Monday Watch

Weekend Headlines
Bloomberg:

- The Group of 20 nations is prepared to act ``urgently'' to bolster growth and called on governments to cut interest rates and raise spending as the world's leading industrialized economies battle the threat of a recession.

- The cost of protecting Asia-Pacific bonds from default declined, according to traders of credit-default swaps. The Markit iTraxx Japan Index fell 19 basis points to 221 as of 9:32 am in Tokyo, according to prices from Morgan Stanley. The iTraxx Australia was quoted 15 basis points lower at 240 in Sydney, Citigroup Inc. data show. Asia’s index of 50 investment-grade borrowers outside Japan, including the Thai government and Hong Kong’s Hutchinson Whampoa Ltd., declined 20 basis points to 320, according to ICAP Plc.

- Organized labor spent more than $100 million in support of Barack Obama and Democratic congressional candidates. It might not have been enough to deliver unions' top legislative priority. Democrats are short of the 60 Senate votes they need to overcome attempts to stall legislation. That doesn't bode well for a measure to require that companies recognize unions once a majority of their workers sign cards requesting a union rather than only after employees vote. Without the 60 votes, the bill may be in trouble. ``The bill will likely be subject to a filibuster,'' said Robert Lian, a labor lawyer in the Washington office of Akin Gump Strauss Hauer & Feld LLP. To pass the measure, Democrats will have to compromise, he said.

- It was bound to happen. And it should surprise no one that the French were the ones to initiate it. French President Nicolas Sarkozy last month proposed that European countries establish sovereign wealth funds to purchase stakes in key companies in the region to foil overseas ``predators'' seeking control at knockdown prices.

- China announced a 4 trillion yuan ($586 billion) stimulus plan to spur expansion in the world's fourth-largest economy, helping sustain global growth as the U.S., Europe and Japan teeter on the brink of recession.

- President-elect Barack Obama has no plans to cancel part of a US missile-defense system to be located in Poland, President Lech Kaczynski said on his Web site. Obama gave the Polish president his reassurance in a telephone conversation yesterday.

- Barack Obama’s office said the president-elect has made “no commitment” to a planned US missile-defense system, after remarks on the Polish president’s Web site suggested that Obama will press ahead with the shield.

- China’s steel production, the largest in the world, will rise at least 5% next year on the government’s $586 billion stimulus plan, according to Daiwa Securities Group Inc. The broker will revise its forecast of a 5% drop in 2009 steel production, analyst Helen Lau said.

- Commodity exchange-traded products had their worst-ever month in October, with outflows totaling $2 billion, Barclays Capital said. Energy products posted $750 million in withdrawals and those linked to agriculture and commodity indexes shrank by $500 million to $550 million each, the bank said. Overall assets under management declined 20% from September, Barclays said. “Retail investors are also now going through a phase of risk reduction in their commodity exposure,” Barclays said. “This is evident as even short ETPs across all sectors are seeing substantial outflows, with short energy ETPs seeing big falls at a tie when oil prices have been falling.” The S&P GSCI Index of 24 commodities plunged 28% last month, the worst performance since at least 1970.

- Billionaire Warren Buffett's Berkshire Hathaway Inc.(BRK/A) posted a fourth straight profit drop, the longest streak of quarterly declines in more than a decade, as hurricanes hurt returns at insurance operations and investments lost value.

- Russia, the world’s second-largest oil producer, will defy calls from Venezuelan President Hugo Chavez to join OPEC in cutting output and pursue an “independent” strategy, Finance Minister Alexei Kudrin said. ``The government isn't planning any restrictions of oil production in the near future,'' Kudrin, who also serves as deputy prime minister, said in an interview in Sao Paulo today. ``Of course we expect decline of oil prices'' through next year as economies of the biggest oil consumers, such as the U.S. and European Union countries, may contract, Kudrin said. Russia cut its forecast for the price of Urals, the country's major blend of oil, to $50 a barrel in 2009 on average, from $95 a barrel previously, Kudrin said. Urals crude traded at $55.71 a barrel on Nov. 7, 61% below its high of $142.50 in July.

