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Monday Watch

Weekend Recommendations
Barron's:
- Made positive comments on (HPQ), (L) and (NTRS).

Citigroup:

- Upgraded (LTD) to Buy, target $10.

- Upgraded (NILE) to Buy, target $30.

Night Trading
Asian indices are -1.25% to +1.75% on avg.
S&P 500 futures +1.04%.
NASDAQ 100 futures +1.07%.

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Earnings of Note
Company/Estimate
- (FST)/.30

- (ONXX)/-.65

- (MHK)/.24

- (JWN)/.30

- (CPB)/.64

- (HTZ)/.06

Upcoming Splits

- None of note

Economic Releases

- None of note

Other Potential Market Movers
- The Fed’s Lockhart speaking, Fed’s Fisher speaking, (HON) investor conference and Dallas Fed Manufacturing Activity Index could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by financial and technology shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 75% net long heading into the week.

Weekly Outlook

Click here for Wall St. Week Ahead by Reuters.

Click here for stocks in focus for Monday by MarketWatch.

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

Economic reports for the week include:

Mon. – Dallas Fed Manufacturing Activity

Tues. – S&P/CS Home Price Index, Consumer Confidence, House Price Index, Richmond Fed Manufacturing Index, Bernanke Report on Economy & Fed Policy, weekly retail sales

Wed. – Weekly MBA mortgage applications report, weekly EIA energy inventory data, Existing Home Sales

Thur. – Weekly EIA natural gas inventory report, Durable Goods Orders, Initial Jobless Claims, New Home Sales

Fri. – Preliminary 4Q GDP, Preliminary 4Q Personal Consumption, Preliminary GDP Price Index, Preliminary Core PCE, Chicago Purchasing Manager, Univ. of Mich. Consumer Confidence, NAPM-Milwaukee

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

Mon. – Forest Oil(FST), Onyx Pharmaceuticals(ONXX), Mohawk Industries(MHK), Nordstrom(JWN), Hertz Global(HTZ), Campbell Soup(CPB)

Tues. – Quanta Services(PWR), Medco Health Solutions(MHS), Home Depot(HD), St. Joe(JOE), Papa John’s(PZZA), Crown Castle(CCI), First Solar(FSLR), Blackstone Group(BX), Macy’s(M), HJ Heinz(HNZ), Wynn Resorts(WYNN), Foster Wheeler(FWLT), Target(TGT), Office Depot(ODP), Vornado Realty(VNO)

Wed. – JM Smucker(SJM), Saks Inc.(SKS), Eaton Vance(EV), TJX Cos(TJX), Liberty Media(LMDIA), Express Scripts(ESRX), Flour Corp.(FLR), Salesforce.com(CRM), Dollar Tree(DLTR), Ltd Brands(LTD), SPX Corp.(SPW), Del Monte(DLM)

Thur. – Federal Signal(FSS), ENSCO Intl.(ESV), Warnaco Group(WRC), Sears Holdings(SHLD), American Tower(AMT), Boyd Gaming(BYD), Novell(NOVL), Kohl’s(KSS), Gap Inc.(GPS), Cablevision(CVC), Deckers Outdoor(DECK), Public Storage(PSA), Dell Inc.(DELL), El Paso(EP), Louisiana Pacific(LPX), Rowan Cos(RDC), Safeway(SWY), Frontier Oil(FTO)

Fri. – Mirant(MIR)

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

Mon. – The Fed’s Lockhart speaking, Fed’s Fisher speaking, BMO Capital Global Metals & Mining Conference, CSFB Global Services Conference, (HON) investor conference

Tue. – President Obama addresses joint session of Congress, Fed Chairman Bernanke testifies before Senate, Fed’s Fisher speaking, Fed’s Duke speaking, BMO Capital Global Metals & Mining Conference, Merrill Lynch Insurance Conference, CSFB Global Services Conference, (WLP) investor conference, (CXG) investor meeting, (MSFT) strategic update, (HBI) investor day, (XTO) analyst conference, (CERN) investment community meeting, (JNPR) analyst meeting

Wed. – Fed Chairman Bernanke gives monetary policy report before House panel, Jeffries Internet Conference, UBS Industrials Conference, BMO Capital Global Metals & Mining Conference, Robert Baird Business Conference, Merrill Lynch Insurance Conference, CSFB Global Services Conference, Goldman Tech & Internet Conference, Pacific Crest Technology Summit, (VOLC) analyst meeting

