Weekly Outlook

Click here for The Week Ahead by Reuters

There are some important economic reports and a number of significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. - Leading Indicators
Tues. - Richmond Fed Index
Wed. - Existing Home Sales
Thur. - Durable Goods Orders, Initial Jobless Claims
Fri. - GDP, Personal Consumption, GDP Price Index, New Home Sales

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. - American Express(AXP), Avaya(AV), Bank of America(BAC), E*Trade(ET), Ford Motor(F), Pilgrim’s Pride(PPC), Texas Instruments(TXN)
Tues. - 3M(MMM), Brinker Intl.(EAT), BJ Services(BJS), Centex Corp.(CTX), CNF Inc.(CNF), Coach Inc.(COH), Computer Assoc.(CA), Corning Inc.(GLW), CSX Corp.(CSX), EMC Corp.(EMC), Golden West Financial(GDW), Imclone Systems(IMCL), Johnson & Johnson(JNJ), Kimberly-Clark(KMB), Legg Mason(LM), Lexmark Intl.(LXK), McDonald’s(MCD), Northrop Grumman(NOC), Ryland Group(RYL), Tidewater Inc.(TDW)
Wed. - Abott Labs(ABT), Altera Corp.(ALTR), Amerada Hess Corp.(AHC), AmerisourceBergen(ABC), Ameritrade Holding(AMTD), Bellsouth Corp.(BLS), Bristol-Myers(BMY), Burlington Resources(BR), Colgate-Palmolive(CL), ConocoPhillips(COP), General Dynamics(GD), HCA Inc.(HCA), Hershey(HSY), Juniper Networks(JNPR), Maxim Integrated(MXIM), Novellus Systems(NVLS), Qualcomm Inc.(QCOM), St Jude Medical(STJ), Varian Medical(VAR)
Thur. - Amgen(AMGN), AT&T(T), Baxter Intl.(BAX), Becton Dickinson(BDX), Broadcom(BRCM), Cardinal Health(CAH), Caterpillar Inc.(CAT), Consolidated Edison(ED), Diebold(DBD), Dow Chemical(DOW), Eli Lilly(LLY), Estee Lauder(EL), General Motors(GM), Honeywell Intl.(HON), Ingersoll-Rand(IR), JDS Uniphase(JDSU), Kla-Tencor(KLAC), Lockheed Martin(LMT), McKesson Corp.(MCK), Microsoft Corp.(MSFT), Peabody Energy(BTU), SanDisk Corp.(SNDK), Sirius Satellite(SIRI), Stryker Corp.(SYK), United Parcel Service(UPS), Verizon Communications(VZ), Western Digital(WDC)
Fri. - Bausch & Lomb(BOL), Chevron Corp.(CVX), Gannett Corp.(GCI), Guidant Corp.(GDT), Halliburton(HAL), ITT Industries(ITT), Massey Energy(MEE), Nucor Corp.(NUE), Procter & Gamble(PG)

Other events that have market-moving potential this week include:

Mon. - None of note
Tue. - AG Edwards Retailing Conference
Wed. - None of note
Thur. - Raymond James Growth Airline Conference
Fri. - None of note

BOTTOM LINE: I expect US stocks to finish the week modestly lower on weaker housing data, worries over Iran’s nuclear ambitions and some disappointment with forward earnings guidance. My trading indicators are now giving mostly bearish signals and the Portfolio is 50% net long heading into the week.

Market Week in Review

S&P 500 1,261.49 -1.91%*



Click here for the Weekly Wrap by Briefing.com.

BOTTOM LINE: Overall, last week's market performance was negative as increasing worries over Iran, raised terrorism fears, earnings failing to meet elevated expectations and profit-taking pressured stocks. The advance/decline line fell, most sectors declined and volume was above average on the week. Measures of investor anxiety were higher. Moreover, the AAII % Bulls fell to 50.0, but is still above average levels. The average 30-year mortgage rate fell to 6.10% which is only 89 basis points above all-time lows set in June 2003. The benchmark 10-year T-note yield was unchanged on the week as economic data was mostly positive and measures of inflation decelerated further.

Small-caps outperformed again as the Russell 2000 made another all-time high on Thursday. Unleaded Gas futures rebounded as oil rose on Iran/Nigeria worries. However gas prices are still 37% below September highs even as refinery utilization remains below normal as a result of the hurricanes. Natural gas supplies fell slightly more than expected this week. However, supplies are now 16.3% above the 5-year average, approaching an all-time record high for this time of year, even as over 18% of daily Gulf of Mexico production remains shut-in. Natural gas prices have plunged around 41% in 5 weeks. Gold fell on the week, notwithstanding geopolitical concerns, as measures of inflation continued to decelerate and traders took profits.

