Bull Radar

Style Outperformer:
Large-Cap Growth (+.24%)

Sector Outperformers:
Steel (+2.08%), Road & Rail (+1.86%) and Oil Tankers (+1.49%)

Stocks Rising on Unusual Volume:
CHA, WRI, LGCY, UN, HAL, PTEN, CUK, ADSK, WBSN, DRWI, OSIS, TEVA, MAKO, ASEI, SCHN, ULTA, BJRI, SIRO, CAGC, GOOG, GENZ, NANO, GTLS, VECO, ALOG, CAAS, SPTN, VLCCF, SIVB, CMG, UPS, CUK, WF and CYD

Stocks With Unusual Call Option Activity:
1) UPS 2) TEVA 3) VECO 4) CSX 5) TIF

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Sector Performance
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Friday Watch

Late-Night Headlines
Bloomberg:

- U.S. Representative Darrell Issa, a California Republican, talks with Bloomberg's Carol Massar and Matt Miller about e-mails between the Federal Reserve Bank of New York and American International Group Inc. dealing with the insurer's payments to banks. The New York Fed, then led by Timothy Geithner, told AIG to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, the e-mails obtained by Issa show. (video)

- General Electric Co.(GE) rose the most since November after a Morgan Stanley report said commercial real estate values may have touched a bottom and JPMorgan Chase & Co. raised its target price on the shares. GE, based in Fairfield, Connecticut, rose 80 cents, or 5.2 percent, to $16.25, the most since Nov. 6. Commercial real estate values may have reached a trough in mid-2009, Morgan Stanley analysts including Paul Morgan and Richard Berner wrote today in a report. Values may remain roughly stable this year and the recovery “will be multistaged and gradual,” the report said. JPMorgan analyst C. Stephen Tusa raised his share-price estimate for GE to $22 from $20. “GE is our top pick as we believe shares do not reflect the potential significant earnings leverage at GE Capital,” Tusa’s note said.

- Bank of America Corp.(BAC), Alcoa Inc.(AA), and Intel Corp.(INTC) will lead companies worldwide to the biggest earning gains since 1993 as industries hardest hit by the recession benefit from job cuts and cheaper loans. Profits of S&P 500 Index companies rose 60 percent in the three months ended Dec. 31, the first quarterly gain after nine quarters of declines, according to analysts’ estimates compiled by Standard & Poor’s and Bloomberg. In 2010, financial, semiconductor, auto, energy and consumer goods companies will probably be the best performers, paving the way for a 25 percent rise in full-year earnings.

- Former SAC Capital Advisors LP analyst Jonathan Hollander is a previously unidentified person described by U.S. regulators in a lawsuit last year against alleged members of an insider-trading ring, two people familiar with the case said. A Securities and Exchange Commission complaint filed last January against former Blackstone Group LP managing director Ramesh Chakrapani refers to Hollander, 34, as “Tippee 1,” the people said, declining to be identified because his link to the case isn’t public.

- Fleeing Politicians Skirt Angry Body Scans: Margaret Carlson.

Wall Street Journal:

- The health-insurance industry's top lobbyist on Thursday estimated that insurers would face up to $225 billion in new taxes and fees over a decade under a final health bill. Karen Ignagni, president of America's Health Insurance Plans, said the group was pressing lawmakers to peel back a new tax on high-value insurance plans included in the Senate bill that President Barack Obama wants to include in the final bill. The group also wants to delay an across-the-board tax so it doesn't kick in until closer to when the government begins distributing new subsidies to help lower earners buy insurance.

- Commodities regulators are likely to propose "generous" trading limits for energy speculators, according to people familiar with the matter, in an effort to avoid disruption to futures markets. The Commodity Futures Trading Commission said Thursday it will meet Jan. 14 to consider the proposal, a top priority of CFTC Chairman Gary Gensler. Mr. Gensler has pushed to impose buying limits on energy futures and perhaps other commodities. Critics said the CFTC didn't do enough to tame speculation in the summer of 2008, when oil prices spiked to an all-time high before falling sharply. The CFTC is expected to propose new limits to energy-futures contracts such as crude oil in a method similar to position limits in some agricultural markets, such as wheat-futures contracts, according to the people familiar with the matter. If the position limits are set high enough, they won't impact a vast majority of futures-market traders. The CFTC's much-awaited plan is also supposed to outline when a trader can qualify for an exemption from speculative limits. The agency has come under fire over the past few years for giving exemptions to some banks.

