Today's Headlines

Bloomberg:
- The DJIA is hitting another all-time high after the government said consumers spent more without fueling inflation.
- Natural gas is falling 2% today after inventories fell less than expected, leaving supplies at record highs for this time of the year.
- Venezuela may devalue its currency this year as accelerating inflation boosts demand for foreign exchange while falling oil prices draw fewer dollars to the economy, Bear Stearns said.
- Exxon Mobil(XOM) and Royal Dutch Shell Plc, the world’s two biggest oil companies, posted higher-than-expected fourth-quarter profits after gains in production softened the blow of declining energy prices.
- Russian companies traded in London are tied so tightly to the Russian government that investors should beware, said Alexander Temerko, a former vp of OAO Yukos Oil Co.
Wall Street Journal:
- A group led by Vornado Realty Trust may raise its bid today for Equity Office Properties Trust(EOP), the real-estate trust founded by Chicago billionaire Sam Zell.

NY Times:
- French President Jacques Chirac said in an interview this week that Iran’s possession of one or two nuclear weapons would not pose a big danger, one of many remarks he retracted a day later.

Washington Times:
- Democratic House Speaker Nancy Pelosi requested that the Bush administration allow her staff, relatives and other members of the California delegation access to military aircraft for domestic flights.

Beijing Antaike Information Development Co.:
- Aluminum output in China, the world’s biggest producer, rose 20% in 2006, citing figures form the National Bureau of Statistics.

Khaleej:
- Oil markets remain oversupplied even as OPEC starts to implement a second round of output cuts, citing Iranian Oil Minister Kazem Vaziri-Hamaneh. “Oil supplies from countries outside OPEC have increased “a lot” and the weather in Europe is “warmer than past years,” he said.

Personal Incomes/Spending Accelerate, Inflation Tame, Job Market Healthy, Pending Home Sales Surge, Manufacturing Decelerates

- Personal Income for December rose .5% versus estimates of a .5% increase and a .3% gain in November.
- Personal Spending for December rose .7% versus estimates of a .7% gain and a .5% increase in November.
- The PCE Core for December rose .1% versus estimates of a .2% increase and an unch. reading in November.
- Initial Jobless Claims fell to 307K versus estimates of 315K and 327K the prior week.
- Continuing Claims rose to 2553K versus estimates of 2469K and 2482K prior.
- Pending Home Sales for December rose 4.9% versus estimates of .9% and a -.3% decline in November.
- ISM Manufacturing for January fell to 49.3 versus estimates of 51.7 and a reading of 47.5 in December.
- ISM Prices Paid for January rose to 53.0 versus estimates of 47.0 and 47.5 in December.

BOTTOM LINE: Personal Spending in the US jumped in December by the most in five months and a measure of inflation watched by the Fed rose less than forecast, Bloomberg said. I suspect spending will rise back to above-average rates, while incomes continue to outpace inflation over the intermediate-term.

The number of Americans filing first-time claims for state unemployment benefits fell more than forecast last week, suggesting the labor market remain firm, Bloomberg said. The four-week moving-average fell to 304,750 from 309,250. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, held steady at 1.9%. I expect the unemployment rate to average a historically low 4.5% for the year as more hiring by technology, healthcare and financial companies offsets real estate-related job weakness.

More Americans signed contracts to buy previously-owned homes in December, adding to evidence the housing market is improving, Bloomberg reported. This index is considered a leading indicator of sales. I continue to believe that housing is stabilizing at relatively high levels as inventories plunge with good demand, thus putting a floor under prices.

Manufacturing in the US unexpectedly contracted in January, Bloomberg reported. The prices paid component rose to 53 versus 47.5 the prior month. Crude oil prices have declined in recent weeks. The average price of a barrel of crude traded on the NY Merc was $54.35 last month versus $62.09 in December. The inventory component of the index fell to 39.9 from 48.5, the largest decline since 1984. Manufacturing will likely remain a drag on the economy during 1Q, however I expect it to improve meaningfully during the second half of the year as inventories are rebuilt.

