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Monday Watch

Weekend Headlines
Bloomberg:

- Congress will send President-elect Barack Obama an economic stimulus package the day he takes office Jan. 20, two Democratic lawmakers said today. Senator Charles Schumer of New York said on ABC’s “This Week” program that the package will be between five and $700 billion. House Majority Leader Steny Hoyer, of Maryland, said on “Fox News Sunday” that he believed the Inauguration Day goal would be met, but he declined to put a price tag on the bill.

- Citigroup Inc.(C) and U.S. regulators are in talks to limit the bank’s potential losses on more than $100 billion of toxic assets after the stock’s plunge last week sparked concerns about the company’s fate, four people familiar with the matter said. The Federal Reserve and Treasury Department were locked in discussions with Citigroup and other regulators throughout the weekend and a deal may be reached as soon as today, according to the people, who declined to be identified because the negotiations are confidential. The assets would remain at Citigroup, with the government agreeing to assume losses beyond a specified amount, two of the people said.

- A purchase of Citigroup Inc.(C) would “significantly” add to Goldman Sachs Group Inc. or Morgan Stanley’s earnings as long as the U.S. government absorbed losses on the embattled bank’s assets, according CreditSights Inc. Buying Citigroup “would be significantly accretive to Goldman and Morgan Stanley’s earnings as the potential buyer would be acquiring a significant future earnings stream for a relatively low price,” David Hendler, an analyst at CreditSights in New York, wrote in a report yesterday. The buyer “would probably receive government support if it was needed.”

- General Motors Corp.(GM), in danger of running out of cash this year, will seek to negotiate a cut in debt levels and new union work rules to help boost its chances of winning federal loans, people familiar with the plan said. The largest U.S. automaker also may ask to delay a $7 billion payment to a union retiree health fund, drop more brands and rework an accord with GMAC LLC to prove it can survive and repay the government, said the people, who asked not to be named because the details haven’t been presented to Congress.

- Hollywood’s largest actors union plans to seek strike authorization from its members after a breakdown of federally mediated talks with film and television studios. Two days of meetings, with the last one ending earlier today, failed to produce an agreement, the Screen Actors Guild and the Alliance of Motion Picture and Television Producers said in separate, e-mailed statements. A strike would idle most production at major studios for a second time in a year and put thousands of writers and support staff out of work. Hollywood was shut for three months after members of the Writers Guild of America walked off their jobs last November.

- Mexican President Felipe Calderon warned Barack Obama against trying to renegotiate the North American Free Trade Agreement, saying restricting commerce would only encourage illegal Mexican emigration to the U.S. ``The day access is closed, workers will jump over whatever river or wall you put there,'' Calderon told business leaders today at the Asia-Pacific Economic Cooperation forum in Lima, Peru, where leaders of 21 nations are meeting.

- The average price of regular gasoline at U.S. filling stations fell to $1.97 a gallon as demand declined in a slumping economy. Gasoline slipped 33 cents, or 14 percent, in the two weeks ended Nov. 21, according to oil analyst Trilby Lundberg’s survey of 7,000 filling stations nationwide.

- General Motors Corp.(GM), under pressure after Congress delayed action on automaker aid, is idling four plants for an additional week, extending the shutdown of an engineering center and returning some corporate jets.

- Amlak Finance PJSC and Tamweel PJSC, Dubai’s two-largest mortgage lenders, will be taken over by a government-owned bank as the global financial crisis squeezed their access to credit and slowed the regional property market.

- Iran, OPEC’s second-largest crude producer, can survive even with oil prices at $8 or $5 a barrel, President Mahmoud Ahmadinejad said. Iran’s Central Bank warned earlier this month that the country will face with “big trouble” should oil price falls below $60.60 a barrel. Iran will deplete its oil stabilization fund within five months if oil drops to $60 a barrel, the bank said. Ahmadinejad has been criticized by local economists and analysts for tapping the fund to pay for the government’s expansion programs and for failing to decreased the country’s dependence on oil revenue.

