Monday Watch

Weekend Headlines
Bloomberg:
- Steny Hoyer, the House Democratic whip, said President Bush and the new Democratic Congress stand a good chance of working out agreements on immigration and deficit reduction.
- US consumers, unfazed by the real-estate slump, keep on spending.
- US Treasuries rose the most this week since September on expectations a divided government will curb spending measures, foreign demand for US bonds will increase and inflation gauges fell.
- Iraqi Prime Minister Nouri al-Maliki, under fire from Iraqis and the US leadership for his government’s failure to help curb violence, called in a closed session of parliament today for a broad cabinet reshuffle.
- China is drafting policies including tax incentives and discounts, to boost exploration for heavy oil resources such as oil sands and oil shale to meet local demand.
- BHP Billiton(BHP), Hess Corp. and Repsol YPF SA paid $1.35 billion to buy the Genghis Khan oil and gas project from Anadarko Petroleum, adding a venture in the Gulf of Mexico that’s due to start production next year.
- Natural gas prices may fall in NY as mild weather reduces demand and inventories remain near all-time highs.
- Russia’s boom in IPOs may indicate companies are concerned that stock prices could fall amid “political uncertainty” as President Putin prepares to step down in 2008, Citigroup said.
- Samsung Electronics, the world’s second-largest maker of semiconductors, forecast “very strong” first-quarter orders for computer memory chips, helped by demand spurred by Microsoft’s new Windows operating system.
- The Consumer Price Index in China unexpectedly slowed to 1.4% from year ago levels, the National Bureau of Statistics said today.
- William Buechler, Chief Investment Officer of Barclays Partners Asset Management, forecasts a “very good” US economy in 2007.
- Copper futures fell 4% in Shanghai, the maximum daily price move allowed by the exchange, to a three-month low as rising inventories raised speculation that supply may exceed demand this year.

NY Times:
- Jobs in the US are so abundant that investors are worried that the Fed may delay making interest rate cuts, lest inflation revive.
- US Treasury Secretary Paulson is looking to reach agreement with Democrats on economic issues of mutual agreement such as middle-class tax cuts and simplification of the tax code.
- The Democratic Party’s win leaves little chance for a bill to open large areas of the Atlantic and Pacific oceans to oil and gas drilling. The bill would have added vast amounts of oil and gas to domestic supplies.
- McGraw-Hill(MHP) is focusing on its global, digital and productivity units as its fastest growing businesses, and plans to expand its operations in India, CEO McGraw said.
- Computer scientists and start-up companies are seeking to develop technology to generate more useful information from the Internet that would allow it to be more of a guide than a catalog.
- US labor unions are trying to persuade Democrats to champion some of their policy initiatives, including making it easier for workers to form unions. Union leaders have been reminding Democrats that union members aided them with more than $100 million in donations and more than 100,000 volunteers for voter-turnout efforts.

Boston Globe:
- The new Democratic leaders in Congress may start probes in President Bush’s use of pre-war intelligence on Iraq and his domestic terrorism surveillance program.

LA Times:
- Almost two-thirds of voters in California say the state is heading in the right direction after re-electing Republican Governor Arnold Schwarzenegger, according to a recent poll.

Washington Post:
- James Webb may plan an independent role as the Democratic senator from Virginia, planning a course separate from that mapped by the party leaders who spent more than $6 million on his campaign to defeat Republican Senator George Allen.
- Almost 11,000 Saudis are attending colleges and universities in the US this year, reversing a decline that came after the Sept. 11, 2001, terrorist attacks.

Chicago Sun-Times:
- The Chicago Cubs, who haven’t won a World Series in 98 years and had the worst record in the National League this year, have a market value of between $500 million and $650 million, analysts said.

AP:
- Cuban President Fidel Castro isn’t expected to live through 2007, citing US government officials.

Financial Times:
- The Bank of Japan’s tightening of money supply is hurting the Japanese economy, former financial services minister Heizo Takenaka said.

