Friday Watch

Late-Night Headlines
Bloomberg:
- A rare red diamond, the largest of its type ever to appear at auction, sold for a record at a Christie’s International sale in Geneva yesterday.
- President Bush announced steps to reduce airline delays before next week’s Thanksgiving holiday travel rush, including opening up military airspace and suspending nonessential maintenance work.
- India’s record stock market rally may falter if the government slaps controls on overseas buying in an attempt to stem gains in the rupee, CLSA Ltd. said.
- The yen fell against all 16 of the most-actively traded currencies as Japanese investors put money into mutual trusts specializing in overseas securities.
- China’s growth in factory and property spending accelerated, making the central bank more likely to raise interest rates for a sixth time this year.

Wall Street Journal:
- Democratic presidential candidates debated in what amounted to Round Two of their feisty encounters two weeks ago.

NY Times:
- Few American industries have had more success in selling goods to China than makers of medical devices like X-rays, pacemakers and patient monitors. Which is why a recent Chinese decree was so troubling.

MarketWatch.com:
- Best long-term market timers believe we’re in a bull market.

CNNMoney.com:
- Tahoe Hybrid SUV named ‘Green Car of Year’

CNBC.com:
- Fed Pumps Over $47 Billion Into Financial System.

USA Today.com:
- Number of cars with top safety scores nearly triples.

AP:
- Major League Baseball Commissioner Bud Selig said the sport’s revenue was $6.07 billion this year, up from $1.2 billion when he took the job in 1992.
- Outfielder Barry Bonds was indicted by a federal grand jury on perjury and obstruction of justice charges.

Financial Times:
- Mubadala Development Co., an investment company owned by the Abu Dhabi government, may buy a 9% stake in Sunnyvale, California-based Advanced Micro Devices(AMD).
- China’s commerce ministry warned on Thursday that a slowing US economy would trigger a drop in Chinese exports that would mark a “turning point” for China’s rapid economic growth.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (INTU), target $35.
- Upgraded (EXPE) to Buy, target $38.

Night Trading
Asian Indices are -2.75% to -1.0% on average.
S&P 500 futures -.20%.
NASDAQ 100 futures -.14%.

Morning Preview
US AM Market Call
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Earnings of Note
Company/EPS Estimate
- (ANN)/.60
- (JBX)/.38

Upcoming Splits
- (D) 2-for-1

Economic Releases
9:00 am EST
- Net Long-term TIC Flows for September are estimated to rise to $71.5 billion versus -$69.3 billion in August.

9:15 am EST
- Industrial Production for October is estimated to rise .1% versus a .1% gain in September.
- Capacity Utilization for October is estimated to fall to 82.0% versus 82.1% in September.

Other Potential Market Movers
- The Fed’s Kroszner speaking, Fed’s Lockhart speaking, (MHS) analyst day, (GIB) investor day, CSFB High Yield Media & Telecom Investor Conference, RBC Capital Markets MLP Conference CSFB Insurance & Asset Management Conference and Bank of America Energy Conference could also impact trading today.

BOTTOM LINE: Asian indices are sharply lower, weighed down by financial and automaker stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Finish Near Session Lows on Lingering Economic Worries

Evening Review
Market Performance Summary
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Market Wrap CNBC Video(bottom right)
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In Play

Stocks Falling into Final Hour on Lingering Economic Worries

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Internet longs, Retail longs and Computer longs. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is very negative today as the advance/decline line is substantially lower, most sectors are falling and volume is above average. Investor anxiety is high. For the first time in many months, the U.S. dollar is trading as though at least a tradable bottom may be in place and oil/gold are trading toppy. It is also interesting to note that the Bombay Bullion Association said yesterday that gold imports into India, the world's largest consumer of the metal, plunged 50% in October from a year earlier. The October-December period is historically the busiest season in India for jewelry sales. Gold is around session lows falling $27 per ounce, to $788 per ounce. It is down $60 per ounce in a week. For several years, gold bugs have made the argument that its rise was indicative of mounting worries over inflation. The CPI rose to a modestly above-average 3.5% year over year in October vs. a 2.8% rise the prior month. The U.S. Dollar Index is 0.3% higher today but is still not far off its recent lows. I have said for some time and continue to believe that the rise in gold has been mainly a function of the historic speculation for the commodity by investment funds related to perceptions over emerging market demand. I continue to believe the secular trend of disinflation remains firmly in tact and that it will reassert itself during the next meaningful global slowdown. While I may take some profits in my iShares Lehman 20+ Year Treasury Bond (TLT) long over the coming weeks, the position remains a core long, and I will add back to it on any significant uptick in interest rates from current levels. Reuters is reporting that Cisco Systems (CSCO) CEO Chambers is saying that he is comfortable with prior estimates. He also said, while there are risks, he see a soft landing for the U.S. economy and a very strong global economy. I continue to see no evidence of the impending recession that investors are pricing into many stocks at current levels. The forward P/E on the S&P 500 is now 15.8, down from 16.1 at the beginning of the year. If the multiple on the S&P 500 were to contract again this year, it would mark the fourth consecutive year of contraction, a feat which has only been done two other times since 1905. I expect US stocks to trade mixed-lower into the close from current levels on lingering economic worries.