- Russia's ruble may be devalued by as much as 30 percent as the drop in oil prices threatens to wipe out the $91.2 billion current-account surplus, according to Troika Dialog, the nation's oldest investment bank. ``Without an increase in oil prices or an improvement in the capital account of the balance of payments, the central bank will eventually have to devalue the ruble,'' Evgeny Gavrilenkov, Troika's Moscow-based chief economist, wrote in a note today. An average price for Urals crude, Russia's main oil-export blend, of $60 a barrel ``would imply a devaluation of the ruble against the bi-currency basket by 25 to 30 percent,'' he said.

- China will boost research into alternative-energy automobiles after investments totaling more than 200 billion yuan ($29 billion) failed to create a brand capable of rivaling Toyota Motor Corp. and Volkswagen AG. ``We should speed up the development of alternative-energy technologies,'' Wan Gang, China's science and technology minister, said at a conference in Tianjin on Nov. 8.

Wall Street Journal:

- Tuesday's election transformed John Rogers from an obscure money manager who eats at McDonald's every day into a confidant of the world's most-powerful man, come January.

- It is hedge funds' turn on Capitol Hill. The congressional committee that made headlines last month grilling former Lehman Brothers Holdings Inc. Chief Executive Richard Fuld and former executives of American International Group Inc. has summoned a handful of top hedge-fund managers to answer questions on topics ranging from their pay to influence on the markets.

Barron’s:

- Yale University’s strategy of investing heavily in illiquid assets may have hurt endowments that copied the allocation without the resources and talents of the Ivy Leaguer. David Swensen, chief investment officer of Yale, has led the university to invest 70% of its endowment in hedge funds, private equity and “real” assets such as timber, real estate and oil-and-gas properties. It's tough to gauge precisely the extent of the woes because most big universities haven't released information on their endowment returns since June 30, the traditional end of the academic fiscal year. Based on anecdotal evidence, however, and the turmoil in financial markets, the numbers aren't pretty.

MarketWatch.com:

- As the market evolves during the financial crisis, the Community Reinvestment Act may achieve new prominence among consumers, regulators and institutions.

The law, which encourages federally regulated banks and thrifts to provide credit to low- and moderate-income communities, has come under pressure from conservative critics who claim it fostered irresponsible lending and led, at least in part, to the subprime mortgage meltdown.

NY Times:

- Google(GOOG) at 10: Searching Its Own Soul.

- Google(GOOG) Signs a Deal to e-Publish Out-of-Print Books.

- It was a good campaign, and a historic victory. As the president-elect gets ready for new responsibilities, here are four ways to become a reliable steward of the economy:

- Wal-Mart(WMT) and McDonald’s(MCD) are using energy-saving appliances and recycled materials to build “green” locations to cut their operating costs and appeal to customers.

- Former Political Radicals See Rebirth of Activism.

CNNMoney.com:

- Gas prices near $2.25. AAA survey shows gas prices have fallen for 53 straight days. Lundberg survey finds that prices dropped a little more than 48 cents in the last two weeks.

- A snapshot of the global smartphone market issued Thursday by Canalys shows just how big a dent Apple’s iPhone made in the cellphone universe last quarter. With a surge of nearly 6.9 million shipments in calendar Q3, the iPhone leapfrogged past RIM (RIMM) and Motorola (MOT) to grab 17.3% of the smartphone market. That put Apple (AAPL) in second place after Nokia, and helped cut the market-leader’s share from 51.4% to 38.9%.

EE Times:

- Qualcomm Inc.(QCOM) used a 27 percent year-over-year growth rate to jump to ninth among the largest semiconductor suppliers through the first three quarters of 2008, while DRAM-supplier Qimonda dropped 12 positions from 18 to 30 overall, according to market research firm IC Insights Inc.

Reuters:

- Iraqi security forces supported by U.S. firepower killed a senior al Qaeda leader who made car bombs and ran Islamist militant cells throughout northern Iraq, the U.S. military said on Friday.

- There were fresh calls on Sunday for the Bush administration to help stalled U.S. automakers, but Democratic and Republican officials said taxpayers cannot repeatedly support business rescues.

