Today's Headlines

Bloomberg:
- Federal Reserve officials said economic growth in 2008 will be less than forecast.
- The cost of borrowing in dollars, euros and pounds fell, extending more than two weeks of declines, as central bank measures to relieve a year-end logjam in money markets continued to show signs of success.
- US gasoline demand fell last week, according to Mastercard Inc. Consumers purchased an average 9.5 million barrels of gasoline a day in the week ended December 28, down 5.5% from the same week last year.
- Crude oil reached a record $100 a barrel and gold rose to a record on commodity/hedge fund inflows and a weaker dollar.
- Ken Miller, vice president for crude oil and refining analysis at Purvin & Gertz in Houston, says “there’s no justification for any of these prices levels. There’s no shortage of crude anywere.”

Wall Street Journal:
- President Bush to Push Congress for Housing Remedy.
- Democratic presidential candidate John Edwards said he would cap executive pay.
- United Technologies(UTX) may say today that it’s teaming with US Renewables Group to introduce a technology that uses molten sale to store solar heat for conversion to electrical power even when the sun isn’t shining.
- Financial, Housing Stocks and High-Yield Bonds Draw Interest From Bargain Hunters.

NY Times:
- John Edwards says that if elected president he would withdraw the American troops who are training the Iraqi army and police as part of a broader plan to remove virtually all American forces within 10 months.

CNNMoney.com:
- $100 oil and the ‘S’ word. Is it growing demand and tight supply, or merely rampant speculation that has pushed crude to record highs?

Handelsblatt:
- Agco Corp.(AG), a US maker of tractors and combine harvesters, expects sales to increase to $8 billion by 2011, $1 billion more than previously estimated, citing CEO Martin Richengagen.

Seoul Economic Daily:
- EBay(EBAY) is in talks to buy South Korean online auctioneer Gmarket Inc.(GMKT) for more than $427 million to expand its operations in the country.

ISM Manufacturing Declines, Construction Spending Unexpectedly Rises

- ISM Manufacturing for December fell to 47.7 versus estimates of 50.5 and a reading of 50.8 in November.

- ISM Prices Paid for December rose to 68.0 versus estimates of 65.0 and 67.5 in November.

- Construction Spending for November rose .1% versus estimates of a .4% decline and an upwardly revised .4% decline in October.

BOTTOM LINE: Manufacturing in the US fell, triggering speculation that the Fed will cut interest rates by half a percentage point, Bloomberg reported. According to Norbert Ore, chairman of the ISM’s survey, the index would have to fall below 41.9 for two consecutive quarters to indicate the potential for a recession across the broad economy. The New Orders component of the index fell to 45.7 from 52.6 the prior month. The Inventories component fell to 45.5 from 46.9 in November. The Employment component of the index rose to 48 from 47.8 the prior month. The ISM Manufacturing Index fell below current levels for nine months during the 1995/1996 mid-cycle slowdown without pushing the economy into recession. It also fell below today’s reading in December 1998 during the Asian crisis without signaling contraction in the broad economy. I continue to believe the economy will grow around 1% in 4Q, but rebound to average around 2% GDP growth for all of 2008. I expect the ISM Manufacturing Index to bounce back next month on inventory rebuilding.

Spending on US construction projects unexpectedly rose in November as work on schools, power plants and factories surged, Bloomberg reported. However, construction on private homebuilding fell 2.5%, the most in five years, versus a 2.3% decline the prior month. Home construction has now declined for 21 consecutive months. Non-residential building jumped 18% from year ago levels. Private non-residential construction climbed 1.7% for the month. I continue to expect overall construction to remain muted over the intermediate-term as homebuilders work down inventories.