- Leaders of Pacific Rim nations promised to ``act quickly and decisively'' to resolve the global economic crisis even as they failed to offer specific steps they'll take to address it. Heads of state from the 21-nation Asia-Pacific Economic Cooperation group, which includes the U.S., China and Japan, said they support a ``prompt'' conclusion of the Doha Round of global trade talks. The leaders issued their comments following a two- day summit in Lima.

- A U.S.-triggered spate of global carmaker-bailout proposals may spark trade disputes over whether the Americans are unfairly trying to subsidize their industry or just making up for state aid that foreign rivals already enjoy. As the U.S. considers a lifeline for its auto companies, officials in Europe, Canada and Asia are considering their own aid packages -- even as the European Union threatens to lodge a complaint against any U.S. bailout to protect manufacturers from Renault SA in France to Fiat SpA in Italy. China also may complain, though the government is considering helping SAIC Motor Corp. and Guangzhou Automobile Group Co. Any World Trade Organization complaints may open a Pandora’s Box, bringing to a head a long-simmering dispute over policies that U.S.-based General Motors Corp., Ford Motor Co. and Chrysler LLC say unfairly aid rivals, including state-financed health-care and retirement benefits, and currency policies.

- Asian currencies fell this week, led by Indonesia's rupiah, as investors flee emerging markets to avoid risk from a deepening global economic slump. Nine of the 10 most-active currencies in Asia dropped this week as the MSCI Asia Pacific Index slumped 6.9 percent, the worst since the five-day period ended Oct. 24. The rupiah fell to a decade low after Bank Indonesia Governor Boediono said the deposit guarantee agency will take over the operations of PT Bank Century, Indonesia's 13th-biggest bank by market value, to provide more security for customers.

- Vaccines against rotavirus, the main cause of severe diarrhea in preschoolers, may win recommendation for global use by the World Health Organization, potentially boosting sales for producers Merck & Co.(MRK) and GlaxoSmithKline Plc.(GSK).

- Cnooc Ltd., China's top offshore oil producer, and its partners may spend about 200 billion yuan ($29 billion) to develop fuel deposits in the South China Sea in the nation's biggest push to tap reserves off the country's coast.

- President-elect Barack Obama will name Lawrence Summers to head the National Economic Council, one of the three top economic jobs in the new administration, a Democratic aide said.

- The cost of protecting Australian and Asian bonds from default fell after U.S. stocks rallied following President-elect Barack Obama’s selection of New York Federal Reserve Bank chief Timothy Geithner to head the Treasury. The Markit iTraxx Australia index of credit-default swaps declined 30 basis points to 325 at 11:30 a.m. in Sydney, ABN Amro Holding NV prices show. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan, including the Thai government and Hutchison Whampoa Ltd., declined 15 basis points to 400 today while the region’s benchmark for high-yield borrowers was last quoted at 1,225 basis points, Barclays Capital prices show.

Wall Street Journal:

- In 2006, Lawrence Summers resigned as president of Harvard University and took a position as a part-time managing director with D.E. Shaw Group, a New York hedge fund with a reputation as one of the most secretive trading outfits in the world. D.E. Shaw is known for using sophisticated computer-based quantitative strategies to make money on fleeting movements in the stock and bond markets.

- Timothy Geithner devoted much of his five-year tenure at the Federal Reserve to pinpointing potential risks to the nation's sprawling financial system. His approach was methodical and cautious, searching for a middle ground between Wall Street's needs and the public interest.

- Fed Has More Ammunition After Firing Rate-Cut Bullets.

MarketWatch.com:

- Members of the board of directors at General Motors Corp. may be at odds with the ailing automaker's top executive in their willingness to consider all options, even bankruptcy, according to a published report.

