Market Week in Review

S&P 500 872.80 -1.41%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 872.80 -1.41%
DJIA 8,515.55 -1.04%
NASDAQ 1,530.24 -1.43%
Russell 2000 476.77 -.50%
Wilshire 5000 8,737.47 -1.32%
Russell 1000 Growth 359.43 -1.13%
Russell 1000 Value 468.91 -1.50%
Morgan Stanley Consumer 535.81 -.87%
Morgan Stanley Cyclical 455.69 -3.29%
Morgan Stanley Technology 330.55 -2.63%
Transports 3,370.19 -.34%
Utilities 359.43 -1.65%
MSCI Emerging Markets 22.93 -6.51%

Sentiment/Internals
NYSE Cumulative A/D Line 18,260 +5.42%
Bloomberg New Highs-Lows Index -306 +14.04%
Bloomberg Crude Oil % Bulls 36.0 -1.9%
CFTC Oil Large Speculative Longs n/a
Total Put/Call .78 -13.3%
OEX Put/Call .67 -39.64%
ISE Sentiment 139.0 +3.73%
NYSE Arms 1.09 -52.81%
Volatility(VIX) 43.38 -8.36%
G7 Currency Volatility (VXY) 19.33 -12.69%
Smart Money Flow Index 7,095.14 -7.0%
AAII % Bulls 29.0 -27.01%
AAII % Bears 44.0 +22.2%

Futures Spot Prices
Crude Oil 37.71 -10.53%
Reformulated Gasoline 84.40 -14.53%
Natural Gas 5.83 +4.88%
Heating Oil 124.50 -11.29%
Gold 871.20 +2.15%
Base Metals 101.04 -2.25%
Copper 130.35 +.66%
Agriculture 302.17 +3.81%

Economy
10-year US Treasury Yield 2.13% +1 basis point
10-year TIPS Spread .10% -1 basis point
TED Spread 1.48 -3 basis points
N. Amer. Investment Grade Credit Default Swap Index 204.47 -6.34%
Emerging Markets Credit Default Swap Index 734.09 +.11%
Citi US Economic Surprise Index -118.40 +13.01%
Fed Fund Futures imply 84.0% chance of no change, 16.0% chance of 25 basis point cut on 1/28
Iraqi 2028 Govt Bonds 42.05 -1.44%
4-Wk MA of Jobless Claims 558,000 +2.5%
Average 30-year Mortgage Rate 5.14% -5 basis points
Weekly Mortgage Applications 1,245,400 +48.02%
Weekly Retail Sales -1.10%
Nationwide Gas $1.64/gallon -.03/gallon
US Heating Demand Next 7 Days 25.0% below normal
ECRI Weekly Leading Economic Index 106.60 +.38%
US Dollar Index 80.89 +1.79%
Baltic Dry Index 774.0 +6.63%
CRB Index 215.28 -2.18%

Best Performing Style
Small-cap Value +.01%

Worst Performing Style
Large-cap Value -1.50%

Leading Sectors
REITs +3.94%
HMOs +3.35%
Hospitals +.97%
Telecom +.66%
Software +.50%

Lagging Sectors
Steel -3.72%
Banks -4.05%
Construction -4.06%
Coal -4.37%
I-Banks -4.86%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Rising into Final Hour on Less Economic Pessimism, Diminishing Credit Market Angst, Short-Covering and Bargain-Hunting

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Computer longs and Medical longs. I have not traded today, 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 gaining and volume is extremely light. Investor anxiety is above average. Today’s overall market action is mildly bullish. The VIX is falling 2.48% and is elevated at 43.69. The ISE Sentiment Index is about average at 141.0 and the total put/call is slightly below average at .79. Finally, the NYSE Arms has been running high most of the day, hitting 1.49 at its intraday peak, and is currently 1.23. The Euro Financial Sector Credit Default Swap Index is unch. today at 109.91 basis points. This index is up from a low of 52.66 on May 5^th, but down from 157.81 on Sept. 16^th. The North American Investment Grade Credit Default Swap Index is falling 1.41% to 204.47 basis points. The TED spread is unch. at 148 basis points. The TED spread is now down 318 basis points in just over ten weeks. The 2-year swap spread is down another 1.86% to 66.0 basis points. The Libor-OIS spread is dropping .64% to 124 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is unch. at .10%, which is down 251 basis points in just under six months and at the lowest level since Bloomberg record-keeping began in August 1998. The 10-year TIPS spread bottomed at .65% in October 1998 during the Asian financial crisis and at 1.24% in October 2001 during the technology bubble-bursting meltdown. The 3-month T-Bill is yielding -.01%, which is unch. today. The Libor-OIS spread, Greenspan’s favorite gauge of credit market health, continues to trend lower, which is a big positive. It has declined 240 basis points since October 10. As well, the 30-day asset-backed commercial paper yield is plunging 44 basis points today to .61%. It has declined 401 basis points since its Oct. 13th high. Econoimcally-sensitive shares, especially commodity stocks, are today’s top-performers. I suspect these stocks will continue to rally through year-end as many are very oversold and the US dollar will likely remain range-bound before another surge higher again during 1Q. Healthcare-related stocks, my favorite group for next year, are also strong again today with many posting 2-3% gains. Nikkei futures indicate an +61 open in Japan and DAX futures indicate an +37 open in Germany on Monday. I expect US stocks to trade modestly higher into the close from current levels on diminishing credit market angst, bargain-hunting, seasonal strength, less forced selling and short-covering.

