Monday Watch

Weekend Headlines
Bloomberg:
- James Halloran, who helps oversee $35 billion at National City Private Client Group, sees ‘downside’ risks for oil is 2008. (video)
- Richard DeKaser, chief economist at National City Corp., sees ‘better times’ for the US housing market in 2008. (video)
- US and Canadian theaters this weekend set a record for yearly ticket sales, taking in an estimated $9.59 billion.
- The Pakistan Peoples Party named Benzir Bhutto’s son Bilawal as its new leader and said it would participate in parliamentary elections next month.
- President Bush said he is committed to making sure the US economy grows next year, and pledged to work with Congress to see that it happens.
- China, the world’s biggest grain producer, will tax exports of wheat, corn and rice to increase domestic supply and control rising food prices.
- Nickel will lead a decline in industrial metals next year as stockpiles expand and demand slows with the US housing market, a survey of analysts showed.

Barron’s:
- Using the options markets, we can infer the marketplace’s expectations for a company’s future dividend payments.

NY Times:
- The NY Times, the third-largest US newspaper by circulation, named Fox News commentator and Weekly Standard editor William Kristol as a columnist on its Op-Ed page.
- General David Petraeus, the top US commander in Iraq, said violent attacks in Iraq have declined 60% since June. He said the number of car bomb, suicide car bomb and suicide vest attacks was also down about 60% since March. Petraeus attributed the drop in violence to the increase in US and Iraqi troops and officers and more aggressive operations. General Abdul Kareem Khalaf, a spokesman for the Iraqi Interior Ministry, said in a separate briefing that 75% of al-Qaeda’s network and safe havens had been destroyed.
- A look at the winners and the losers behind the most notable mergers and acquisitions of the year.

CNBC.com:
- ‘Dogs of Dow’ Have Subpar Year, Thanks to Citibank.
- Baidu.com’s(BIDU) CFO Dies in Accident.

MarketWatch.com:
- In-vehicle technology in focus in Las Vegas. This year’s Consumer Electronics Show will highlight an unlikely innovator: the automotive industry. GM’s Rick Wagoner will be the first car chief to deliver a keynote speech.

IBD:
- Tech Firms’ Sales Keep Growing On Hot Gadgets, Business Gear. Call it the sector that saved Christmas. As the mortgage mess and higher energy prices cast a pall on Wall Street, investors are finding refuge in technology stocks, which have remained largely immune to the broader spending woes.

TheStreet.com:
- Get Your Portfolio in Shape for 2008.
- Google’s(GOOG) Grip Tightens.

SmartMoney:
- Bears Are Full of Bull. The US Economy is faring well despite the housing mess. Just look around.

Boston Globe:
- Town governments, school districts and other municipalities looking to borrow money got a new option Friday when trying to insure their bonds: billionaire investor Warren Buffett. Buffett’s formation of a bond insurance company provided some validation to an industry that has been battered by fears of collapse in recent weeks.

Business Week:
- Inside Toyota’s Hybrid Truck. The automaker is introducing a concept compact hybrid pickup designed in America, for Americans.
- Will Apple(AAPL) Upset the Rental Cart? A plan to offer online video rentals could turn up the heat on Netflix and Amazon.com – and reinvigorate interest in Apple TV.
- iRobot(IRBT): Ready to Clean Up. The Roomba maker says it’s readying more robots to do the dirty work of cleaning and the fun work of keeping people connected.

USA Today:
- Setting up your HDTV not as easy as it looks; tips to help.
- Southwest(LUV) hopes changes add up to some ch-cha-ching.

CNNMoney.com:
- Growth funds outpace value names in 2007. Funds dedicated to growth companies had surprisingly solid gains for 2007. A tally of mutual fund performance for the year by Lipper Inc. found that one of the broadest mutual fund categories – large-cap US growth funds – had an average return of 14.9% for the year versus a 2.7% gain for large-cap US value funds.
- Deutsche Bank’s Walter sees oil price dropping to $80/bbl. over the next year.
- Oil investing: 2007 a tough act to follow. It was a banner year for energy – the sector was up 30% and crude jumped 60%. But don’t count on a repeat performance in ’08.
- Real Estate: The best- and the worst – of 2007.
- Cars: Best of the best, 2007.

