Weekly Outlook

Click here for the weekly economic preview by Bloomberg.

Click here for stocks in focus for Monday by MarketWatch.

There are some economic reports of note and a few significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. – Consumer Credit

Tues. – Pending Home Sales, IDB/TIPP Economic Optimism Index, Minutes of March 18 FOMC Meeting, weekly retail sales

Wed. – Weekly EIA energy inventory report, weekly MBA Mortgage Applications report, Wholesale Inventories

Thur. – Trade Balance, Initial Jobless Claims, ICSC Chain Store Sales, Monthly Budget Statement

Fri. – Import Price Index, U. of Mich. Consumer Confidence

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. – Alcoa Inc.(AA)

Tues. – Sealy Corp.(ZZ)

Wed. – Shaw Group(SGR), Christopher & Banks(CBK), Circuit City(CC), Bed Bath & Beyond(BBBY), Progressive Corp.(PGR)

Thur. – Genentech(DNA), Pier 1(PIR), Rite Aid(RAD), VeriFone(PAY), Fastenal(FAST)

Fri. – General Electric(GE)

Other events that have market-moving potential this week include:

Mon. – Fed’s Yellen speaking, Fed’s Kohn speaking, Howard Weil Energy Conference

Tue. – (AWI) analyst meeting, Howard Weil Energy Conference, CSFB Global Real Estate Conference

Wed. – Fed’s Fisher speaking, (WBSN) analyst meeting, (AWI) analyst meeting, CSFB Global Real Estate Conference, Howard Weil Energy Conference

Thur. – (NVDA) analyst day, (EMKR) analyst day, (DNR) analyst meeting, CSFB Global Real Estate Conference, Howard Weil Energy Conference

Fri. – Fed’s Fisher speaking

BOTTOM LINE: I expect US stocks to finish the week modestly higher on a firmer dollar, short-covering, diminishing credit market angst and bargain hunting. My trading indicators are giving bullish signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,370.40 +4.2%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 1,370.40 +4.2%
DJIA 12,609.42 +3.2%
NASDAQ 2,370.98 +4.9%
Russell 2000 713.73 +4.5%
Wilshire 5000 13,770.24 +4.3%
Russell 1000 Growth 568.13 +4.2%
Russell 1000 Value 748.54 +4.5%
Morgan Stanley Consumer 701.92 +1.7%
Morgan Stanley Cyclical 973.19 +5.7%
Morgan Stanley Technology 554.96 +5.1%
Transports 4,976.39 +4.7%
Utilities 498.29 +5.3%
MSCI Emerging Markets 140.49 +4.4%

Sentiment/Internals
NYSE Cumulative A/D Line 56,681 +5.6%
Bloomberg New Highs-Lows Index -201
Bloomberg Crude Oil % Bulls 29.0 -21.2%
CFTC Oil Large Speculative Longs 225,434 -.4%
Total Put/Call 1.2 +4.3%
OEX Put/Call 1.53 +64.5%
ISE Sentiment 124.0 +12.7%
NYSE Arms 1.20 -26.38%
Volatility(VIX) 22.45 -12.68%
G7 Currency Volatility (VXY) 11.67 -6.2%
Smart Money Flow Index 8,675.33 +1.8%
AAII % Bulls 36.7 -11.8%
AAII % Bears 39.4 +17.1%

Futures Spot Prices
Crude Oil 106.23 +1.2%
Reformulated Gasoline 275.74 +1.8%
Natural Gas 9.32 -5.0%
Heating Oil 299.15 +.4%
Gold 917.90 -2.4%
Base Metals 257.17 -1.5%
Copper 395.25 +3.2%
Agriculture 434.09 +1.2%

Economy
10-year US Treasury Yield 3.47% +3 basis points
10-year TIPS Spread 2.30% -5 basis points
TED Spread 1.36 +3 basis points
N. Amer. Investment Grade Credit Default Swap Index 109.2 -20.0%
Emerging Markets Credit Default Swap Index 244.76 +8.2%
Citi US Economic Surprise Index -83.80 +14.9%
Fed Fund Futures 60.0% chance of 25 cut, 40.0% chance of 50 cut on 4/30
Iraqi 2028 Govt Bonds 69.75 -1.6%
4-Wk MA of Jobless Claims 374,500 +4.4%
Average 30-year Mortgage Rate 5.88% +2 basis points
Weekly Mortgage Applications 688,300 -28.7%
Weekly Retail Sales +1.1%
Nationwide Gas $3.30/gallon +.02/gallon.
US Heating Demand Next 7 Days 11.0% below normal
ECRI Weekly Leading Economic Index 129.90 -1.4%
US Dollar Index 71.96 +.5%
Baltic Dry Index 7,690 -2.5%
CRB Index 395.09 +.1%

Best Performing Style
Mid-cap Growth +5.9%

Worst Performing Style
Small-cap Value +4.1%

Leading Sectors
Homebuilders +10.0%
I-Banks +9.7%
Semis +8.8%
Steel +8.3%
Retail +7.2%

