Thursday Watch

Late-Night Headlines
Bloomberg:
- Shares of Quanta Display, a unit of the world’s biggest notebook computer maker, are rising as much as 3% after a news report said Sharp Corp. may buy as many as 4 million flat-panel displays from the Taiwanese company this year.
- The PGA Tour agreed to six-year television contracts with CBS and NBC and a 15-year deal with cable’s Golf Channel.
- Shares of Sharp Corp., the world’s biggest liquid-crystal display television maker, are having their biggest gain in more than four years after the company said sales next fiscal year will rise to a record $26 billion on demand for its flat-panels and solar cells.

Financial Times:
- Borders Group(BGP) may be acquired by one or more private-equity firms for more than $25 a share, or almost $2 billion, and taken private.

Fortune:
- Plans to reorganize the leadership of Dow Jones(DJ), publisher of the Wall Street Journal, began in April 2005.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (MYL), (CSCO), (QCOM) and (RIMM).

Night Trading
Asian Indices are unch. to +.50% on average.
S&P 500 indicated -.08%.
NASDAQ 100 indicated -.08%.

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Earnings of Note
Company/EPS Estimate
(CBSH).82
(SRR)-.02
(MTG)1.52
(MI).78

Upcoming Splits
(HITK) 3-for-2
(NRPH) 2-for-1

Economic Releases
8:30 am EST
- The Trade Deficit for November is estimated to shrink to -$66.1 billion versus -$68.9 in October.
- The Import Price Index for December is estimated to rise .2% versus a 1.7% decline in November.
- Initial Jobless Claims for last week are estimated to rise to 315K versus 291K the prior week.
- Continuing Claims are estimated to fall to 2681K versus 2718K prior.

2:00 pm EST
- The Monthly Budget for December is estimated at a $7.0 billion surplus versus a -$3.4 billion deficit in November.

BOTTOM LINE: Asian indices are mostly higher, led by technology companies in the region. I expect US equities to open modestly lower and to rally later in the day, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Near Session Highs Despite Headwinds

Indices
S&P 500 1,294.18 +.35%
DJIA 11,043.44 +.29
NASDAQ 2,331.36 +.48%
Russell 2000 711.19 +.03%
DJ Wilshire 5000 n/a
S&P Barra Growth 619.45 +.38%
S&P Barra Value 670.22 +.31%
Morgan Stanley Consumer 602.36 -.02%
Morgan Stanley Cyclical 806.64 -.21%
Morgan Stanley Technology 556.36 +.68%
Transports 4,199.29 -.46%
Utilities 412.51 -.31%
Put/Call .63 +5.0%
NYSE Arms .78 -32.86%
Volatility(VIX) 10.94 +.74%
ISE Sentiment 192.00 +20.0%
US Dollar 88.99 -.38%
CRB 335.71 -.22%

Futures Spot Prices
Crude Oil 64.05 +.17%
Unleaded Gasoline 173.78 +.27%
Natural Gas 9.25 +.18%
Heating Oil 173.25 +.31%
Gold 548.70 -.25%
Base Metals 158.57 +.32%
Copper 209.65 +.07%
10-year US Treasury Yield 4.45% +.58%

Leading Sectors
Computer Hardware +1.85%
Semis +1.65%
Gaming +1.21%

Lagging Sectors
Utilities -.31%
HMOs -.59%
Airlines -3.77%

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Afternoon Recommendations
Goldman Sachs:
- Downgraded (BUD) to Underperform.
- Rated (VIA/B) Outperform.
- Rated (CBS) Underperform.
- Reiterated Outperform on (DD) and (ALEX).

Afternoon/Evening Headlines
Bloomberg:
- Gap Inc.(GPS) will increase last-minute orders and buy more merchandise in North America to respond faster to fashion trends after sales tumbled last year.
- Best Buy(BBY) promoted Brian Dunn to president, replacing Allen Lenzmeier, who will stay on as vice chairman.
- Tribune Co.(TRB) will pull most stock-price listings from its flagship Chicago Tribune newspaper because more readers are using the Internet to track stocks.
- Howard Stern, whose talk show debuted on Sirius Satellite Radio(SIRI) this week, and his agent registerd to sell as much as $225 million in the company’s stock.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Computer longs, Semi longs, Software 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 almost unchanged, sector performance was mostly positive and volume was heavy. Measures of investor anxiety were mostly lower into the close. Overall, today's market performance was positive. Considering the rise in oil intraday, another bounce in long rates, more rumblings about Iran and recent gains, today's rise was even more impressive. The bond market's reaction to tomorrow's likely higher-than-expected import price index will probably dictate short-term trading in stocks.

Stocks Modestly Higher Heading into Final Hour, Led by Tech and Financials

BOTTOM LINE: The Portfolio is slightly higher mid-day on gains in my Computer longs, Software longs, Retail longs and Semi longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is modestly negative as the advance/decline line is slightly lower, sector performance is mixed and volume is heavy. Measures of investor anxiety are mostly lower. Sirius Satellite (SIRI) is breaking down through its 200-day moving average on almost double its normal volume. I would not touch this stock on the long side as I believe they "top-ticked" Howard Stern. I think his pay package will weigh on the shares for years, likely leading to the company's demise as a serious threat to XM Satellite (XMSR). I expect US stocks to trade mixed-to-higher from current levels into the close on strength in the technology sector, a late-day reversal in energy prices and short-covering.

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

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