Weekly Outlook

Click here for The Week Ahead by Reuters
Click here for Stocks in Focus for Monday by MarketWatch

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

Economic reports for the week include:

Mon. - NAHB Housing Market Index

Tues. - Housing Starts, Building Permits, weekly retail sales

Wed. - weekly MBA Mortgage Applications, FOMC Rate Decision

Thur. - Initial Jobless Claims, Continuing Claims, Leading Indicators

Fri. - Existing Home Sales

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

Mon. - None of note

Tues. - Adobe Systems(ADBE), Chaparral Steel(CHAP), Cintas Corp.(CTAS), Commercial Metals(CMC), Darden Restaurants(DRI), Factset Research(FDS), Oracle Corp.(ORCL), Shuffle Master(SHFL), Sonic Corp.(SONC)

Wed. - Charming Shoppes(CHRS), FedEx(FDX), Morgan Stanley(MS), Ross Stores(ROST)

Thur. - Barnes & Noble(BKS), Borders Group(BGP), ConAgra Foods(CAG), General Mills(GIS), Georgia Gulf(GGC), Herman Miller(MLHR), KB Home(KBH), Nike Inc.(NKE), Palm Inc.(PALM), Williams-Sonoma(WSM)

Fri. - Apollo Group(APOL), Family Dollar(FDO), Freddie Mac(FRE)

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

Mon. - Lehman Brothers Global Healthcare Conference, the Bank of Japan Policy Meeting

Tue. - Lehman Brothers Global Healthcare Conference, AG Edwards Energy Conference, (CAKE) analyst day

Wed. - Lehman Brothers Global Healthcare Conference, JPMorgan Insurance Conference, JPMorgan Aviation & Transport Conference, AG Edwards Energy Conference, Merrill Lynch Retailing Leaders Conference, BB&T Manufacturing & Materials Conference, JPMorgan Gaming/Lodging/Restaurant Conference

Thur. - BB&T Manufacturing & Materials Conference, JPMorgan Aviation & Transport Conference, Merrill Lynch Retailing Leaders Conference, JPMorgan Gaming/Lodging/Restaurant Conference, (ADP) analyst meeting

Fri. - (BEAV) analyst meeting, the Fed’s Plosser speaking

BOTTOM LINE: I expect US stocks to finish the week modestly higher on buyout speculation, constructive FOMC comments, mostly positive earnings reports, short-covering and bargain-hunting. My trading indicators are giving mixed signals and the Portfolio is 75% net long heading into the week.

Market Week in Review

S&P 500 1,386.95 -1.13%*



Click here for the Weekly Wrap by Briefing.com.

Weekly Scoreboard*

Indices
S&P 500 1,386.95 -1.13%
DJIA 12,110.41 -1.35%
NASDAQ 2,372.66 -.62%
Russell 2000 778.77 -.81%
Wilshire 5000 13,999.05 -1.10%
Russell 1000 Growth 548.52 -.87%
Russell 1000 Value 798.22 -1.38%
Morgan Stanley Consumer 685.47 -1.15%
Morgan Stanley Cyclical 934.88 -.65%
Morgan Stanley Technology 552.78 -.73%
Transports 4,781.63 -1.0%
Utilities 478.56 +.49%
MSCI Emerging Markets 110.89 -.80%

Sentiment/Internals
NYSE Cumulative A/D Line 65,809 +2.0
Bloomberg New Highs-Lows Index -30 +21.0%
Bloomberg Crude Oil % Bulls 49.0 +48.4%
CFTC Oil Large Speculative Longs 172,387 +.2%
Total Put/Call 1.22 +6.1%
NYSE Arms 1.35 +6.0%
Volatility(VIX) 16.79 +19.8%
ISE Sentiment 93.0 +36.7%
AAII % Bulls 32.99 -7.9%
AAII % Bears 45.36 +1.05%

Futures Spot Prices
Crude Oil 57.10 -4.9%
Reformulated Gasoline 190.32 +.52%
Natural Gas 6.93 -1.91%
Heating Oil 169.10 -1.33%
Gold 653.0 +.33%
Base Metals 247.72 +4.7%
Copper 301.40 +8.1%

Economy
10-year US Treasury Yield 4.54% -5 basis points
4-Wk MA of Jobless Claims 329,300 -3.0%
Average 30-year Mortgage Rate 6.14% unch.
Weekly Mortgage Applications 690.50 +2.81%
Weekly Retail Sales +3.4%
Nationwide Gas $2.55/gallon +.03/gallon
US Heating Demand Next 7 Days 4.0% below normal
ECRI Weekly Leading Economic Index 140.30 +.07%
US Dollar Index 83.23 -1.22%
CRB Index 304.44 -1.2%

Leading Sectors
Wireless +1.3%
HMOs +1.3%
Hospitals +.64%
Disk Drives +.41%

Lagging Sectors
Alternative Energy -2.1%
Insurance -2.1%
Steel -2.2%
I-Banks -3.1%
Homebuilders -3.7%

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

*5-Day Change

Stocks Lower into Final Hour, Weighed Down by I-Banks

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Retail longs and Internet longs. I covered my remaining (IWM)/(QQQQ) hedges this morning, thus leaving the Portfolio 100% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are falling and volume is very heavy. Oil is now trading .50 lower today despite a weaker dollar and strength in other commodities, giving up this morning's gains. I am hearing from a number of sources that energy-related commodity funds are seeing substantial redemptions. Moreover, Bloomberg is saying today that some of this money is flowing into energy-related equity hedge funds due to their lower volatility and better performance. In my opinion, oil is still very elevated, even after its 27% plunge, given the deteriorating fundamentals for the commodity. I still believe this is almost solely a result of the frenzied and historic speculation by investment funds. It is interesting to note that if enough investors yank their money from commodity funds investing in oil, oil will likely drop further, thus eventually resulting in a substantial fall in energy-related equities. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, falling energy prices and short-covering.

