Weekly Outlook

Click here for the Wall St. Week Ahead by Reuters.

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

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

Economic reports for the week include:

Mon. – ISM Manufacturing, ISM Prices Paid, Total Vehicle Sales

Tues. – Weekly retail sales reports

Wed. – Weekly MBA Mortgage Applications report, weekly EIA energy inventory report, Challenger Job Cuts, ADP Employment Change, Final 3Q Non-farm Productivity, Final 3Q Unit Labor Costs, Factory Orders, ISM Non-Manufacturing

Thur. – Initial Jobless Claims, ICSC Chain Store Sales

Fri. – Change in Non-Farm Payrolls, Unemployment Rate, Average Hourly Earnings, Univ. of Mich. Consumer Confidence, Consumer Credit

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

Mon. – Phillips-Van Heusen(PVH), Cost Plus(CPWM), BearingPoint(BE)

Tues. – Autozone(AZO), Chico’s FAS(CHS), Sanderson Farms(SAFM), Guess ?(GES), Shaw Group(SGR), Copart(CPRT)

Wed. – DSW Inc.(DSW), Aspen Technology(AZPN), Blyth Inc.(BTH), Novell Inc.(NOVL)

Thur. – Korn/Ferry(KFI), UTi Worldwide(UTIW), National Semi(NSM), Synopsys(SNPS), Krispy Kreme(KKD), Quanex(NX, Toll Brothers(TOL), Pathmark Stores(PTMK)

Fri. – Kellwood(KWD)

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

Mon. – Fed’s Rosengren speaking, Fed’s Yellen speaking, (SLG) analyst meeting, (GKK) analyst meeting, Bear Stearns Real Estate Conference, Banc of America Credit Conference, (LSTR) mid-quarter conference call, (MET) Investor’s Day, UBS Global Media Conference

Tue. – (NOK) capital market day, (TXRH) analyst meeting, (ARBA) financial analyst day, (MDU) analyst meeting, (IFX) analyst meeting, BMO Healthcare Conference, Banc of America Credit Conference, Citigroup Basic Materials Conference, Bear Stearns Real Estate Conference, UBS Global Media Conference

Wed. – BOE Policy Meeting, (FTE) investor day, (XEL) investor meeting, (ATO) analyst meeting, (OREX) analyst luncheon, (BMY) investment meeting, BMO Healthcare Conference, Wachovia Global Real Estate Conference, UBS Global Media Conference, Lehman Brothers Global Tech Conference, ThinkEquity Alternative Energy Forum, Citigroup Basic Materials Conference, (XLNX) mid-quarter update

Thur. – ECB Policy Meeting, (PHG) analysts’ day, (FE) analyst meeting, (PRS) analyst meeting, (PH) investor day, (KNXA) analyst meeting, (SCUR) investor day, (SVVS) analyst meeting, (SFI) investor day, BOE Policy Meeting, Deutsche Bank Healthcare Tech Day, Stifel, Nicolaus Financial Institutions Conference, CIBC Communications Software 1-on-1 Conference, Citigroup ePayments Day, Lehman Brothers Tech Conference, ThinkEquity Alternative Energy Forum

Fri. – (SON) analysts’ meeting, (HSC) analysts conference, (RRGB) analyst meeting, Lehman Brothers Tech Conference

BOTTOM LINE: I expect US stocks to finish the week mixed as a firmer dollar, lower energy prices, seasonal strength, less economic pessimism and short-covering offsets profit-taking. My trading indicators are now giving mostly bullish signals and the Portfolio is 75% net long heading into the week.

Market Week in Review

S&P 500 1,481.14 +2.81%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 1,481.14 +2.81%
DJIA 13,371.72 +3.01%
NASDAQ 2,660.96 +2.48%
Russell 2000 767.77 +1.69%
Wilshire 5000 14,869.56 +2.80%
Russell 1000 Growth 614.82 +2.77%
Russell 1000 Value 805.77 +3.02%
Morgan Stanley Consumer 754.30 +2.22%
Morgan Stanley Cyclical 992.37 +3.94%
Morgan Stanley Technology 616.45 +1.94%
Transports 4,661.29 +4.72%
Utilities 532.25 +1.62%
MSCI Emerging Markets 153.66 +4.55%

Sentiment/Internals
NYSE Cumulative A/D Line 62,651 +4.65%
Bloomberg New Highs-Lows Index -293 -1,076.67%
Bloomberg Crude Oil % Bulls 32.14 -14.29%
CFTC Oil Large Speculative Longs 230,982 -2.14%
Total Put/Call 1.07 +27.4%
NYSE Arms .83 +112.82%
Volatility(VIX) 22.87 -10.70%
ISE Sentiment 96.0 -34.69%
AAII % Bulls 28.57 +11.69%
AAII % Bears 56.12 +6.47%

Futures Spot Prices
Crude Oil 88.71 -9.65%
Reformulated Gasoline 223.06 -9.51%
Natural Gas 7.30 -8.85%
Heating Oil 251.50 -7.37%
Gold 789.10 -5.13%
Base Metals 224.93 +2.81%
Copper 318.45 +5.12%

Economy
10-year US Treasury Yield 3.94% -6 basis points
4-Wk MA of Jobless Claims 335,300 +1.8%
Average 30-year Mortgage Rate 6.10% -10 basis points
Weekly Mortgage Applications 652.50 -4.28%
Weekly Retail Sales +2.4%
Nationwide Gas $3.08/gallon unch.
US Heating Demand Next 7 Days 5% above normal
ECRI Weekly Leading Economic Index 138.10 -.72%
US Dollar Index 76.15 +1.46%
CRB Index 339.84 -4.08%