I still believe prices for many commodities are being driven by fear and record capital inflows into commodity funds, rather than fundamentals. I continue to expect global energy demand destruction, decelerating economic growth and a significant increase in supplies into 2006 to push oil prices substantially lower from current levels. Elevated prices related to Iran only make this outcome more likely. Any temporary spike in energy price due to an attack on Iran or Iranian halt in oil production would likely be less severe and more temporary than most expect as speculators are already pricing in a substantial OPEC production disruption. This scenario would also likely lead to a Fed rate cut.

Earnings growth for the fourth quarter is on pace to rise 13% year-over-year, good by historic standards. Some disappointing guidance is likely just an attempt to lower the bar for companies to exceed estimates this quarter. The ECRI Weekly Leading Index made another cycle high and is forecasting continued healthy US economic activity. While volatility will likely increase going forward, I still expect the S&P 500 to return 15% this year, notwithstanding any temporary weakness related to issues with Iran. High single-digit earnings growth, average economic growth of around 3%, an end to Fed rate hikes, low long-term interest rates, lower energy prices, a healthy labor market, a more sustainable housing market, p/e multiple expansion, a stable dollar, decelerating inflation, increased corporate spending, rising demand for US assets and a lifting of irrational pessimism should provide the catalysts for strong gains this year.

*5-day % Change

Weekly Scoreboard*

Indices
S&P 500 1,261.49 -1.91%
DJIA 10,667.39 -2.69%
NASDAQ 2,247.70 -2.98%
Russell 2000 704.60 -.31%
S&P Equity Long/Short Index 1,135.47 -.45%
S&P Barra Growth 604.01 -1.88%
S&P Barra Value 653.05 -1.94%
Morgan Stanley Consumer 595.42 -.79%
Morgan Stanley Cyclical 765.79 -3.56%
Morgan Stanley Technology 532.52 -3.80%
Transports 4,158.48 +.24%
Utilities 421.31 +2.06%
S&P 500 Cum A/D Line 7,894 -5.0%
Bloomberg Crude Oil % Bulls 53.0 -11.66%
Put/Call 1.06 +47.22%
NYSE Arms 2.10 +64.06%
Volatility(VIX) 14.56 +30.0%
ISE Sentiment 177.00 -7.81%
AAII % Bulls 50.00 -15.20%
AAII % Bears 25.83 +35.38%
US Dollar 88.96 -.58%
CRB 345.15 +3.12%
ECRI Weekly Leading Index 137.70 +.58%

Futures Spot Prices
Crude Oil 68.48 +6.09%
Unleaded Gasoline 181.70 +5.39%
Natural Gas 9.28 +3.34%
Heating Oil 186.72 +8.62%
Gold 553.80 -.66%
Base Metals 160.59 -.79%
Copper 208.50 -1.30%
10-year US Treasury Yield 4.34 unch.
Average 30-year Mortgage Rate 6.10 -.81%

Leading Sectors
Oil Service +7.64%
Energy +5.01%
Utilities +2.06%
Gold & Silver +1.85%
Steel +1.45%

Lagging Sectors
Banks -3.54%
Wireless -3.63%
Insurance -4.0%
Internet -5.44%
Airlines -6.70%

One-Week High-Volume Gainers
One-Week High-Volume Losers

*5-Day % Change

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
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

***Alert***

Due to a scheduling conflict I am unable to post through tomorrow's close. I will post the weekly scoreboard tomorrow evening.

Stocks Sharply Higher Heading into Final Hour Despite Today's Headwinds

BOTTOM LINE: The Portfolio is slightly higher heading into the final hour on gains in my Semi longs, Medical longs and Networking longs. I added to my (AAPL) long and exited my IWM and QQQQ shorts, 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 gaining and volume is heavy. Measures of investor anxiety are lower. Today, we have seen new threats from Bin Laden, higher energy prices, higher long-term rates, a $15 rise in gold, weaker-than-expected housing and manufacturing numbers and some "disappointing" earnings reports. All these perceived negatives and the major averages and breadth are at session highs on heavy volume. Small caps are especially strong as the Russell 2000 makes another all-time high. This is one of the most underreported stories around. The vast majority of U.S. companies are strong and getting stronger. This is what is fueling the best string of 3%+ GDP quarters since 1986. I expect US stocks to trade modestly higher from current levels into the close on short-covering.