Wednesday Watch

Late-Night Headlines
Bloomberg:
- Japan’s exports rose to a record in October as companies shipped more cars and electronics.
- Pakistan will ensure elections on Jan. 8 are free and transparent, President Pervez Musharraf said, as the government released opposition supporters and journalists held under emergency regulations imposed almost three weeks ago.
- Copper Arch Capital LLC, the hedge-fund firm run by former Morgan Stanley managing director Scott Sipprelle, is liquidating and returning money to clients after returns trailed peers this year.

Wall Street Journal:
- US Treasury Secretary Henry Paulson, concerned that millions of homeowners aren’t being helped quickly enough, is pressing the mortgage-service industry to help broad swaths of borrowers qualify for better loans instead of dealing with mortgage problems on a case-by-case basis.
- Scientists have created human embryonic stem cells from mature cells in a breakthrough that avoids destroying human embryos. The technique could lead to new treatments for disease without the ethical questions involved in cloning.

BusinessWeek:
- Life Sciences Stocks: A Healthy Outlook. S&P likes the fundamentals of one of the stronger-performing subindustries this year, and has buy ratings on seven names.

USA Today.com:
- Sales picture is bright for digital cameras; ’07 may see 16% rise.
- One more thing cellphones could do: Replace wallets.
- Oil’s record has analysts puzzled. The price of oil again set a record Tuesday, easily blowing through the previous high earlier this month, in a move some analysts said was absurd because there was no solid, supply-and-demand reason for it.

Reuters:
- GM’s November sales meeting expectations: Lutz.

Financial Times:
- US reports ‘phenomenal’ drop in Iraq violence. The figures show the number of suicide attacks, roadside bombings, mortar and other attacks on US forces and on the Iraqi population have plunged 50% since the 30,000 extra troops in June.
- BlackRock(BLK), the asset manager 49% owned by Merrill Lynch(MER), is set to be signed up as the manager of the $75 billion superfund being put together by the top three US banks.
- The failure rate of hedge funds is expected to double this year, citing an interview with Man Group Plc CEO Peter Clarke. As many as one in 10 funds will go out of business, and the number of funds introduced will drop by about a third, Clarke said.

London-based Times:
- Starbucks Corp.(SBUX) plans to open at least 100 new coffee shops in the UK and Ireland next year, 25% more than the company opened this year.

Australian Financial Review:
- Publishing & Broadcasting Ltd., Australia’s biggest casino owner, may spend at least $1.8 billion on gaming acquisitions in Pennsylvania.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (EBAY), target $49.
- Reiterated Buy on (SKS), target $25.
- Reiterated Buy on (ROST), target $38.
- Removed Comcast(CMCSK) from Recommended List, added NYMEX Holdings(NMX).
- October appears to have been a very strong month for Google(GOOG). Google “core” queries were up 15% M/M and 50% Y/Y. Google’s share increased 150 bps M/M to 58.5%, a new record. Yahoo! Queries were up 8% M/M but were flat on a Y/Y basis. Its search share dropped 80 bps M/M to 22.9%, which is the lowest we have tracked. MSFT share dropped to 9.7%, down 60 bps M/M and the lowest we have seen since the June ’07 launch of Club Live. Queries were up 5.5% M/M and 11% Y/Y.
- Reiterated Buy on (CVS), raised EPS estimates, raised target to $50.

Night Trading
Asian Indices are -2.25% to -.25% on average.
S&P 500 futures -.66%.
NASDAQ 100 futures -.56%.

Morning Preview
US AM Market Call
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Pre-market Commentary
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Rasmussen Business/Economy Polling
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Earnings of Note
Company/EPS Estimate
- (CHRS)/-.03
- (DE)/1.54
- (PDCO)/.40
- (PLCE)/.38
- (BKE)/.74
- (GPS)/.29
- (ANF)/1.28

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Initial Jobless Claims for this week are estimated to fall to 330K versus 339K the prior week.
- Continuing Claims are estimated to rise to 2575K versus 2568K prior.

10:00 am EST
- The Final Univ. of Mich. Consumer Confidence reading for November is estimated at 75.0 versus a prior estimate of 75.0.
- Leading Indicators for October are estimated to fall .3% versus a .3% increase in September.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil build of 750,000 barrels versus a 2,814,000 barrel increase the prior week. Gasoline supplies are expected to rise by 950,000 barrels versus a 714K barrel build the prior week. Distillate Supplies are estimated to fall by -450,000 barrels versus a -1,965,000 barrel decline the prior week. Refinery Utilization is expected to rise by .5% versus a 1.43% increase the prior week. Finally, Natural Gas supplies are expected to rise by 3 bcf versus a -9 bcf decline the prior week.

Other Potential Market Movers
- The weekly EIA energy inventory report and weekly MBA Mortgage Applications Report could also impact trading today.

