Bear Radar

Style Underperformer:

Mid-cap Value +1.13%

Sector Underperformers:

HMOs (-1.51%), Utilities (+.15%) and REITs (+.22%)

Stocks Falling on Unusual Volume:

NILE, HCSG, DAKT, ATAC, WERN, WYNN, RECN and UNH

Retail Sales Exceed Estimates, Business Inventories Rise

- Advance Retail Sales for January rose .3% versus estimates of a .3% decline and a .4% decline in December.

- Retail Sales Less Autos for January rose .3% versus estimates of a .2% gain and an upwardly revised .3% decline in December.

- Business Inventories for December rose .6% versus estimates of a .5% increase and a .4% gain in November.

BOTTOM LINE: Retail sales in the US unexpectedly rose in January, easing concern that the US economy is slipping into recession, Bloomberg reported. The gain was led by spending on autos, clothes and gasoline. Sales at automobile dealerships and parts stores jumped .6% versus a 1.1% decline in December. Sales at clothing retailers surged 1.4% and purchases at non-store retailers, which include online and catalog sales, gained .5%. Sales at building materials stores fell 1.7%. I expect retail sales to continue to improve back to more average rates over the intermediate-term on historically low interest rates, decelerating inflation, improving consumer confidence, fiscal stimulus, pent-up demand, rising stock prices, a more healthy job market and subsiding housing fears.

Inventories at US businesses in December rose more than expected and sales fell at the end of last year, Bloomberg reported. Sales fell .5% after a 1.4% gain in November. The amount of goods on hand at the current sales pace rose to 1.26 months’ worth. Inventories at retailers actually fell .1% and auto dealers saw a 1.6% decline in supplies. Inventories at building materials retailers rose .3%. Falling inventories were the main reason 4Q GDP rose a less-than-estimated .6%, subtracting 1.3 percentage points from growth. Inventory rebuilding this quarter should help add to growth.

Bull Radar

Style Outperformer:

Small-cap Growth (+.93%)

Sector Outperformers:

Alternative Energy (+3.71%), Computer Hardware (+2.20%) and Semis (+2.18%)

Stocks Rising on Unusual Volume:

ARP, BGC, GNA, ABD, ORB, JNY, GWR, ACOR, WSPI, MDCO, BWLD, SPSS, VOLC, VRTX, CEPH, FSLR, OCNF, PNRA, GXDX, AMAT, ECOL, KNSY, PFCB, BOBE, VLCCF, HOFT, MICC, CSIQ, ALY, UDRL, INT, CLMS, CLWR, ITU, OFG and ARGN

Links of Interest

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Wednesday Watch

Late-Night Headlines
Bloomberg:
- The euro will decline to its lowest level against the US dollar since October over the next three months as the European economy slows and the European Central Bank is forced to reduce its main interest rate, according to Credit Suisse Group.
- US farmers will produce more core per acre in the next decade as improved seed technology boosts yields enough to meet food and fuel needs, even as ethanol consumers about a third of the crop. Yields will rise 13% to 173.3 bushels per acre by 2017, compared with 153 bushels projected for this year, the Dept. of Agriculture said in a report.
- Wheat fell 3.9%, capping the biggest two-day loss since 2003, on speculation that farmers will increase planting.
- The Senate passed legislation to extend the Bush administration’s authority to eavesdrop on suspected terrorists and shield phone companies from privacy lawsuits for cooperating with the program.
- The Genentech Inc.(DNA), the largest US maker of anti-cancer drugs, said its Avastin treatment helped slow the spread of breast tumors in a clinical trial.
- Buffalo Wild Wings Inc.(BWLD) jumped as much as 15% in after-hours trading after the company reported fourth-quarter profit that beat the average estimate of analysts.
- Applied Materials(AMAT), the largest maker of semiconductor-production machines, reported a 35% drop in fiscal first-quarter profit after filling few orders from memory chipmakers. The stock rose 4.6% in after-hours trading.
- Wynn Resorts(WYNN) fell 4.2% in trading after the close following a decline in earnings at its Las Vegas property.
- The International Energy Agency will lower its forecast for global oil demand tomorrow, Executive Director Nobuo Tanaka said.

Wall Street Journal:
- Obama, McCain Sweep In Potomac Primaries.
- Sprint Nextel(S) director Ralph Whitworth may push for the sale of the Nextel network or the whole company.
- Morgan Stanley’s(MS) Jerker Johansson is the leading candidate to become head of UBS AG’s investment banking business.