Financial Times:

- AIG(AIG) is closing in on a new government bail-out that will allow the troubled insurer to reduce interest payments and give it more time to sell assets and save itself from collapse.

- US President-elect Barack Obama intends to push a comprehensive programme of social and economic reform beyond an immediate emergency stimulus package, Rahm Emanuel, the next White House chief of staff, indicated on Sunday. Mr Emanuel brushed aside concerns that an Obama administration would risk taking on too much when it takes office in January. He said Mr Obama saw the financial meltdown as an historic opportunity to deliver the large-scale investments that Democrats had promised for years. Tackling the meltdown would not entail delays in plans for far-reaching energy, healthcare and education reforms when all three were also in crisis, he said. “These are crises you can no longer afford to postpone [addressing].” Economists have estimated the US budget deficit could more than double next year to almost $1,000bn, raising concerns about whether Mr Obama could deliver on expensive campaign promises including $150bn in investments in alternative energy over the next decade and a $60bn-$110bn plan to provide universal health insurance for Americans. In contrast to 1992, when Mr Clinton postponed longer-term investments in favour of urgent budget deficit reduction, advisers to Mr Obama, including Mr Summers, who is tipped by some as his first Treasury secretary, are tilting towards investments.

Telegraph:

- UK Families and small businesses to receive billions in tax cuts.

Tages-Anzeiger:

- Credit Suisse Group has closed six funds that aimed to make money for investors even if markets fell. The funds were worth 1.1 billion francs at the end of September, compared with a peak value of 7 billion Swiss francs.

Interfax:

- Russian oil exports have dropped 25% below “normal” levels, OAO Transneft CEO Tokarev said.

IMF:

- The IMF is urging countries to stimulate their economies in the face of a bigger-than-expected slowdown in the global economy triggered by recent financial turmoil.

Globe and Mail:

- If you're the right sort of investor, beaten-down blue-chip companies are starting to look like a smart buying opportunity. Not the shares of these companies. That's a story well told already. Today, we're talking about bonds.

- It’s been 10 years since the birth of the euro zone, and the dream of global economic clout. But now the blanket is tearing, threatening a disastrous derailment of the monetary union.

Globo TV:

- European Central Bank President Jean-Claude Trichet said he can’t rule out a further cut in interest rates in December, citing an interview. While tensions in money markets persist, they are “progressively alleviating,” Trichet said.

The Economic Times:

- The numbers are shocking. Something that no sector has witnessed in India so far. The textile sector which was reeling under rupee pressure and rising cotton prices since the beginning of this year has lost close to 700,000 jobs in the past six months.

South China Morning Post:

- Chinese shipyard orders fell 11% in the first nine months of 2008 as demand slowed from the US and Europe, citing the China Assoc. of the National Shipbuilding Industry. It’s the first drop in orders since the first half of 2005 and the trend is expected to continue. The association also warned of a further drop in vessel prices next year because deliveries will be double this year’s figure.

Haaretz:

- The Hamas leader in Gaza, Ismail Haniyeh, said on Saturday his government was willing to accept a Palestinian state within the 1967 borders.

Etemaad:

- Iranian Parliamentary Speaker Ali Larijani said US President-elect Barack Obama’s comments on Iran’s nuclear program are a step down “the wrong path.” Obama’s Nov. 7 comment, when he said Iran’s potential development of nuclear weapons is unacceptable, “is the daily talk of previous US leaders” Larijani said.

Weekend Recommendations
Barron's:
- Made positive comments on (WBSN), (STR) and (HLS).

- Made negative comments on (BX) and (RJF).

Citigroup:

- Rated (KMB) Buy, target $65.

Morgan Stanley:

- Reiterated Overweight on (AMAT), target $17.

Night Trading
Asian indices are unch. to +4.0% on avg.
S&P 500 futures +1.62%.
NASDAQ 100 futures +1.38%.