Thur. – President Obama releases his first budget proposal, Jeffries Internet Conference, Robert Baird Business Conference, Goldman Tech & Internet Conference, Pacific Crest Technology Summit, (BKC) analyst meeting, (DF) investor day, (SFY) analyst meeting, (PCG) analyst meeting

Fri. – The Fed’s Bullard speaking, Fed’s Plosser speaking, Fed’s Yellen speaking, Goldman Tech & Internet Conference, Pacific Crest Technology Summit, (ETN) analyst meeting, (IMGN) analyst meeting, (HS) investor day, (PGN) analyst meeting

BOTTOM LINE: I expect US stocks to finish the week modestly higher on bargain-hunting, technical buying, declining credit market angst, diminishing financial sector pessimism and short-covering. My trading indicators are giving mostly bullish signals and the Portfolio is 75% net long heading into the week.

Stocks Finish Lower, Weighed Down by Financial, Commodity, Airline and HMO Shares

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In Play

Stocks Rebounding into Final Hour on Less Extreme Financial Sector Pessimism, Short-Covering, Bargain-Hunting

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Education longs, Biotech longs, Medical longs, Computer longs and Emerging Market/Commodity/Index shorts. I covered some of my (IWM)/(QQQQ) hedges and some of my (EEM) short today, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, sector performance is mostly negative and volume is heavy. Investor anxiety is high. Today’s overall market action is bullish. Nikkei futures indicate a -46 open in Japan and DAX futures indicate an +41 open in Germany on Monday. I expect US stocks to trade higher into the close from current levels on less financial sector pessimism, bargain-hunting and short-covering.

Today's Headlines

Bloomberg:

- Senate Banking Committee Chairman Christopher Dodd said it may be necessary to nationalize some banks for a short time as Citigroup Inc. and Bank of America Corp. tumbled today on concern the U.S. may take over both banks. “I don’t welcome that at all, but I could see how it’s possible it may happen,” Dodd said in an interview on Bloomberg Television’s “Political Capital with Al Hunt” to be broadcast later today. “I’m concerned that we may end up having to do that, at least for a short time.”

- Warren Buffett’s Berkshire Hathaway Inc.(BRK/A) fell to its lowest price in five years in New York trading amid concern about possible losses on bets the billionaire chairman has taken on world stock markets. Berkshire Class A shares, the most expensive on the New York Stock Exchange, fell $3,200, or 4.1 percent, to $75,400 at 11:57 a.m. in composite trading, the lowest since October 2003. The stock of the Omaha, Nebraska-based firm has declined for six straight days and plunged 48 percent in the past 12 months.

- A California law banning sales of violent video games to minors is unconstitutional, a federal appeals court ruled.

- General Electric Co.(GE) headed for its lowest close since 1995 and became the fifth Dow Jones Industrial Average stock to slip below $10 after Sanford C. Bernstein & Co. forecast an unprecedented profit drop at its finance unit. Operating profit at GE’s subsidiaries will fall 80 percent, driven mostly by a decline in finance earnings, Bernstein analyst Steven Winoker wrote in a note. He cut his 2009 income estimate by 3.3 percent to $1.18 a share, below the $1.28 average of 14 analysts in a Bloomberg survey.

- President Barack Obama’s plans to limit greenhouse-gas emissions may be stymied by the specter of an international trade war. U.S. Steel Corp., American Electric Power Co. and the AFL- CIO, the largest U.S. federation of labor unions, are all pressing lawmakers for protection against imports from countries that won’t have to bear the costs of any new measures to curb global warming. The companies say fees might be needed to prevent price- undercutting by manufacturers in countries that won’t match U.S. climate-change standards. Lobbying groups for exporters such as Microsoft Corp. counter that imposing penalties on imports may violate World Trade Organization rules and spark retaliation by China and other nations. “Climate change is going to be the big issue of the next year, and no one has really grappled with the trade aspects,” said Jake Colvin, vice president at the Washington-based National Foreign Trade Council, whose members include Caterpillar Inc., Exxon Mobil Corp. and Microsoft. The idea of assessing fees on imports is “alarming,” he said.

- Oil lost as much as 6.5 percent as the MSCI World Index of stocks headed toward its biggest weekly drop since November. Crude is heading for its first weekly gain in four weeks. Prices are down 14 percent this year. Fuel demand during the past four weeks averaged 20 million barrels a day, down 0.1 percent from the average over the same period last year, the Energy Department said yesterday. U.S. motorists reduced driving by the most in 66 years in 2008, the Federal Highway Administration said yesterday in a report. Vehicle-miles traveled last year fell by 107.9 billion, or 3.6 percent.