BOTTOM LINE: Asian indices are 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 Mostly Higher on Late Rebound

Evening Review
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
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Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
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In Play

Stocks Lower into Final Hour on Rise in Oil, Financial Sector Worries

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Semi longs and Software longs. I covered some of my (EEM) short and my (QQQQ/(IWM) hedges this morning, then added back to my (EEM) short and added (IWM)/(QQQQ) hedges this afternoon, 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 again. Weekly retail sales rose 2.3% vs. 2.4% last week and up from 1.4% in early July. There remains much evidence that consumer spending is modestly below-average but little evidence of the imminent plunge in spending that has been predicted for years and is being priced into many stocks at current levels. Building permits were the lowest in 14 years, which is a positive as homebuilders work down inventory. UBS upgraded Under Armour (UA) to Buy, saying its channel checks indicate sales have accelerated significantly over the last few weeks as weather turned more seasonal. The firm said that UA sales growth at some retailers was in the triple-digit range. I think the stock remains very attractive at current levels. Research In Motion (RIMM) said today at the Scotia Capital Telecom & Tech Conference that the company wasn't worried about a macroeconomic slowdown, especially in the financial services sector. Worries over a possible slowdown at RIMM have been weighing on the tech sector. Thomas Weisel initiated the company with an Overweight rating today. Nordstrom (JWN) is soaring 11.5% after yesterday's beat and raise. The company also expanded its buyback by $2.5 billion. I said yesterday that longer-term investors would regret selling Google (GOOG) into recent broad market weakness. Today, CSFB upped its target on the stock to $900, and it is jumping 2.2%, despite broad market weakness. The stock remains my large equity long position, and I still see substantial upside from current levels. Last night in Asia, the Nikkei and Hang Seng saw large reversals, with both opening down over 3% and both finishing at session highs, rising over 1% for the day. Oil is rising $3.76 per barrel on a 0.72% decline in the dollar index and still looks poised to test $100 per barrel, which could finally provide the negative catalyst to demand for a substantial decline in the commodity into year-end. The release of the FOMC minutes today showed the Fed believes US economic growth will come in around 1.8%-2.5% in 2008, which is near my prediction of 2-2.5% over the intermediate-term. I continue to believe true growth stocks will outperform the broad market substantially given the current macro backdrop. I expect US stocks to trade mixed-to-lower into the close from current levels on another rise in oil and global economic worries.

Links of Interest

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
Movers & Shakers
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In Play
NYSE Unusual Volume
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Hot Spots
Option Dragon
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Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes

Tuesday Watch

Late-Night Headlines
Bloomberg:

- The global burden of HIV has been overstated, with new surveillance data showing the number of people carrying the AIDS-causing virus is about 6.3 million lower than estimated last year. More accurate ways of tracking the disease indicate for the first time that the world turned the corner on the three-decade epidemic in the late 1990s.
- London Metal Exchange director Philip Crowson stated on Monday that China’s robust demand for raw materials may slow down after the 2008 Beijing Olympics, due to a series of policies on curbing investment and rising inflation pressure. Philip stressed at a mining conference in PerthChina’s vigorous investment boom might be exaggerating the country’s underlying needs, particularly as its economy becomes more market-oriented, the state-owned companies improve their efficiency, and more efforts are made on environmental protection. that
- Leaders of the Association of Southeast Asian Nations will today agree to “abide by and implement” changes to their markets allowing the region to be a European Union-modeled economic community by 2015.
- Japan starts taking fingerprints and photographs of foreigners entering the country from today to catch terrorists that Justice Minister Kunio Hatoyama says are beating immigration controls using false passports and disguises.

BusinessWeek:
- Brazil, the New Oil Superpower. State-run Petrobras’ “monstrous” new oil find has wide-ranging implications for the South American country, the oil majors, oil services providers, and beyond.

IBD:
- Hard Drive Makers Resist Price War.

USA Today.com:
- Why give thanks when you can shop?

AP:
- General Motors’(GM) Cadillac CTS was named 2008 car of the year in the US by Motor Trend magazine.

Financial Times:
- The US Federal Reserve will on Tuesday publish its first set of enhanced economic forecasts alongside the minutes of the last meeting of the Federal Open Market Committee, and the result may surprise some investors. The new economic projections are likely to show that Fed policymakers expect the US economy will pull through an expected near-term rough patch and regain strength over the course of 2008, even though they see downside risks to that ­forecast.
- Arab investors, flush with liquidity, are considering investments in distressed US financial assets as they try to turn the turmoil in credit markets into a regional opportunity.

Daily Telegraph:
- Rio Tinto(RTP), defending a takeover proposal from BHP Billiton(BHP), may offer its larger rival partnerships in some projects instead of a merger.

Economic Daily News:
- AU Optronics(AUO) will supply panels that will be sued in Dell’s(DELL) new touch-screen laptops.

Jiji Press:
- Tomy Co. and other Japanese toymakers are shifting production to Vietnam on rising costs and safety concerns in China, where almost 90% of Japanese-brand toys are produced.