Today's Headlines

Bloomberg:
- General Motors Corp.(GM), poised to get at least $9.4 billion in U.S. aid, gained the most in a month in New York trading after the Federal Reserve approved lender GMAC LLC’s bid to become a bank holding company. GMAC’s shift to a bank eases the threat of a default that threatened to dry up credit for GM dealers who used the company to finance about three-quarters of their inventory. GMAC also handled loans for about 35 percent of GM’s 2007 retail buyers.

- Commercial-mortgage bonds are outperforming investment-grade company debt and Fannie Mae corporate notes this month, all among the top debt categories rewarding investors who bought or held on to devalued securities. Top-rated commercial-mortgage bonds, which returned 32 percentage points less than Treasuries in October and November, have offered a record 12 percentage points more than government notes through Dec. 24, Barclays Capital index data show. Debt markets are improving amid hopes that prices fell enough to account for potential defaults and as the U.S. government continues efforts to thaw credit and curb a yearlong recession. One of the AAA classes of a $7.6 billion 2007 Goldman Sachs Group Inc. commercial-mortgage-bond deal, considered a market benchmark, has jumped 24 percent, according to Ken Hackel, head of fixed-income strategy at RBS Greenwich Capital Markets.

- Kimberly Rodriguez, principal of Grant Thornton LLP’s automotive practice, says GMAC bank status to unlock auto lending. (video)

- Jacob Schmidt, CEO of Schmidt Research Partners Ltd., sees changes to hedge-fund transparency, fees. (video)

- Tony Regan, an independent oil and gas analyst, says oil is ‘bouncing along bottom,’ may fall further. (video)

- Aluminum declined from a three-week high in Shanghai as a state purchase plan by China, the world’s largest producer and consumer, was smaller than expected. The metal still posted the biggest weekly gain in ten weeks.

- The ruble fell to a record low against the euro as Russia's central bank extended six weeks of devaluations to compensate for falling oil prices. The ruble lost 1.3 percent to 40.7960 per euro at 12:48 p.m. in Moscow, the lowest level since the European currency was introduced in 1999. It declined 1.1. percent to 29.0107 against the dollar, a four-year low, capping a 20 percent drop since early August.

- Crude oil rose more than 5 percent after the United Arab Emirates said it would reduce production to comply with OPEC’s supply curbs. Abu Dhabi National Oil Co., the biggest producer in the U.A.E., will reduce oil supply to Asia in January and February, according to a statement sent to Asian buyers. OPEC agreed to a record production cut on Dec. 17 in response to collapsing demand because of the economic slowdown. Oil also advanced because the dollar dropped against the euro.

- US mortgage rates, already the lowest since Freddie Mac started tracking them in 1971, have plenty of room to fall if history is any guide. The average 30-year fixed-rate mortgage is still relatively costly compared with the yield on 10-year Treasury notes, a benchmark for home loans. The difference, or spread, between them exceeded 3 percentage points this week for the first time since 1986. The gap has averaged 1.64 points during the past two decades. Add that figure to the benchmark Treasury’s yield on Dec. 24 and the resulting mortgage rate would be 3.82%, well below this week’s reading of 5.14%. It’s possible that the spread may narrow to 1.25 points because the government is “absolutely obsessed” with making home loans more affordable, Don Hays, an investment strategist with Hays Advisory LLC, wrote. Hays projected that the 30-year fixed rate will drop as low as 4.25% by March, and perhaps sooner. “That will really ignite the spirits of home buyers,” he wrote.

- Allergan Inc.(AGN), maker of the wrinkle smoother Botox, won U.S. approval to sell the first prescription medicine to make eyelashes longer, darker and thicker. The Food and Drug Administration cleared the solution, called Latisse, to treat hypotrichosis of the eyelashes, “another name for having inadequate or not enough eyelashes,” Allergan said.

- Jones Apparel Group Inc.(JNY), the maker of Jones New York clothing and Nine West shoes, surged the most in 17 years in New York trading after it reduced credit lines and obtained more flexible lending terms from bankers. Jones Apparel jumped $1.40, or 36 percent, to $5.29 at 12:37 p.m. in New York Stock Exchange composite trading.

Wall Street Journal:

- Hundreds of private lenders, using the latest technology and paying high salaries, failed to adequately manage mortgage credit risk during the housing boom. Now, the Federal Housing Administration, using 24-year-old computer programs and civil servants who still handle some loan documents by hand, is trying to do better. At an FHA processing center in Philadelphia's Center City -- one of four such centers across the country -- the number of loans approved for insurance has soared to an average of about 40,000 a month from 12,250 a year ago.

- The Securities and Exchange Commission is casting a wide net as it investigates the apparent $50 billion fraud allegedly committed by Bernard Madoff, and it continues to look into whether Mr. Madoff's family had any connection to wrongdoing, according to a person familiar with the probe.

