Today's Headlines

Bloomberg:
- US mortgage applications rose for the first time in five weeks as filings for home purchases rebounded, according to a private group’s survey.
- BP Plc, Europe’s largest oil company, said a decline in oil and gas production worsened in the fourth quarter, with damage from hurricanes costing more than $900 million in profit at its Texas City refinery.
- Wall Street firms will pay their NYC workers a record $21.5 billion in bonuses for 2005 after profits at companies including Goldman Sachs(GS) and Lehman Brothers(LEH) reached an all-time higher, state Comptroller Alan Hevesi said.

Wall Street Journal:
- Currency hedge funds posted their lowest returns in at least three years in 2005 because of the strong rally in the US dollar, prompting some to prepare for an exodus of short-term investors from the funds.
- Coca-Cola(KO) is having to compete in the US with imports of its own brand from Mexico, which are favored by Hispanic immigrants.
- Office rents rose worldwide for the first time in five years in the second half of 2005, as vacancies fell in 10 of the biggest markets, citing data by CB Richard Ellis.
- US state, non-profit and company programs to encourage people to save money have begun to produce an accumulation of assets among poor and lower-income Americans.
- China’s TCL Corp., the world’s biggest maker of TV sets, has teamed up with Intel(INTC) to develop a personal computer that resembles and functions like a flat-panel television.

NY Times:
- The FDA cleared 20 drugs last year, down from 36 in 2004, the second such drop in the past 10 years.
- The first comprehensive New Orleans rebuilding proposal calls for a complete revamp of the city’s school system, eliminates a 76-mile shipping channel that helped to cause flooding after Hurricane Katrina and adds a new jazz district downtown.
- General Electric’s(GE) NBC television network has sold few advertising spots for its “The Book of Daniel,” a series criticized as anti-Christian by the conservative American Family Association.
- Sony BMG Music Entertainment and Logo channel founder Matt Farber agreed to create a record label for gay and lesbian music artists.
- Johnson & Johnson(JNJ) made a last-ditch effort to acquire Guidant Corp.(GDT) to prevent the company from accepting a $25 billion bid from Boston Scientific(BSX).
- Developers are poised to break ground on a “big-box” shopping center in East Harlem after Home Depot(HD) signed a long-term lease and Costco Wholesale(COST) prepared to do the same.

Reuters:
- US Transportation Secretary Mineta suggested that Delta Air and Northwest Air may emerge from bankruptcy a merged carrier.

Distillate Supplies Continue to Soar

- The EIA announced a 2,887,000 barrel crude drawdown versus estimates of a 550,000 fall. Gasoline inventories rose 4,519,000 barrels versus estimates of a 1,725,000 build. Distillate supplies rose 4,862,000 barrels versus estimates of a 2,125,000 increase. Refinery utilization fell .06% versus estimates of unchanged.

BOTTOM LINE: The energy inventory numbers are very bearish for the energy complex considering a distillate shortage had been anticipated earlier in the year, however fear over Iran and new year inflows may temporarily cushion an otherwise more serious decline in oil.

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
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Wednesday Watch

Late-Night Headlines
Bloomberg:
- A US campaign to rid the United Nations of corruption and inefficiencies has stalled, raising the prospect that Washington lawmakers will exact a financial penalty on the world body.

Wall Street Journal:
- The European Union says there is increasing evidence of illegal pricing among Chinese and Vietnamese shoemakers, citing EU officials it didn’t identify.

NY Times:
- World Cup champion Bode Miller might be thrown off the US ski team if he doesn’t apologize for comments about drinking alcohol before racing.

Congressional Quarterly:
- The Senate may vote Jan. 31 on Ben Bernanke’s nomination to succeed Alan Greenspan as head of the Federal Reserve, the last day of the departing chairman’s tenure.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Underperform on (HRB).

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

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
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
(AEIS).06
(MTB)1.75

Upcoming Splits
(HITK) 3-for-2

Economic Releases
- None of note

BOTTOM LINE: Asian indices are mostly higher, led by semiconductor companies in the region. I expect US equities to open modestly higher and to build on gains into the afternoon. The Portfolio is 100% net long heading into the day.