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

Thursday Watch

Late-Night Headlines
Bloomberg:
- President Bush, making the first presidential visit to the NYSE during trading hours in more than two decades, said a four-year rally in stocks may continue if taxes don’t rise.
- The Iraqi government invited Syria, Iran and other neighboring states to come to Iraq in March to talk about ways to improve the country’s security, Iraq’s ambassador in Washington said.
- Nikko Cordial Corp. shares plunged as much as 17%, the biggest drop since the October 1987 stock market crash, after an inquiry implicated former executives in an accounting fraud that may cost Japan’s third-largest brokerage its stock market listing.
- The University of California and the University of Illinois will split a $500 million grant from BP Plc(BP), Europe’s second-largest oil company, to fund research into development of clean-burning biofuels.
- The yuan rose to its highest since China ended its fixed exchange rate in 2005 on speculation the central bank will seek to reward US Treasury Secretary Henry Paulson for heading off sanctions to force currency gains.
- The Senate moved toward approval of the first increase in the US minimum wage in a decade, voting 88-8 to complete work on the bill after eight days of debate. The measure includes $8.3 billion in tax breaks over 10 years for small businesses that lawmakers paid for in part by including a cap on deferred-compensation for top executives.

Financial Times:
- Sony Corp.(SNE) will announce deals with software providers and internet service providers in March to boost sales of its handheld PlayStation Portable games device, the company’s CFO said.

Guardian:
- Dow Jones(DJ) plans to offer the Wall Street Journal’s Web site in several languages and would consider buying the Financial Times if Pearson Plc put it up for sale, citing executive VP Gordon Crovitz.

Financial News:
- China needs a bullish stock market to absorb planned share sales by large state-owned enterprises on the mainland exchanges in 2007.

Wen Wei Po:
- China should consider imposing a windfall tax on property developers to curb over-investment in the housing market.

China Securities Journal:
- China may implement “big changes” to its foreign-exchange policy this year amid the balance of payments imbalance and excess cash in the banking system.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (EL), raised target to $55.

CSFB:
- We continue to believe Google(GOOG) represents the best investment in the internet space. With shares trading at 28x '08 EPS, and EPS growing in excess of 35% over the next 3-5 years, we see considerable upside in buying GOOG at these levels.

Night Trading
Asian Indices are +.50% to +.75% on average.
S&P 500 indicated unch.
NASDAQ 100 indicated +.11%.

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
- (ADVS)/.06
- (ATK)/1.32
- (AMZN)/.21
- (BUD)/.25
- (APA)/1.60
- (ADM)/.60
- (AVID).57
- (BSX)/.11
- (CA)/.21
- (CELG)/.18
- (CERN)/.41
- (CLX)/.50
- (CMCSA)/.24
- (CVS)/.43
- (DLB)/.21
- (ERTS)/.57
- (XOM)/1.51
- (ILMN)/.30
- (IP)/.35
- (ISRG)/.51
- (MRO)/2.25
- (MNST)/.33
- (MYL)/.36
- (RTN)/.65
- (RGLD)/.19
- (TSG)/.44
- (STA)/1.42
- (UA)/.25
- (VLO)/1.37
- (YRCW)/1.00

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Personal Income for December is estimated to rise .5% versus a .3% gain in November.
- Personal Spending for December is estimated to rise .7% versus a .5% increase in November.
- The PCE Core for December is estimated to rise .2% versus unch. in November.
- Initial Jobless Claims for last week are estimated to fall to 315K versus 325K the prior week.
- Continuing Claims are estimated to fall to 2469K versus 2484K prior.

10:00 am EST
- Pending Home Sales for December are estimated to rise .9% versus a -.5% decline in November.
- ISM Manufacturing for January is estimated to rise to 51.7 versus a reading of 51.4 in December.
- ISM Prices Paid for January is estimated to fall to 47.0 versus a reading of 47.5 in December.

Afternoon:
- Total Vehicle Sales for January are estimated to fall to 16.7M versus 16.8M in December.
- Domestic Vehicle Sales for January are estimated at 12.7M versus 12.7M in December.

BOTTOM LINE: Asian indices are higher, boosted by technology and automaker shares in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

DJIA Makes Another All-Time High on More Economic Optimism, Lower Inflation, Positive Fed Comments

Indices
S&P 500 1,438.24 +.66%
DJIA 12,621.69 +.79%
NASDAQ 2,463.93 +.62%
Russell 2000 800.34 +.30%
Wilshire 5000 14,471.77 +.64%
Russell 1000 Growth 567.64 +.80%
Russell 1000 Value 826.90 +.57%
Morgan Stanley Consumer 708.95 +.49%
Morgan Stanley Cyclical 932.40 +1.17%
Morgan Stanley Technology 565.93 +.23%
Transports 4,916.82 +2.69%
Utilities 454.54 +.21%
Put/Call .79 -14.13%
NYSE Arms .82 -13.11%
Volatility(VIX) 10.42 -4.93%
ISE Sentiment 122.0 -26.06%
US Dollar 84.60 -.46%
CRB 301.22 +.98%

