Today's Headlines

Bloomberg:
- Bear Stearns(BSC), the US firm that posted its first-ever loss last quarter on mortgage writedowns, is betting more than $1 billion that subprime home loans and bonds will continue to decline.
- Copper is rising another 2.4%, heading for its biggest weekly gain since May 2006, as inventories fell to the lowest level in more than three months.
- Oil is rising $3.41/bbl. to $91.44/bbl. after OPEC said it may cut oil production despite the fact that record prices for the commodity are greatly contributing to the global economic slowdown and that it may abandon the US dollar for the euro in pricing oil.
- Amazon.com(AMZN) posted its biggest two-day gain since November after saying it plans to buy back as much as $1 billion of stock in the next two years.
- Google Inc.(GOOG) hasn’t received formal objections from EU regulators about its proposed $3.1 billion purchase of DoubleClick(DCLK), indicating the EU is close to approving the deal.
- McDonald’s(MCD), the world’s largest restaurant company said comparable-store sales at US outlets rose 1.9%, more than the 1.5% increase it had previously forecast.
- OPEC may cut crude production when it meets next month to keep the price near record levels.

Wall Street Journal:
- Internet Logjams Spur Cable Boom. Seven years after a telecom boom and bust created a glut of fiber optical cable and destroyed $2 trillion in stock-market wealth, another building binge is on.
- Retailers in the US are turning to the Internet to sell to shoppers abroad in hopes of easing the pain of an economic slowdown at home.
- Toyota Motor(TM) is offering 7-year loans on new cars to help dealers boost sales.
- Now that the excitement of Super Tuesday has passed, we should remember the kinds of policies and principles at stake, Exhibit A: three pieces of legislation pending in Congress that would dramatically increase the liability of private companies for alleged acts of employment discrimination.

NY Times:
- Seattle Becomes New Destination for Venture Capital.

CNBC:
- An agreement for a bailout of bond insurers Ambac Financial(ABK) and FGIC Corp. might be reached as early as next week.

Social Science Research Network:
- Do Hedge Funds Profit from Mutual-Fund Distress?

CNNMoney.com:
- Unusual Perks: Goldman Sachs’(GS) Health Insurance Covers Sex Changes.

Reuters:
- The US dollar fell against the euro after a magazine report said OPEC may adopt the euro and abandon the US dollar when pricing oil.

Financial Times:
- PGGM, Europe’s second largest pension fund, has shaken up its commodities investment portfolio, halving its exposure to the agricultural sector and scrapping its gold and silver allocations in spite of recent record prices in both areas. At the same time, the Dutch pension fund has increased its exposure to industrial metals and livestock, according to officials and bankers familiar with the fund.

Dagens Naeringsliv:
- StatoilHydro ASA, Norway’s largest oil producer, will send a team to investigate the Bay Hassan oil field in northern Iraq, citing Iraqi Oil Minister Hussain al-Shahristani. Iraq plans to expand oil production to 6 million barrels a day in five years, from 2.4 million barrels a day now, al-Shahristani said.

Xinhua:
- Chinese mobile phone users are expected to send a record 17 billion text messages during the Lunar New Year holiday, citing government forecasts.

Bear Radar

Style Underperformer:

Large-cap Value (-1.61%)

Sector Underperformers:

Banks (-3.42%), Airlines (-2.85%) and HMOs (-2.78%)

Stocks Falling on Unusual Volume:

CNC, RHD, AGN, TDG, BW, AWH, SCOR, UTIW, CEPH, LPNT, PRFT, IPSU, SHPGY, CELL, JCOM, AU, TMX and ACL

Wholesale Inventories Rise

- Wholesale Inventories for December rose 1.1% versus estimates of a .3% gain and an upwardly revised .8% increase in November.

BOTTOM LINE: Inventories at US wholesalers surged in December as sales declined, Bloomberg reported. Sales fell .7%, the most since January. The decline in sales brought the supply of goods on hand to 1.09 months from 1.07 months worth the prior month. The increase in wholesale inventories was led by a 9.2% rise in oil product stockpiles. The overall gain in inventories could help lead to an upward revision in 4Q GDP. The odds of a 50 basis point rate cut at the FOMC meeting next month are 68.0%, while the odds of a 75 basis point cut have risen to 32.0%. According to Intrade.com, the odds the US enters recession this year have fallen to 66.5% from 77.5% a few weeks ago. The ECRI Weekly Leading Economic Index jumped 1.83% this week back to 133.50. Despite the recent bounce higher in commodities, fueled by OPEC’s talk of oil production cuts, the 10-year TIPS spread, a good gauge of inflation expectations, is 2.29% today, down from 2.48% in November and 2.38% one week ago. I continue to believe inventory rebuilding will help boost overall US growth over the intermediate-term as exports rise to new records and companies gain confidence in future economic conditions.