AP:
- Osama bin Laden warned Iraq’s Sunni Arabs not to join tribal councils opposed to the terrorist group al-Qaeda, citing an internet audiotape released today. He also told Sunnis not to support a unified government in Iraq. US and Iraqi officials want to establish a “national unity government” to join Sunnis, Shiites and Kurds. “Our duty is to foil these dangerous schemes, which try to prevent the establishment of an Islamic state in Iraq,” he said.

Reuters:
- Bin Laden remarks make Gulf dollar peg likelier. Gulf Arab oil producers may be less likely to drop their currency pegs to the US dollar after Al Qaeda leader Osama bin Laden criticized dollar pegs as “unjust and arbitrary,” economists said. The Saudi-born militant leader urged Muslims in a video recording on Saturday to support militants so they can “preserve your oil and wealth and protect your money that is slipping between your fingers due to the unjust and arbitrary dollar pegs.” “Your support to sincere mujahideen (holy fighters) … guarantees all aspects of your security,” bin Laden said.

Newsday.com:
- Wall Street gurus optimistic for ’08.

Financial Times:
- Equity capital markets may receive a boost next year as financial institutions seek to repair their balance sheets.
- Just an illusion? British business looks bright even as consumers fret. Mario Thomas, managing director of Chapter Eight, says his Bradford-based website design company has full order books and is still taking on staff. “I’ve never seen an economy like this before, with all the doom and gloom. But it hasn’t let up for us at all – with existing customers commissioning work and new business flooding in.”

TimesOnline:
- Google Inc.(GOOG) is in talks with newspaper publishers about selling advertising space in their pages to the company’s online clients, citing comments from Google. Google, based in Mountain View, California, plans to use a bidding system to sell newspaper advertising space, and it will earn commission on the deals. Google’s UK advertising revenue rose 40% this year to $2.49 billion.

Economist.com:
- China’s markets flashing red. Sooner or later, the world’s hottest market will burn up.

Guardian:
- Nanosolar Inc., a privately held California-based solar-panel maker, has started production of wafer-thick solar cells printed on aluminum film.
- Merrill Lynch(MER) is in talks with Chinese and Middle Eastern sovereign-wealth funds to raise capital through selling another “big” stake in the company, citing London and NY sources.

Auto Motor und Sport:
- General Motors Corp.s(GM) Chevrolet brand sales in Europe increased to a record in 2007, boosted by purchases of cars in Russia and eastern European countries, citing Chevrolet Europe chief Wayne Brannon. Sales may double to 900,000 vehicles by 2018.

Kyodo News:
- Japan aiming for 30% of households to have solar panels by 2030.

Nihon Keizai:
- Hitachi Ltd. will stop producing small hard-disk drives for use in video cameras and music players as manufacturers increasingly favor flash memory chips as a means of data storage.

Sankei newspaper:
- Mitsubishi Heavy Industries Ltd., France’s Areva SA and Japan Nuclear Fuel Ltd. will form a joint venture in the US to focus on building fast reactor nuclear plants and fuel reprocessing.

Middle East News Agency:
- President Nicolas Sarkozy said France will have no contact with Syria until it allows Lebanon to end a political crisis and appoint a new president.

Weekend Recommendations
Barron's:
- Made positive comments on (BK) and (LTR).
- Made negative comments on (COGT).

Citigroup:
- Reiterated Buy on (LM), target $108.

Night Trading
Asian indices are unch. to +.75% on avg.
S&P 500 futures +.06%.
NASDAQ 100 futures unch.

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/Estimate
- None of note

Upcoming Splits
- (CMI) 2-for-1
- (GHM) 5-for-4

Economic Data
10:00 am EST
- Existing Home Sales for November are estimated at 4.97M versus 4.97M in October.