Guardian:
- The Chairman of the Democratic National Committee, Howard Dean, will meet with senior officials of Britain’s Labour party to advise on campaign strategy, in an effort to boost Labour’s election prospects.

Nihon Keizai:
- Petroleo Brasileiro SA will export bio-ethanol to Japan from 2008 for automobile fuel and aims to boost shipments to about 185 million gallons a year in 2011.
- Toyota Motor(TM), Nissan Motor(NSANY) and Honda Motor(HMC) may boost production in North America by 30% to 5.4 million vehicles by 2010.

Asahi:
- Japan’s government plans to produce 13.2 million gallons of bio-ethanol within five years by using inventories of imported rice.

Tehran Times:
- Iran plans to increase its oil output capacity by 45,000 barrels per day by developing new onshore fields.

Weekend Recommendations
Barron's:
- Made positive comments on (WYNN) and (WFMI).

Night Trading
Asian indices are -1.0% to -.25% on average.
S&P 500 indicated -.09%
NASDAQ 100 indicated -.04%.

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/Estimate
- (BOBE)/.39
- (DKS)/.05
- (KNOT)/.10
- (QGEN)/.14
- (TSN)/-.04

Upcoming Splits
- None of note

Economic Releases
2:00 pm EST
- The Monthly Budget Deficit for October is estimated to widen to -$49.0 billion versus -$47.4 billion in September.

BOTTOM LINE: Asian Indices are lower, weighed down by commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the week.

Weekly Outlook

Click here for The Week Ahead by Reuters

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

Economic reports for the week include:

Mon. - Monthly Budget Statement

Tues. - Producer Price Index, Advance Retail Sales, Business Inventories

Wed. - Empire Manufacturing, Oct.24 FOMC Minutes

Thur. - Consumer Price Index, Initial Jobless Claims, Net Foreign Security Purchases, Industrial Production, Capacity Utilization, Philly Fed, NAHB Housing Market Index

Fri. - Housing Starts, Building Permits

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

Mon. - Bob Evans Farms(BOBE), Dick’s Sporting Goods(DKS), Qiagen NV(QGEN), Tyson Foods(TSN)

Tues. - Abercrombie & Fitch(ANF), Agilent Technology(A), American Eagle Outfitters(AEOS), Analog Devices(ADI), BJ’s Wholesale(BJ), DR Horton(DHI), Fossil Inc.(FOSL), Home Depot(HD), Pep Boys(PBY), Pilgrim’s Pride(PPC), Ross Stores(ROSS), Saks Inc.(SKS), Staples(SPLS), Target Corp.(TGT), TJX Cos(TJX), Wal-Mart Stores(WMT)

Wed. - Applied Materials(AMAT), Aramark Corp.(RMK), BEA Systems(BEAS), Charming Shoppes(CHRS), Gymboree Corp.(GYMB), HOT Topic(HOTT), Ltd Brands(LTD), Men’s Warehouse(MW), Network Appliance(NTAP), PetSmart Inc.(PETM), Salesforce.com(CRM), Talbots(TLB), Tyco Intl.(TYC)

Thur. - Barnes & Noble(BKS), Children’s Place(PLCE), Claire’s Stores(CLE), Dell Inc.(DELL), Footlocker(FL), Hewlett-Packard(HPQ), Hibbett Sporting Goods(HIBB), Intuit(INTU), JLG Industries(JLG), Kulicke & Soffa(KLIC), Longs Drug Store(LDG), Marvell Tech(MRVL), Stages Stores(SSI), Starbucks(SBUX), William-Sonoma(WSM), Zale Corp.(ZLC)

Fri. - AnnTaylor Stores(ANN), JM Smucker(SJM), Vimpel Communications(VIP), Zoll Medical(ZOLL)

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

Mon. - Deutsche Bank/Goldman Sachs Gaming Forum

Tue. - Bear Stearns SMid-cap Conference, Merrill Lynch Banking and Financial Services Conference, Citigroup Transports Conference, Morgan Stanley Global Consumer & Retail Conference, Deutsche Bank/Goldman Gaming Forum, UBS Global Communications and Tech Conference, (GE) Analyst Meeting, Fed’s Poole speaking, Fed’s Minehan speaking, Fed’s Yellen speaking

