Monday Watch

Weekend Headlines
Bloomberg:
- Citigroup Inc.(C) Chairman and CEO Charles Prince resigned after $6.5 billion of writedowns and losses from the credit markets and shares of the biggest US bank slumped to a four-year low.
- Ford Motor(F) and the union representing its 58,500 US factory workers reached a tentative contract agreement, the United Auto Workers said.
- Iraq will take “visible measures” to crack down on Kurdish guerrillas to dissuade Turkey from launching military operations against rebel bases in the country’s north, Iraqi Foreign Minister Hoshyar Zebari said.
- The hedge-fund industry is grappling with its first shakeout in a decade as investors increasingly recoil from startups considered susceptible to the toxic shocks of this year’s credit markets. New hedge funds are opening at the slowest pace since 2003 with almost all of the $164 billion of new investments going to managers with proven records, data compiled by Chicago-based Hedge Fund Research Inc. show.
- Former Prime Minister Benazir Bhutto accused President Pervez Musharraf of staging a “second coup” in Pakistan by imposing emergency rule and said judges, lawyers and opposition parties will protest the move today.
- Berkshire(BRK/A) Profit Surges 64% on Sale of PetroChina(PTR) Stake.

Wall Street Journal:
- Ford Motor(F) told labor leaders at its Jaguar and Land Rover units to be ready to meet potential buyers as soon as Nov. 20 after receiving three “firm bids.”
- With two months left in 2007, the winners and losers on Wall Street are shaping up. Technology stocks have taken the lead down the stretch. At the back of the pack: financials.

NY Times:
- Citigroups’s(C) board is highly likely to name Robert E. Rubin, the former Treasury secretary and an influential adviser to its embattled leader, as its interim chairman at an emergency meeting today, according to a person briefed on the situation.
- Why Google(GOOG) Turned Into a Social Butterfly.
- Wireless Workplaces, Touching the Sky.

CNBC.com:
- American International Group(AIG) shareholder and former CEO Maurice “Hank” Greenberg said on Friday he was considering “strategic alternatives” for the world’s largest insurer.
- Fink Considers Merrill Lynch(MER) CEO Position.

MarketWatch.com:
- Citigroup(C) shares open 5.8% higher in Tokyo debut.
- Excess body weight, even just a little, increases your risk of cancer, according to a study released this week by the American Institute for Cancer Research. But staying active and following six rules for good eating can turn the odds back in your favor, researchers says.
- Legg Mason’s Miller: Buy financials, housing stocks. Fund manager says today’s battered sectors are market’s next leaders.

IBD:
- 166,000 New Jobs Created Last Month, Double Expectations.
- Living In a Networked World. Video is a voracious consumer of network capacity. YouTube – and other “Web 2.0”-oriented sites – are driving demand for more gear to handle that growing traffic.

Time:
- Invention Of the Year: The iPhone.

Zacks.com:
- Third-quarter growth remains strong thus far and has held above double digits for the past week. The median company has reported growth of 11.1%. The surprise ratio is at 2.73:1 and the median surprise is just under 3%. At last report, these three metrics stood at 11.8%, 2.68:1, and 3% respectively. Every sector currently boasts more positive surprises than negatives and the surprise ratio has continued its steady rise over the past week.

Business Week:
- Oil or gas? Prices may lead to switch. With his furnace sputtering its final gasps, Charles Comito decided its was time to trade in his heating oil system for natural gas this year. The switch cost $4,400, a price he says will be worthwhile.

CNNMoney.com:
- Big solar power plant planned for California’s central coast.

Oil & Gas Journal:
- Doubling of oil recovery efficiency seen possible.

Financial Times:
- Britons may buy as many as 200,000 Apple Inc.(AAPL) iPhones over Christmas and the New Year, citing Telefonica SA’s 02 unit, one of the retailers.
- Democrats wake up to being the party of the rich. A legislative proposal that was once on the fast track is suddenly dead. The Senate will no consider a plan to extract billions in extra taxes from mega-millionaire hedge fund managers.

