Bear Radar

Style Underperformer:

Small-cap Value (-1.29%)

Sector Underperformers:

Gold (-3.30%), Biotech (-2.85%) and Steel (-2.65%)

Stocks Falling on Unusual Volume:

PLT, MOD, TTO, ELN, EEFT, ASYS, FTEK, BIIB, CIEN, NETC, HAYN, SHPGY, NIHD, RNOW, CCBL, ACMR, IPSU, BUSE, DPTR, OTEX and MICC

PPI Surges on Rise in Energy and Light Trucks, Retail Sales Double Estimates

- The Producer Price Index for November rose 3.2% versus estimates of a 1.5% increase and a .1% gain in October.

- The PPI Ex Food & Energy for November rose .4% versus estimates of a .2% gain and unch. in October.

- Advance Retail Sales for November rose 1.2% versus estimates of a .6% gain and a .2% rise in October.

- Retail Sales Less Autos for November rose 1.8% versus estimates of a .6% gain and an upwardly revised .4% increase in October.

- Initial Jobless Claims for this week fell to 333K versus estimates of 335K and 340K the prior week.

- Continuing Claims rose to 2639K versus estimates of 2599K and 2601K prior.

BOTTOM LINE: Prices paid to US producers climbed more than economists expected in November, pushed up by surging energy prices. Core prices rose .4%, the most since February, on a rise in the cost of light trucks. Core producer prices are rising at a 2% rate over the last year, just above the long-term average of 1.8% and down from 2.8% in July 2005. Energy costs rose 14.1%, a record one-month gain versus a .8% decline in October. Food prices were unchanged for the month. Computer prices fell 2.4% versus a 1.3% decline the prior month. Producer Price increases should show meaningful deceleration next month on the pullback in energy prices. The 10-year TIPS spread, a gauge of inflation expectations, is only 2 basis points higher on the news and is still down 15 basis points from levels seen two weeks ago. I continue to believe inflation fears have peaked for this cycle and that the secular trend of disinflation remains firmly in tact.

Retail sales exceed forecasts, rising twice as much as economist predicted in November, Bloomberg reported. Purchases at furniture, electronics, building-material, and department stores all increased. Morgan Stanley boosted their 4Q GDP growth estimate to 1.2% from .2% after the report. Excluding gasoline, autos and building materials, the number used to compute GDP, sales still gained a strong 1.1% versus a .2% gain the prior month. I continue to believe retail sales, including online sales, will exceed estimates for the entire holiday shopping season as low unemployment, strong wage growth, record consumer net worth and low interest rates more than offset the drag from energy and housing.

Bull Radar

Style Outperformer:

Large-cap Growth (-.65%)

Sector Outperformers:

Software (+.92%), HMOs (+.18%) and Road & Rail (+.16%)

Stocks Rising on Unusual Volume:

MGI, KNM, MMA, IOSP, RIGL, SVNT, MATK, EMKR, ADCT, JOSB, IOSP, MRTN, XRAY, CYNO, UMBF, FCSX, FSLR, FSIN, LTRE, XMSR, CRDC, PRAI, ACAP, DOW, HON, FALC, PAS, CCE, NKE and HES

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
Upgrades/Downgrades
In Play
NYSE Unusual Volume
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Dow Jones Hedge Fund Indexes

Thursday Watch

Late-Night Headlines
Bloomberg:
- Bill Gross, manager of the world’s biggest bond fund, said a plan by the Federal Reserve and European central banks to alleviate a global credit crunch will help break the reluctance among banks to lend.
- China’s industrial production grew at the slowest pace this year, suggesting weaker export growth and government curbs on lending are starting to cool the world’s fastest-growing major economy.
- The risk of Asia-Pacific companies, including National Australia Bank Ltd., defaulting on their debt fell after the Federal Reserve announced a joint effort with four other central banks to alleviate a credit squeeze.

Wall Street Journal:
- In the biggest coordinated show of international financial force since Sept. 11, 2001, the Federal Reserve yesterday joined four other central banks in a plan aimed at coaxing banks to lend more readily at a time when fear has seized up world credit markts.

BusinessWeek.com:
- Holiday Shoppers Plan to Flock Online.

CNNMoney.com:
- Despite the day-to-day turmoil, the stock market damage has been limited, with the Dow and S&P 500 clinging to levels not far from record highs.
- GM dominates ‘Car of the Year’ nominee list. General Motors products capture four of six nominations in two categories for prestigious auto journalists’ award.

IBD:
- Host Of Comparison-Shopping Web Sites Emerge.

USA Today.com:
- China talks introduce world of import controls.

Globeandmail.com:
- Even as many investors fret that US consumers could slow spending sharply, possibly tipping the US into recession, Tobias Levkovich, chief US equity strategist at Citigroup Global Markets, recommends a look at US retailing stocks, along with media issues, given what he considers are those groups’ attractive valuations.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (CCE), target $31.

CSFB:
- Reiterated Outperform on (T), raised target to $50.

Night Trading
Asian Indices are -1.50% to unch. on average.
S&P 500 futures -.15%.
NASDAQ 100 futures -.21%.

