Stocks Finish Higher, Boosted by Technology Shares as Commodity Prices Fall

Indices
S&P 500 1,384.42 +.25%
DJIA 12,131.88 +.19%
NASDAQ 2,406.38 +.70%
Russell 2000 772.41 +.42%
Wilshire 5000 13,870.77 +.26%
S&P Barra Growth 641.16 +.23%
S&P Barra Value 741.29 +.28%
Morgan Stanley Consumer 669.16 -.06%
Morgan Stanley Cyclical 868.41 +.52%
Morgan Stanley Technology 568.30 +1.09%
Transports 4,774.45 +.87%
Utilities 449.20 -.14%
Put/Call .79 -19.39%
NYSE Arms .82 -43.17%
Volatility(VIX) 10.86 +.65%
ISE Sentiment 145.0 +7.41%
US Dollar 85.38 +.36%
CRB 308.03 -.87%

Futures Spot Prices
Crude Oil 58.52 -1.80%
Unleaded Gasoline 153.70 -1.64%
Natural Gas 7.95 +2.12%
Heating Oil 165.90 -2.22%
Gold 627.20 +.22%
Base Metals 230.34 -4.72%
Copper 311.60 +.08%
10-year US Treasury Yield 4.6% +.34%

Leading Sectors
Airlines +3.11%
Semis +1.56%
Computer Hardware +1.23%

Lagging Sectors
Oil Service -.34%
Coal -1.0%
Retail -1.09%

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Afternoon Recommendations
Bank of America:
- Rated (FFIV) and (NICE) Buy.

Afternoon/Evening Headlines
Bloomberg:
- The California Public Employees’ Retirement System, the largest US public pension, will use $500 million to speculate on oil, metals and other commodities for the first time. Speculation in commodity indexes by pension funds and other investment vehicles doubled in the past year to $110 billion. Notwithstanding this record infusion of capital, the CRB Index is 7% lower this year and down 16% from record highs set in May.
- Shares of American Airlines(AMR) surpassed the price they reached the day before the 9/11 terrorist attacks as the world’s largest airline benefits from more than five years of retooling how it flies.
- Microsoft(MSFT) plans to add a video-sharing feature to its Zune player and will eventually sell a model that combines the device with a phone, CEO Ballmer said.
- Chevron(CVX) said it’s boosting expansion plans at its largest refinery to raise gasoline output to 6.25 million gallons a day, enough to supply more than half the cars in New Jersey.
- Natural gas may fall in NY as mild weather reduces demand and inventories remain near all-time highs, a Bloomberg survey showed.
- Venezuela said exploration in the country’s heavy-crude belt along the Orinoco River has added as much as 7.6 billion barrels to the country’s certified recoverable oil reserves.

Andina:
- President Bush and Colombian leader Alvaro Uribe will sign a free trade agreement on Nov. 22.

BOTTOM LINE: The Portfolio finished higher today on gains in my Computer longs, Semi longs and Internet longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished higher, sector performance was mostly positive and volume was about average. Measures of investor anxiety were mostly lower into the close. Today's overall market action was modestly bullish. The 10-year rallied into the afternoon, pushing the yield down to 4.6%. Commodities finished lower, with lead falling 12% intraday, the most in 16 years, however commodity stocks finished mostly higher as investors continue to treat weakness as temporary and remain complacent, in my opinion. The U.S. dollar index finished near session highs. I expect retail sales, excluding service station receipts, to exceed estimates tomorrow. Another sharp decline in the PPI is expected. I expect stocks to build on today's modest gains later this week.

Stocks Higher into Final Hour on Falling Commodity Prices and Buyout Speculation

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Computer longs and Internet longs. I added a long position in (ILMN) and took profits in another trading long today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is modestly higher, most sectors are rising and volume is about average. Today's decline in Illumina(ILMN) is a severe overreaction by momentum players to the announcement of its purchase of Solexa(SLXA), in my opinion. I added this new long position when it was down about 12%. The Airline Index (XAL) has risen 23.0% since I highlighted the group back in September. It is up another 3% today to session highs. AMR (AMR), my favorite, has rocketed 52% over the same timeframe, making a five-year high. I expect airlines to continue to outperform over the intermediate term as the overwhelming majority of investors remain significantly underexposed to the group and fundamentals continue to improve. I expect US stocks to trade modestly higher into the close from current levels on short-covering, performance anxiety, lower energy prices and buyout speculation.