TimesOnline:
- Saudi Arabia is hub of world terror. The desert kingdom supplies the cash and the killers. Saudis make up half of foreign fighters in Iraq.

Reuters:
- Google Inc.(GOOG) will announce its mobile phone strategy next week, including an operating system and deals with several service providers and handset makers.
- Oil prices fell on Monday, pulling back from previous session’s 2.5% surge, as easing tensions in the Middle East encouraged investors to take profits.
- Canada’s CIBC said on Sunday it would sell a major part of its US capital markets business to Oppenheimer Holdings as it focuses on its core operations.

Mainichi:
- Toyota Motor(TM) plans to develop robots to help with household chores and nursing care as part of its “Global Vision 2020” plan unveiled yesterday. Toyota aims to make the home-use robot business a center of future growth in light of Japan’s aging society and the growing prominence of women in society.

MEED:
- Arab Gulf states offered to provide enriched uranium to Iran, aiming to resolve the international standoff over the country’s nuclear program, citing a top Saudi official. Under the plan, Saudi Arabia, Bahrain, Kuwait, Oman, the United Arab Emirates and Qatar will set up a nuclear enrichment plant in a “neutral” country, citing Saudi Arabian Foreign Minister Prince Saud Al-Faisal.

Weekend Recommendations
Barron's:
- Made positive comments on (NTRS), (GRMN), (AAPL), (GOOG), (RIMM), (AKAM) and (KCP).
- Made negative comments on (DPTR), (BIDU) and (MAT).

Citigroup:
- Reiterated Buy on (RIMM), Top handset pick.
- Reiterated Buy on (BRCM), target $49.
- Reiterated Buy on (INTC), target $33. Despite some suggestion that Intel would build inventory in 4Q07, we now view this as an unlikely scenario. Essentially, at the mid-point of Intel’s revenue guidance, we now expect inventories to decline q/q, marking the 3^rd quarter in a row of falling inventories to decline q/q, marking the 3^rd quarter in a row of falling inventories.
- Reiterated Buy on (ATVI), raised estimates, target $29.

Morgan Stanley:
- Reiterated Overweight on (ERTS), raised estimates.

Night Trading
Asian indices are -1.50% to -1.0% on avg.
S&P 500 futures -.42%.
NASDAQ 100 futures -.38%

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Earnings of Note
Company/Estimate
- (BKC)/.33
- (MVL)/.29
- (CAH)/.87
- (DNB)/1.01
- (DIVX)/.12
- (SIE)/.59
- (CUZ)/.08
- (FST)/.55
- (CECO)/.23
- (ATVI)/-.02
- (WMS)/.19
- (SYY)/.41
- (JAVA)/.03

Upcoming Splits
- (ATU) 2-for-1

Economic Data
10:00 am EST
- ISM Non-Manufacturing for October is estimated to fall to 54.0 versus 54.8 in September.

Other Potential Market Movers
- The (NUS) analyst meeting, JPMorgan SMid Cap Conference, CIBC Healthcare Conference and UBS Building Conference could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by commodity and financial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,509.65 -1.67%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 1,509.65 -1.67%
DJIA 13,595.10 -1.53%
NASDAQ 2,810.38 +.22%
Russell 2000 797.78 -2.87%
Wilshire 5000 15,194.27 -1.63%
Russell 1000 Growth 629.14 -.24%
Russell 1000 Value 820.02 -2.97%
Morgan Stanley Consumer 737.33 -.78%
Morgan Stanley Cyclical 1,044.66 -.92%
Morgan Stanley Technology 673.42 +.60%
Transports 4,802.75 -1.32%
Utilities 525.84 +.62%
MSCI Emerging Markets 160.98 -.52%

Sentiment/Internals
NYSE Cumulative A/D Line 69,033 +.41%
Bloomberg New Highs-Lows Index -197 -3,183%
Bloomberg Crude Oil % Bulls 60.0 +43.2%
CFTC Oil Large Speculative Longs 246,342 +.99%
Total Put/Call 1.15 +42.0%
NYSE Arms 1.11 +89.47%
Volatility(VIX) 23.01 +18.0%
ISE Sentiment 136.0 -15.72%
AAII % Bulls 44.7 +43.1%
AAII % Bears 36.5 -24.3%

