Stocks Finish Mostly Lower Ahead of Jobs Report

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Stocks Mostly Lower into Final Hour on Rising Anxiety Ahead of Tomorrow's Jobs Report

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Semi longs, Biotech longs and Medical longs. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is negative today as the advance/decline line is lower, sector performance is mostly negative and volume is about average. Investor anxiety is high again. Today’s overall market action is mildly bearish. The total put/call hit a high 1.24 again this morning and the ISE Sentiment Index hit a depressed 82.0. For the sixth day in a row, the NYSE Arms is high, hitting an elevated 1.77. Fed funds futures now imply a 24.1% chance for a 50 basis point rate cut at the upcoming Fed meeting, up from a 7.8% chance last week. Trading has a very sloppy/choppy feel to it today. Retail stocks are under significant pressure, which is weighing on the broad market. It looks to me like there is a lot of beginning of the year profit-taking still going on in last year’s winners. As well, it seems new shorts are being placed on last year’s already heavily shorted losers. I still see few signs that large buyers are stepping up. I suspect we will see large buyers finally emerge next week. I expect US stocks to trade mixed into the close from current levels as more economic pessimism, increased shorting and rising anxiety ahead of tomorrow’s jobs report offsets bargain hunting, lower energy prices and seasonal strength.

Today's Headlines

Bloomberg:
- SunTrust Banks(STI) bought a minority interest in Alpha Equity Management LLC to expand its hedge fund offerings.
- For the first time since the August freeze in the credit markets, companies issued more IOUs backed by collateral as the cost to borrow in the short-term debt fell to the lowest in 22 months.
- The cost of borrowing in euros, dollars and pounds fell for a fourth day, suggesting central bank efforts at reviving interbank lending are working.
- Crude oil fell after an Energy Dept. report showed that US gasoline and diesel inventories rose as refineries increased operating rates.
- US airline delays in November fell for the third consecutive month.
- Monsanto Co.(MON) more than doubled first-quarter profit and raised this year’s earnings forecast after demand for food and biofuels boosted corn plantings in South America.
- Average global temperatures will be lower in 2008 than in any year since 2000 because of cooling waters in the Pacific Ocean, according to an estimate from the Met office, the UK weather forecaster.

Wall Street Journal:
- New Office for Macs Speeds Up Programs, Integrates Formats.
- Wireless HDTVs to Be on View at Tech Show.
- China Stocks Could Be Hindered In 2008 by Slower Profit Growth.

ABC News:
- Housing Slump?” Not in Manhattan.

IBD:
- The Big 10: Top Hedge Fund Trades of 2007.

AFP:
- Iran would receive “no benefit” by opening diplomatic or trade relations with the US administration, Supreme Leader Ayatollah Ali Khamenei said.

Bear Radar

Style Underperformer:

Small-cap Value (-.86%)

Sector Underperformers:

Coal (-3.86%), Retail (-2.42%) and REITs (-1.94%)

Stocks Falling on Unusual Volume:

JTX, CVS, SFG, SFLY, OSIP, CYMI, BLOG, VRTX, PCBC, PNRA, YRCW, SONC, LVS and ALJ

Initial Jobless Claims Fall, Job Cuts Decline, Factory Orders Surge

- Initial Jobless Claims for this week fell to 336K versus estimates of 345K and 357K the prior week.

- Continuing Claims rose to 2761K versus estimates of 2675K and 2715K prior.

- Factory Orders for November rose 1.5% versus estimates of a .5% gain and an upwardly revised .7% increase in October.

BOTTOM LINE: The number of Americans filing first-time claims for unemployment benefits fell last week, Bloomberg reported. A private survey based on payroll data from ADP showed the US created 40,000 jobs in December, 7,000 more than estimates. The four-week moving average of jobless claims fell to 343,750 from 344,500 the prior week. Moreover, Challenger Job Cuts fell -18.7% in December from year ago levels. The unemployment rate among people eligible to collect benefits, which tracks the US unemployment rate, rose to 2.1% from 2.0% the prior week. Jobless claims would have to move above 370,000 to be indicative of a broad economic contraction. I suspect the change in non-farm payrolls for December, released tomorrow, will come in slightly below estimates of 70K. As well, the unemployment rate is likely to come in around estimates of 4.8%, which is still low by historic standards. I continue to believe the labor market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

Orders to US factories rose more than forecast in November, Bloomberg reported. The 1.5% gain in orders was the most in four months. Excluding transportation, bookings rose 1.4%. Bookings for non-durable goods surged 3%, the most since March 2005. Commercial aircraft orders rose 21%. Orders for non-defense capital goods excluding aircraft, a gauge of future business spending, fell .1% versus a 3% decline in October. Shipments of those goods, which are used to calculate GDP, rose .2% versus a 1.2% decline in October. Manufacturers had 1.22 months of goods on hand versus 1.23 months worth in October. I continue to expect manufacturing to help boost overall US growth over the intermediate-term as companies gain confidence in the sustainability of the current expansion and rebuild depleted inventories as a result of record high exports.

Bull Radar

Style Outperformer:

Large-cap Value(+.38%)

Sector Outperformers:

Construction (+2.43%), Defense (+1.13%) and Utilities (+1.10%)

Stocks Rising on Unusual Volume:

SPN, RC, SYT, UNF, MON, STT, KFS, FTI, VE, AKNS, SCRX, ITWO, WATG, SOLF, CRXL, AIXG, THRX, SINA, CSIQ, DRIV, PHRM, IIVI, NURO, HSTX, CALM, HERO, CELG, CMED, TRA, TOT, BP, ISIL, MHS, ESRX and ETN