CPI at Expectations, NY Manufacturing Near 3-year High, Job Market Healthy, Philly Fed Rises

- The Consumer Price Index for October rose .3% versus estimates of a .3% gain and a .3% increase in September.

- The CPI Ex Food & Energy for October rose .2% versus estimates of a .2% gain and a .2% rise in September.

- Empire Manufacturing for November came in at 27.4 versus estimates of 19.0 and a reading of 28.8 in October.

- Initial Jobless Claims for this week rose to 339K versus estimates of 320K and 319K the prior week.

- Continuing Claims fell to 2568K versus estimates of 2575K and 2575K prior.

- The Philly Fed for November rose to 8.2 versus estimates of 5.0 and a reading of 6.8 in October.

BOTTOM LINE: Consumer prices in the US rose at the same pace in October as the previous month, Bloomberg reported. Core consumer prices are now rising at a 2.2% annual rate. Food prices rose .3% versus a .5% gain in September. Clothing prices were unch. and auto prices fell slightly. The impact of high energy prices on other prices has been limited. Competition for business continues to keep a lid on inflation, economists said. I continue to believe next month’s inflation readings will show acceleration on the move higher in energy prices, but that further deceleration in inflation is likely over the intermediate-term. I still think the secular trend of disinflation remains firmly in tact.

The pace of manufacturing in NY this month held near a three-year high as shipments accelerated, Bloomberg reported. The Inventories component dropped to minus 1.2 versus 3.5 the prior month. The New Orders component fell to 24.5 versus 25 in October. The Prices Paid component rose to 42.9 versus 36.1 last month. I continue to expect manufacturing to help boost overall US growth as exports remain strong and companies rebuild depleted inventories as they gain confidence in the sustainability of the current expansion.

The number of Americans filing first-time claims for unemployment benefits increased last week, Bloomberg said. The four-week moving average of claims held steady at 330,000. The unemployment rate among those eligible to collect benefits, which tracks the US unemployment rate, held steady at a historically low 1.9%. The Hollywood writers' strike likely contributed to the uptick in claims. I still believe the job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

Manufacturing in the Philly region unexpectedly accelerated this month as new orders and shipments strengthened, Bloomberg reported. The Inventory component rose to 2.5 versus minus 15 in October. The Prices Paid component fell to 37.7 versus 40.3 in October. As I said above, I still expect manufacturing to continue to help boost overall US economic growth over the intermediate-term.

Links of Interest

Market Snapshot Commentary
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Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
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In Play
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Dow Jones Hedge Fund Indexes

Thursday Watch

Late-Night Headlines
Bloomberg:
- John Thain, the former Goldman Sachs Group president who has run the NYSE since 2004, was named CEO of Merrill Lynch, the first outsider to lead the firm in its 93-year history.
- Yen Falls on Speculation Japanese Mutual Funds Buying Overseas Assets.
- Billionaire shareholder activist Carl Icahn increased his stake in Motorola(MOT), becoming the mobile-phone company’s third-largest investor.
- Gold may decline as low as $718 an ounce by February as jewelry demand drops with the close of the festival season in India, the world’s biggest consumer of the precious metal, MF Global Ltd. said. The October-December period is the busiest season in India for jewelry sales, spurred by the wedding season and last week’s Diwali, or the festival of light. Imports by the South Asian nation fell 50% last month from a year earlier after prices surged, according to the Bombay Bullion Assoc. Concern central banks in countries such as Spain and Switzerland could sell bullion may also limit prices. Under the terms of the Central Bank Gold Agreement, European banks agreed to sell 2,500 tons of the metal between 2004 and 2009. MF Global joins UBS AG, Europe’s largest bank by assets, in forecasting lower gold prices.
- Billionaire Edward Lampert’s hedge fund acquired a $485 million stake in Home Depot(HD).
- The White House signaled it will opposes subprime legislation set for a vote in the US House of Representatives, saying the measure would constrict mortgage markets and limit credit to potential homebuyers. “The administration is concerned with these and other provisions that could lead to greater uncertainty and increased litigation, which could cause an undesirable reduction in mortgage credit and a drop in future homeownership,” the White House’s Office of Management and Budget said in the statement.
- China, the world’s biggest steel producer, increased crude-steel output 14% in October from the same month of last year.
- China, the world’s biggest buyer of cotton, cut imports of the fiber 37% in the first ten months of the year, according to preliminary data issued by the Beijing-based customs office.
- China’s industrial production growth slowed in October as the government sought to curb the expansion of factories that are heavy polluters and energy consumers.
- Berkshire Hathaway(BRK/A) boosted its holdings of banks and health insurers and disclosed a stake in CarMax, the biggest US used-car dealer
- Markit Group Ltd. agreed to buy the owners of the iTraxx and CDX credit-default swap indexes, giving it control of the benchmarks for the world’s $45.5 trillion credit-derivatives market.
- Legg Mason’s Bill Miller raised his stakes in Bear Stearns(BSC) and Goldman Sachs(GS) in the third quarter as financial stocks tumbled on losses tied to subprime mortgages.