CNBC.com:
- The U.S. government will make an equity infusion of between $10 to $20 billion into Citigroup, Capitol Hill sources close to the ongoing negotiations tell CNBC. The Citigroup(C) infusion plan is provisional and subject to change. The plan will probably be a multi-layered one, which means the government could backstop losses on Citigroup's troubled assets as well. In exchange, Citi may issue preferred stock to the government Sources add that other actions are "not off the table", meaning that even the government plan of buying the troubled assets could be revived.

NY Times:

- Former Disney(DIS) Chief Eisner Crafting Internet Programs.

NY Post:
- Buffet’s Liquidity Is Pinched. Oracle of Omaha’s Bet On S&P Feeling Pressure.

- There they were last week, five noted hedge-fund traders getting sworn in and giving testimony before Congress. Phil Falcone, Ken Griffin, John Paulson, James Simons and George Soros, no strangers to earning $1 billion a year by successfully shorting companies their research showed were over-leveraged or otherwise poised to fall, defended their shorting of stocks. Missing from this lineup was Jim Chanos, whose $7 billion Kynikos Associates is enjoying a better 2008 than any of the less-fab five. Chanos, readers of The Post learned last week, has posted a 53.2 percent increase through Oct. 31 for his $5 billion short-only Ursus fund.

Forbes.com:

- China joins other Asian nations that are feeling the growing fiscal pressure of paying subsidies. China is readying the introduction of a fuel tax, replacing the price controls it now imposed on refined petroleum products such as gasoline and diesel.

The Star-Ledger:

- After making millions selling New Jersey bonds to investors, Wall Street giant Goldman Sachs(GS) told other wealthy clients they could profit by betting the Garden State may not be able to pay off its bonds as scheduled, according to a confidential presentation made two months ago. The advice would cost state taxpayers if investors believe New Jersey bonds appear riskier than they actually are -- and force the state to pay higher interest rates on future bonds. While not illegal, it is troubling Goldman Sachs almost simultaneously marketed New Jersey bonds to one set of investors, while suggesting to others they would be smart to buy insurance from the investment bank because those bonds may not be repaid, according to Geoffrey M. Heal, professor of public policy and business responsibility at Columbia University. "That's not a good way to do business," he said. "They've got a conflict of interest and they're acting against the interest of their customers. Goldman's strategy of "shorting municipal credit," or essentially betting the state bonds would decline in value, was outlined in a 58-page report obtained by ProPublica, a New York-based nonprofit group specializing in investigative reporting.

- Managers of New Jersey's embattled pension fund, criticized by lawmakers for bailing out a struggling BlackRock(BLK) hedge fund in October, secretly gave two other hedge funds the same deal, records from the state investment council show. The Canyon Special Opportunities Fund and GoldenTree Credit Opportunities Fund were each awarded $49.5 million in state funds on the same day the controversial $49.5 million bailout of a BlackRock Inc. fund took place, according to a memo released by the investment council this week. The cash infusions were a shade below the $50 million threshold that triggers public scrutiny. The pension fund, which started the year worth $81.3 billion, has lost $23 billion in value so far this year amid the collapsing stock and credit markets. Declines, unless recouped in the future, must be made up in taxpayer payments into the pension system, which bankrolls retirement benefits for 700,000 public workers and teachers.

USA Today:

- Monday, Virgin America plans to become the latest airline to offer in-flight Wi-Fi Internet, a service with a problematic past that still promises far-ranging flexibility in entertainment.

Financial Times:

- Democratic officials made clear on Sunday that the cost of Barack Obama's economic rescue plan would run into hundreds of billions of dollars and hinted he was prepared to hold off introducing new taxes for his first two years as president.

O Estado de S. Paulo:

- Brazilian vehicle sales fell 20% in the first 20 days of November from a year earlier, prompting carmakers to intensify promotions.

Telegraph:

- Bankers are the new pantomime villains. Forget wicked stepmothers and ugly sisters, bankers are the pantomime villains this Christmas. Writers are capitalising on the rock-bottom reputation of bankers following the credit crisis and portraying them as leading pantomime baddies.

