Weekly Outlook

Click here for The Week Ahead by Reuters.

Click here for Stocks in Focus for Monday by MarketWatch.com.

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

Economic reports for the week include:

Mon. – Existing Home Sales

Tues. – Consumer Confidence, August 7 FOMC Minutes, weekly retail sales

Wed. – Weekly MBA Mortgage Applications, Preliminary 2Q GDP, Preliminary 2Q Personal Consumption, Preliminary 2Q GDP Price Index, Preliminary 2Q Core PCE

Thur. – Initial Jobless Claims, Continuing Claims, House Price Index

Fri. – Personal Income, Personal Spending, PCE Core, Chicago Purchasing Manager, Factory Orders, Univ. of Mich. Consumer Confidence

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

Mon. – Shanda Interactive(SNDA), Winn-Dixie Stores(WINN)

Tues. – Borders Group(BGP), Corinthian Colleges(COCO), Micros Systems(MCRS), Sanderson Farms(SAFM), Tuesday Morning(TUES)

Wed. – Big Lots(BIG), Brown Shoe(BWS), Chico’s FAS(CHS), Coldwater Creek(CWTR), Dollar Tree Stores(DLTR), Energy Conversion Devices(ENER), Fred’s Inc.(FRED), Jo-Ann Stores(JAS), Joy Global(JOYG), Novell Inc.(NOVL), Quanex Corp.(NX), Tivo Inc.(TIVO), Williams-Sonoma Inc.(WSM)

Thur. – Brown-Forman(BF/A), Ciena Corp.(CIEN), Cost Plus(CPWM), Del Monte Foods(DLM), Dell Inc.(DELL), Freddie Mac(FRE), Genesco Inc.(GCO), H&R Block(HRB), Omnivision Technologies(OVTI), Sears Holdings(SHLD), Tiffany & Co.(TIF), United Natural Foods(UNFI), Wind River(WIND), Zale Corp.(ZLC)

Fri. – BearingPoint(BE), Dollar General(DG), Focus Media(FMCN), Shaw Group(SGR)

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

Mon. – None of note

Tue. – None of note

Wed. – None of note

Thur. – Moody’s State of the Credit Markets Weekly Update

Fri. – Fed Chief Bernanke in Jackson Hole

BOTTOM LINE: I expect US stocks to finish the week modestly higher on bargain-hunting, diminishing credit market fears, mostly positive economic data and short-covering. My trading indicators are giving neutral signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,479.37 +2.31%*

Click here for What a Week from TheStreet.com.

*5-day % Change

Weekly Scoreboard*

Indices
S&P 500 1,479.37 +2.31%
DJIA 13,378.87 +2.29%
NASDAQ 2,576.69 +2.86%
Russell 2000 798.93 +1.64%
Wilshire 5000 14,855.94 +2.46%
Russell 1000 Growth 591.48 +3.02%
Russell 1000 Value 833.09 +2.05%
Morgan Stanley Consumer 719.15 +1.65%
Morgan Stanley Cyclical 1,031.87 +4.26%
Morgan Stanley Technology 629.74 +3.1%
Transports 4,915.95 +3.1%
Utilities 498.80 +2.34%
MSCI Emerging Markets 129.59 +7.29%

Sentiment/Internals
NYSE Cumulative A/D Line 65,381 +10.1%
Bloomberg New Highs-Lows Index -145 +92.2%
Bloomberg Crude Oil % Bulls n/a
CFTC Oil Large Speculative Longs 206,977 -6.2%
Total Put/Call 1.07 -12.3%
NYSE Arms .62 -7.14%
Volatility(VIX) 20.72 -30.91%
ISE Sentiment 115.0 -11.6%
AAII % Bulls 41.28 -2.2%
AAII % Bears 43.1 -5.4%

Futures Spot Prices
Crude Oil 71.2 -.61%
Reformulated Gasoline 197.85 -2.22%
Natural Gas 5.49 -21.1%
Heating Oil 199.70 -.74%
Gold 678.30 +1.53%
Base Metals 233.95 +4.45%
Copper 336.50 +7.82%

