Tuesday Watch

Late-Night Headlines
Bloomberg:
- Crude oil is little change in NY after falling yesterday on forecasts for a mild end to the winter.
- Taiwan’s energy use fell in November from a year earlier, the third decline last year, because motorists used less fuel.
- Nariman Behravesh, chief economist at Global Insight Inc., says the US economic “soft patch is pretty much over.”
- SAC Capital Advisors LLC, the $10 billion hedge-fund firm run by Steven Cohen, reduced its stake in Phelps Dodge(PD) to 4% from 5.1%.
- China, diversifying its $1.07 trillion in currency reserves, may favor US bonds. The People’s Bank of China needs to be cautious because much of its reserves were created by “speculative inflows,” said Zhao Qingming, an analyst at China Construction Bank Corp., the nation’s fourth-biggest lender.

Chosun Ilbo:
- North Korea and US negotiators made progress in talks on financial sanctions against the North.

Xinhua News Agency:
- China extended a list of machinery that isn’t exempt from import duties to help domestic companies compete locally.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (LOW), top pick target $41. Sees inflection point in the housing market in 3Q07, believes the fundamentals of home improvement sector will turn favorable.
- Unsold home inventories should fall sharply this year as the pace of new construction plummeted in 2006, while demand fell only half as much. Housing’s drag on growth should get smaller as 2007 transpires. A small positive growth contribution for housing in 2008 is likely.

Night Trading
Asian Indices are -.50% to unch. on average.
S&P 500 indicated -.01%.
NASDAQ 100 indicated +.06%.

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
Conference Calendar
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (ADTN)/.23
- (AMD)/.10
- (AKS)/.18
- (AV)/.13
- (AVY)/1.0
- (BAC)/1.18
- (BLK)/1.53
- (EAT)/.39
- (BNI)/1.39
- (CTX)/-2.00
- (CTXS)/.38
- (COH)/.58
- (DHI)/.33
- (EMC)/.16
- (HYSL)/.44
- (IDTI)/.28
- (JNJ)/.79
- (MCHP)/.33
- (NBIX)-.76
- (PNC)/1.30
- (QLGC)/.26
- (STX)/.32
- (SUNW)/.00
- (TMA)/.59
- (UAUA)/-.35
- (UTX)/.85
- (WB)/1.18
- (XRX)/.37
- (YHOO)/.13

Upcoming Splits
- None of note

Economic Releases
10:00 am EST
- Leading Indicators for December are estimated to rise .2% versus a .1% gain in November.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Finish Lower on Weakness in Cyclicals

Indices
S&P 500 1,422.95 -.53%
DJIA 12,477.16 -.70%
NASDAQ 2,431.07 -.83%
Russell 2000 777.96 -.92%
Wilshire 5000 14,271.25 -.54%
Russell 1000 Growth 561.27 -.69%
Russell 1000 Value 816.38 -.35%
Morgan Stanley Consumer 708.22 -.49%
Morgan Stanley Cyclical 911.69 -1.11%
Morgan Stanley Technology 558.09 -.92%
Transports 4,812.85 -.96%
Utilities 447.39 -.16%
Put/Call .95 +15.85%
NYSE Arms 1.31 +37.37%
Volatility(VIX) 10.77 +3.56%
ISE Sentiment 116.0 -33.71%
US Dollar 85.05 +.22%
CRB 289.98 -.17%

Futures Spot Prices
Crude Oil 52.63 -1.44%
Reformulated Gasoline 137.94 -1.33%
Natural Gas 7.33 +6.45%
Heating Oil 151.14 -.14%
Gold 632.60 -.60%
Base Metals 224.91 +1.85%
Copper 252.25 -.22%
10-year US Treasury Yield 4.76% -.38%

Leading Sectors
Alternative Energy +.41%
Foods +.25%
Gaming +.03%

Lagging Sectors
Papers -1.10%
HMOs -1.13%
Airlines -2.03%

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
Morgan Stanley:
- Rated (ACN) Outperform, target $44.

Afternoon/Evening Headlines
Bloomberg:
- Texas Instruments(TXN) said fourth-quarter profit rose 2%. The stock is rising 3% after-hours.
- American Express(AXP) said profit surged 23% as defaults declined and holiday spending by cardmembers reached a record. The stock finished little changed.
- Angelo Haligiannis, the fugitive hedge-fund manager who defrauded investors in Sterling Watters Group LP, was ordered by a federal court to pay more than $30.6 million in fines and forfeited profit.
- The mild weather that blanketed most of the northern US during the first two months of the heating season will return next month, setting up a warmer-than-normal end to winter, forecasters at WSI Corp. said.
- US gasoline at the pump fell 6.4 cents to a nationwide average of $2.16/gallon the week ended today, the lowest price since Dec. 5, 2005, a government report showed.
- Gap Inc.(GPS) CEO Paul Pressler resigned form the largest US clothing chain after failing to bring the company’s stock back to its historic highs.
- Microsoft’s(MSFT) Zune music and video player, intended as a rival to Apple’s(AAPL) market-dominating iPod, can’t share some songs, potentially eroding a key advantage over iPod.

Nikkei English News:
- Mitsubishi Heavy Industries Ltd., Japan’s biggest heavy-machinery maker, will produce motors and lithium-ion batteries to power electric and hybrid cars.

AP:
- Chinese officials in Beijing assured a visiting US envoy that a test of an anti-satellite weapon should not be viewed as a threat, citing State Dept. spokesman Sean McCormack.