Wed. - Merrill Lynch Banking and Financial Services Conference, CSFB Healthcare Conference, Think Equity Media Convergence Summit, Citigroup Transports Conference, Morgan Stanley Global Consumer & Retail Conference, Lehman Small-cap Conference, Bank of America Energy Conference, Bear Stearns SMid-cap Conference, UBS Global Communications and Tech Conference

Thur. - Oppenheimer Restaurant Conference, CIBC Optical Tech Conference, Morgan Stanley Global Consumer & Retail Conference, CSFB Alternative Energy Conference, Bank of America Energy Conference, Lehman Small-cap Conference, CSFB Healthcare Conference, Merrill Lynch Banking & Financial Services Conference, Fed’s Pinalto speaking, Fed’s Kroszner speaking, Fed’s Bies speaking, Fed’s Moskow speaking

Fri. - Lehman Small-cap Conference, Bank of America Energy Conference, CSFB Insurance Conference, CSFB Healthcare Conference, Fed’s Fisher speaking, Fed’s Pinalto speaking

BOTTOM LINE: I expect US stocks to finish the week modestly higher on less political uncertainty, falling inflation worries, rising consumer spending optimism, lower energy prices, seasonal strength, strong corporate profits, investment manager performance anxiety and short-covering. My trading indicators are still giving bullish signals and the Portfolio is 100% net long heading into the week.

Weekly Scoreboard*

Indices
S&P 500 1,380.90 +1.22%
DJIA 12,108.43 +1.02%
NASDAQ 2,389.72 +2.53%
Russell 2000 769.15 +2.18%
Wilshire 5000 13,835.02 +1.36%
S&P Barra Growth 639.69 +.96%
S&P Barra Value 739.21 +1.47%
Morgan Stanley Consumer 669.56 +.59%
Morgan Stanley Cyclical 863.90 +2.26%
Morgan Stanley Technology 562.16 +2.94%
Transports 4,733.41 +2.62%
Utilities 449.83 +.91%
MSCI Emerging Markets 105.98 +2.69%
S&P 500 Cum A/D Line 8,535 +3.0%
Bloomberg Crude Oil 49.0% Bulls +29.5%
CFTC Oil Large Speculative Longs 162,794 +2.0%
Put/Call .98 +8.89%
NYSE Arms 1.45 +36.79%
Volatility(VIX) 10.79 -3.31%
ISE Sentiment 135.0 +15.4%
AAII % Bulls 50.60 +15.6%
AAII % Bears 26.51 -28.12%
US Dollar 85.07 -.78%
CRB 310.74 +.27%
ECRI Weekly Leading Index 137.50 +1.03%

Futures Spot Prices
Crude Oil 59.59 +.64%
Unleaded Gasoline 156.0 +3.45%
Natural Gas 7.77 -.92%
Heating Oil 169.86 +1.06%
Gold 629.50 +.33%
Base Metals 241.74 -1.51%
Copper 309.50 -7.55%
10-year US Treasury Yield 4.59% -2.75%
Average 30-year Mortgage Rate 6.33% +.32%

Leading Sectors
Gaming +5.87%
Networking +5.46%
Tobacco +4.46%
Internet +4.33%
Airlines +4.06%

Lagging Sectors
Gold and Silver -.29%
Telecom -1.21%
HMOs -2.23%
Drugs -2.62%
Coal -3.10%

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

*5-Day % Change

Stocks Mostly Higher into Final Hour on Falling Commodity Prices, Lower Long-term Rates and Short-covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Retail longs and Commodity shorts. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is positive as the advance/decline line is modestly higher, most sectors are rising and volume is below average. The Import Price Index for October fell 2.0% yesterday vs. estimates of a 1.0% decline and a 2.0% decline in September. Moreover, import prices fell 0.2% year-over-year. This is the first year-over-year decline since 2002 and it is down from a 9.9% increase in September 2005. Almost every widely followed measure of inflation is decelerating substantially. As the many U.S. stock market bears continue to pick and chose measures of inflation that suit their arguments, the 10-year yield, the best long-term predictor of inflation, moves ever lower. I remain long (TLT). I expect US stocks to trade modestly higher into the close from current levels on short-covering, performance anxiety, declining interest rates, lower energy prices and less irrational pessimism.