- Citigroup(C) is understood to have approached its existing sovereign wealth fund shareholders from the Middle East and Asia to gauge their appetite for buying additional stakes in the bank. The discussions, which are being held alongside negotiations with officials from the US Treasury and the New York Federal Reserve, follow a collapse in Citigroup's share price last week.

The Chronicle Herald:

- Global slowdown saps promise of emerging auto markets. Smoke and flashing lights, dancing girls in white go-go boots — the world’s top automakers put on dazzling shows as they wooed Chinese buyers with their latest models. But for all the flash at this year’s Guangzhou Auto Show, automakers face a dimmer outlook for global sales, even here in the world’s second-largest vehicle market. Just as GM and other manufacturers are desperately looking to emerging markets to compensate for falling sales in the U.S., Europe and Japan, potential car buyers in China, Russia and other once sizzling markets are pulling back.

The Peninsula:

- Qatari Real-Estate Prices Drop Almost 50%. Real estate prices have fallen by almost 50 percent in the suburbs of Doha, reviving hopes of a downslide in the rental market, property market operators said yesterday. The global financial crisis has put sudden brakes to the real estate boom in the country. While land prices have fallen by almost 30 percent in Doha city limits this month alone, the rates in the suburbs have been declining faster.

Gulfnews.com:

- Atlantis slashes room rates as visitors stay away. Dubai: Business at Atlantis, the $1.5 billion (Dh5.5 billion) hotel on the Palm Jumeirah is slow, with room rates slashed dramatically and occupancy low. Despite the grand opening of the resort on Thursday night, which saw stars and celebrities descend on the Palm, causing actual residents difficulty accessing their own homes, business is not so impressive.

Weekend Recommendations
Barron's:
- Made positive comments on (ESRX), (BRK/A), (YHOO), (PLXS), (URS) and (TEVA).

- Made negative comments on (NFP).

Night Trading
Asian indices are -1.0% to -.25% on avg.
S&P 500 futures +.43%.
NASDAQ 100 futures +.18%.

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Earnings of Note
Company/Estimate
- (CPB)/.76

- (CBRL)/.52

- (ADI)/.44

- (HPQ)/1.00

- (ATW)/1.13

- (DCI)/.54

- (NUAN)/.25

Upcoming Splits

- None of note

Economic Releases

10:00 am EST

- Existing Home Sales for October are estimated to fall to 5.0M versus 5.18M in September.

Other Potential Market Movers
- The (KMT) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by insurance and financial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing higher. 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 some economic reports of note and several significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. – Existing Home Sales

Tues. – Weekly retail sales reports, Preliminary 3Q GDP, Preliminary 3Q Personal Consumption, Preliminary GDP Price Index, Preliminary 3Q Core PCE, S&P/CaseShiller Home Price Index, Consumer Confidence, Richmond Fed Manufacturing Index, House Price Index

Wed. – Weekly MBA mortgage applications report, weekly EIA energy inventory data, Durable Goods Orders, Personal Income, Personal Spending, PCE Core, Initial Jobless Claims, Chicago Purchasing Manager, Univ. of Mich. Consumer Confidence, New Home Sales

Thur. – US Markets Closed

Fri. – NAPM-Milwaukee

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

Mon. – CBRL Group(CBRL), Campbell Soup(CPB), Analog Devices(ADI), Nuance Communications(NUAN), Hewlett-Packard(HPQ)

Tues. – Tech Data Corp.(TECD), Chico’s FAS(CHS), Hormel Foods(HRL), Zale Corp.(ZLC), DR Horton(DHI), Eaton Vance(EV), Borders Group(BGP), Talbots(TLB), Dollar Tree(DLTR), American Eagle(AEO), Genesco(GCO), J Crew Group(JCG)

