Bear Radar

Style Underperformer:

Mid-cap Value (-.24%)

Sector Underperformers:

I-Banks (-1.59%), Gaming (-.92%) and Tobacco (-.75%)

Stocks Falling on Unusual Volume:

DCP, ASFI, STAR, COHR, ACMR, SYNA, ZGEN, STKL, RIGL, ACIW, PSYS, EHTH and PENX

Housing Starts Fall as Builders Work Down Inventories

- Housing Starts for November fell to 1187K versus estimates of 1176K and 1232K in October.

- Building Permits for November fell to 1152K versus estimates of 1150K and 1170K in October.

BOTTOM LINE: Housing starts in the US dropped in November and permits for future construction fell to a 14-year low, Bloomberg reported. Starts fell 16% in the Northeast, 6.9% in the West and 1.5% in the Midwest. Starts rose .3% in the South. New home construction will continue to be a drag on overall growth over the intermediate-term as homebuilders work down inventories.

Bull Radar

Style Outperformer:

Small-cap Growth (+.59%)

Sector Outperformers:

Computer Services (+1.49%), Utilities (+1.44%) and Telecom (+.91%)

Stocks Rising on Unusual Volume:

KND, KWK, TNL, RRC, BHS, TPL, EICU, EMKR, WWIN, PSEC, BMTI, ADBE, IMKTA, CONN, SLXP, COMV, OTEX, PWRD, DDUP, MICC, SYNT, CNSL, AHII, CRNT, CLWR, GMO, HES, KEP, SMG and SHFL

Links of Interest

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

Tuesday Watch

Late-Night Headlines
Bloomberg:
- Treasury Secretary Henry Paulson said his department will soon issue a report with suggestions on how to lower US corporate taxes, which he called “relatively high.”
- Forest Labs(FRX) and Mylan Inc.(MYL) won US approval for a new medicine for high blood pressure after 2 ½ years of delays.
- China is studying extra lending curbs to prevent overheating in the world’s fastest-growing major economy, according to a central bank official.
- The Federal Reserve will make it harder for lenders to charge fees for early repayment of subprime mortgages, according to consumer advocates and a regulator.

MarketWatch.com:
- NetSuite IPO highlights hot software space. Dutch-auction method, Ellison backing expected to increase attention.
- When economic historians tally up the global winners and losers of the 2007 subprime mortgage meltdown, the dollar will be in the loser column – but it’s not likely to stay there throughout the year to come.
- Tech in 2008: Steady, solid growth. Analysts say tech will benefit from utility computing, virtualization trends.

BusinessWeek.com:
- Innovation Predictions 2008.
- Asia-Pacific to Spend $154 Billion on IT. China and India will lead the charge, says research firm IDC, with government spending and green IT initiatives fueling some of the momentum.

USA Today.com:
- Gasoline prices under $3 a gallon, government says.

Reuters:
- President Fidel Castro suggested he doesn’t intend to hold on to power in Cuba and will make way for younger leaders.

Financial Times:
- There is no limit to the amount of money the Federal Home Loan Bank System can lend to support the mortgage finance industry as long as investors are willing to keep on buying its debt at moderate prices, said the system’s regulator.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (GM), target $41.

Night Trading
Asian Indices are -.75% to +.50% on average.
S&P 500 futures +.38%.
NASDAQ 100 futures +.23%.

Morning Preview
US AM Market Call
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Earnings of Note
Company/EPS Estimate
- (BBY)/.41
- (GS)/6.34
- (DRI)/.50
- (HOV)/-1.63
- (TTWO)/-.08
- (PRX)/.22
- (PAY)/.37
- (LDK)/.36
- (PALM)/-.10
- (FDS)/.58

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Housing Starts for November are estimated to fall to 1179K versus 1229K in October.
- Building Permits for November are estimated to fall to 1150K versus 1170K in October.