Stocks Finish Mixed After Late-day Rebound

Indices
S&P 500 1,289.69 -.04%
DJIA 11,011.58 unch.
NASDAQ 2,320.32 +.07%
Russell 2000 710.99 +.67%
DJ Wilshire 5000 n/a
S&P Barra Growth 617.09 -.07%
S&P Barra Value 668.13 unch.
Morgan Stanley Consumer 602.50 -.39%
Morgan Stanley Cyclical 808.31 -.75%
Morgan Stanley Technology 552.62 -.09%
Transports 4,218.69 -.46%
Utilities 413.80 +.14%
Put/Call .60 -11.76%
NYSE Arms 1.16 +7.73%
Volatility(VIX) 10.86 -2.43%
ISE Sentiment 160.00 -15.79%
US Dollar 89.33 +.09%
CRB 336.45 -.26%

Futures Spot Prices
Crude Oil 63.39 +.03%
Unleaded Gasoline 173.70 -.01%
Natural Gas 9.33 unch.
Heating Oil 173.79 unch.
Gold 543.90 -.33%
Base Metals 158.06 +.29%
Copper 210.50 -.09%
10-year US Treasury Yield 4.42% +1.35%

Leading Sectors
Oil Service +2.10%
Disk Drives +1.89%
Computer Hardware +1.33%

Lagging Sectors
Airlines -1.32%
Broadcasting -1.88%
Hospitals -2.55%

Evening Review
Detailed Market Summary
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
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on (ALL), (DNA), (HD) and (CRL).

Afternoon/Evening Headlines
Bloomberg:
- Biogen Idex(BIIB) said its Tysabri multiple sclerosis medicine, suspended in 2005 after being linked to an often fatal nervous system disease, may return to the market this year.
- Genentech(DNA) said quarterly profit jumped 64% on higher cancer-drug sales.

CNBC:
- Gannett Co.(GCI) made a bid for Knight Ridder(KRI) and then withdrew it.

Chronicle of Higher Education:
- A Florida International University professor and his wife were accused in a US government indictment of spying for Cuba.

Hollywood Reporter:
- Walt Disney’s(DIS) ABC television is charging a record $2.5 million on average for each 30-second advertisement during Super Bowl XL.

Sun Herald:
- Harrah’s Entertainment(HET) will spend more than $1 billion to build two casinos in Biloxi, Mississippi, citing Mayor AJ Holloway.

Seoul Economic Daily:
- Japan isn’t considering diversifying its foreign exchange reserves.

Handelsblatt:
- BMW AG may expand further at its plant in Spartanburg, South Carolina, citing CEO Panke.

BOTTOM LINE: The Portfolio finished higher today on gains in my Computer longs, Semi longs, Medical longs and Retail longs. I did not trade today, thus leaving the Portfolio 100% net long. The tone of the market was modestly positive today as the advance/decline line finished higher, sector performance was mixed and volume was above average. Measures of investor anxiety were mixed into the close. Overall, today’s action was bullish considering long-term rates bounced, oil held steady, fears over Iran’s nuclear program rose and the DJIA closed above 11,000 again after a morning decline of 60 points. Ituran Location (ITRN), one of my recent small long additions, broke to a new high today on 4x average volume. This Israeli stock's performance is even more impressive considering recent Middle Eastern news events. I expect the stock to trade in the low $20s in a fairly short period of time as this recent IPO gets discovered.

Stocks Modestly Lower Into Final Hour as Long-term Rates Bounce and Iran Worries Increase

BOTTOM LINE: The Portfolio is higher mid-day on gains in my Computer longs, Software longs, Retail longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is modestly positive as the advance/decline line is slightly higher, sector performance is mixed and volume is around average. Measures of investor anxiety are mixed. The S&P 500, already up 3.3%, is outperforming many foreign markets that posted stellar gains last year. With the Nasdaq up 5% for the year and high-profile consumer tech companies such as Google (GOOG) and Apple (AAPL) roaring, I would expect to see increasing interest in U.S. stocks as the mania for international equities and commodities wanes. I expect US stocks to trade mixed-to-higher from current levels into the close on strength in the technology sector and short-covering.