South China Morning Post:
- BYD Co. plans to export its own-brand electric cars to the US and western Europe by the middle of next year, citing an official at the Hong Kong-listed battery maker.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (TGT), target $66. TGT’s November sales are tracking in-line with the company’s original guidance. We believe the arrival of more favorable weather in November has helped to drive sales of seasonal and cold weather items during the month.
- Reiterated Buy on (HOLX), target $74.
- Reiterated Buy on (MSFT), target $41.
- Reiterated Buy on (JWN), target $52.

Night Trading
Asian Indices are -3.0% to -.75% on average.
S&P 500 futures +.37%.
NASDAQ 100 futures +.65%.

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
- (UNFI)/.32
- (BKS)/-.09
- (DHI)/-.85
- (DKS)/.05
- (TGT)/.62
- (GME)/.23
- (FRE)/.00
- (EV)/.49
- (ROST)/.35
- (SKS)/.16
- (ZLC)/-.60
- (SSI)/.05
- (BJ)/.33
- (DDS)/-.19
- (HRL)/.65
- (BGP)/-.62
- (LTD)/.00
- (ARUN)/.03
- (HIBB)/.24
- (WFMI)/.30
- (PSUN)/.14
- (GYMB)/.90
- (ODP)/.40
- (HOTT)/.15
- (MWRK)/-.59
- (PLL)/.57
- (JCG)/.36
- (FL)/.24
- (BCSI)/.24

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Housing Starts for October are estimated to fall to 1170K versus 1191K in September.
- Building Permits for October are estimated to fall to 1200K versus 1261K in September.

2:00 pm EST
- Oct. 31 FOMC Meeting Minutes

Other Potential Market Movers
- The weekly retail sales reports, (IART) analyst meeting, Bank of America Defense Day and Scotia Capital Telecom & Tech Conference could also impact trading today.

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

Stocks Finish Sharply Lower on Economic Worries

Indices
S&P 500 1,433.27 -1.75%
DJIA 12,958.44 -1.66%
NASDAQ 2,593.38 -1.66%
Russell 2000 750.35 -2.49%
Wilshire 5000 14,405.22 -1.79%
Russell 1000 Growth 595.66 -1.50%
Russell 1000 Value 778.59 -2.04%
Morgan Stanley Consumer 734.03 -1.26%
Morgan Stanley Cyclical 945.74 -3.05%
Morgan Stanley Technology 609.08 -1.68%
Transports 4,457.97 -2.32%
Utilities 520.45 +.08%
MSCI Emerging Markets 149.62 -2.38%

Sentiment/Internals
Total Put/Call 1.12 -12.50%
NYSE Arms 1.74 +147.8%
Volatility(VIX) 26.01 +2.04%
ISE Sentiment 128.0 +88.2%

Futures Spot Prices
Crude Oil $94.76 +.98%
Reformulated Gasoline 238.45 +.38%
Natural Gas 7.76 -2.96%
Heating Oil 260.75 +.79%
Gold 781.80 -.66%
Base Metals 229.07 -.80%
Copper 303.85 -5.02%

Economy
10-year US Treasury Yield 4.07% -9 basis points
US Dollar 75.80 -.04%
CRB Index 346.90 -.72%

Leading Sectors
Utilities +.08%
Medical Equipment -.22%
Restaurants -.32%

Lagging Sectors
Gold -4.5%
Homebuilders -4.7%
Airlines -5.2%

Evening Review
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Stock Quote
In Play

Afternoon Recommendations
- None of note

Afternoon/Evening Headlines
Bloomberg:
- Nordstrom Inc.(JWN), the owner of 101 department stores in the US, said third-quarter profit rose more than analysts estimated on the sale of its Faconnable brand. The stock jumped 12% in after-hours trading.
- Hewlett-Packard(HPQ), the biggest personal-computer maker, reported a profit that beat analysts’ estimates after extending its lead over Dell Inc.(DELL). The company plans to buy back as much as $8 billion in shares.
- The average US pump price for regular gasoline fell 1.2 cents to $3.10/gallon in the week ended today.
- Zinc fell to a 20-month low as shipments from China, the world’s largest producer of the metal, accelerated on speculation the government will end a tax rebate on exports.

Business Week:
- Finance Stocks to Buy Now.

BOTTOM LINE: The Portfolio finished lower today on losses in my Retail longs and Biotech longs. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was very negative today as the advance/decline line finished substantially lower, almost every sector fell and volume was slightly above average. Measures of investor anxiety were high into the close. Today's overall market action was very bearish. Nikkei futures are indicating a down-230 open in Japan. Hewlett-Packard (HPQ) and Nordstrom (JWN) just beat and raised. HPQ isn't moving much on the news, however JWN is rising 12% in after hours. Cyclicals were hit especially hard again today, falling 3%. I still think an imminent recession in the U.S. is virtually impossible if not accompanied by a significant slowdown overseas. It appears as though investors are pricing in this possibility right now. I want to see how the market reacts to this evening's positive earnings reports, and if overseas stocks stabilize tomorrow morning, before further shifting market exposure.