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Earnings of Note
Company/Estimate
- (LNY)/.32

- (ENER)/.26

- (AIG)/-.80

- (CKEC)/.02

- (SBUX)/.13

- (ROK)/.97

- (MWY)/.38

- (SATS)/.07

- (TSN)/.18

- (DISH)/.58

- (PPC)/-2.02

- (SIRI)/-.08

Upcoming Splits

- None of note

Economic Releases

- None of note

Other Potential Market Movers
- The (HLS) Investor Day, (MVSN) Investor Day, Rodman & Renshaw Investment Conference could also impact trading today.

BOTTOM LINE: Asian indices are sharply higher, boosted by technology and financial shares in the region. I expect US stocks to open higher and to maintain gains into the afternoon. The Portfolio is 100% net long heading into the week.

Weekly Outlook

Click here for a weekly market preview by MarketWatch.

Click here for stocks in focus for Monday by MarketWatch.

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

Economic reports for the week include:

Mon. – None of note

Tues. – IDB/TIPP Economic Optimism, weekly retail sales reports

Wed. – Weekly EIA energy inventory report, weekly MBA mortgage applications report

Thur. – Trade Deficit, Initial Jobless Claims, Monthly Budget Deficit

Fri. – Import Price Index, Advance Retail Sales, Univ. of Mich. Consumer Confidence, Business Inventories

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

Mon. – Energy Conversion Devices(ENER), American International Group(AIG), Starbucks(SBUX), Tyson Foods(TSN), DISH Network(DISH), Pilgrim’s Pride(PPC), Sirius XM Radio(SIRI)

Tues. – Fossil Inc.(FOSL), Liz Claiborne(LIZ), TJX Cos.(TJX), Intrepid Potash(IPI)

Wed. – NetApp Inc.(NTAP), Macy’s Inc.(M), Applied Materials(AMAT), Las Vegas Sands(LVS)

Thur. – Urban Outfitters(URBN), Kohl’s Corp.(KSS), Nordstrom(JWN), JC Penney(JCP), Wal-Mart Stores(WMT)

Fri. – Abercrombie & Fitch(ANF), Agilent Technologies(A), Nuance Communications(NUAN)

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

Mon. – (HLS) Investor Day, (MVSN) Investor Day, Rodman & Renshaw Investment Conference

Tue. – (PCL) Analyst Day, (BBX) Reception, (STR) Analyst Meeting, (SPWRA) Analyst Day, (FISV) Investor Conference, (UNM) Analyst Meeting, (VMED) Analyst Meeting, (SNS) Analyst Meeting, Rodman & Renshaw Investment Conference, Robert W. Baird Industrial Conference, DB-Biotech Boston Confab, Merrill Banking/Financial Services Conference, UBS Building Conference, Piper Internet Summit

Wed. – (AVCT) Analyst Day, (ACN) Analyst Conference, (STR) Analyst Meeting, (RFMD) Analyst Meeting, (CMI) Analyst Day, (HAS) Analyst Meeting, (BBX) Investor Luncheon, (NKTR) Analyst Meeting, Merrill Banking/Financial Services Conference, UBS Building Conference, Rodman & Renshaw Investment Conference, Robert W. Baird Industrial Conference, CSFB Healthcare Conference, Merrill Defense Forum

Thur. – (QCOM) Analyst Meeting, (BRY) Investor Day, (IWOV) Analyst Day, (SYMM) Analyst Meeting, (TLAB) Investor Conference, (GPRO) Analyst Day, (ULBI) Analyst Meeting, (AMD) Analyst Day, Bank of America Energy Conference, BMO Capital Interactive Entertainment Conference, Merrill Banking/Financial Services Conference, CSFB Healthcare Conference, Needham Telecom Conference

