Weekly Outlook

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Click here for stocks in focus for Tuesday by MarketWatch.

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

Economic reports for the week include:

Mon. – US markets closed

Tues. – Weekly retail sales reports

Wed. – Weekly MBA mortgage applications report, NAHB Housing Market Index

Thur. – Weekly EIA energy inventory data, Initial Jobless Claims, Housing Starts, House Price Index

Fri. – None of note

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

Mon. – US markets closed

Tues. – Forest Labs(FRX), Jeffries Group(JEF), Precision Castparts(PCP), Fastenal(FAST), Continental Air(CAL), IBM(IBM), CSX Corp.(CSX), TD Ameritrade(AMTD), State Street(STT), Johnson & Johnson(JNJ)

Wed. – Progressive Corp.(PGR), Coach Inc.(COH), Air Products(APD), US Bancorp(USB), Abbott Labs(ABT), BlackRock Inc.(BLK), United Technologies(UTX), Burlington Northern(BNI), F5 Networks(FFIV), AllianceBernstein(AB), SLM Corp.(SLM), Noble Corp.(NE), Kinder Morgan(KMP), AMR Corp.(AMR), Allegheny Technologies(ATI), Citrix Systems(CTXS), eBay Inc.(EBAY), UAL Corp.(UAUA), Raymond James(RJF), Apple Inc.(AAPL)

Thur. – SunTrust Banks(STI), Sherwin-Williams(SHW), ITT Educational(ESI), BB&T Corp.(BBT), Comerica(CMA), United Health(UNH), AmerisourceBergen(ABC), Fifth Third Bancorp(FITB), Bank of NY(BK), Interactive Broker(IBKR), Capital One(COF), BancorpSouth(BXS), Federated Investors(FII), Microsoft Corp.(MSFT), Brinker Intl.(EAT), National City(NCC), Union Pacific(UNP), Southwest Air(LUV), Baxter Intl(BAX), Exelon(EXC), International Game Tech(IGT), Lockheed Martin(LMT), Consolidated Edison(ED), Keycorp(KEY), Google Inc.(GOOG), Intuitive Surgical(ISRG)

Fri. – Schlumberger(SLB), General Electric(GE), US Air(LCC), Northrop Grumman(NOC), Domino’s Pizza(DPZ)

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

Mon. – US markets closed

Tue. – Presidential inauguration

Wed. – None of note

Thur. – (JBL) Shareholders Meeting, (NAV) Analyst Meeting, (MOH) Investor Day, (DRI) Analyst Meeting, (APD) Shareholders Meeting, Bank of America REIT Summit

Fri. – (NUVO) Shareholders Meeting, (DRI) Analyst Meeting

BOTTOM LINE: I expect US stocks to finish the week higher on lower mortgage rates, bargain-hunting, short-covering, technical buying and declining credit market angst. My trading indicators are giving neutral signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 850.12 -4.52%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 850.12 -4.52%
DJIA 8,281.22 -3.70%
NASDAQ 1,529.33 -2.69%
Russell 2000 466.45 -3.08%
Wilshire 5000 8,567.23 -4.27%
Russell 1000 Growth 361.22 -2.94%
Russell 1000 Value 447.18 -5.89%
Morgan Stanley Consumer 529.96 -1.87%
Morgan Stanley Cyclical 451.40 -9.32%
Morgan Stanley Technology 342.24 -3.25%
Transports 3,147.60 -9.05%
Utilities 369.79 -.27%
MSCI Emerging Markets 23.28 -6.47%

Sentiment/Internals
NYSE Cumulative A/D Line 20,200 -19.90%
Bloomberg New Highs-Lows Index -378 -500.0%
Bloomberg Crude Oil % Bulls 34.0 -17.1%
CFTC Oil Large Speculative Longs 228,912 -2.69%
Total Put/Call .96 -4.0%
OEX Put/Call 1.66 +7.79%
ISE Sentiment 89.0 unch.
NYSE Arms 1.08 -56.27%
Volatility(VIX) 46.11 +7.68%
G7 Currency Volatility (VXY) 19.13 -1.09%
Smart Money Flow Index 7,389.03 -1.84%
AAII % Bulls 27.63 -43.26%
AAII % Bears 47.37 +35.11%

Futures Spot Prices
Crude Oil 35.95 -11.03%
Reformulated Gasoline 116.60 +4.86%
Natural Gas 4.78 –13.78%
Heating Oil 147.35 -.97%
Gold 841.50 -1.46%
Base Metals 112.15 -1.41%
Copper 152.50 -.97%
Agriculture 302.99 -4.20%