- Bank of America Corp.(BAC) investment bankers are likely to get bonuses that are close to 2007 levels as the giant bank tries to stem more defections following its takeover of Merrill Lynch & Co., according to people familiar with the situation. The expected payouts reflect Merrill's recovery since the securities firm's net loss of $27.6 billion in 2008, forcing a rescue by the U.S. government.

- The lobbying association for the hedge fund industry told Dow Jones Newswires it will begin to ask for key financial data from hedge fund managers, the group's latest move to be a more effective lobbyist for an industry under fire from regulators. The Managed Funds Association said it will ask for key data from managers using PerTrac Financial Solutions' P-Card system, which is a self-reporting system for hedge fund managers to disclose information to investors.

- The office market in Washington, D.C., is poised to topple New York as the nation's most expensive, reflecting the declining fortunes of the nation's financial center and the government expansion under way in the U.S. capital.

- Through the tall trees of northern Wisconsin, Republican Sean Duffy is stalking a giant. The 38-year-old district attorney is talking fiscal responsibility, job creation, entitlement reform. He's scoring Washington for higher taxes, and for a health-care takeover. He's Facebooking and Twittering. He comes across as a serious yet positive reformer, a combo that has caught the public's eye. He'll need that eye, and more, since his Goliath is one David Obey, Democratic head of the Appropriations Committee, the liberal bull who has occupied Wisconsin's Democratic-leaning 7th congressional seat since before Mr. Duffy was . . . born. That the Republican is getting some traction says something about how bitter voters are with the Democratic agenda. It says something equally important about a nascent GOP effort to rebrand the party.

- The antiterror education of President Obama continued yesterday, with his release of a White House report blaming the "counterterrorism community" as a whole for "a failure to connect the dots of intelligence" that would have prevented Umar Farouk Abdulmutallab from boarding a plane to Detroit on Christmas Day.

CNBC.com:
- Cramer's 'Top Techs for 2010'.

Forbes:

- Aerospace Stocks Rebounding.

IBD:
- The blackboard has been replaced in many classrooms and meeting spaces by the whiteboard. But Blackboard (BBBB), the company, is bringing the once-ubiquitous educational tool online.

NY Times:

- Faced with the failure of the biggest recent gamble in television, NBC is shuffling its late-night deck one more time. The network has a plan in the works to restore Jay Leno to his old spot at 11:35 each weeknight for a half-hour, while pushing the man who replaced him, Conan O’Brien, to a starting time of 12:05 a.m. Mr. O’Brien would then have a full hour.

- Contrarian Investor Sees Economic Crash in China. Mr. Chanos, a wealthy hedge fund investor, is working to bust the myth of the biggest conglomerate of all: China Inc.

Detroit Free Press:

- Ford Motor(F) is expanding a partnership with Best Buy, the nation’s largest consumer electronics retailer, in which Best Buy(BBY) associates will demonstrate Ford’s Sync voice-controlled communications and entertainment technology — and hopefully snag a few car buyers in the process.

FINalternatives:

- Federal authorities are investigating the activities of two executives at Vicis Capital LLC, a New York hedge fund operator that began last year with nearly $5 billion under management. Vicis is the biggest investor in a pair of small public companies that have been implicated in an insurance fraud scheme. The FBI and a grand jury have been examining what role, if any, representatives of the hedge fund played in that scheme. The investigation has focused attention on the close relationship between Vicis and Midtown Partners & Co. LLC, a Florida-based investment bank that has paired Vicis with 20 companies whose shares trade mainly on the Over the Counter Market or Pink Sheets.

CNNMoney.com:

- The AIG fiasco keeps getting worse.

Business Week:

- U.S. retailers’ December sales gained more than analysts estimated, indicating higher holiday spending than some trade groups anticipated. Sales climbed 14 percent at TJX Cos.’ stores open at least a year, beating the 5.9 percent average of analysts’ estimates compiled by Retail Metrics Inc. Aeropostale Inc. jumped 10 percent, compared with a 3 percent projection. Sears Holdings Corp. posted a sales gain and issued a profit forecast that topped analysts’ projections. After an East Coast snowstorm snarled sales the weekend before Christmas, shoppers made up for it with online buying and discount hunting. A “last-minute sales surge” lifted December comparable-store sales 3 percent, the biggest gain since April 2008, Retail Metrics said today.

- Accelerating Factory Exodus Guts Japan Manufacturing Center.