BOTTOM LINE: The Portfolio finished lower today on losses in my Computer longs, Retail longs and Internet longs. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was negative today as the advance/decline line finished lower, sector performance was mostly negative and volume was above average. Measures of investor anxiety were mostly higher into the close. Today's overall market action was bearish. With all the talk of how bad things are by the many bears, the major averages are all higher year to date, with the exception of the Russell 2000, which is down only 1%. An ABCNews.com report that raised terrorism concerns was likely the reason for the slight dip over the last hour of trading. Oil is near session lows, falling another .70 after an early morning spike higher, however natural gas is surging 6.5% today on "cold weather" despite the fact that inventories are now 85% of their pre-season capacity vs. usual levels of 60% at this time of the year. Essentially full natural gas storage is even more likely this year. After some more early morning weakness, I expect to see US stocks rally modestly tomorrow afternoon.

Stocks Lower into Final Hour on Emerging Market Concerns and Weakness in Cyclicals

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Internet longs, Retail longs and Computer longs. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, sector performance is mostly negative and volume is above average. The major averages are still solidly lower, however I am seeing some encouraging signs as oil is reversing hard again, falling $2/bbl. from session highs. It is unusual of late to see oil sell off like this on contract expiration day. A number of market-leading stocks seem to have stabilized. American Express(AXP) just announced earnings slightly below estimates, however the stock is rising from session lows. Financials have been holding up relatively well. As well, a number of medical tech and biotech stocks are displaying relative strength. Venezuela is trading down over 6% and has plunged 28% in two weeks. The NYSE Arms has been running at above average levels most of the day. The latest figures from the NYSE show short interest rose again in the most recent month and is very close to a new record high. I expect US stocks to trade mixed into the close from current levels as lower oil prices offset emerging market concerns.

Today's Headlines

Bloomberg:
- Crude oil is falling $2/bbl. from session highs, on forecasts for another gasoline inventory build, the sixth straight.
- Venezuela has spent more on arms purchases since 2005 than China, Pakistan or Iran.
- American Express(AXP) said profit rose 24%, missing analysts’ estimates, as gas prices declined and holiday spending fell below expectations.
- The American depository receipts of CA Nacional Telefonos de Venezuela plunged 17% after President Hugo Chavez said the government won’t pay investors the market value for their holding when it seizes the nation’s biggest phone company.
- Fed Bank of Chicago President Michael Moskow, whose inflation warnings have weakened bonds, confirmed he will retire Aug. 31, leaving a fourth high-level opening at the central bank.
- Sun Micro, the world’s third-largest marker of server computers, said it will use Intel Corp.(INTC) microprocessors, ending its exclusive use of Advanced Micro Devices(AMD) parts.
- President Bush has rejected an industry-driven proposal to impose limits on carbon dioxide emissions, and his State of the Union address tomorrow will focus instead on promoting alternatives to fossil fuels, White House spokesman Snow said.

Wall Street Journal:
- Intel Corp.(INTC) may lure Sun Micro(SUNW) as a customer for chips used in servers, dealing a blow to Advanced Micro Devices(AMD).
- Intl. Business Machines(IBM) will sell social-networking software that will work like News Corp.’s(NWS) MySpace yet will focus on business uses.
- Kimberly-Clark Corp.(KMB) is betting that its new Kleenex tissue paper containing disinfectant to fight cold and flu viruses will fend off competition from makers of rival generic and high-tech paper products.
- The SEC is helping to accelerate the introduction of ETFs that invest in international securities.
- Steve Case, the America Online entrepreneur who quit when AOL’s takeover of Time Warner(TWX) disappointed investors, is starting a new Web site to help people manage their health.

USA Today:
- Democratic Senator James Webb, chosen to give his party’s formal response to President Bush’s State of the Union speech, said he favors cutting off funding for Iraq reconstruction and using the money to pay for Hurricane Katrina recovery efforts.

NY Times:
- Group Danone unit Dannon’s success with Activia, a yogurt with live bacteria marketed as helping with digestive regularity, has led other food makers to develop products with live microbes offering health benefits.
- Quick tests for germs that can cause epidemics such as whooping cough often give false positives and can cause scares like the one last year at Dartmouth-Hitchcock Medical Center in New Hampshire.

NY Post:
- Sirius Satellite Radio(SIRI) and XM Satellite Radio(XMSR), which attract talent with contracts valued at $29 million for Martha Stewart to $650 million to air Major League Baseball games, may cut spending on content, citing analysts and company officials.

AP:
- Venezuelan President Hugo Chavez said yesterday that US officials should “go to hell, gringos,” and referred to Secretary of State Condoleezza Rice as “missy.” During the television address he also said the Venezuelan government won’t pay the market value for CA National Telephones de Venezuela, the country’s largest phone company, which he is planning to nationalize. The Venezuelan stock exchange is plunging another 6% today and has collapsed -28.2% over the last two weeks.
- Retailers CompUSA Inc. and Best Buy Co. plan to open stores a few minutes before midnight Jan. 30 to attract interest in Microsoft’s(MSFT) Windows Vista operating system when it does on sale.

Financial Times:
- NYC is losing ground as the world’s leading center for finance in areas such as IPOs and derivatives trading, where global CEOs say they have shifted business to London because of a more desirable regulatory climate.
- US venture-capital investments rose to $25.8 billion last year, the most since 2001 thanks to deals in health care, consumer, Internet and alternative energy, citing a study by Ernst & Young LLP and DowJones VentureOne.

Iranian Students News Agency:
- Iran will forbid 38 inspectors from the UN nuclear agency from entering the country.

Economic Releases

- None of note

Links of Interest

Market Snapshot
Detailed Market Summary
Quick Summary
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