Economy
10-year US Treasury Yield 4.62% -7 basis points
4-Wk MA of Jobless Claims 317,800 +1.5%
Average 30-year Mortgage Rate 6.52% -10 basis points
Weekly Mortgage Applications 641.10 -5.5%
Weekly Retail Sales +2.2%
Nationwide Gas $2.78/gallon -.02/gallon
US Cooling Demand Next 7 Days 25.0% above normal
ECRI Weekly Leading Economic Index 139.80 -1.34%
US Dollar Index 80.69 -.93%
CRB Index 305.64 -.17%

Best Performing Style
Mid-cap Growth +3.8%

Worst Performing Style
Small-cap Value +1.4%

Leading Sectors
Steel +12.3%
Engineering & Construction +11.2%
Airlines +7.8%
Gaming +7.1%
Retail +5.1%

Lagging Sectors
Medical Equipment +1.95%
Alternative Energy +1.8%
Insurance +1.73%
Tobacco +1.30%
Banks -.98%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Higher into Final Hour on Positive Economic Data, Diminishing Credit Fears

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Computer longs, Medical longs, Internet longs and Retail longs. I covered my some of my (EEM) short and all of my (IWM)/(QQQQ) hedges today, thus leaving the Portfolio 100% net long. The overall tone of the market is positive today as the advance/decline line is higher, every sector is rising and volume is below average. My intraday gauge of investor angst is still above average. Bloomberg is reporting that Google's (GOOG) chief economist is saying that the advertisers have not slowed Web spending. This is a positive for the stock and market. I expect Google to outperform the market substantially through year-end. There has been a lot of recession talk of late, mainly by those who know that the more the media talk about it, the more the consumer will retrench. A recession this year, defined by two consecutive quarters of negative growth, is virtually impossible, in my opinion. We would have to see a contraction this quarter. Based on my analysis, that is a very remote possibility. I also believe the likelihood of a recession beginning next year is fairly low. Recessions don't occur often. We never even saw two consecutive quarters of negative growth during the 2000-2002 bubble bursting and 9/11 terrorist attacks. I see few signs that point to a recession now, however, if we did start to get substantially weaker economic data, there is no doubt in my mind that the Fed would act and act vigorously. The Fed has a lot of ammunition to fire, and I strongly disagree with those who think that doesn't matter. We have heard for several years every time we get some weak data that the bulls are in a lose-lose situation. If the Fed cuts, it means the economy is too weak; if they don't, investors will sell because they will be disappointed. In my opinion, we are in a win-win situation. I think stocks rally if an imminent recession begins to be taken out of the equation, and I think we rally if the Fed cuts rates. We saw historic levels of investor angst in many gauges over the last few weeks as investors prepared for the worst. What if the worst doesn't happen? There is a mountain of cash on the sidelines, insiders are buying at levels last seen before we took off in 2003, fear is high, bears are partying likes it's 2000-2002, and the S&P 500 is just 4.8% off its record high. If the major averages continue to trade around current levels or even grind higher over the coming weeks as we get more negative news, investment manager performance anxiety will come back into play in a monstrous way. This could pave the way for an extraordinarily bullish fourth-quarter for stocks. Money market funds are at new record levels and have now seen $127.79 billion in cash inflows over the last two weeks, the most in several years. Asia will likely take today's U.S. economic data very well on Monday, especially the 9.8% surge in auto orders and decline in new home inventories. The average 30-year mortgage rate fell 10 basis points, to 6.52% this week, the largest weekly decline since Nov. 24, 2005. This is also down 22 basis points from mid-June highs. As well, the average 30-year jumbo mortgage rate has declined 7 basis points over the last week, to 7.21%. I expect rates to fall further over the intermediate term as credit fears subside and inflation decelerates further. The 10-year swap rate is falling another 3.25%, to 68.15 basis points over Treasuries. This is down from 83.75 on Aug. 17, which was the day after the S&P 500 bottomed. The Broker/Dealer Index, the source of much angst, is at session highs, rising 1.0%. Nikkei futures are indicating an up 220 open in Japan on Monday. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, diminishing credit fears, less economic pessimism and bargain hunting.