NY Times:
- Frito-Lay is redesigning a potato-chip factory aiming to reduce the energy it consumers and waste it creates.
- Airlines Vow to Do Better.

MarketWatch.com:
- Gasoline prices rose to an average $3.05 a gallon at the pump last week as consumers cut their demand for gas for the fourth straight week, according to data released Wednesday by SpendingPulse.
- What sound of the other shoe dropping? Wal-Mart(WMT) earnings rebut predictions of a consumer pullback.

BusinessWeek:
- Is GM’s Green Tech Better Than Toyota’s? That’s what Chrysler, Daimler, and BMW seem to think. They’re all using GM’s hybrid technology for their new trucks and SUVs.

CNNMoney.com:
- Google: Half-trillion dollar company by 2010?
- Sony PlayStation sales soar in US after price cut.

CNBC.com:
- Lehman Brothers(LEH) co-Chief Administrative Officer Ian Lowitt said Wednesday the company doesn’t expect substantial write-downs of its most illiquid assets.

The Standard:
- Macau is planning to raise from 18 to 21 the minimum age at which a person can legally gamble, chief executive Edmund Ho Hau-wah told lawmakers yesterday.

Straits Times:
- Singapore banned Microsoft’s(MSFT) “Mass Effect” Xbox 360 video game because it contains a sex scene between a human woman and a female alien, citing the Media Development Authority.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (BX), target $36.
- Upgraded (VCLK) to Buy, target $30..

Night Trading
Asian Indices are -.75% to unch. on average.
S&P 500 futures -.11%.
NASDAQ 100 futures -.61%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Macro Calls
Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (STP)/.29
- (WSM)/.25
- (TYC)/.56
- (GMCR)/.17
- (NUAN)/.14
- (ZOLL)/.31
- (HB)/.75
- (KLIC)/.33
- (INTU)/-.12
- (VM)/-.21
- (BEAS)/.13
- (CRM)/.03
- (LDK)/.38
- (SBUX)/.21
- (HP)/.87
- (SGR)/.51
- (KSS)/.60
- (A)/.52
- (ADSK)/.47
- (CUB)/.36
- (JCP)/1.00
- (MSCC)/.27

Upcoming Splits
- (APAGF) 4-for-1
- (D) 2-for-1

Economic Releases
8:30 am EST
- The Consumer Price Index for October is estimated to rise .3% versus a .3% gain in September.
- The CPI Ex Food & Energy for October is estimated to rise .2% versus a .2% gain in September.
- The Empire Manufacturing index for November is estimated to fall to 19.0 versus 28.8 in October.
- Initial Jobless Claims for this week are estimated to rise to 320K versus 317K the prior week.
- Continuing Claims are estimated to fall to 2575K versus 2579K prior.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of -750,000 barrels versus a -821,000 barrel decline the prior week. Gasoline supplies are expected to fall by -400,000 barrels versus an -819,000 barrel decline the prior week. Distillate inventories are estimated to fall by -250,000 barrels versus a 98K barrel increase the prior week. Finally, Refinery Utilization is estimated to rise by .50% versus a .07% gain the prior week.

12:00 pm EST
- The Philly Fed for November is estimated to fall to 5.0 versus 6.8 in October.

Other Potential Market Movers
- The Fed’s Evans speaking, Fed’s Hoenig speaking, (SCHW) Business Update, (HAS) analyst meeting, (SRDX) analyst meeting, (TLM) analyst meeting, (IWOV) analyst meeting, (IVZ) analyst day, (LYV) analyst day, (TQNT) analyst day, (VPRT) investor day, (ROK) investor day, Stephens Investment Conference, CSFB Healthcare Conference, CSFB Insurance & Asset Management Conference, Morgan Stanley Global Consumer & Retail Conference, UBS Global Tech & Services Conference, Bank of America Energy Conference and Merrill Lynch Banking & Financial Services Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and automaker stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.