- China may review its 8 percent economic-growth target for this year as the global financial crisis deepens, Deputy Commerce Minister Zhong Shan said. Falling export demand because of recessions in the U.S., Europe and Japan has slowed China’s growth to the weakest pace in seven years and cost the jobs of 20 million migrant workers, adding to the risk of social instability. Premier Wen Jiabao acknowledged last month that meeting the 8 percent target will be “a tall order.” Falling export demand because of recessions in the U.S., Europe and Japan has slowed China’s growth to the weakest pace in seven years and cost the jobs of 20 million migrant workers, adding to the risk of social instability. Premier Wen Jiabao acknowledged last month that meeting the 8 percent target will be “a tall order.” China “strongly opposes” protectionism, Zhong said, urging the U.S., the nation’s second-biggest export market, to be “very cautious in this area.”

- Asustek Computer Inc., which pioneered the market for sub-$500 laptops, may install Google Inc.’s free Android operating system on its low-cost notebooks, challenging the dominance of Microsoft Corp.’s Windows software.

- Brazil’s unemployment rate jumped the most in seven years last month as companies trimmed payrolls to weather the first global recession since World War II. Unemployment in Brazil’s six largest metropolitan areas rose to 8.2 percent in January from 6.8 percent in December, the national statistic agency said in a report distributed today in Rio de Janeiro. The rate was higher than the 7.8 percent median forecast of 24 economists surveyed by Bloomberg.

- Natural gas fell below $4 per million British thermal units for the first time in more than six years as the worsening recession curbs demand for the factory and power-plant fuel.

Wall Street Journal:

- Ford Motor Co.(F), which hasn't taken a dime of government bailout loans, is benefiting from the troubles of its two cross-town competitors in Detroit, General Motors Corp. and Chrysler LLC. GM and Chrysler are required to seek cost concessions from the United Auto Workers union under the terms of their federal loans. That allowed Ford to open parallel talks with the UAW, which has a history of working out the same conditions at each company. This week, Ford and the UAW reached an agreement to cut pay for laid-off workers, ease work rules and eliminate wage increases tied to the cost of living -- two days before GM and Chrysler reached the same deal.

- Virtualization, a technology used primarily to squeeze more processing power from servers, is coming to corporate desktops and laptops, a development that could open up new revenue streams for pioneers like VMware Inc. (VMW) and Citrix Systems Inc. (CTXS).

The Detroit News:

- GMAC Financial Services, whose Motor City roots date back 90 years, is considering changing its headquarters from Detroit to Charlotte, N.C., but would keep its auto financing arm here.

Washington Post:

- A senior Republican lawmaker pressed the Securities and Exchange Commission yesterday about whether it had properly investigated warnings about possible insider trading at the failed investment bank Lehman Brothers. Sen. Charles E. Grassley (Iowa), the ranking Republican on the Senate Finance Committee, said in a letter to the SEC that it was unclear whether the agency was seriously examining the allegations raised by a whistleblower at the firm.

NJ.com:

- With his budget-cutting options dwindling, Gov. Jon Corzine is preparing plans to severely curtail or eliminate New Jersey's popular property tax rebates for the coming year, multiple sources close to the governor said today.

Boston Globe:

- After months of private rumination and public mixed signals, Governor Deval Patrick will propose a 19 cent increase in the state's gasoline tax today, in an attempt to solve the increasingly complex maze of problems confronting the state's aging and debt-ridden transportation system. Patrick's plan would give Massachusetts one of the highest gas taxes in the nation, but it may avert an unpopular increase that would have raised the cash toll at the airport tunnels to $7, according to two administration officials who spoke on condition of anonymity.

USAToday:

- Gov. Pat Quinn of Illinois is holding a press conference right now and said: "I would ask my good friend Sen. Roland Burris .. to step aside and resign from the office." The press conference can be watched here.

Reuters:
- German Foreign Minister Frank-Walter Steinmeier said that a process is under way to determine how economically stronger members of the euro region could help weaker members, citing comments made by the minister in Berlin today. “An economy like Germany’s obviously relies on the economy of its neighboring states and neighboring markets not suffering too much,” Steinmeier said. “This process has just started” and it “cannot yet be said to what extent measures can be taken.”