Politico:

- Sen. Ben Nelson (D-Neb.) has begun negotiations with Senate Democratic leaders to expand his special Medicaid funding deal to all states or to allow states to opt out of the Medicaid expansion in 2017, his spokesman told POLITICO Thursday. “There are serious discussions,” Nelson spokesman Jake Thompson said. The negotiations follow weeks of scathing Republican criticism of the deal, which critics have termed the “Cornhusker Kickback,” arranged by Majority Leader Harry Reid (D-Nev.) in order to help secure Nelson’s support for the health care reform bill. Senate Democrats have also begun to blast the deal, saying it should be removed before the final legislation is passed. Sens. Blanche Lincoln (D-Ark.), Sherrod Brown (D-Ohio) and Michael Bennet (D-Colo.), and Rep. Joe Sestak (D-Pa.) have been critical of the deal.

Rasmussen Reports:

- The Christmas Day terrorist attempt by a Nigerian Muslim on a U.S. airliner has reignited the debate on racial and ethnic profiling in airports, but most Americans agree that profiling is necessary to ensure airline safety. The latest Rasmussen Reports national telephone survey finds that 59% of adults say factors such as race, ethnicity and overall appearance should be used to determine which boarding passengers to search at airports. Twenty-six percent (26%) say these factors should not be used to determine which passengers to search.

Huffington Post:

- Timothy Geithner, I Call Your Bluff by Janet Tavakoli. I assert there should be fraud audits of Wall Street's securitization activities. Given the extraordinary circumstances surrounding AIGs trades, the global financial crisis, and the AIG bailout, it is time to reopen this issue. AIG's counterparties can repurchase the approximately $62 billion CDOs from Maiden Lane III at full price**. If the Fed really believes they are worth 35 cents on the dollar, then these counterparties will be getting a windfall versus ten cents on the dollar. As for Goldman Sachs's approximately $8.2 billion in CDOs (including synthetic CDOs) that are still on AIG's books, they can be settled at ten cents on the dollar, and excess collateral currently held by Goldman can be returned. This is the value at which other bond insurers have settled similar deals. The return of payments to AIG can be used to pay down its public debt, before banks pay tax-payer subsidized bonuses to their employees.

IndexUniverse:

- Markit has announced that its SovX CEEMEA credit derivatives index will start trading on 20 January. The index forms part of the Markit iTraxx SovX family of sovereign credit default swap (“CDS”) indices and provides market participants with a standardised tool to hedge or gain exposure to the risk of fifteen countries in central and eastern Europe, the middle east and Africa. The 15 countries represented in the index have a combined total outstanding CDS notional exposure of US$530 billion. The index is an equally-weighted basket of 15 sovereign CDS referencing the following entities: Republic of Turkey; Russian Federation; Republic of Hungary; Republic of South Africa; Republic of Kazakhstan; Republic of Poland; Republic of Bulgaria; Romania; Republic of Croatia; Czech Republic; Republic of Latvia; State of Qatar; Emirate of Abu Dhabi; Ukraine; Republic of Lithuania.

BloggingStocks:

- Google(GOOG) probably hoped that 2009 would be a banner year for the breakout of wireless handsets that use its Android operating system. In most views, it was. More than 10 handsets were introduced in 2009 and mobile advertising -- as planned -- scaled along with it. In fact, Google bought mobile ad firm AdMob to ensure it would stake its claim to being the first true relevant mobile advertising provider globally. Just between October and December of 2009, mobile ad requests nearly doubled, gaining 97% in just two months to over one billion ad requests in December.

TelephonyOnline:

- Google(GOOG) today launched yet another way for monetizing its new mobile and telecom efforts — charging its AdWords advertisers for clicks on phone numbers in location-specific mobile ads, essentially creating a new “pay-per-call” revenue stream to join its core business of “pay-per-click” ad impressions. Google built a billion dollar business mainly by charging customers for clicks that Web users make on text-based ads. With its strong move into mobile advertising — driven further this week with the release of its own Nexus One phone — that pay-per-click model will start taking new forms.

USAToday:

- Higher oil prices are hitting consumers at the gas pump and will help drive higher winter home heating bills, too. The national average for a gallon of regular gasoline topped $2.71 on Thursday, $1 a gallon more than a year ago and the highest level in 15 months, auto club AAA says. Crude oil prices, up 12% in the past month, dipped slightly Thursday to $82.66 a barrel. The run-up is being driven by investors pouring into oil-backed assets and commodities, including natural gas, energy analysts say. "This is being driven by the money flow," says Tom Kloza, analyst with the Oil Price Information Service. Cold weather has also spurred demand for natural gas, which heats 52% of U.S. homes, and heating oil, which is heavily used in the Northeast. Higher costs will "provide formidable speed bumps" for the strengthening economy, Kloza says. He expects gasoline to hit $2.75 a gallon before drifting lower and rallying to $3 a gallon in the spring. Whether prices will stay there is unclear because demand is expected to be flat with last year.