Economy
10-year US Treasury Yield 2.32% -7 basis points
10-year TIPS Spread .53% -5 basis points
TED Spread 1.03 -17 basis points
N. Amer. Investment Grade Credit Default Swap Index 210.92 +5.32%
Emerging Markets Credit Default Swap Index 740.65 +4.70%
Citi US Economic Surprise Index -85.70 +14.73%
Fed Fund Futures imply 72.0% chance of no change, 28.0% chance of 25 basis point cut on 1/28
Iraqi 2028 Govt Bonds 42.33 -98%
4-Wk MA of Jobless Claims 518,500 -1.5%
Average 30-year Mortgage Rate 4.96% -5 basis points
Weekly Mortgage Applications 1,324,800 +15.82%
Weekly Retail Sales -1.9%
Nationwide Gas $1.82/gallon +.04/gallon
US Heating Demand Next 7 Days 1.0% below normal
ECRI Weekly Leading Economic Index 108.60 -.64%
US Dollar Index 84.21 +1.87%
Baltic Dry Index 908.0 +4.13%
CRB Index 221.09 -3.84%

Best Performing Style
Small-cap Growth -2.60%

Worst Performing Style
Large-cap Value -5.89%

Leading Sectors
Education +6.42%
Biotech +2.23%
Medical Equipment +1.74%
Computer Hardware +1.62%
Tobacco +1.47%

Lagging Sectors
Alternative Energy -8.62%
Homebuilders -9.17%
Coal -12.04%
Road & Rail -14.96%
Banks -20.8%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Finish Near Session Highs, Boosted by Airline, Education, REIT, Homebuilding, Restaurant and Technology Shares

Evening Review
Market Summary
Top 20 Biz Stories
Today’s Movers
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Real-Time Stock Bid/Ask
After-hours Stock Quote
After-hours Stock Chart
In Play

Stocks Rising into Final Hour on Short-Covering, Bargain-Hunting, Technical Buying

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Retail longs, Biotech longs and Medical longs. I added (STRA) long and took profits in another trading long today, thus leaving the Portfolio 100% net long. The tone of the market is mildly bullish as the advance/decline line is about even, most sectors are rising and volume is above average. Investor anxiety is high. Today’s overall market action is bullish. The VIX is falling 8.6% and is elevated at 46.60. The ISE Sentiment Index is low at 88.0 and the total put/call is above average at .96. Finally, the NYSE Arms has been running at a high level most of the day, hitting 2.13 at its intraday peak, and is currently 1.04. The Euro Financial Sector Credit Default Swap Index is falling 1.26% today to 108.67 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 5.08% to 210.92 basis points. The TED spread is rising 4.75% to 103 basis points. The TED spread is now down 363 basis points in just over three months. The 2-year swap spread is unch. at 60 basis points. The Libor-OIS spread is rising 7.74% to 97 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up 5 basis points to .48%, which is down 222 basis points in just over 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 .11%, which is up 1 basis point today. Considering the massive carnage in the global banking sector this morning, today’s broad market action is very impressive. Airline, technology, education, restaurant, reit, homebuilding, hmo, defense and utility shares are all surging 2.5%+, substantially outperforming the major averages. I expect stocks to build on today’s gains next week. Nikkei futures indicate an +35 open in Japan and DAX futures indicate an +11 open in Germany on Monday. I expect US stocks to trade modestly higher into the close from current levels on short-covering, technical buying and bargain-hunting.

Today's Headlines

Bloomberg:

- The Federal Reserve may purchase Treasuries within the next few days or weeks as it broadens its policy beyond interest rate cuts to ease credit conditions amid the worst recession in 25 years, according to UBS AG. “Fed officials use every chance they get to highlight Treasury purchases as an important arrow in their quiver,” William O’Donnell, U.S. government bond strategist at UBS Securities LLC in Stamford, Connecticut, wrote in a research report today. “It now appears as if the Fed may use Treasury purchases as a blunt tool to bring loan rates down further. This makes it more likely that Treasury purchases come sooner.”

- The heads of the U.S. Treasury and Federal Deposit Insurance Corp. gave further momentum to the idea of a new government-backed bank to remove toxic assets from lenders’ balance sheets.

- Israel may be a step closer to ending its 21-day campaign against Hamas after the U.S. agreed to help stop the flow of smuggled weapons into the Gaza Strip. Israeli Foreign Minister Tzipi Livni, making a joint announcement in Washington with Secretary of State Condoleezza Rice, called the accord signed with the U.S. on arms smuggling a “vital component to the cessation of hostilities” in Gaza.