Futures Spot Prices
Crude Oil 57.90 +1.63%
Reformulated Gasoline 150.09 -1.34%
Natural Gas 7.67 -.90%
Heating Oil 167.35 +1.68%
Gold 658.20 +1.23%
Base Metals 225.99 -.34%
Copper 259.25 +1.21%
10-year US Treasury Yield 4.81% -1.30%

Leading Sectors
Homebuilders +2.87%
I-Banks +1.58%
Retail +1.38%

Lagging Sectors
Alternative Energy -.21%
Insurance -.33%
Networking -1.86%

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
Oppenheimer:
- Rated (PFCB) Buy, target $53.

Afternoon/Evening Headlines
Bloomberg:
- The DJIA, Russell 2000 and S&P 400 all made new all-time highs today.
- Bank of America(BAC) CEO Ken Lewis squelched speculation his company might buy Countrywide Financial Corp.(CFC), signaling that he wants to build the bank’s mortgage business without a takeover or joint venture.
- Dell Inc.(DELL) Chairman and founder Michael Dell replaced Kevin Rollins as CEO and said fourth-quarter results will miss analysts’ estimates. The stock is rising 4.5% in after-hours.
- Starbucks Corp.(SBUX) said first-quarter profit rose 18%, meeting analysts’ estimates, as consumers spent more for holiday drinks such as peppermint mocha. The stock is rising 2% after-hours.
- Treasuries rose the most in about a month after the Federal Reserve kept borrowing costs steady, saying price increases have moderated.
- Google(GOOG) said fourth-quarter profit more than doubled as the company expanded its lead over Yahoo!(YHOO) and sold more advertising outside the US. The stock is trading down 2.4% after-hours.
- Corn and soybean prices fell, reversing earlier gains, on speculation southern US farmers will plant less cotton and more corn and soybeans under a farm bill proposal.
- The US is in “better shape” for the summer driving season this year and for the demands of supplying and distributing gasoline additives, such as ethanol, Energy Secretary Samuel Bodman said.
- Gilead Sciences(GILD), the world’s second-biggest maker of HIV drugs, had a fourth-quarter loss on acquisition costs that outweighed record sales of its medicines. The stock is surging 5% in after-hours.
- Five suspicious devices found in various locations around Boston today weren’t dangerous, WCVB-TV Channel 5 Boston said, citing Mayor Thomas Menino.

BOTTOM LINE: The Portfolio finished higher today on gains in my Retail longs, Biotech longs, Telecom longs and Medical 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, almost every sector rose and volume was above average. Measures of investor anxiety were mostly lower into the close. Today's overall market action was bullish as the major averages and breadth are finished near session highs. The 10-year yield finished at session lows, reversing 8 basis points lower from session highs. The US dollar finished near session lows on the more-dovish-than-expected FOMC policy statement. This helped boost oil $1.17. Homebuilders outperformed substantially, rising another 3.04%. The (HGX) has now rocketed 30.5% from last year's lows. I continue to believe the many bears will do another argument switcheroo, in hopes of keeping the public excessively bearish over the coming months, from the “housing collapse” to a “return of inflation.”

Stocks Soaring to Records into Final Hour on Positive Economic Data and Constructive Fed Comments

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Retail longs, Internet longs, Biotech longs and Medical longs. I covered my (IWM) and (QQQQ) hedges into this morning’s weakness, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, almost every sector is rising and volume is above average. Overall, the Fed’s statements were more dovish than the market expected. The major averages are rallying sharply with bonds. Google (GOOG) is trading 2.0% higher today, near session highs. Maybe Google will really report a disappointing quarter, but I suspect that the company will post excellent results. I also expect the many bears to attack the company vigorously as Google was recently ranked the No. 1 most recognized brand in the world. It is a high-profile U.S. growth company, much like Apple (AAPL), that has the potential to help turn the bearish public bullish on U.S. stocks. I have said numerous times, it is very important for the bears to keep the general public excessively pessimistic on U.S. stocks. It is all that stands between them and the "mother of all short-covering rallies," in my opinion. I remain long Google and Apple. I expect US stocks to trade mixed-to-higher into the close from current levels on more economic optimism, bargain-hunting, short-covering and lower long-term rates.