Voice of America:

- The U.S. Navy says it is on heightened alert after receiving what it calls "credible" al-Qaida threats against American warships and commercial vessels in the Gulf of Aden, the Arabian Sea, and the Persian Gulf. The latest threat from Osama bin Laden's terror network calls on followers to gather intelligence about ships and their sailors so that they can be targeted for attacks. The threat, made on December 31 in a message posted on an extremist Internet Web site, prompted the Naval Criminal Investigative Service to elevate the risk for all U.S. military and commercial ships sailing through an area stretching from Somalia to the Persian Gulf. The message contained detailed instructions, particularly on what type of intelligence should be collected from each U.S. warship. The unnamed author says al-Qaida will use the information to target American vessels, including aircraft carriers, submarines, and all naval equipment deployed in the region.

Reuters:

- Goldman Sachs Group Inc(GS) was sued on Thursday by an Illinois pension fund seeking to recover billions of dollars of bonuses and other compensation being awarded for 2009, saying the payouts harm shareholders.

- Global Payments Inc (GPN), which processes online credit card transactions, posted a better-than-expected quarterly profit, raised its 2010 outlook, and said it is looking at acquisition opportunities.

- Schnitzer Steel Industries Inc (SCHN) posted a better-than-expected first-quarter profit from continuing operations, helped by improved margins in its key metals recycling business.

- An offline Florida power plant is providing a warm-water refuge for several hundred manatees who like the Sunshine State's human residents are shivering in record low cold temperatures. Close to 400 of the bulky, wrinkly and endangered sea mammals, including mothers and young, have congregated at an outlet on Florida's Intracoastal Waterway where heated water flows from the Riviera Power Plant operated by the Florida Power and Light Company, a unit of the FPL Group Inc (FPL).

TimesOnline:
- The gas was turned off for nearly 100 businesses yesterday to protect domestic power supplies after unprecedented demand brought on by the cold weather. The national grid was forced to reduce the supply to companies in the North West and East Midlands shortly after issuing its second warning in three days that the system was running out of gas. Demand in recent days has been 28 per cent above seasonal norms and is likely to increase today, when temperatures could fall to minus 22C (-8F) in some areas after what was expected to be the coldest night of the winter so far.

Telegraph:

- China has begun to tighten monetary policy and restrict access to mortgages, fearing that its torrid credit boom may be running out of control. The country's asset watchdog ordered its army of state-owned firms to take greater care, "resisting the temptation" of speculating in property, stocks, and derivatives markets. "This tightening is the start of a long squeeze," said Charles Dumas from Lombard Street Research. The think tank said Beijing is waking up to the danger of over-heating, with the money supply growing at an annual rate of 20pc. While China's $600bn (£376bn) fiscal stimulus package has been huge, it was more than matched by nearly $1 trillion growth in credit in the first half of the year. The authorities have since tried to rein in credit but it is already leaking in food inflation – as well as into an asset bubble – a dangerous political issue in a country grappling with tens of millions of footloose migrant workers, often quick to protest. Jiang Weixin, the housing minister, said credit for property would be restricted to slow the runaway rise in prices. "We should scrap or adjust local property policies launched last year that no longer comply with the current macroeconomic goals," he said. The government is concerned that huge tracts of office blocks and housing bought by investors are sitting empty. Banking practices have been opaque, leaving it far from clear whether or not lenders are sitting on a vast underbelly of bad loans. China appears to be opting for a credit squeeze rather than allowing the yuan to rise against the dollar, euro, and yen – an alternative way to cool the economy. This mercantilist strategy lowers the risk of job losses among toy, textile, shoe and furniture exporters but raises the risk of a trade showdown with the West, where protectionist voices are growing louder. Tightening by China may have knock-on effects for the global commodities markets, which have been feeding the insatiable Dragon for the last year. Andy Xie from Caijing says a significant chunk of government stimulus has been used to speculate on metals and crude. Even pig farmers have been borrowing from banks to hoard copper, hoping to flip a profit.