Today's Headlines

Bloomberg:
- Crude oil is falling for the first time in three days after the International Energy Agency cut its demand forecast for the third consecutive month.
- Russian and the US will sign terms for the former Soviet state to join the World Trade Organization next week, clearing one of the last hurdles for an agreement that may add $10 billion a year to the Russian economy.
- Copper is plunging to a four-month low, capping the biggest weekly decline since September. The Beijing-based customs office said recently that warehouse inventories monitored by the Shanghai Futures Exchange rose 15% this week and that Chinese imports plunged 22% so far this year. Merrill Lynch, today, is telling clients its sees copper collapsing 47% by 2008.
- Jeff Shankman, the former chief operating officer of global markets at Enron Corp., plans to raise as much as $250 million in the next six months for an energy hedge fund.
- SEC Chairman Cox said the agency will propose rules next month that raise hedge fund investing requirements.
- US Treasuries are headed for their biggest weekly advance since September on decelerating inflation readings and optimism about demand for new securities.
- Economists at Citigroup(C), JPMorgan Chase(JPM), Royal Bank of Scotland Group and Commerzbank AG cut their forecasts for the European economy after French growth unexpectedly stalled in the third quarter.
- Gold in NY is falling on skepticism China will buy the precious metal to diversify its foreign-currency reserves.

Wall Street Journal:
- Sweden’s new right-leaning government, led by Prime Minister Fredrik Reinfeldt, is on track with its program of promoting economic growth by shrinking the country’s welfare system.
- Starbucks Corp.(SBUX) is trying to offer new choices in its interior designs to help it defuse opposition as it expands worldwide.
- Businesses gained a victory in coping with US accounting standards after regulators agreed to relax the requirements for verifying and assessing internal financial controls.
- Citigroup(C) so far has little to show for its efforts to expand in China’s $2 trillion banking market as the Chinese government has resisted expansion by foreign banks.
- GM(GM) plans to sell a new Buick model, which carries seven passengers, at a lower price than rival vehicles from Toyota Motor’s(TM) Lexus and Honda Motor’s Acura.
- Dell Inc.(DELL) has sacrificed its leading position in the global computer market in favor of higher profit and investors are signaling approval.
- US Large-cap Growth mutual funds seem poised for a rally, after several years of underperformance.

NY Times:
- Burger King Holdings(BKC), OfficeMax(OMX) and Anheuser-Busch(BUD) are among companies augmenting advertising by creating entire television shows featuring their products.
- Cummins(CMI) and Caterpillar(CAT) are among companies either building or using diesel engines to meet US EPA requirements.
- Allergan(AGN) is offering free injections of its wrinkle-filler Juvederm to users of Restylane, which is sold in the US by Medicis Pharmaceutical(MRX).
- The five principals of Fortress Investment Group LLC stand to make $6.8 billion from the hedge fund’s initial public offering.
- NBC has ordered nine more episodes of “Studio 60 on the Sunset Strip,” even as the number of viewers has plunged 41%.
- President Bush began efforts to remove Defense Secretary Rumsfeld almost three months ago and put off the ouster because of fear it would be interpreted as political opportunism.

Philadelphia Inquirer:
- Robert Johnson, the founder of Black Entertainment Television, will be a partner in Pinnacle Entertainment’s(PNK) bid to build a $350 million waterfront casino in Philadelphia.

Boston Globe:
- Fidelity Investments will eliminate the $20 annual fee on all college-savings plans and lower the minimum investment required to start an account.

Economic Releases

- None of note