Bear Radar

Style Underperformer:

Small-cap Value (-2.0%)

Sector Underperformers:

Semis (-3.59%), Airlines (-3.47%) and Retail (-3.06%)

Stocks Falling on Unusual Volume:

HHS, NCMI, MELI, PANL, COCO, TISI, CACB, POWI, FOSL and WAL

Bull Radar

Style Outperformer:

Mid-cap Growth(-.40%)

Sector Outperformers:

Oil Service (+.49%), Construction (+.38%) and HMOs (+.33%)

Stocks Rising on Unusual Volume:

MTE, FFH, GHI, AKNS, GLAD, CMED, HOKU, ULBI, SYNA, EPIQ, FISV, GPOR, GMKT, CTXS, CSUN, AMZN, GRNB, PLLL, PCLN, MLNM, HGSI, HDNG, MSSR, AUY, KGC, ANW, CAM, MLNX and HLIT

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
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes

Wednesday Watch

Late-Night Headlines
Bloomberg:
- The steepest yearend slump in global stocks since 2000 left equities with the cheapest valuations in 34 years. Equities yield 4.17 percentage points more in projected earnings than 10-year government bonds paid in interest at the end of 2007, according to an analysis of 29 countries by New York-based Lehman Brothers Holdings Inc. The gap is now the widest since September 1974, when adjusted for volatility, the data show. The last time the spread was wider, equities outperformed debt by 24 percentage points in the next 12 months, according to Lehman.
- Australian manufacturing expanded at the fastest pace in more than five years in December, buoyed by consumer and business spending.
- Candidates Kick Off 36-Hour Marathon of Campaigning in Iowa.
- Democratic presidential candidate Barack Obama is in first place in Iowa, and former Arkansas Governor Mike Huckabee is leading the Republican field, according to a Des Moines Register poll.

NY Times:
- US Educators Taking Aim on Boys’ Classroom Skills.
- Outside Groups Spend Heavily and Visibly to Sway 08 Election.

CNNMoney.com:
- The top 10 wireless trends for 2008.
- Energy and the presidential race. Where the top candidates stand on everything from a gas tax to a carbon cap to drilling in the Arctic National Wildlife Refuge.
- Survey: Mac OS hit record 7.3% share in December; iPhone up 33%. Reflecting strong holiday sales of both MacBooks and iPhones, Apple’s(AAPL) market share grew sharply in December, as measured by a Net Applications survey released today.

CNBC TV18:
- India will allow investors to short-sell stocks starting February 1.

IBD:
- Funds Notch Gains For Fifth Year In A Row. US diversified stock funds racked up a total return of 6.85% for the year through Dec. 27, according to Lipper Inc. Growth walloped value in all size groups. Mid-cap growth beat all other categories, averaging 17.04%.

Washingtonpost.com:
- Stock Market Shows Resilience In a Year of Economic Turmoil. Analysts Predict Continued Growth and Volatility in 2008.

Reuters:
- Home builders and financial issues, the biggest casualties of the subprime lending meltdown, were hit again by tax-motivated selling in recent weeks but could rebound a bit early in the new year, money managers said.
- Best and worst of the Dow’s 30 stocks for 2007.
- Mortgage and vehicle fleet company PHH Corp said on Tuesday it terminated its nearly $2 billion sale to General Electric Co and Blackstone, after the private equity firm failed to obtain required financing for the deal.
- California’s gasoline consumption drops again.
- Citigroup, Merrill top Wall St underwriters in 2007.

Financial Times:
- The Kuwait Investment Authority is following its peers in the Middle East in the hope of finding bargain investments in the US in the wake of the subprime mortgage crisis.

globeandmail.com:
- Commodities set to take breather in ’08.

Xinhua:
- Beijing started enforcing a stricter auto fuel standard yesterday as part of efforts to reduce pollution in time for the Olympic Games in August.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -.25% to +.25% on average.
S&P 500 futures n/a.
NASDAQ 100 futures n/a.

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
- None of note

Upcoming Splits
- None of note

Economic Releases
10:00 am EST
- ISM Manufacturing for December is estimated to fall to 50.5 versus 50.8 in November.
- ISM Prices Paid for December is estimated to fall to 64.9 from 67.5 in November.
- Construction Spending for November is estimated to fall .4% versus a .8% decline in November.

2:00 pm EST
- Dec. 11 FOMC Minutes.

Other Potential Market Movers
- None of note

BOTTOM LINE: Asian indices are mixed as gains in energy shares offset losses in technology stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.