- Legg Mason Capital Management's veteran chief investment officer and chairman, Bill Miller, believes the market is underestimating the potential rate of US GDP growth in 2010. Mr Miller is tipping the US stockmarket to rise by up to 20pc over the next 12 months, on the back of significant GDP growth, which he predicts could be as high as 8pc. The consensus forecast is currently for a 2.6pc rise in GDP for 2010, but Mr Miller believes it could be a lot higher due to the fact that the fall in industrial output in the US has far exceeded the actual drop in demand. Consequently, Mr Miller expects to see a rapid restocking by US companies that will stimulate a sharp rise in economic growth for several quarters. He tips technology and financials to be the two sectors most likely to benefit from any upturn and has positioned his portfolio to make the sectors his biggest and second biggest respective weightings. He says financials are at their most liquid since the 1930s and that the companies that have survived the last two years' market dislocation are now well placed to grow their market share.

Evening Recommendations

Citigroup:

- Upgraded (AGU) to Buy, target $82.

- Reiterated Buy on (AEO), target $19.

Macqarie:

- Rated (MS) Buy, target $39.

Raymond James:

- Raised (HOT) to Outperform, target $42.

Cowen:

- Rated (FRT) Underperform.

- Rated (SPG) Outperform.

- Rated (WRI) Outperform.

- Rated (KIM) Outperform.

Night Trading
Asian indices are -.25% to +75% on avg.

Asia Ex-Japan Inv Grade CDS Index 90.0 +3.50 basis points.
S&P 500 futures +.05%.
NASDAQ 100 futures +.08%.

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

- (GBX)/-.12

- (PSMT)/.34

Economic Releases

8:30 am EST

- The Change in Non-Farm Payrolls for December is estimated at 0K versus -11K in November.

- The Unemployment Rate for December is estimated at 10.0% versus 10.0% in November.

- Average Hourly Earnings for December is estimated to rise +.2% versus a +.1% gain in November.

10:00 am EST

- Wholesale Inventories for November are estimated to fall -.3% versus a +.3% gain in October.

3:00 pm EST

- Consumer Credit for November is estimated to fall -$5.0B versus a -$3.5B decline in October.

Upcoming Splits

- None of note

Other Potential Market Movers
- The Fed's Rosengren speaking, Fed's Lacker speaking and the Consumer Electronics Show could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and retail stocks in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish at Session Highs, Boosted by Homebuilding, Bank, HMO, Airline, Education, Construction and Hospital Shares

StocksEvening Review
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Stocks Slightly Higher into Final Hour on Less Financial Sector Pessimsim, Diminishing Economic Fear, Technical Buying, Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Financial longs, Biotech longs, Retail longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly positive as the advance/decline line is slightly higher, most sectors are rising and volume is slightly above average. Investor anxiety is high. Today’s overall market action is mildly bullish. The VIX is falling -.68% and is above average at 19.03. The ISE Sentiment Index is above average at 177.0 and the total put/call is below average at .70. Finally, the NYSE Arms has been running around average most of the day, hitting 1.08 at its intraday peak, and is currently .76. The Euro Financial Sector Credit Default Swap Index is falling -3.69% to 57.34 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is falling -1.90% to 77.20 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is unch. at 20 basis points. The TED spread is now down 443 basis points since its all-time high of 463 basis points on October 10^th, 2008. The 2-year swap spread is rising +.68% to 27.56 basis points. The Libor-OIS spread is unch. at 10 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up +3 basis points to 2.44%, which is down -21 basis points since July 7^th, 2008. The 3-month T-Bill is yielding .05%, which is unch. today. There are an unusual number of stocks rising on above-average volume again today for a flat broad market. Value shares are outperforming growth today. Education, Airline, Homebuilding, Construction, HMO, Hospital and Bank shares are especially strong, rising 1.5%+. (XLF) is trading very well today as the euro financial sector cds index dropped to the lowest level since trading in the instrument began in March 2008, which is a large positive. The US sovereign debt credit default swap is plunging 21% to 34.0 basis points, which is also a large positive. The AAII % Bulls fell to 41.0 this week, while the % Bears rose to 26.0%. Considering the major averages are at 52-week highs, this is constructive. On the negative side, select tech leaders are relatively weak again. This is likely the result of hot money traders taking profits into CES and major product announcements. While competition is increasing for weaker players, (GOOG), (AAPL) and (AMZN) should see little new pressure on their core businesses. I will add to my (GOOG) and (AAPL) long positions on any meaningful decline in the stocks from current levels. As well, recent pullbacks are a healthy development ahead of quarterly earnings releases, especially given the broad market’s resilience in the face of this select weakness. I suspect the market will respond positively to tomorrow's jobs report. Nikkei futures indicate an +140 open in Japan and DAX futures indicate an +19 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, less economic fear, technical buying, lower energy prices, buyout speculation and less financial sector pessimism.