Fri. – CSFB Healthcare Conference

BOTTOM LINE: I expect US stocks to finish the week modestly higher on an end to political uncertainty, seasonal strength, bargain-hunting, technical buying, less credit market angst, diminishing financial sector pessimism, less forced selling and short-covering. My trading indicators are giving mostly bullish signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 930.99 -3.90%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 930.99 -3.90%
DJIA 8,943.81 -4.1%
NASDAQ 1,647.40 -4.27%
Russell 2000 505.79 -5.90%
Wilshire 5000 9,328.29 -4.15%
Russell 1000 Growth 381.70 -4.06%
Russell 1000 Value 500.34 -4.03%
Morgan Stanley Consumer 553.48 -2.16%
Morgan Stanley Cyclical 506.05 -5.40%
Morgan Stanley Technology 355.14 -5.68%
Transports 3,666.02 -5.66%
Utilities 375.77 -.70%
MSCI Emerging Markets 24.38 -2.84%

Sentiment/Internals
NYSE Cumulative A/D Line 21,239 -1.42%
Bloomberg New Highs-Lows Index -602 -9.45%
Bloomberg Crude Oil % Bulls 46.0 -19.3%
CFTC Oil Large Speculative Longs 191,433 +3.42%
Total Put/Call .96 +3.23%
OEX Put/Call 2.34 +103.48%
ISE Sentiment 116.0 -4.13%
NYSE Arms .50 -46.24%
Volatility(VIX) 56.10 -6.34%
G7 Currency Volatility (VXY) 19.85 -13.81%
Smart Money Flow Index 6,335.18 -5.47%
AAII % Bulls 44.83 +20.71%
AAII % Bears 33.33 -17.85%

Futures Spot Prices
Crude Oil 61.15 -9.45%
Reformulated Gasoline 135.0 -9.21%
Natural Gas 6.78 +1.04%
Heating Oil 198.40 -4.18%
Gold 735.60 +1.54%
Base Metals 132.86 -2.12%
Copper 170.95 -9.05%
Agriculture 282.04 -2.61%

Economy
10-year US Treasury Yield 3.80% -16 basis points
10-year TIPS Spread .96% +5 basis points
TED Spread 2.0 -59 basis points
N. Amer. Investment Grade Credit Default Swap Index 190.24 -5.32%
Emerging Markets Credit Default Swap Index 652.89 -4.15%
Citi US Economic Surprise Index -96.20 -34.73%
Fed Fund Futures imply 97.0% chance of 50 basis point cut, 3.0% chance of 25 basis point cut on 12/16
Iraqi 2028 Govt Bonds 52.61 +5.74%
4-Wk MA of Jobless Claims 477,00 unch.
Average 30-year Mortgage Rate 6.20% -26 basis points
Weekly Mortgage Applications 379,900 -20.31%
Weekly Retail Sales +.6%
Nationwide Gas $2.31/gallon -.24/gallon
US Heating Demand Next 7 Days 13.0% below normal
ECRI Weekly Leading Economic Index 110.90 -1.77%
US Dollar Index 85.91 +.32%
Baltic Dry Index 829 -2.59%
CRB Index 256.84 -4.30%

Best Performing Style
Large-cap Value -4.03%

Worst Performing Style
Small-cap Value -6.40%

Leading Sectors
Telecom +1.95%
HMOs +.36%
Insurance -.41%
Utilities -.70%
Biotech -1.34%

Lagging Sectors
Steel -8.67%
Retail -9.16%
Homebuilding -9.28%
Gaming -13.52%
Coal -16.47%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Finish at Session Highs, Boosted by REIT, Construction, Utility, Energy, Alt Energy, Wireless and Pharma Shares

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In Play

Stocks Rising into Final Hour on Short-Covering, Bargain-Hunting, Falling Credit Angst

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs and Biotech longs. I covered all my (IWM)/(QQQQ) hedges and some of my (EEM) short this morning, thus leaving the Portfolio 100% net long. The tone of the market is mildly bullish as the advance/decline line is higher, most sectors are rising and volume is slightly below average. Investor anxiety is very high. Today’s overall market action is mildly bullish. The VIX is falling 8.4% and is very high at 58.33. The ISE Sentiment Index is low at 115.0 and the total put/call is above average at .96. Finally, the NYSE Arms has been running around average most of the day, hitting 1.59 at its intraday peak, and is currently .77. Nikkei futures indicate an +180 open in Japan and DAX futures indicate an +30 open in Germany on Monday. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting, less forced selling and diminishing credit market angst.