Other Potential Market Movers
- Early close for financial futures and options at 1 pm EST.

BOTTOM LINE: Asian indices are higher, boosted by technology and commodity shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the week.

Weekly Outlook

Click here for the weekly market preview by MarketWatch.com.

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

Economic reports for the week include:

Mon. – Existing Home Sales, NAPM-Milwaukee

Tues. – US Markets Closed

Wed. – ISM Manufacturing, ISM Prices Paid, Construction Spending, FOMC Minutes

Thur. – MBA Mortgage Applications report, EIA Energy Inventory report, Challenger Job Cuts, ADP Employment Change, Initial Jobless Claims, Factory Orders, Total Vehicle Sales

Fri. – Change in Non-farm Payrolls, Average Hourly Earnings, Unemployment Rate, ISM Non-Manufacturing

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

Mon. – None of note

Tues. – US Markets Closed

Wed. – Immucor(BLUD)

Thur. – Monsanto(MON), Texas Industries(TXI), Bed Bath & Beyond(BBBY), Finish Line(FINL), Global Payment(GPN), Sonic(SONC), Merix(MERX)

Fri. – None of note

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

Mon. – None of note

Tue. – US markets closed

Wed. – None of note

Thur. – None of note

Fri. – The Fed’s Kohn speaking

BOTTOM LINE: I expect US stocks to finish the week modestly higher on a firmer US dollar, lower energy prices, seasonal strength, less economic pessimism, diminishing credit market anxiety, bargain hunting and short-covering. My trading indicators are still giving mostly bullish signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,478.48 +1.26%*

Click here for the Weekly Wrap by Briefing.com.

Weekly Scoreboard*

Indices
S&P 500 1,478.48 +1.26%
DJIA 13,365.87 +.91%
NASDAQ 2,674.46 +1.27%
Russell 2000 771.76 +.55%
Wilshire 5000 14,847.34 +1.19%
Russell 1000 Growth 616.54 +1.13%
Russell 1000 Value 800.28 +1.28%
Morgan Stanley Consumer 744.24 +.75%
Morgan Stanley Cyclical 999.99 +1.53%
Morgan Stanley Technology 629.30 +.52%
Transports 4,625.57 +.91%
Utilities 537.17 +.09%
MSCI Emerging Markets 152.17 +2.28%

Sentiment/Internals
NYSE Cumulative A/D Line 60,357 +2.68%
Bloomberg New Highs-Lows Index -436
Bloomberg Crude Oil % Bulls 41.0 +156.2%
CFTC Oil Large Speculative Longs 219,382 +2.95%
Total Put/Call .92 +42.86%
NYSE Arms 1.10 +13.26%
Volatility(VIX) 20.71 +.68%
ISE Sentiment 169.0 +53.64%
AAII % Bulls 30.0 -16.3%
AAII % Bears 50.0 +6.0%

Futures Spot Prices
Crude Oil 96.08 +5.59%
Reformulated Gasoline 246.65 +5.54%
Natural Gas 7.36 +1.69%
Heating Oil 264.45 +1.94%
Gold 841.90 +5.07%
Base Metals 214.73 +.28%
Copper 307.70 +3.55%

Economy
10-year US Treasury Yield 4.08% -9 basis points
4-Wk MA of Jobless Claims 342,500 -.3%
Average 30-year Mortgage Rate 6.17% +3 basis points
Weekly Mortgage Applications 603.80 -7.6%
Weekly Retail Sales +1.3%
Nationwide Gas $3.00/gallon +.02/gallon
US Heating Demand Next 7 Days 2.0% below normal
ECRI Weekly Leading Economic Index 135.20 -.73%
US Dollar Index 76.20 -2.02%
CRB Index 358.51 +2.54%

Best Performing Style
Large-cap Value +1.28%

Worst Performing Style
Small-cap Value -.04%

Leading Sectors
Alternative Energy +5.7%
Steel +5.7%
Oil Service +5.6%
Telecom +3.3%
Wireless +2.4%

