Market Week in Review

S&P 500 1,453.70 -3.6%*

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Weekly Scoreboard*

Indices
S&P 500 1,453.70 -3.6%
DJIA 13,042.74 -4.01%
NASDAQ 2,627.94 -6.41%
Russell 2000 772.38 -3.34%
Wilshire 5000 14,645.14 -3.59%
Russell 1000 Growth 601.40 -4.38%
Russell 1000 Value 796.58 -2.79%
Morgan Stanley Consumer 729.57 -1.03%
Morgan Stanley Cyclical 995.16 -4.65%
Morgan Stanley Technology 616.64 -8.35%
Transports 4,603.92 -4.01%
Utilities 524.27 -.12%
MSCI Emerging Markets 155.43 -3.28%

Sentiment/Internals
NYSE Cumulative A/D Line 65,194 -5.6%
Bloomberg New Highs-Lows Index -823 -317.77%
Bloomberg Crude Oil % Bulls 36.7 -38.3%
CFTC Oil Large Speculative Longs 251,944 +2.3%
Total Put/Call 1.08 -6.09%
NYSE Arms .86 -22.52%
Volatility(VIX) 28.50 +23.86%
ISE Sentiment 118.0 -13.24%
AAII % Bulls 36.19 -19.06%
AAII % Bears 51.43 +41.02%

Futures Spot Prices
Crude Oil 96.20 +.62%
Reformulated Gasoline 245.60 +.93%
Natural Gas 7.88 -6.31%
Heating Oil 261.25 +1.93%
Gold 834.0 +3.22%
Base Metals 238.19 -3.11%
Copper 314.60 -5.71%

Economy
10-year US Treasury Yield 4.21% -10 basis points
4-Wk MA of Jobless Claims 329,800 +.6%
Average 30-year Mortgage Rate 6.24% -2 basis points
Weekly Mortgage Applications 670.60 -1.63%
Weekly Retail Sales +2.1%
Nationwide Gas $3.08/gallon +.14/gallon
US Heating Demand Next 7 Days 27% below normal
ECRI Weekly Leading Economic Index 140.10 +.5%
US Dollar Index 75.39 -1.23%
CRB Index 354.54 +.27%

Best Performing Style
Small-cap Value -2.34%

Worst Performing Style
Large-cap Growth -4.4%

Leading Sectors
Hospitals +1.93%
HMOs +.43%
Utilities -.29%
Gaming -1.11%
Alternative Energy -1.29%

Lagging Sectors
Networking -7.06%
Internet -8.01%
Software -8.02%
Computer Hardware -9.4%
Airlines -11.7%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Lower into Final Hour Despite Gains in Financial Shares

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Software longs, Internet longs and Computer longs. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is negative today as the advance/decline line is lower, most sectors are falling and volume is heavy. Investor anxiety is above-average. Money market funds reported net inflows soared by $63.1 billion, bringing assets in the sector to $2.97 trillion. According to Intrade.com, the odds of a U.S. recession next year are down to 41.7% vs. 58.9% in September. Copper is falling another 2% today and has been moving almost straight down for a month. The metal remains at extremely speculative levels due to the explosion in hedge and commodity funds, and its decline does not indicate a recession is forthcoming, in my opinion. Fed fund futures now imply a 96% chance for another 25-basis-point cut at the December meeting vs. 90% yesterday and 68% one week ago. The S&P 500 is back near session highs, boosted by the financials heading into positive territory. The (XLF), which is the second most-heavily shorted security on the AMEX, is now 1.4% higher on the day. There are rumors that HUD may make a statement that would benefit (CFC), and the stock is surging 5.5% to session highs. Nasdaq breadth is -700, which isn't bad at all considering the 35-point loss in the index. I expect the bears to try and bring us back down over the next 20 minutes. If they are unable to gain traction, we should see some broad market short-covering into the close. I expect US stocks to trade modestly higher into the close from current levels on bargain-hunting and short-covering.

Trade Deficit Shrinks Again as Exports Soar to Another Record, Import Prices Boosted by Oil, Confidence Low

- The Trade Deficit for September shrank to -$56.5 billion versus estimates of -$58.5 billion and -$56.8 billion in August.

- The Import Price Index for October rose 1.8% versus estimates of a 1.2% gain and a downwardly revised .8% increase in September.

- The Preliminary Univ. of Mich. Consumer Confidence Index for November fell to 75.0 versus estimates of 80.0 and a reading of 80.9 in October.