Morning Preview
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NASDAQ 100 Pre-Market Indicator/Heat Map
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Earnings of Note
Company/EPS Estimate
- (COST)/.59
- (LEH)/1.44
- (JOSB)/.33
- (CIEN)/.41
- (NOVL)/.04
- (LEAP)/-.04
- (ZQK)/.53

Upcoming Splits
- (DNR) 2-for-1

Economic Releases
8:30 am EST
- The Producer Price Index for November is estimated to rise 1.5% versus a .1% gain in October.
- The PPI Ex Food & Energy for November is estimated to rise .2% versus unch. in October.
- Advance Retail Sales for November are estimated to rise .6% versus a .2% gain in October.
- Retail Sales Less Autos for November are estimated to rise .6% versus a .2% gain in October.
- Initial Jobless Claims for this week are estimated to fall to 335K versus 338K the prior week.
- Continuing Claims are estimated at 2599K versus 2599K prior.

10:00 am EST
- Business Inventories for October are estimated to rise .3% versus a .4% gain in September.

Other Potential Market Movers
- The weekly EIA natural gas inventory data, (PBG) investor day, (AMD) analyst day, (SMG) analyst day, (ZGEN) analyst meeting, (JAV) analyst meeting, (UTX) analyst meeting, Thomas Weisel Telecom Technologies of Tomorrow Conference, Merrill Lynch Growth Industrial Conference and RBC Healthcare Conference 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 Higher After Rebound into the Close

Indices
S&P 500 1,486.60 +.61%
DJIA 13,473.90 +.31%
NASDAQ 2,671.14 +.71%
Russell 2000 771.71 +.71%
Wilshire 5000 14,929.50 +.50%
Russell 1000 Growth 618.61 +.65%
Russell 1000 Value 806.82 +.40%
Morgan Stanley Consumer 751.98 +.19%
Morgan Stanley Cyclical 1,003.47 +.71%
Morgan Stanley Technology 633.65 +1.0%
Transports 4,738.15 +.07%
Utilities 540.93 +.20%
MSCI Emerging Markets 157.79 +.45%

Sentiment/Internals
Total Put/Call .98 -10.91%
NYSE Arms .90 -66.80%
Volatility(VIX) 22.47 -4.75%
ISE Sentiment 127.0 -13.01%

Futures Spot Prices
Crude Oil $93.71 +4.09%
Reformulated Gasoline 239.60 +4.56%
Natural Gas 7.39 +4.25%
Heating Oil 262.90 +4.20%
Gold 818.30 +.15%
Base Metals 212.64 -.42%
Copper 303.0 -1.94%

Economy
10-year US Treasury Yield 4.09% +12 basis points
US Dollar 76.19 -.04%
CRB Index 354.08 +2.09%

Leading Sectors
Telecom +3.10%
Alternative Energy +2.76%
Energy +2.57%

Lagging Sectors
Restaurants -1.31%
Banks -1.78%
Airlines -4.48%

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
Bank of America:
- Rated (PMCS) Sell, target $6.
- Rated (OMTR) Buy, target $40.
- Rated (FIS) Buy, target $54.

Citigroup:
- Rated (MDP) Buy, target $64.
- Rated (OMC) Buy, target $59.
- Rated (SCHL) Sell, target $30.50.
- Rated (MHP) Buy, target $60.

Afternoon/Evening Headlines
Bloomberg:
- Treasuries fell the most in three years after the Fed announced a joint effort with foreign central banks to break a logjam in credit markets.
- The perceived risk of companies defaulting on their debt fell after central banks in the US and Europe announced plans to alleviate a credit squeeze that’s threatening global growth.
- Duke Energy(DUK) agreed to buy 100 turbines from General Electric(GE) in its first purchase of generators for the wind power business it acquired this year.
- Biogen Idec(BIIB) said it will remain an independent company instead of pursuing a sale, after it didn’t receive any definitive offers. The shares fell 28% in after-hours trading.
- Gap Inc.(GPS) is defying the skeptics. By refusing to join competitors making early-holiday markdowns, the biggest US clothing retailer may post a fourth-quarter profit gain for the first time since 2005.

Reuters:
- The manager of the world’s biggest bond fund, Bill Gross, said on Wednesday there is less doubt about the Fed’s understanding of the global liquidity crunch after it and other central banks unveiled a plan to bolster credit availability.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Biotech longs, Computer longs and Networking longs. I covered some of my (EEM) short and some of my (IWM/QQQQ) hedges in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was slightly positive today as the advance/decline line finished slightly higher, most sectors rose and volume was above average. Measures of investor anxiety were above average into the close. Today's overall market action was neutral. As I said earlier, the fact that the financials were unable to rally on today’s news was a large negative. However, the many bears were unable to gain downside traction into the close. Growth stocks outperformed value again today. The US dollar recouped losses into the afternoon and is near session highs against the yen, which is a positive. I want to see the market’s reaction to tomorrow’s PPI report and Lehman’s(LEH) earnings report before further shifting market exposure.