Bull Radar

Style Outperformer:

Mid-cap Growth (+.78%)

Sector Outperformers:

Construction (+3.35%), Restaurants (+1.77%) and Software (+1.56%)

Stocks Rising on Unusual Volume:

MTD, WNS, DRS, MFE, HEP, LZ, GDI, COG, VNUS, CTSH, CSTR, LMNX, OMTR, GMXR, HAYN, OYOG, SPTN, TTMI, ALNY, URBN, IOSP, FRME, KNSY, ACAP, EPIC, TBSI, GOLD, GCOM, NFS, EQ and AIZ

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Friday Watch

Late-Night Headlines
Bloomberg:
- The euro headed for the biggest weekly decline in 1 ½ years against the dollar after European Central Bank President Trichet signaled he’s open to cutting interest rates as economic growth slows.
- The rebound in the dollar foreseen by UBS AG, BNP Paribas SA and Deutsche Bank AG is gaining momentum.
- Freddie Mac’s(FRE) losses from mortgage defaults may hit bottom by the end of the year as the housing recovery, CEO Richard Syron said today.
- The US Senate approved a $151 billion economic stimulus measure that will send tax rebates to more than 100 million US households.
- US economic growth is poised to return to its long-term trend in the second half of the year following aggressive interest –rate cuts, said Federal Reserve Bank of Dallas President Richard Fisher.
- OPEC may cut crude production when it meets next month to keep the price above $80 a barrel, oil ministry officials from four of the group’s nations said.
- Cognizant Technology(CTSH) said quarterly revenue rose 41% from year ago levels. The shares surged 13% in extended trading.
- Intermec(IN) reported revenues rose 16% over year ago levels. The shares rose 7.4% in after-hours trading.
- BMC Software(BMC) reported revenues exceeded the high end of guidance, rising 11% from year ago levels. The stock gained 4% in extended trading.
- CF Industries(CF) said net sales rose 62% from year ago levels. The shares jumped 7% in after-hours trading.
- MBIA Inc.(MBI) raised $1 billion by selling shares at $12.15 each in an effort to protect its AAA insurance rating. The stock fell 8.4% in extended trading.

MarketWatch.com:
- Hedge funds had their worst month since the dot-com bust. Fed rate cuts may have made things worse as heavily shorted stocks rallied.

NY Times:
- Benazir Bhutto died from a head wound caused after a bomb blast and not from an assassin’s bullet, according to Scotland Yard investigators probing the Pakistan opposition leader’s killing.

IBD:
- Handhelds Become Instant Hit For Maker Of Ultrasound Devices.
- HR Software Online Rising.

Gizmodo:
- Google(GOOG) Phone Prototype to Be Shown Next Week at Mobile World Congress.

USA Today.com:
- Corporate cafeterias go the green, healthy route.
- It’s not just Clinton, Obama and McCain stressing over the presidential election. Wall Street is, too.

Reuters:
- Three former El Paso(EP) natural gas traders were convicted on Thursday of reporting false deals to manipulate gas prices from 2000-2002.

Financial Times:
- China Investment Corporation, the Chinese sovereign wealth fund, is close to an agreement with JC Flowers, the US pirate equity group, to put about $4 billion into a new fund to invest in ailing financial institutions.
- US and Italian police arrested more than 70 Mafia suspects in NY and Sicily on Thursday, decapitating the second largest crime family in the US and thwarting plans by a new generation of organized crime bosses to re-establish a transatlantic axis.

Late Buy/Sell Recommendations
Citigroup:
- Maintained Buy on (WW), target $62.
- Reiterated Buy on (ARW), raised target to $50..
- Reiterated Buy on (EXPE), target $38.
- Maintained Buy on (MDTH), target $40.
- Maintained Buy on (COV), target $52.
- Maintained Buy on (IP), target $40.
- Reiterated Buy on (CF), target $139.

Night Trading
Asian Indices are -.50% to +.75% on average.
S&P 500 futures -.03%.
NASDAQ 100 futures -.07%.

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Earnings of Note
Company/EPS Estimate
- (ALU)/.14
- (BEC)/1.03
- (CVH)/1.18
- (FNM)/-1.29
- (SKYW)/.64
- (WY)/.34

Upcoming Splits
- None of note

Economic Releases
10:00 am EST
- Wholesale Inventories for December are estimated to rise .3% versus a .6% gain in November.

Other Potential Market Movers
- The Fed’s Lockhart speaking, Fed’s Pianalto speaking, Fed’s Yellen speaking, (GLW) investor meeting, (STJ) analyst meeting and CSFB Energy Conference could also impact trading today.

BOTTOM LINE: Asian indices are mixed as gains in automaker stocks are offsetting losses in industrial 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.