Bull Radar

Style Outperformer:

Small-cap Growth(+.95%)

Sector Outperformers:

Biotech (+2.55%), Drugs (+2.31%) and Steel (+2.06%)

Stocks Rising on Unusual Volume:

APL, HNT, PZE, RPM, GRR, NSH, SEH, KG, VRUS, ISIS, ITMN, QMAR, HWAY, SBUX, AMSG, WBSN, HELE, HRBN, INCY, SHPGY, AVCT, LEAP, ALXN, PERY, TISI, PPDI, SIGM, PGNX, KGC, SSRI, TNE, BRP, PBR, WYE, SGP, DIVX, ICE, SWS, UBS and ACGL

Links of Interest

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Tuesday Watch

Late-Night Headlines
Bloomberg:
- Australia’s home-building approvals unexpectedly surged in November by the most in nine months as higher employment, wages and immigration spurred investment.
- Wheat output in Australia, the world’s fifth-largest exporter, may rebound to a record next harvest as higher prices and expectations of improved weather spur farmers to lift plantings, Emerald Group Australia Pty said.
- President Bush and Treasury Secretary Paulson said that US economic indicators are sending “mixed” signals and that they are considering whether a stimulus is needed.
- Democratic presidential candidate Hillary Rodham Clinton, her voice cracking, told voters in New Hampshire “it’s not easy” to keep going in a long political campaign “against some pretty difficult odds.”
- You’re more likely to survive cancer if you live in a sunny place and make the most of the weather, scientists say.
- Starbucks Corp.(SBUX) ousted CEO Jim Donald and replaced him with former CEO and Chairman Howard Schultz after posting its worst-ever annual performance in US trading. The shares surged 9% in after-hours trading.
- Genzyme Corp.(GENZ) will license Isis Pharmaceuticals’(ISIS) cholesterol-lowering drug for $175 million to start and will buy 5 million of its partner’s shares for $150 million. The shares soared 51% in extended trading.
- Matsushita Electric Industrial, the world’s biggest consumer electronics maker, will sell televisions in the US that can access Internet video clips on Google’s(GOOG) YouTube.

CNBC.com:
- CNBC has confirmed that James Cayne, the chairman and CEO of Bear Stearns(BSC), is stepping down.
- Top Manager Names Wireless, Web Stocks.

IBD:
- Q4 Profits Seen Off Nearly 10%, But Up 12% Ex Financials.

USA Today.com:
- After an unprecedented year of toy recalls, the Consumer Product Safety Commission is adding staff at the nation’s busiest ports and pledging to work more closely with US Customs to stop suspect imports and identify potential hazards before toys hit the market.

Reuters:
- Short interest on the NYSE rose .7% in late December, the exchange said on Monday, indicating an increase in bearish sentiment in the stock market.

Financial Times:
- TV screen makers vie for slimness.
- Paramount Pictures plans to abandon Toshiba Corp.’s HD-DVD format after Warner Bros. Entertainment dropped its support of the technology.

globeandmail.com:
- TD Bank repeats it has no US subprime exposure.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -.25% to +1.0% on average.
S&P 500 futures +.19%.
NASDAQ 100 futures +.27%.

Morning Preview
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Earnings of Note
Company/EPS Estimate
- (FDO)/.37
- (STZ)/.55
- (KBH)/-1.34
- (AYI)/.82
- (APOL)/.73
- (PPDI)/.34
- (SWY)/.69
- (SVU)/.63

Upcoming Splits
- None of note

Economic Releases
10:00 am EST
- Pending Home Sales for November are estimated to fall .7% versus a .6% increase in October.

3:00 pm EST
- Consumer Credit for November is estimated to rise to $8.0 billion from $4.7 billion in October.

Other Potential Market Movers
- The Fed’s Plosser speaking, weekly retail sales reports, IBD/TIPP Economic Optimism Index, Needham Growth Conference, JPMorgan Healthcare Conference, Citigroup Entertainment Conference, Consumer Electronics Show, JPMorgan Global Energy Day and Raymond James Govt. Services & Tech. Summit could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and financial stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

Stocks Finish Well Off Session Lows After Late Rebound

Evening Review
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In Play

Stocks Lower into Final Hour, Weighed Down by Tech and Commodity Shares

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Semi longs, Software longs and Medical longs. I have not traded today, thus leaving the Portfolio 75% 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 heavy. Investor anxiety is above average. Today’s overall market action is bearish. Many market leading tech and cyclical shares, with the largest gains last year, remain under pressure today, substantially underperforming the broad market. Many true growth stocks are rapidly approaching very attractive entry points on the long side for investors, in my opinion. Economic pessimism is extraordinarily high given recent data. Many pundits that have proclaimed for years that the US faced an imminent recession are now saying that the economy is already in one and that it will be a very bad one. I suspect that if the US economy were to head into recession in the future these same pundits would then start calling for a depression. In the current "US negativity bubble" it seems their dire forecasts are so easily believed. I continue to see little evidence of an outright recession in the data even as this is currently being priced into stocks at current levels. On the positive side, the TED spread is falling another 13 basis points today to 131 basis points. This is down 109 basis points from August highs and down 92 basis points from highs hit three weeks ago. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting and rising economic pessimism.

Today's Headlines

Bloomberg:
- The risk of companies defaulting on their debt fell amid speculation the Federal Reserve will cut interest rates further, trading in credit-default swaps show.
- Crude oil is falling more than $2 barrel, the most since November, on expectations demand will drop, a firmer US dollar and warmer weather.
- The fastest-growing bet in the oil market these days is that the price of crude will double to $200 a barrel by the end of the year.
- The US dollar rose for the first time this year versus the yen and gained against the euro on speculation global growth may withstand a slowing US economy.
- Three US Navy warships were briefly confronted by five Iranian “fast boats” yesterday in the Persian Gulf, a Defense Dept. spokesman said.

Wall Street Journal:
- McDonald’s(MCD) Takes On A Weakened Starbucks(SBUX).
- Could GM’s(GM) Salvation Be Stuff of Science Fiction.
- Comcast(CMCSA) Devices Aim to Simplify TV Watching.
- The level of crisis in the securities and investment banking industry is at its highest since records began, according to the Financial News annual Crisis Index.

NY Times:
- CNBC and the NY Times(NYT) will share material on their Web sites starting today to compete with the Wall Street Journal and the Fox Business Network.
- Peter Hopkins, a civic-minded and idealistic 2004 Harvard grad, is hoping that his new Web site, Big Think, will do for intellectuals what YouTube, the popular video-sharing site, did for bulldogs on skateboards.

AppleInsider:
- Apple(AAPL) is closing in on agreements with almost all the major motion picture studios for an iTunes movie rental service that will serve up 24-hour rentals for $3.99 a pop.

AP:
- Comcast Corp.(CMCSA) and Time Warner Inc.(TWX) will allow electronics manufacturers to standardize televisions and other devices so they will work with any cable provider, which may encourage the development of new services.

Financial Times:
- Plug-in cars are picking up speed and credibility.

Sentido Comun:
- Microsoft’s(MSFT) Bill Gates reclaimed the title of the world’s richest man from Mexican billionaire Carlos Slim.