Lagging Sectors
Drugs +2.3%
HMOs +1.8%
Computer Services +1.6%
Gold +.74%
Tobacco +.73%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Mostly Higher into Final Hour on Bargain Hunting, Diminishing Credit Angst, Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Biotech longs, Internet longs, Retail longs and Alternative Energy longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is mildly bullish as the advance/decline line is higher, sector performance is mostly positive and volume is below average. Investor anxiety is slightly above average, despite today’s gains. Today’s overall market action is very bullish considering recent gains, the employment report and the rise in energy prices. The VIX is falling 4.2%, but remains above average at 22.2. The ISE Sentiment Index is a below average 140.0 and the total put/call is high at 1.17. Finally, the NYSE Arms has been running above average most of the day and is currently 1.12. Nikkei futures indicate an +127 open in Japan and DAX futures indicate an +74 open in Germany on Monday. Despite the weaker employment report today, the North American Investment Grade Credit Default Swap Index is dropping another 10.5 basis points today. This index has plunged 47% since March 10^th. Credit default swaps had been the source of much angst, implying corporate default rates much higher than the fundamentals suggested. This is a huge positive. The 10-year TIPS spread, a good gauge of inflation expectations, is falling another 5 basis points today to 2.29%. This is down from 2.68% on March 13^th. Growth stocks are substantially outperforming value stocks, with leaders especially strong. With more signs that global growth is slowing, I suspect investors are warming to these stocks again as valuations are extraordinarily compelling at current levels. I expect US stocks to trade modestly higher into the close from current levels on short-covering, diminishing credit market angst and bargain-hunting.

Today's Headlines

Bloomberg:
- The cost to protect corporate debt from default dropped to the lowest in more than two months as futures signaled the US stock market is poised to rise for the fourth day this week. Credit-default swaps n the Market CDX North America Investment Grade Index of 125 companies fell 10.5 basis points to 102.5, according to broker Phoenix Partners Group. The Markit LCDX index, a gauge of confidence in the US high-yield, high-risk loan market that rises as sentiment improves, gained .55 percentage point to 95.1, according to Goldman Sachs(GS). Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit rating dropped 40 basis points to 465, according to JPMorgan Chase(JPM).
- Crude oil rose more than $2 a barrel as the US dollar fell against the euro, prompting speculators to purchase commodities.
- Buy Wal-Mart(WMT), Sell Goldman(GS) Becoming Easiest Trade. The best trade on Wall Street these days may be buying Wal-Mart Stores(WMT) and companies whose earnings will increase as the US economy recovers, while selling the banks that were behind the subprime market meltdown.
- Jim O’Neill, head of global economic research at Goldman Sachs(GS), says the economy is “not as bad as they all think.” (video)
- India’s inflation accelerated to the fastest pace in more than three years.
- Federal Reserve officials signaled the central bank will keep lowering interest rates because financial markets remain distressed.

Wall Street Journal:
- Nokia Corp.(NOK) is counting on people such as Rita El Khoury, who splurged on the Finnish phone maker’s $674 N81 handset so she could be an early user of the company’s N-Gage Internet service platform for videogames.
- Microsoft(MSFT) and Yahoo Inc.(YHOO) senior executives met this week to discuss Microsoft’s proposal to acquire the Internet company but failed to resolve any of their differences.
- Failure by the US Congress to pass a free-trade agreement with Colombia this year would be a serious setback for Washington’s closet ally in South America, President Alvaro Uribe said.

NY Times:
- Rising Leader for Next Phase of Al Qaeda’s War.

Washington Post:
- Democrats Fight for Super-Superdelegates.

CNNMoney.com:
- Michigan Democrats will not go to the polls again to choose a presidential nominee, even though the national party has refused to recognize the results of their vote in January, the party announced.

Reuters:
- JPMorgan Chase(JPM), which is taking over rival investment bank Bear Stearns(BSC), will dominate the management ranks of the combined investment banking and trading businesses, according to an internal memo.

Financial Times Deutschland:
- Otmar Issing, the European Central Bank’s former chief economist, said the euro’s appreciation helps curb inflation.

Market News International:
- European Central Bank council member Vitor Constancio said slower economic growth will damp inflation. Constancio predicted the US slowdown will impact on the euro-region economy with a “delay.”

Ansa:
- The IMF cut its 2008 forecast for Italy’s economy to .3%. The last prediction for Italy, Europe’s fourth largest economy, was for economic expansion of 1.3%.

Bear Radar

Style Underperformer:

Mid-cap Value +.21%

Sector Underperformers:

Gaming (-1.14%), Telecom (-1.11%), Banks (-1.08%)

Stocks Falling on Unusual Volume:

RVBD, OFIX, BCSI, AZZ, ELX and MYE

Stocks With Unusual Put Option Activity:

1) CEPH 2) SY 3) IMCL 4) MEE 5) FDRY