Wed. – Fred’s Inc.(FRED), Tiffany & Co.(TIF), Deere & Co.(DE)

Thur. – US Markets Closed

Fri. – PEP Boys-Manny Moe & Jack(PBY)

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

Mon. – (KMT) analyst meeting

Tue. – (JEC) presentation to financial analysts

Wed. – None of note

Thur. – US Markets Closed

Fri. – CSFB Infrastructure Conference

BOTTOM LINE: I expect US stocks to finish the week higher on seasonal strength, bargain-hunting, technical buying, 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 500 800.03 -8.39%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 800.03 -8.39%
DJIA 8,046.42 -5.31%
NASDAQ 1,384.35 -8.73%
Russell 2000 406.54 -10.95%
Wilshire 5000 7,911.11 -9.05%
Russell 1000 Growth 330.77 -7.23%
Russell 1000 Value 420.49 -10.31%
Morgan Stanley Consumer 508.79 -4.63%
Morgan Stanley Cyclical 403.16 -11.85%
Morgan Stanley Technology 302.33 -7.07%
Transports 3,122.75 -10.64%
Utilities 366.34 unch.
MSCI Emerging Markets 20.22 -10.71%

Sentiment/Internals
NYSE Cumulative A/D Line 8,287 -54.42%
Bloomberg New Highs-Lows Index -4117 -96.99%
Bloomberg Crude Oil % Bulls 15.0 -57.14%
CFTC Oil Large Speculative Longs 184,453 -4.06%
Total Put/Call 1.11 +15.63%
OEX Put/Call 1.23 -6.82%
ISE Sentiment 117.0 -14.60%
NYSE Arms .43 -79.62%
Volatility(VIX) 72.67 +9.59%
G7 Currency Volatility (VXY) 20.58 -4.68%
Smart Money Flow Index 5,733.22 -14.61%
AAII % Bulls 24.37 -36.42%
AAII % Bears 57.14 +34.45%

Futures Spot Prices
Crude Oil 50.49 -11.70%
Reformulated Gasoline 107.45 -12.55%
Natural Gas 6.51 +3.0%
Heating Oil 171.25 -6.71%
Gold 799.90 +7.36%
Base Metals 120.68 -7.43%
Copper 159.75 -6.61%
Agriculture 268.83 -7.83%

Economy
10-year US Treasury Yield 3.19% -54 basis points
10-year TIPS Spread .13% -68 basis points
TED Spread 2.15 +5 basis points
N. Amer. Investment Grade Credit Default Swap Index 279.22 +34.41%
Emerging Markets Credit Default Swap Index 857.49 +12.02%
Citi US Economic Surprise Index -114 +5.0%
Fed Fund Futures imply 80.0% chance of 50 basis point cut, 20.0% chance of 75 basis point cut on 12/16
Iraqi 2028 Govt Bonds 46.75 -4.10%
4-Wk MA of Jobless Claims 506,500 +3.2%
Average 30-year Mortgage Rate 6.04% -10 basis points
Weekly Mortgage Applications 398,600 -6.21%
Weekly Retail Sales -.9%
Nationwide Gas $1.99/gallon -.16/gallon
US Heating Demand Next 7 Days 5.0% above normal
ECRI Weekly Leading Economic Index 108.0 -1.91%
US Dollar Index 88.19 +2.11%
Baltic Dry Index 847.0 +1.07%
CRB Index 231.38 -6.54%

Best Performing Style
Large-cap Growth -7.23%

Worst Performing Style
Mid-cap Value -11.64%

Leading Sectors
Utilities unch.
Software -4.02%
Restaurants -4.46%
Defense -5.26%
Wireless -5.31%

Lagging Sectors
Steel -17.94%
I-Banks -21.78%
Homebuilders -22.69%
Banks -23.74%
Coal -26.56%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Finish Sharply Higher on Heavy Volume, Boosted by REIT, Construction, Insurance, Tech and Commodity Shares

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