Futures Spot Prices
Crude Oil 95.98 +4.59%
Reformulated Gasoline 243.85 +7.45%
Natural Gas 8.38 +7.99%
Heating Oil 257.02 +5.1%
Gold 809.80 +2.74%
Base Metals 245.84 -1.23%
Copper 335.95 -6.07%

Economy
10-year US Treasury Yield 4.32% -8 basis points
4-Wk MA of Jobless Claims 327,000 +.5%
Average 30-year Mortgage Rate 6.26% -7 basis points
Weekly Mortgage Applications 681.70 +3.84%
Weekly Retail Sales +2.2%
Nationwide Gas $2.94/gallon +.12/gallon
US Heating Demand Next 7 Days 4% below normal
ECRI Weekly Leading Economic Index 139.40 -.21%
US Dollar Index 76.27 -.90%
CRB Index 353.57 +2.23%

Best Performing Style
Large-cap Growth -.24%

Worst Performing Style
Small-cap Value -4.0%

Leading Sectors
Software +4.4%
Gold +4.11%
Disk Drives +2.8%
Defense +1.4%
Computer Hardware +1.0%

Lagging Sectors
Insurance -4.0%
Homebuilders -4.63%
Steel -4.2%
Banks -6.7%
Coal -7.49%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Mixed into Final Hour as Tech Strength Offsets Financial Weakness

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Medical longs and Biotech longs. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is mixed today as the advance/decline line is slightly lower, sector performance is mixed and volume is above-average. Traders are once again ignoring positive economic data as investors seem to always take the stance that the worst is yet to come in the current U.S. negativity bubble. Goldman Sachs (GS) told CNBC that rumors of an impending writedown aren't true. As well, Merrill Lynch (MER) said that it doesn't believe inappropriate deals occurred. So far, action today is sloppy and likely frustrating for both bulls and bears. Strength in tech, energy and biotech is being offset by weakness in anything associated with housing. Investor anxiety is still high. It is a positive that the broad market is holding as well as it is given the groups that remain under pressure. Housing-related plays are getting very oversold again and remain heavily-shorted, which means the slightest of catalysts could spur a near-term rally in the beaten-up shares. Beneath the surface, the tone is more positive in the broad market. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting and short-covering.

Job Creation Healthy, Unemployment Still Historically Low, Earnings Rising Almost Twice Inflation, Factory Orders Rebound

- The Change in Non-farm Payrolls for October was 166K versus estimates of 85K and 96K in September.

- The Unemployment Rate for October was 4.7% versus estimates of 4.7% and 4.7% in September.

- Average Hourly Earnings for October rose .2% versus estimates of a .3% gain and a .3% increase in September.

- Factory Orders for September rose .2% versus estimates of a .7% decline and a 3.5% decline in August.

BOTTOM LINE: American employers added almost twice as many jobs as forecast in October, Bloomberg reported. The unemployment rate held at a historically low 4.7%. Service industries, which includes banks, insurance companies, restaurants and retailers, added 190,000 jobs. Average Hourly Earnings rose 3.8%, which is very high by historic stands and almost twice most measures of inflation. For two years, we have been hearing that the housing downturn would lead to imminent massive job loss, and there remains little evidence of this. Fed fund futures now imply a 72% chance for another 25 basis-point-cut at the upcoming December meeting, up from a 60% chance yesterday. I continue to believe the US job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

Orders to US factories unexpectedly rose in September, suggesting companies remain confident the economy will continue to grow, Bloomberg reported. Excluding transports, demand jumped 1.4%. Bookings for capital goods excluding aircraft and military equipment, a measure of future business investment, rose .6% versus a .1% gain in August. Manufacturers had enough goods on hand to last 1.24 months, the same as the prior month. I continue to believe manufacturing will help boost overall US growth over the intermediate-term as companies gain confidence in the sustainability of the current expansion and rebuild depleted inventories.

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