- India's print-media industry is being forced to delay expansion plans, lay off staff, freeze hiring and cut the number of pages as companies reduce the amount they spend on advertisements to cope with a softening economy.

- An American-backed drive to curb misconduct at the United Nations is faltering, blighted by bureaucracy and accusations of retaliation against whistle-blowers. Launched in December 2005 with advice from U.S. officials, the reform initiative was supposed to protect U.N. employees who exposed wrongdoing. The U.N. pledged this would ensure the "highest standards of integrity." Since then, the organization has been hit by numerous allegations of misconduct, from claims that U.N. peacekeepers in Congo traded guns for gold with rebels to accusations of corruption by U.N. employees in Kosovo.

- Fixed-rate home mortgage rates fell again this week, with the 30-year fixed-rate mortgage setting another record low, at least since Freddie Mac began doing its weekly survey in the early 1970s. The 30-year averaged 5.14% for the week ended Dec. 24, down from last week's 5.19% average, according to the Freddie Mac survey released Wednesday. It was more than a full percentage point below its 6.17% average a year ago, and hasn't been lower since Freddie started doing its rate survey in 1971.

CNBC.com:
- The steep drop in oil prices may not be over yet, says the CEO of Gulf Oil. While oil has tumbled more than $100 off its $147 a barrel high in the summertime, the price of US light, sweet crude could yet move as low as $25, and even $20 if current conditions persist, Gulf CEO Joe Petrowski said on CNBC.

MarketWatch.com:

- The average U.S. retail gasoline price resumed its fall after a week of stability, dropping to $1.64 a gallon for regular, according to the AAA Fuel Gauge report Friday. Prices had remained at or near $1.66 per gallon for well over a week prior to the recent drop. AAA attributed the decline to seasonal factors, in which "holiday demand for gasoline starts draining from the market and the slowest period of the year for fuel consumption - January and February - gets underway." The current price is far below the year ago level of $2.98 a gallon and the record $4.11 a gallon reached on July 17.

ZDNet:

- Google’s(GOOG) future: Predictions for 2009.

Seattle Post-Intelligencer:

- In the midst of a holiday shopping season in which online retail sales might fall for the first time, the general manager of Microsoft's online store said sales and traffic are "really good."

USA Today:

- More than a third of top congressional staffers who left their public service jobs this year went to work for private lobbying firms or other groups seeking to influence the government, according to a USA TODAY analysis.

SiliconAlleyInsider:

- iPhone, iPod Touch Browser Share Skyrockets On Christmas. Apple (AAPL) had a good day yesterday: Its iPhone and iPod touch browsers accounted for more than 5% of our visits on Christmas day, according to Google (GOOG) analytics -- almost twice their browser share just last weekend. Specifically, 3.22% of our visits came from the iPhone's Safari browser on Dec. 25, and 2.00% came from the iPod touch, for a total of 5.22% share. (Note discussion below. This is not a scientific market share representative of the whole Web.) That's up 76% from last weekend, when 2.41% of our visits came from the iPhone and 0.55% came from the iPod touch. And it's up 90% from last Christmas, when 2.39% of our visits came from the iPhone and 0.36% came from the iPod touch. The iPod touch had an especially impressive day: Its Christmas browser share jumped 456% year-over-year and 525% from its Dec. 1-24 average.

- 20 Great Apps For Your New iPhone Or iPod Touch.

Reuters:
- Online retailer Amazon.com Inc(AMZN) on Friday reported its best holiday sales season yet, even as sales and traffic at U.S. store chains were the weakest in decades, sending its shares up nearly 4 percent.

- Wal-Mart Stores Inc(WMT) said on Friday it will start selling certain models of Apple Inc's iPhone on Sunday, but the popular cell phones will not priced as low as some anticipated.

- The New York Times Co(NYT) is trying to sell its stake in the holding company of the Boston Red Sox baseball team, The Wall Street Journal reported on Wednesday, citing people familiar with the discussions. The sale, which could give the Times desperately needed cash as newspaper advertising revenue falls and its debt payments loom, could involve its 17.5 percent stake in New England Sports Ventures and possibly the struggling Boston Globe daily newspaper, the Journal reported.

Bear Radar

Style Underperformer:
Mid-cap Value (+.09%)

Sector Underperformers:
Gaming (-1.01%), Banks (-.97%) and REITs (-.96%)

Stocks Falling on Unusual Volume:
SON

Stocks With Unusual Put Option Activity:
1) AKAM 2) MRVL 3) XOMA 4) WLP 5) n/a

Bull Radar

Style Outperformer:
Large-cap Value (+.49%)

Sector Outperformers:
Hospitals (+.94%), Computer Services (+.78%) and Telecom (+.60%)

Stocks Rising on Unusual Volume:
SFD, MCF, CATY, ISYS, FDI, MLI, ALO, PEZ, NNI, RXI, SPH and PLD

Stocks With Unusual Call Option Activity:
1) NLY 2) YRCW 3) LCC 4) HRB 5) ATVI