Other Potential Market Movers
- The Fed governors meeting on the mortgage situation, weekly retail sales reports, (CHH) analyst meeting, (ALO) analyst meeting, (CBLI) investor update and (BCR) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are mixed as gains in financial shares are offsetting losses in 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 Near Session Lows on Overseas Weakness, Profit-taking

Indices
S&P 500 1,445.90 -1.50%
DJIA 13,167.20 -1.29%
NASDAQ 2,574.46 -2.32%
Russell 2000 739.06 -1.97%
Wilshire 5000 14,494.65 -1.60%
Russell 1000 Growth 601.60 -1.73%
Russell 1000 Value 784.40 -1.31%
Morgan Stanley Consumer 738.14 -1.15%
Morgan Stanley Cyclical 967.64 -2.10%
Morgan Stanley Technology 608.12 -2.41%
Transports 4,643.05 -.74%
Utilities 533.11 -1.15%
MSCI Emerging Markets 145.65 -3.76%

Sentiment/Internals
Total Put/Call 1.11 +6.73%
NYSE Arms 1.12 -32.75%
Volatility(VIX) 24.52 +5.37%
ISE Sentiment 106.0 -13.82%

Futures Spot Prices
Crude Oil $90.72 -.60%
Reformulated Gasoline 233.55 -.26%
Natural Gas 7.03 +.07%
Heating Oil 260.02 -.30%
Gold 796.0 -.25%
Base Metals 206.57 -1.23%
Copper 288.0 -2.59%

Economy
10-year US Treasury Yield 4.15% -8 basis points
US Dollar 77.40 -.05%
CRB Index 347.99 -.17%

Leading Sectors
Retail -.12%
Insurance -.58%
Disk Drives -.62%

Lagging Sectors
Steel -4.30%
Gold -4.40%
Airlines -5.27%

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

Afternoon Recommendations
Bank of America:
- Rated (MFLX) Buy, target $23.

CSFB:
- Rated (SUNH) Outperform, target $20.
- Rated (PSYS) Underperform, target $30.

Afternoon/Evening Headlines
Bloomberg:
- Treasury Secretary Henry Paulson said Fannie Mae(FNM) and Freddie Mac(FRE), the largest sources of finance for American mortgages, may help “jump start” the market for the largest home loans.
- The US dollar may extend its rally against the euro on speculation the US government will come up with measures to mitigate subprime mortgage losses.
- General Electric(GE) won an order for 200 wind turbines from EDF Energies Nouvelles SA to help the Paris-based company expand US operations.
- Adobe Systems(ADBE), the biggest maker of graphic-design software, reported a 21% increase in profit and issued a forecast that beat analysts’ estimates on increased demand for its Creative Suite program.
- Bill Gross said mortgage-backed securities guaranteed by government-chartered companies such as Fannie Mae(FNM) and Freddie Mac(FRE) “offer very compelling value.”
- Research In Motion(RIMM), the maker of the BlackBerry e-mail device, will open a US headquarters in Irving, Texas, stepping up efforts to reach American consumers and businesses.

CNBC:
- The boards of directors at Citigroup Inc.(C), Merrill Lynch(MER), UBS AG(UBS) and “possibly” JPMorgan(JPM) may make emergency injections into the companies’ bonus pools. The firms are concerned that Goldman Sachs(GS), with its “intact bonus pool,” will try to hire away their “top people.”

BOTTOM LINE: The Portfolio finished lower today on losses in my Internet longs, Computer longs, Medical longs and Retail 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, every sector fell and volume was slightly below average. Measures of investor anxiety were above average into the close. Today's overall market action was bearish. Goldman Sachs(GS) reports earnings before the open in the morning. As well, we get more housing data. I want to gauge the market’s reaction to these market movers before further shifting market exposure. Gauges of credit market angst fell today and financials displayed relative strength. Recent market bottoms have been preceded by the type of severe negative action that took place today in market leading stocks. Nikkei futures are indicating a down 125 open in Japan.