- Morgan Stanley(MS) and Citigroup Inc.(C), which are forming a venture to be the largest investment adviser to individuals, had $1.8 billion of clients’ cash in a fund that invested with Bernard Madoff, said two people familiar with the matter.

- Chrysler Financial, the credit arm of Chrysler LLC, received a $1.5 billion, five-year loan from the U.S. Treasury, prompting the automaker to offer no-interest financing to buyers of some of its vehicles. As a condition of the aid, part of the $700 billion Troubled Asset Relief Program passed last year, Chrysler Financial agreed to limits on corporate governance and executive compensation. The loan will be secured by a pool of new consumer auto loans, the Treasury said today in a statement released in Washington.

- General Electric Co.’s(GE) finance arm may cut 7,500 to 11,000 jobs, or at least 10 percent of its workforce, because of the global financial slump, people familiar with the company’s plans said.

- Oil demand will fall for a second year, the first back-to-back contractions since 1983, as a deepening recession erodes consumer spending, the International Energy Agency said. The adviser to 28 nations cut its global 2009 forecast by 1 million barrels a day on expectations the economic outlook will deteriorate. The IEA estimates consumption will shrink 0.6 percent to 85.3 million barrels a day. Forecasters including OPEC, JPMorgan Chase & Co. and Deutsche Bank AG have already said demand will fall this year. “It’s a major shift,” said Gareth Lewis-Davies, an analyst at Dresdner Kleinwort Group Ltd. in London who worked at the IEA.

- European Central Bank President Jean- Claude Trichet said while the bank is likely to cut interest rates further, it will not reduce its benchmark to zero. “To the question is 2 percent the lowest level we will attain, I say no,” Trichet told Japanese broadcaster NHK in an interview broadcast earlier today.

- European Central Bank President Jean-Claude Trichet’s vision of economies converging behind the shield of a shared currency may be unraveling. The gap between the interest rates Spain, Italy, Greece and Portugal must pay investors to borrow for 10 years and the rate charged to Germany has ballooned to the widest since before they joined the euro. The difference may grow further as Europe’s worst recession since World War II hurts budgets and credit ratings across the region. Diverging bond yields hurt Trichet’s argument that the ECB’s inflation-fighting mandate ushered in an era of stability for nations that once suffered rampant price growth. They also make it tougher for the ECB, which cut its key rate to a record yesterday, to set one benchmark for all 16 euro nations. That may delay recovery as governments try to fund stimulus plans.

- Wilbur L. Ross, the investor who made billions turning around distressed steel and textile companies, will buy a majority stake in First Bank and Trust Co., giving him a platform to purchase more banking assets. The bank has “good opportunities” to expand, Ross said in a Bloomberg Television interview today. “We view the whole financial services sector as a very interesting one.”

- Circuit City Stores Inc., the bankrupt consumer-electronics retailer, named four liquidators to sell the remaining merchandise in 567 U.S. stores before it goes out of business.

- The ruble dropped, heading for the biggest weekly decline against the dollar in a decade, as Russia’s central bank quickened the pace of devaluations to stanch the erosion of currency reserves.

CNBC.com:
- McDonald's(MCD) is prepared for another tough year economically but believes it is well-positioned to thrive despite the recession, company CEO Jim Skinner said Friday.

AP:

- A schedule of events for Obama’s inauguration.

Lloyd’s List:

- Shippers forecast Hong Kong’s container throughput would fall 10% this year.
The port of Hong Kong handled 24.24m teu in the full year 2008, up 1% from the previous year. It managed to retain its third place in the world’s container port league. However, users of the port are not optimistic about its performance in the new year. Hong Kong Shippers Council executive director Sunny Ho estimated that the port would see a 10% decrease in container throughput this year. He explained the forecast is not too pessimistic as Hong Kong had seen its volume fall 24% in the single month of December last year, compared with the same month in 2007.

VentureBeat:

- Apple’s(AAPL) stock was down today, but not as much as you might expect on the day following an announcement that its chief executive Steve Jobs will be taking a five month medical leave of absence. Why? Maybe it’s because Apple’s investors (and bargain hunters) realized that with or without Steve Jobs, Apple is likely set for at least the next few years.

Silicon Alley Insider:

- Apple(AAPL) iPhone App Downloads Accelerating, Crossed 500 Million.

Reuters:
- The U.S. Treasury has been in discussions with Ford Motor Co. (F) regarding its financing needs and the $700 billion federal rescue fund since December, a U.S. government official said on Friday.

Telegraph:
- Sales of Ugg boots, the wooly footwear favored by celebrities, have jumped in recent weeks thanks to the sub-zero temperatures that have hit Britain.