Lagging Sectors
REITs -.94%
Computer Services -1.23%
Hospitals -1.25%
Retail -1.77%
Airlines -5.0%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Mostly Lower into Final Hour on More Economic Pessimism, Profit-taking

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Semi longs, Software longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is mildly negative today as the advance/decline line is slightly lower, sector performance is mixed and volume is light. Investor anxiety is above average again. Today’s overall market action is neutral. The NYSE Arms hit a high 1.42 and the VIX is rising another 2.5% today, back to 21. The 10-year yield is falling another 10 basis points on another spike in economic pessimism as investors ignore today’s healthy December Chicago PMI report and chose to focus on the weaker November New Homes Sales report. Gauges of credit market angst are falling again today. The TED spread is falling 13 basis points to 158 basis points today. The 10-year swap spread is down 2.1 basis points to 64.9 basis points over Treasuries. LIBOR is dropping again and the 30-day US asset backed commercial paper yield is falling 10 basis points today. With such light volume, elevated levels of investor pessimism and high NYSE Arms readings over the last couple of days, it shouldn’t take too much buying to boost the averages by Monday’s close, which I expect. Recent long addition (SIGM) is surging 8% on above-average volume today. I still see substantial upside in the shares even after this year’s strong gains. I expect US stocks to trade mixed-to-higher into the close from current levels on diminishing credit market angst, seasonal strength, bargain-hunting and short-covering.

Today's Headlines

Bloomberg:
- A Taliban commander linked to al-Qaeda is suspected of plotting the suicide attack that killed former Prime Minister Benazir Bhutto, Pakistan’s government said.
- Macy’s Inc.(M), Best Buy(BBY) and Abercrombie & Fitch(ANF) may get a boost in store traffic and revenue in the next few weeks from the redemption of gift cards, which are growing faster than total retail sales.
- The cost of borrowing in dollars, euros and pounds fell, capping a second week of declines, as coordinated central bank action to revive money markets showed signs of success.
- Checkpoint Systems(CKP), the maker of anti-theft tags for retailers, rose the most in nine months after it named a new CEO and forecast 2008 earnings exceeding analysts’ estimates.
- Farmers in India, the world’s second-biggest wheat grower, may harvest more of the crop following early planting and “good weather” in the main growing areas, lowering overseas purchases. The country may harvest more than 75 million tons of wheat during the March-April harvest, the most since 2000, the nation’s agriculture commissioner said.
- Crude oil is rising to a one-month high on year-end investment fund mark-ups and a weaker dollar.
- Treasuries rose the most in more than two weeks and headed for the best annual returns since 2002 after a government report showed sales of new homes in the US fell more than expected.
- Democratic presidential candidate John Edwards said neither of his two major opponents would bring substantial change to the way Washington works – Hillary Clinton doesn’t want to and Barack Obama doesn’t know how.

Wall Street Journal:
- Warren Buffett, seizing a chance to profit from turmoil in the nation’s credit markets, is starting up a bond insurer that aims to make it cheaper for local governments to borrow and promises to be a tough competitor for the industry’s embattled incumbents.

NY Times:
- US companies are working with the Chinese government to design and install high-tech public surveillance systems as the country prepares for the Beijing Olympics.

NY Post:
- NY’s population stays almost unchanged.

AP:
- Google’s(GOOG) online search engine increased its lead in the US Internet search market in November over October, according to a report released Thursday by Nielsen Online.

MSNBC:
- Wind farms are popping up across the US to generate renewable electric energy, and that’s driving a large backlog of wind-tower business at Dallas-based industrial manufacturer Trinity Industries Inc.(TRN).

Information Times:
- China’s number of mobile-phone users may climb to 620 million next year, bringing the total telephone subscribers in the country to 976 million. Sales from the country’s communications industry may rise 25% to $342 billion in 2008 from a year earlier, citing comments by Wang Xudong, who heads the Ministry of Information Industry.