BOTTOM LINE: The US trade deficit unexpectedly narrowed in September as exports soared to another record, Bloomberg reported. Exports boomed to new record highs for the seventh consecutive month. Exports rose to $140.1 billion as almost all major categories, including foods, raw materials, automobiles and consumer goods registered gains. The trade deficit will likely continue to improve over the intermediate-term.

Prices for goods imported into the US jumped more than forecast in October as oil prices neared a record, Bloomberg reported. Prices excluding petroleum, which still includes nat gas, food and metals, rose .5%. Excluding petroleum, prices rose 3.2% over the last 12 months. The cost of imported capital goods fell .1% versus unch. the prior month. Costs for consumer goods excluding autos rose .1%. I expect import price increases to subside over the coming months and move back to below-average levels over the intermediate-term.

Confidence among US consumers fell more than expected in November, Bloomberg reported. The Expectations component fell to 64.7 versus 70.1 the prior month. The Current Conditions component fell to 91 versus 97.6 the prior month. Consumers expect inflation to rise a below average 2.9% over the next five years. I still expect Consumer Confidence to head back near cycle highs over the intermediate-term as housing fears subside, stocks make new record highs, unemployment remains historically low, wages continue to substantially outpace inflation, gas prices fall, the dollar firms and inflation decelerates further.

Links of Interest

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Friday's Watch

Late-Night Headlines
Bloomberg:
- BHP Billiton(BHP) may need to offer cash for Rio Tinto Group(RTP) after its smaller rival rejected the largest ever takeover bid.
- Merck(MRK) may pay about $5 billion to settle claims it hid the health risks of its withdrawn Vioxx painkiller, three lawyers with direct knowledge of the accord said.
- China called on Iran to “positively respond” to international concerns it may be using its nuclear program to develop an atomic weapon.
- Nikon Corp., the world’s second-biggest maker of cameras aimed at professionals, climbed the most in almost five years after the company raised its full-year profit forecast and dividend.
- North Korea thanked the US Navy for assisting one of its cargo ships hijacked by pirates off the coast of Somalia last month and said the incident was a symbol of cooperation between the government in Washington and Pyongyang.
- Julius Baer Holding, Switzerland’s third-largest private bank, plans to spin off its US fund unit early next year in an IPO.

Wall Street Journal:
- Chrysler LLC plans to offer rebates and incentives next month to reduce its inventory.

CNNMoney.com:
- If it feels like more and more Americans have extra money to spend, that's because they do. The percentage of U.S. households with discretionary income rose to 64 percent last year from 52 percent in 2002, a report by The Conference Board shows. Today about 73 million U.S. households have discretionary income, up from about 57 million in 2002.
- Wall Street braces for higher tax rates. If lawmakers let capital gains and dividend rates move higher, selling pressure could pick up and buyers could get stingy. The leading Democratic candidates for president have said they’d favor higher investment taxes on upper-income taxpayers – and Wall Streeters don’t like it.
- Marvel recalling plush ‘Curious George’ dolls. About 175,000 plush dolls are being recalled for excessive levels of lead after the company re-tested its entire product line.
- Prince Alwaleed: Why Chuck had to go.

IBD:
- Intel(INTC) Unveils Its ‘Penryn’ Chip Lineup.

CNBC.com:
- NY Democratic Attorney General Andrew Cuomo was wrong to file subpoenas against Fannie Mae(FNM) and Feddie Mac(FRE) without consulting their federal regulator and may have overreached his authority, the regulator wrote in a letter Thursday.

Reuters:
- Economy faces risks, not recession: Bernanke.

Telegraph:
- Citigroup Inc.(C) is being urged by some analysts and shareholders to beak off and sell its brokerage, investment banking and retail operations, citing analysts.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (CELG), target $78.
- Reiterated Buy on (URBN), target $30.

Night Trading
Asian Indices are -.50% to +1.0% on average.
S&P 500 futures +.29%.
NASDAQ 100 futures +.40%.

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Earnings of Note
Company/EPS Estimate
- (KDE)/-.15
- (CLWR)/-.75
- (DRS)/.95
- (FNM)/.85
- (GG)/.15
- (JASO)/2.63

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- The Trade Deficit for September is estimated to widen to -$58.5 billion versus -$57.6 billion in August.
- The Import Price Index for October is estimated to rise 1.2% versus a 1.0% gain in September.

10:00 am EST
- Preliminary Univ. of Mich. Consumer Confidence for November is estimated to fall to 80.0 versus 80.9 in October.

Other Potential Market Movers
- The (HNT) Investor Conference, (CTIC) analyst day, (GAS) Analyst Presentation and (FNM) Conference Call could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by financial and commodity stocks in the region. I expect US equities to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.