Bear Radar

Style Underperformer:

Large-cap Value +.65%

Sector Underperformers:

Airlines (-.82%), Internet (-.82%) and Coal (-.49%)

Stocks Falling on Unusual Volume:

GOOG, TSRA, HWAY, SSYS, CRDN, KSWS, FWLT, BABY and GTXI

PPI Rises More Than Estimates, Consumer Confidence Falls More Than Estimates

- The Producer Price Index for January rose 1.0% versus estimates of a .4% increase and a downwardly revised .3% decline in December.

- Consumer Confidence for February fell to 75.0 versus estimates of 82.0 and a reading of 87.3 in January.

BOTTOM LINE: Prices paid to US producers rose more than forecast in January, Bloomberg reported. Core producer prices rose 2.3% in January from year-ago levels. Energy costs rose 1.5% as the price of gas gained 2.9% during the month. The 10-year TIPS spread, a good gauge of longer-term inflation expectations, is rising 4 basis points on the report to 2.44%. However, this is still 4 basis points below levels seen in November and 13 basis points below the peak in June of last year at 2.57%. There remains a 92% chance for another 50 basis point fed funds cut at the upcoming March 18^th meeting and an 8% chance of a 25 basis point cut. I suspect inflation worries will peak for the year over the next couple of months and gauges will show meaningful deceleration in the second half of the year.

Consumer confidence fell more than forecast in February, Bloomberg reported. The Present Conditions component fell to 100.6, slightly below the long-term average of 102.8, from 114.3 the prior month. The Expectations Component fell to 57.9, the lowest since January 1991 at the beginning of the Gulf War, from 69.3 the prior month. The S&P 500 had already put in place a major bottom in October of 1990 at the time of that reading. The spread between what consumers say now about their current financial situation and what they feel about the future remains historically wide. The percentage of consumers planning to purchase a home rose to 2.7% from 2.5% the prior month. As well, those planning to purchase a large appliance rose to 30.9% from 30.6% in January. Consumer confidence in the Northeast Central region is at an extraordinarily depressed 43.3. Depressed sentiment in the northern part of the country continues to weigh heavily on the overall gauge. Sentiment in the Southwest Central and Mountain regions came in at a healthy 109.3 and 104.9, respectively. According to Intrade.com, the odds the US enters recession this year have fallen to 63.9% from 77.5% last month. I suspect this will mark the low point in consumer confidence for the year.

Bull Radar

Style Outperformer:

Small-cap Value (+.22%)

Sector Outperformers:

Homebuilders (+2.11%), Retail (+1.74%) and Restaurants (+1.32%)

Stocks Rising on Unusual Volume:

CBRL, DPZ, TRN, RDEN, TGT, AXA, DFG, TTEC, SNDA, FRP, RRI, CCOI, REP, POR, CGPI, ASTE, YTEC, FELE, COIN, HSII, TYPE, AMCN, VOCS, KNDL, SSRI, STRA, AVTR, SAFM, CVCO, FCSX, ATHN, TNS, RSH, TCI, CEP, FSF and FDP

Links of Interest

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Tuesday Watch

Late-Night Headlines
Bloomberg:
- MBIA Inc.(MBI) seeking to stave off a crippling credit rating downgrade, will stop writing guarantees on asset-backed securities for six months and will separate that business from its municipal unit within five years.
- Iran won’t suspend uranium enrichment as demanded in a proposed UN Security Council resolution set for a vote this week, Iran’s ambassador said.
- Tiffany(TIF) rose the most in more than two weeks in NY trading as investors speculated that LVMH Moet Hennessy Louis Vuitton SA, the world’s largest luxury-goods maker, may make a bid to buy it.
- PIMCO’s Bill Gross said the firm is buying US AA, A-rated corporate bonds.

MarketWatch.com:
- Foreign buyers eye US homes.
- As the stalemate over Microsoft’s bid to buy Yahoo Inc.(YHOO) enters is third week, some analysts are already pointing to a winner in the impasse: Google Inc.(GOOG).
- A slate of dark films nominated for this year’s Academy Awards casts a pall over the Oscar ceremony, with the telecast turning in the lowest ratings in its history, according to data released Monday by ABC.
- Top market-timers still bullish. Their confidence bodes well for stocks intermediate-term.