Today's Headlines

Bloomberg:
- Crude oil is falling again, another .84 to $58.75/bbl., as warm weather in the eastern US reduced heating fuel consumption and speculators continued to trim bets on production disruptions.
- The 250 biggest US law firms grew 4% in the past year, slower growth than the previous year, and half of the rate in 2001, according to a survey published today by the National Law Journal.
- Citigroup(C) will put its name on the NY Mets’ new ballpark under a 20-year agreement that also includes a partnership to develop sports and entertainment ventures.
- Wynn Resorts(WYNN) will pay shareholders a $609.3 million special cash dividend, almost a quarter of which will go to billionaire founder Steve Wynn.
- The US dollar is rising the most in more than a week against the euro and yen as traders bet comments by the head of China’s central bank do not indicate a faster pace of US currency sales in the near future.
- House Democratic leader Nancy Pelosi said she supports Representative John Murtha, who has called for the immediate withdrawal of US troops from Iraq, for the post of majority leader, bypassing the current No. 2, Steny Hoyer.
- Duke University Management Co. CEO Thruston Morton will retire at the end of the year to form his own investment firm, following the leads of the former endowment heads at Harvard and Stanford universities.
- Lead is headed for its biggest loss in 16 years, falling 12% today, leading zinc and copper lower in London.
- Eddie Bauer Holdings said it plans to be acquired by Sun Capital Partners and Golden Gate Capital, for $286 million.
- The SEC expects to file more enforcement actions against hedge funds over illegal trading and violations of client trust.

Wall Street Journal:
- Tribune Co.(TRB) has received a preliminary bid from Gannett Co.(GCI), the nation’s largest newspaper publisher by circulation.
- News Corp.’s(NWS) Twentieth Century Fox plans to sell cheap DVDs in China to help reduce sales of counterfeits.
- Some US hedge funds and other large investors are transferring some cash to speculative energy stocks from commodities. Yet some analysts say the energy stocks are risky, especially if gas prices fall again.
- A Los Angeles entrepreneur has built a thriving business fixing defective imported apparel.
- GM(GM) plans to increase publicity for its gasoline-electric hybrid cars and other fuel-saving projects over the next few weeks.
- Merck(MRK) CEO Richard Clark has set tough financial targets for the company and so far succeeded in achieving them.

NY Times:
- Maurice R. Greenberg, former chairman of American International Group(AIG), is considering a bid for Tribune Co.(TRB).
- Half of all US identity-theft victims say the thief was a family member, a friend, a neighbor or an in-home employee, citing surveys by the FTC and private research firm Javelin Strategy and Research.
- Clear Channel Communications(CCU) today may get final bids worth $18 billion from two groups of private equity firms.
- Gap Inc.(GPS), Apple Computer(AAPL) and Motorola(MOT) are among US retailers that will use the holiday season to link their product lines to charitable causes.

NY Post:
- Telkonet Inc. subsidiary Microwave Satellite Technologies will cover the southern half of New York’s Central Park with a wireless network.

La Tribune:
- Beneteau SA, the world’s biggest sailboat maker, is considering acquisitions in the US and could spend about $708 million to expand, CEO Cathelinais said.

El Universal:
- Venezuela faces economic policy challenges as crude oil prices decline and may fall further next year.

Panorama:
- Petroleos de Venezuela SA, South America’s largest oil company, found a new oil field in the western state of Zulia, citing Energy and Oil Minister Rafael Ramirez.

Calgary Herald:
- US buyout firms the Carlyle Group and Riverstone Holdings LLC are among investors planning a $352 million refinery that produces ethanol and bio-diesel in Alberta.

Xinhua News:
- China next year will use less state funds for construction projects to counteract overheated growth in fixed-asset investment, citing the Ministry of Finance. The government will use more funds from the sale of treasury bonds for projects in areas including social security, resource conservation and rural development, and less on “blind investment” in construction, citing ministry spokesman Zhang Tong.

Economic Releases

- None of note

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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%.

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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.