Today's Headlines

Bloomberg:
- German Chancellor Angela Merkel said the recent turmoil in world financial markets underscores the need for greater transparency in hedge funds, a key aim of Germany’s presidency of the Group of Eight leading nations.
- Credit investors are overcompensating for their years of complacency by “shunning deals with innovation and added risk,” S&P analysts said in a report today.
- David Kelly, an economic adviser at Putnam Investments LLC, says worries about a slower housing market and losses on subprime mortgages have been blown out of proportion by Wall Street.
- Crude oil rose after a report showed orders for US-made durable goods rose more than expected last month, easing concern that loan defaults will slow economic growth.
- Sugar is falling 1% on speculation that a global surplus will overwhelm demand next year and that lower energy prices will reduce the value of ethanol made from sugar cane.
- Zbigniew Brzezinski, one of the most influential foreign-policy experts in the Democratic Party, threw his support behind Barack Obama’s presidential candidacy, saying the Illinois senator has a better global grasp than his chief rival, Hillary Clinton.
- US three-month Treasury bill yields rose for a fourth day as demand eased for the safest government securities.
- Republican presidential candidate Mitt Romney will propose tax breaks to help Americans pay for health insurance and incentives for states to craft their own programs to make sure everyone gets coverage.

NY Times:
- The headquarters of Google Inc.(GOOG) is increasingly popular among US presidential candidates as a fund-raising destination.

USA Today:
- More Americans with varying levels of wealth are giving it to relatives or charitable causes while they’re still alive.

Washington Post:
- What Credit Crunch?

Financial Times:
- Vulture funds, or seekers of distressed securities, are poised to pick through dead or wounded companies and securities. A net flow of $20 billion into distressed-securities funds in the first half of 2007 was double the entire amount for 2003-2006, citing Hedge Fund Research data.

Reuters:
- Robert Merton, the Nobel Prize winner who co-founded the failed hedge fund Long-Term Capital Management, said his new firm plans to start and asset management business and open new hedge funds.

Durable Goods Orders Strong, New Home Sales Unexpectedly Rise, Home Inventories Fall

- Durable Goods Orders for July rose 5.9% versus estimates of 1.0% and an upwardly revised 1.9% gain in June.

- Durable Ex Transports for July rose 3.7% versus estimates of a .6% gain and a downwardly revised 1.2% decline in June.

- New Home Sales for July rose to 870K versus estimates of 820K and an upwardly revised 846K in June.

BOTTOM LINE: Orders for US-made durable goods rose more than forecast in July, suggesting business spending remains healthy, Bloomberg reported. Orders for autos rose 9.8%, the biggest increase since January 2003 versus a .7% decline in the prior month. Non-defense capital goods orders excluding aircraft, a gauge of future business spending, rose 2.2%, versus a .1% decline in June. The gain in ex-transport orders was propelled by demand for machinery, communications gear and primary metals. I expect business spending to remain healthy over the intermediate-term as companies gain confidence in the sustainability of the current expansion and continue to rebuild depleted inventories.

Sales of new homes in the US unexpectedly rose for the second time this year in July, suggesting the housing market is stabilizing, Bloomberg reported. The median sales price of a new home rose .6% to $239,500. Inventories of unsold homes at the current sales pace fell to 7.5 months worth at the current sales pace. This is down from 8.3 months supply worth in March. Sales soared 22% in the West and rose .6% in the South. Sales fell 24% in the Northeast and .9% in the Midwest. New home sales are considered a leading indicator of demand because they are recorded when an agreement is signed. The decline in inventories is a large positive. I continue to believe home sales are in the process of stabilizing at relatively high, by historic standards, levels.