stocks Finish Near Session Lows, Led by Energy Shares

Indices
S&P 500 1,256.54 -.96%
DJIA 10,777.77 -.97%
NASDAQ 2,226.89 -1.0%
Russell 2000 676.58 -1.44%
DJ Wilshire 5000 12,566.31 -1.0%
S&P Barra Growth 600.91 -1.03%
S&P Barra Value 651.33 -.88%
Morgan Stanley Consumer 595.44 -.60%
Morgan Stanley Cyclical 786.89 -.75%
Morgan Stanley Technology 528.46 -.84%
Transports 4,216.26 -1.18%
Utilities 409.02 -.64%
Put/Call .88 +27.54%
NYSE Arms 1.66 +27.86%
Volatility(VIX) 11.57 +12.66%
ISE Sentiment 197.00 +23.13%
US Dollar 91.17 +.43%
CRB 324.59 -.53%

Futures Spot Prices
Crude Oil 57.80 -.62%
Unleaded Gasoline 151.30 -.03%
Natural Gas 10.97 -.43%
Heating Oil 163.65 -.03%
Gold 510.10 unch.
Base Metals 153.51 +.63%
Copper 206.95 +.10%
10-year US Treasury Yield 4.33% -.98%

Leading Sectors
Airlines +1.55%
Homebuilders -.05%
Telecom -.15%

Lagging Sectors
Coal -1.98%
Energy -2.82%
Oil Service -3.13%

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Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on BSX.

Afternoon/Evening Headlines
Bloomberg:
- First Data Corp. shares rose as much as 1.6% after a report today that the company is in discussions with unidentified private equity firms about a sale of its Western Union subsidiary.
- Poland’s two-month-old government plans to keep soldiers in Iraq next year, countering the previous cabinet’s pledge to pull out of the US-led operation by this week.
- Fidelity National Financial, the biggest US title insurer, agreed to buy Sedgwick CMS Holdings for $635 million to offer third-party claims management services to Fortune 500 companies.
- Natural gas futures plunged 10%, the largest one-day drop in almost 3 years, as warmer-than-normal weather slashed demand for the furnace fuel.
- US Treasury notes rose on speculation a decline in 10-year yields to below two-year yields may foreshadow an economic slowdown.
- Hurricanes Katrina, Rita and Wilma may cost insurers $57.6 billion, more than double the annual record for US natural disasters, a consulting firm said.

Reuters:
- Iraq’s political leaders plan to meet their country’s interim president in his Kurdish homeland in the next few days to lay the groundwork for a new government, citing a senior government official.

CNBC:
- Mortgage-backed securities are attractive because of their high yields relative to government and corporate debt and their credit quality, Paul McCulley, a managing director at PIMCO said.

BOTTOM LINE: The Portfolio finished lower today on losses in my Medical longs, Internet longs and Semi longs. I covered some of my IWM and QQQQ shorts, thus leaving the Portfolio 75% net long. The tone of the market was negative today as the advance/decline line finished substantially lower, almost every sector fell and volume was very light. Measures of investor anxiety were mostly higher into the close. The 4-basis-point decline in the 10-year Treasury note yield, besides energy declines, worried traders today. I continue to believe U.S. growth is slowing to average rates from vigorous levels before the hurricanes. This, combined with decelerating inflation readings and rising demand for U.S. assets, helped boost bonds. I do not believe bond gains are foreshadowing a meaningful slowdown in U.S. economic activity.

Stocks Sharply Lower Mid-day, Pressured by Energy Shares

Indices
S&P 500 1,258.83 -.77%
DJIA 10,800.19 -.76%
NASDAQ 2,229.91 -.87%
Russell 2000 677.68 -1.28%
DJ Wilshire 5000 12,587.37 -.83%
S&P Barra Growth 602.02 -.85%
S&P Barra Value 652.50 -.70%
Morgan Stanley Consumer 596.00 -.51%
Morgan Stanley Cyclical 788.37 -.56%
Morgan Stanley Technology 528.62 -.81%
Transports 4,219.88 -1.10%
Utilities 409.26 -.59%
Put/Call .93 +34.78%
NYSE Arms 1.55 +19.44%
Volatility(VIX) 11.50 +11.98%
ISE Sentiment 202.00 +26.25%
US Dollar 91.04 +.29%
CRB 323.87 -.75%

Futures Spot Prices
Crude Oil 57.65 -1.33%
Unleaded Gasoline 152.25 -1.81%
Natural Gas 11.01 -10.12%
Heating Oil 165.00 -3.24%
Gold 510.10 +.83%
Base Metals 153.51 +.63%
Copper 206.75 +1.60%
10-year US Treasury Yield 4.34% -.71%

Leading Sectors
Airlines +1.89%
Gold & Silver +.07%
Homebuilders +.05%

Lagging Sectors
Coal -2.16%
Energy -2.83%
Oil Service -3.20%

BOTTOM LINE: The Portfolio is lower mid-day on losses in my Internet longs, Medical longs and Semi longs. I added IWM and QQQQ shorts this morning, thus leaving the Portfolio 50% net long. The tone of the market is negative as the advance/decline line is substantially lower, most sectors are lower and volume is light. Measures of investor anxiety are mostly higher. Overall, today’s market action is negative considering the decline in energy prices, falling long-term rates and lack of normal seasonal strength. It appears to me the losses in the energy sector, which had been one of the best performing in 2005, are prompting hedge funds to take profits in most other winners. Gains by most funds are mediocre for the year and they do not want to slip into the red. I expect US stocks to trade mixed-to-higher from current levels into the close on short-covering.