Best Performing Style
Mid-cap Growth +3.49%

Worst Performing Style
Small-cap Value +.86%

Leading Sectors
Alternative Energy +7.09%
Construction +6.39%
Steel +5.96%
Biotech +5.38%
Banks +5.31%

Lagging Sectors
Semis +.66%
Software -.03%
Energy -.14%
Gold -3.41%
Oil Service -5.61%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Slightly Higher into Final Hour on Short-Covering in Beaten Up Sectors

BOTTOM LINE: The Portfolio is slightly lower into the final hour as gains in my Commodity shorts, Biotech longs and Retail longs are more than offset by losses in my Internet longs, Computer longs and Semi longs. I added (IWM)/(QQQQ) hedges this morning, thus leaving the Portfolio 75% net long. The overall tone of the market is slightly positive today as the advance/decline line is mildly higher, sector performance is mostly positive and volume is above average. Investor anxiety is above average. Today’s overall market action is slightly bullish. Yesterday, I cautioned recent short interest data indicated that the many bears had recently increased their short positions in the most beaten up and most heavily shorted stocks right near their lows and that recent action in the market should make them very nervous. Today, many of those stocks are soaring. Homebuilders, financials and retailers are all posting meaningful gains. While these sectors have likely bottomed for the intermediate-term, they will not remain market leaders for long, in my opinion. I continue to favor true growth stocks for the longer-term as growth, interest rates and inflation remain below long-term average levels. Fed fund futures now imply a 40% chance for a 50 basis point rate cut and a 60% chance of a 25 basis point rate cut at the upcoming meeting. The average 30-year mortgage rate fell again this week to 6.1%, down from 6.74% in June, which is a big positive. The 10-year swap spread and G-7 currency volatility index are falling meaningfully again today, which are also positives. The US dollar continues to trade as if at the very least an intermediate-term bottom is in place. This, combined will decelerating global demand, should also continue to pressure most commodities over the intermediate-term. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking.

Today's Headlines

Bloomberg:
- China Mobile Ltd., the world’s largest wireless-phone operator by subscribers, said it is still in discussions to offer Apple’s(AAPL) iPhone handset, denying a newspaper report that talks between the two have ended.
- Countrywide Financial(CFC), the biggest US mortgage company, rose as much as 29% on optimism among investors that the US Treasury’s plan to freeze subprime mortgage rates will stem losses from record foreclosures.
- ABX Indexes tied to subprime-mortgage bonds rose on speculation that a plan to stem foreclosures among subprime borrowers may curb losses on the securities.
- Crude oil is falling $2/bbl. to below $90/bbl. for the first time in a month on concern over falling global demand growth and as Saudi Oil Minister Ali al-Naimi said supplies in the market are “absolutely ample.”
- Lincoln Anderson, who helps manage about $165 billion as chief investment officer at LPL Financial Services, says the subprime issue has been “overblown” and that the “top is in” for crude oil prices.
- Walt Disney(DIS) and retailer Nordstrom(JWN) led companies selling at least $35 billion in the busiest week in more than two months as Treasury yields fell to the lowest since April 2004.

USAToday.com:
- The number of US combat deaths in Iraq this month is headed toward the lowest monthly level since March 2006, reflecting a turnaround in US efforts to establish security and defeat insurgents.

NY Post:
- A pair of hedge funds that are getting battered by the choppy markets of the past few months are serving as a stark reminder that the pain inflicted on the once white-hot hedge-fund sector isn’t only confined to those with subprime-bond exposure.

Cash Daily:
- Swisscom AG has been selected by Apple Computer(AAPL) to sell the iPhone in Switzerland.

Personal Incomes/Spending Rise Less Than Estimates, Inflation Contained, Chicago PMI Surges, Construction Spending Falls

- Personal Income for October rose .2% versus estimates of a .4% gain and a .4% increase in September.

- Personal Spending for October rose .2% versus estimates of a .3% gain and a .3% increase in September.

- The PCE Core for October rose .2% versus estimates of a .2% gain and a .2% increase in September.

- The Chicago Purchasing Manager November rose to 52.9 versus estimates of 50.5 and a reading of 49.7 in October.

- Construction Spending for October fell .8% versus estimates of a .3% decline and a .2% increase in September.

BOTTOM LINE: Consumer spending and incomes in the US rose less than forecast in October, Bloomberg reported. The Fed’s favorite inflation gauge, the Core PCE rose .2% for a second straight month and is up 1.9% year-over-year, which is within the Fed’s comfort zone. Consumer spending should accelerate next month on more seasonal weather and incomes will remain relatively healthy over the intermediate-term as unemployment stays low by historic standards. I continue to believe inflation concerns have peaked for this cycle.

A measure of US business activity expanded more than expected in November, as employment and production rebounded, Bloomberg reported. The Production Component surged to 57.4 from 46.9 the prior month. The New Orders component continued to show expansion, remaining at 53.9. The Order Backlogs component rose to 45.9 versus 39.9 the prior month. The Employment component of the index jumped to 54.4 from 49.5 the prior month. The Inventories component fell to 47.1 from 49.6 the prior month. The Prices Paid component rose to 76.2 from 74.7 the prior month. The gain in this index is a big positive. I continue to believe manufacturing will help boost overall economic growth to around 2-2.5% over the intermediate-term as companies gain confidence in the sustainability of the current expansion and rebuild depleted inventories as exports boom.

Spending on US construction projects fell in October, Bloomberg reported. Private residential construction spending fell 2%, the 20^th consecutive decline. Non-residential construction rose .1%. I continue to believe overall construction spending will remain muted over the intermediate-term as homebuilders pare down inventories.