MarketWatch.com:
- The world oil market is poised to ease over the next two years with production increases offsetting moderate growth in oil demand, the US Energy Information Administration said. Surplus production capacity is projected to grow from the current level of less than 2 million barrels a day to more than 4 million barrels a day by the end of 2009. World oil consumption is expected to grow by 1.4 million barrels a day in 2008, about 200,000 barrels lower than last month’s assessment.

CNBC.com:
- Bernanke Expects Housing Recovery by Year End.
- Apple(AAPL): On The Road(Back) To Respect?
- Long-Term Investing’s Other Benefit: Better Tax Rates.

NY Times:
- Businesses, large and small, will be directly helped by the new economic stimulus legislation passed by Congress last week, But small businesses, in particular, may get the biggest lift indirectly – from consumers spending their tax rebates.

BusinessWeek.com:
- Standard & Poor's expects the S&P 500 to post a 23.2% decline in earnings for the 2007 fourth quarter. But, excluding the financial sector, S&P projects a 13.7% gain in earnings.

CNNMoney.com:
- Despite widespread public perception that speculative investing is to blame for high oil prices, big investors distanced themselves from it Tuesday, saying the recent run up has more to do with strong demand, tight supply, and a desire to diversify instead of trading momentum. “It’s pure speculation,” longtime Oppenheimer oil analyst Fadel Gheit said recently.
- Berkshire Hathaway’s(BRK/A) offer to the troubled bond insurers is presented as a rescue, but its terms may be too tough for the companies’ shareholders to accept.

SmartMoney.com:
- Microsoft’s(MSFT) Drop Offers Tempting Entry Point.

Portfolio.com
- Why Google(GOOG) Might Want a Microsoft(MSFT)-Yahoo(YHOO) Merger.
- Illumina(ILMN) C.E.O. Jay Flatley is moving fast to outmaneuver rivals in a futuristic industry that stands to make billions of dollars off your DNA.

IBD:
- Sharp Steepening Of Yield Curve Shows Means To Refuel Growth.
- Chipmaker Nvidia(NVDA) Makes A Big Leap Into Smart Phones.

USA Today.com:
- Fed lends banks another $30 billion to keep credit flowing.

Reuters:
- Carrie McCabe, among the most prominent women executives in the hedge fund industry, is launching a new hedge fund investment firm backed by General Electric’s(GE) asset management division.
- Venezuela halts oil supplies to Exxon Mobil(XOM).

Late Buy/Sell Recommendations
Citigroup:
- Maintained Buy on (GME), target $65.
- Reiterated Buy on (HS), target $29.
- Maintained Buy on (MCD), target $64.
- Reiterated Buy on (GM), target $35.
- Maintained Buy on (AMAT), raised target to $26.
- Reiterated Buy on (TWTC), target $25.

Night Trading
Asian Indices are -.5% to +1.75% on average.
S&P 500 futures -.30%.
NASDAQ 100 futures -.14%.

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Earnings of Note
Company/EPS Estimate
- (KO)/.55
- (DE)/.78
- (GBE)/.22
- (MTG)/-8.13
- (JNY)/.06
- (DTV)/.29
- (GENZ)/.92
- (DF)/.30
- (PFCB)/.31
- (FSLR)/.53
- (VCLK)/.18
- (A)/.41
- (BYI)/.39
- (NTAP)/.34
- (CAR)/.18
- (VMC)/1.09
- (MHK)/1.53
- (AAP)/.38
- (BIDU)/4.98
- (CLB)/1.35
- (NVDA)/.47
- (IM)/.14
- (TIE)/.30
- (JASO)/.13

Upcoming Splits
- (WGOV) 2-for-1

Economic Releases
8:30 am EST
- Advance Retail Sales for January are estimated to fall .3% versus a .4% decline in December.
- Retail Sales Less Autos for January are estimated to rise .2% versus a .4% decline in December.

10:00 am EST
- Business Inventories for December are estimated to rise .5% versus a .4% gain in November.

Other Potential Market Movers
- The weekly EIA energy inventory data, weekly MBA Mortgage Applications report, BB&T Transports Conference, Merrill Insurance Investors Conference, Citigroup Retail Conference, BIO CEO & Investor Conference, Lehman Industrial Select Conference, Deutsche Bank Small/Mid-cap Growth Conference and UBS Global Healthcare Services Conference could also impact trading today.

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

Stocks Finish Higher, Boosted by REIT, Insurance, Telecom, Healthcare, Bank Shares

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