Today's Headlines

Bloomberg:
- Crude oil is falling below $57/bbl. in NY on reduced concern that Iranian supplies would be curtailed after the US said it will issue a visa to Iran’s President so he can speak to the UN Security Council in NYC.
- The world’s shipping lines charged less to move containers in the fourth quarter as new vessels entered service, Containerisation International monthly magazine said.
- BJ Willingham, who oversees $115 million in oil and gas investments at a Houston hedge fund, said the drop in commodity prices that wiped out Amaranth Advisors LLC last year was a boon for managers who stick to stocks. Investors who were burned by the 2006 rout of natural gas prices are fleeing into the arms of energy hedge funds that trade only equities, eschewing the risks of commodities futures.
- US farmers will plant more corn than expected two months ago to take advantage of higher prices, Informa Economics Inc. said in a report to clients.
- Wal-Mart Stores(WMT) scrapped plans to open its own bank, ending a two-year controversy that roiled financial-services companies that feared direct competition from the world’s largest retailer.

Wall Street Journal:
- EBay Inc.’s(EBAY) Skype Internet telephone service attracted its biggest number of new customers in China.
- Jonathan Abrams, who founded Friendster Inc. social-networking Web site, will today introduce Socializer Inc., an Internet site designed to help viewers plan events.
- The US is expected by economic forecasters to avoid a recession and even a significant increase in unemployment, despite a perceived likelihood that recent defaults in the subprime mortgage market will spread to the wider mortgage market, citing a WSJ.com survey.

Deal.com:
- Kohlberg Kravis Roberts is favored to acquire Armstrong World Industries, a building products maker, for just under $3 billion.

CNBC:
- Merchant bank Blackstone Group LP may file for an IPO within the next two weeks. Goldman Sachs(GS) is working with Blackstone’s lawyers on a prospectus for the offering and the company is assessing potential opposition form equity partners.

Business Week:
- Google Inc.(GOOG), Coach(COH) and Gilead Sciences(GILD) are the best-performing companies, Business Week said in a cover story devoted to the 50 best performers.

Financial Times:
- Buyout firms are trying to prevent the loans they use to fund acquisitions from being sold on to hedge funds.

AFP:
- President Mahmoud Ahmadinejad said Iran won’t go back on sensitive nuclear work, after, after world powers agreed on new sanctions, citing Iran’s semi-official Fars news agency.

Valor Economico:
- Petroleo Brasileiro SA, Brazil’s state-controlled oil company, will boost its exports of ethanol 700% this year on rising demand from Venezuela, Nigeria and the US.

CPI Still Below Average, Industrial Production Jumps, Sentiment Falls

- The Consumer Price Index for February rose .4% versus estimates of a .3% gain and a .2% rise in January.
- The CPI Ex Food & Energy for February rose .2% versus estimates of a .2% gain and a .3% rise in January.
- Industrial Production for February rose 1.0% versus estimates of a .3% gain and an upwardly revised -.3% decline in January.
- Capacity Utilization for February rose to 82.0% versus estimates of 81.3% and 81.4% in January.
- Preliminary Univ. of Mich. Consumer Confidence for March fell to 88.0 versus estimates of 89.0 and a reading of 91.3 in February.

BOTTOM LINE: Prices paid by US consumers rose .4% last month, higher than estimates, Bloomberg reported. Energy prices rose .9% in February versus a 1.5% decline in January due to the fact that we saw historically cold temperatures during the month. While the CPI came in above estimates, it is still nowhere near worrisome levels. The CPI year-over-year for February rose 2.4% vs. the 20-year average of 3.1%. Current Average Hourly Earnings year-over-year at 4.1% are still almost twice the rise in the CPI. Moreover, the 10-year yield is only 1 basis point higher on this morning's reports. I continue to believe inflation fears have peaked for this cycle.

Industrial production in the US rose last month by the most since November 2005, as manufacturing rebounded and the return of cold weather prompted a surge in utility use, Bloomberg said. The report indicates factories are making headway in their inventory reduction efforts, suggesting manufacturing may soon begin adding to US economic growth. Manufacturing, which accounts for most of the report, rose .4% versus a .5% decline the prior month. Computer production surged 2.2% and home electronics production soared 9.9%. Moreover, auto production rose 3.2%. Responses to a question in the Philly Fed report also indicated manufacturing will accelerate during the second quarter. The worst of the manufacturing slowdown is likely over. I continue to believe significant inventory de-stocking will lead to a below trend 1Q GDP report. However, manufacturing should begin adding to growth in the second quarter and help boost GDP back to average rates of around 3% by 3Q.

Confidence declined this month after fuel prices rose and stocks declined, Bloomberg reported. The expectations component of the index fell to 79.3 versus 81.5 in February. The current conditions component fell to 103.6 versus 106.7 in January. Consumers expect an inflation rate of 3% over the next 12 months, the same as February. Gas prices rose to $2.55/gallon this month even as crude oil prices continue to fall. Rising gas prices, the stock pullback and media’s obsession with housing all contributed to the decline in sentiment. I expect consumer confidence to hit a new cycles high by year-end as stocks rise, inflation decelerates further, gas prices fall, housing sales stabilize at relatively high levels, the job market remains healthy and wages continue to outpace inflation.