BusinessWeek.com:
- Why Cisco(CSCO) Is a Buy.
- Google(GOOG) Now Britain’s Top Tech Brand. The Web search giant climbed from the No. 5 position it held in the Superbrands rankings a year ago, surpassing Microsoft(MSFT) and the BBC.

CNNMoney.com:
- Ivy League university – latest major college to give parents a break – to give grants to families making less than $100,000 and drop tuition for those under $60,000.

Forbes.com:
- Nielsen Online said Monday Google(GOOG) topped January’s search rankings with 4.22 billion queries, or a 56.9% share. Yahoo(YHOO) came in second for the month with 1.41 billion searches, or a 19% share, followed by Microsoft’s(MSFT) MSN/Windows Live with a 12.1% share.
- Hedge funds still pose a potential systemic risk to the economy, despite having improved their management and disclosure practices, according to a study released Monday by US congressional investigators.

Reuters:
- Federal Reserve Governor Frederic Mishkin on Monday defended the central bank’s emphasis on core inflation, saying an emphasis on less volatile prices produces a stronger economy in the long run.

Financial Times:
- Opprobrium was poured on Hillary Clinton’s campaign on Monday amid allegations that an aide had circulated a photograph showing Barack Obama dressed as a Somali Muslim elder.
- US share prices staged a late rally on Monday after S&P’s affirmed the top-notch credit ratings of beleaguered bond insurers MBIA(MBI) and Ambac(ABK) and said MBIA was no longer at risk of a downgrade.

TimesOnline:
- The latest buying opportunity. If a bailout for the bond insurers is finalized, this could well mark the turning point in the global financial crisis. In terms of market psychology, the view that “this crisis is different from every other” is really just an echo of the cry “this time is different” that is always heard at the top of a bull market.

Financial Post:
- Web sites in the Google(GOOG) family have finally taken the top spot in the comScore Canadian web rankings.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (JWN), raised target to $45.
- Reiterated Buy on (CVH), target $74.
- Added (CSCO) to Recommended List.
- Reiterated Buy on (HON), target $70.

Night Trading
Asian Indices are unch. to +.75% on average.
S&P 500 futures -.07%.
NASDAQ 100 futures +.14%.

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Earnings of Note
Company/EPS Estimate
- (EP)/.29
- (FWLT)/.76
- (HD)/.43
- (NBL)/1.62
- (ODP)/.17
- (RSH)/.72
- (AZO)/1.62
- (CBS)/.51
- (KBR)/.32
- (ESV)/1.55
- (FTO)/.47
- (TGT)/1.22
- (DISH)/.47
- (KWK)/.24
- (HNZ)/.67
- (PZZA)/.43
- (DWA)/.72
- (OSG)/.58
- (ADSK)/.54
- (BID)/1.45
- (DPZ)/.27
- (FMCN)/.49
- (M)/1.61
- (CBRL)/.70

Upcoming Splits
- (RBN) 2-for-1

Economic Releases
8:30 am EST
- The Producer Price Index for January is estimated to rise .4% versus a -.3% decline in December.
- The PPI Ex Food & Energy for January is estimated to rise .2% versus a .2% increase in December.

10:00 am EST
- Consumer Confidence for February is estimated to fall to 82.0 versus a reading of 87.9 in January.

Other Potential Market Movers
- The Fed’s Kohn speaking, weekly retail sales reports, S&P/CaseShiller Home Price Index, Richmond Fed Manufacturing Index, (SO) analyst meeting, (NICE) analyst meeting, (XTO) analyst conference, HIMSS Conference, BMO Global Metals/Mining Conference, CSFB Global Services Conference, Goldman Sachs Tech Symposium and Merrill Communications Services Conference could also impact trading today.

BOTTOM LINE: Asian indices are 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 mixed. The Portfolio is 100% net long heading into the day.

Stocks Finish Near Session Highs, Boosted by Biotech, Energy, REIT, Retail and Construction Shares

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