Market Week in Review

S&P 500 1,144.98 +2.68%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 1,144.98 +2.68%
DJIA 10,618.19 +1.82%
NASDAQ 2,317.17 +2.12%
Russell 2000 644.56 +3.07%
Wilshire 5000 11,706.78 +2.82%
Russell 1000 Growth 509.31 +1.82%
Russell 1000 Value 587.70 +3.78%
Morgan Stanley Consumer 675.39 +.76%

Morgan Stanley Cyclical 887.60 +6.96%
Morgan Stanley Technology 583.33 +.91%
Transports 4,222.26 +2.99%
Utilities 396.31 -.43%
MSCI Emerging Markets 43.0 +3.44%

Lyxor L/S Equity Long Bias Index 975.70 +.85%

Lyxor L/S Equity Variable Bias Index 847.58 +1.06%

Lyxor L/S Equity Short Bias Index 958.21 -.92%

Sentiment/Internals
NYSE Cumulative A/D Line +73,395 +6.51%
Bloomberg New Highs-Lows Index +798 +620
Bloomberg Crude Oil % Bulls 35.0 -20.45%
CFTC Oil Net Speculative Position +108,835 +15.69%

CFTC Oil Total Open Interest 1,231,436 +3.90%
Total Put/Call .65 -28.57%
OEX Put/Call 1.07 -53.48%
ISE Sentiment 138.0 +50.0%
NYSE Arms 1.45 -32.55%
Volatility(VIX) 18.13 -16.37%
G7 Currency Volatility (VXY) 12.40 -9.22%
Smart Money Flow Index 9,357.50 +.78%

Money Mkt Mutual Fund Assets $3.307 Trillion +.40%
AAII % Bulls 41.0 -16.63%
AAII % Bears 26.0 +13.29%

Futures Spot Prices
CRB Index 290.77 +2.61%

Crude Oil 82.75 +3.93%
Reformulated Gasoline 215.53 +4.51%
Natural Gas 5.75 +3.07%
Heating Oil 220.03 +3.78%
Gold 1,138.90 +3.74%
Bloomberg Base Metals 214.77 +1.44%
Copper 340.05 +1.81%

US No. 1 Heavy Melt Scrap Steel 260.0 USD/Ton unch.

China Hot Rolled Domestic Steel Sheet 3,917 Yuan/Ton +.46%

S&P GSCI Agriculture 359.67 +1.77%

Economy
ECRI Weekly Leading Economic Index 131.50 +.61%

Citi US Economic Surprise Index +5.20 -71.74%

Fed Fund Futures imply 54.0% chance of no change, 46.0% chance of 25 basis point cut on 1/27

US Dollar Index 77.47 -.50%

Yield Curve 285.0 +16 basis points

10-year US Treasury Yield 3.83% unch.

Federal Reserve’s Balance Sheet $2.216 Trillion -.13%

U.S. Sovereign Debt Credit Default Swap 34.0 -9.0 basis points

10-year TIPS Spread 2.45% +5 basis points
TED Spread 21.0 +2.0 basis points
N. Amer. Investment Grade Credit Default Swap Index 77.81 -9.10%

Euro Financial Sector Credit Default Swap Index 57.44 -7.60%
Emerging Markets Credit Default Swap Index 236.53 -8.47%
CMBS Super Senior AAA 10-year Treasury Spread 399.0 -41.0 basis points

M1 Money Supply $1.688 Trillion +.10%

Business Loans 662.90 -.27%
4-Wk MA of Jobless Claims 450,300 -2.20%

Continuing Claims Unemployment Rate 3.6% -20 basis points
Average 30-year Mortgage Rate 5.09% -5 basis points
Weekly Mortgage Applications 462.20 +.46%

ABC Consumer Confidence -41 +3 points
Weekly Retail Sales +1.80% -10 basis points
Nationwide Gas $2.73/gallon +.09/gallon
US Heating Demand Next 7 Days 3.0% below normal
Baltic Dry Index 3,140 +4.50%

Oil Tanker Rate(Arabian Gulf to US Gulf Coast) 55.0 +46.70%

Rail Freight Carloads 149,128 +5.24%

Iraqi 2028 Govt Bonds 83.50 +8.21%

Best Performing Style
Mid-Cap Value +3.87%

Worst Performing Style
Large-Cap Growth +1.82%

Leading Sectors
Oil Tankers +11.95%

Oil Service +11.70%

Banks +10.04%

Steel +8.35%
HMOs +6.21%

Lagging Sectors
Internet -.02%
REITs -.23%
Utilities -.43%

Restaurants -.69%
Telecom -2.81%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Finish at Session Highs, Boosted by Transportation, Hospital, Commodity, and Tech Shares

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Stocks Slightly Higher into Final Hour on Less Economic Pessimism, Lower Long-Term Rates, Technical Buying, Tech Sector Optimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Biotech 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 higher, sector performance is mixed and volume is slightly above average. Investor anxiety is high. Today’s overall market action is mildly bullish. The VIX is falling -3.36% and is above average at 18.42. The ISE Sentiment Index is around average at 150.0 and the total put/call is below average at .64. Finally, the NYSE Arms has been running very high most of the day, hitting 1.72 at its intraday peak, and is currently 1.50. The Euro Financial Sector Credit Default Swap Index is rising +3.23% to 57.84 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 rising +.78% to 77.81 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is up +1 basis point to 21 basis points. The TED spread is now down 442 basis points since its all-time high of 463 basis points on October 10^th, 2008. The 2-year swap spread is falling -.90% to 27.63 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 +1 basis point to 2.45%, which is down -20 basis points since July 7^th, 2008. The 3-month T-Bill is yielding .04%, which is down -1 basis point today. There are an unusual number of stocks rising on above-average volume again today for a flat broad market. Tech leaders, which had been under pressure the last few days, are reversing higher today. Economically sensitive shares are substantially outperforming, with the MS Cyclical Index rising .83%, despite the disappointing jobs report. Food, Road & Rail, Hospital, Semi, Steel, Oil Service and Oil Tanker shares are especially strong, rising 1.5%+. Even though the major averages are just slightly higher over the last few days, a number of small/mid-cap stocks are breaking out and posting significant gains. Oil Tanker rates are up 40.0% this week to 52.50 worldscale. On the negative side, (XLF) and (IYR) are underperforming and oil reversed higher despite weaker economic data. Consumer Credit fell a record -$17.5B in November, which I view as a positive, considering the improvement in retail sales during that period. The jobs report was a bit disappointing, but it will likely calm inflation expectations and imminent Fed hike worries. The 10-Year CMBS/AAA spread fell another 6.1% this week, which is a large positive. I suspect the major averages will build modestly on this week’s gains next week. Nikkei futures indicate an +67 open in Japan and DAX futures indicate an +3 open in Germany on Monday. I expect US stocks to trade modestly higher into the close from current levels on short-covering, less economic fear, technical buying, lower long-term rates, tech sector optimism and buyout speculation.

Today's Headlines

Bloomberg:

- The U.S. unexpectedly lost 85,000 jobs in December, supporting Federal Reserve forecasts that a labor market recovery will take time and making it more likely interest rates will stay near zero for the next six months. Payrolls fell last month after a revision showed a gain of 4,000 in November, the first in almost two years. The median estimate of economists surveyed by Bloomberg News projected no change in December. The jobless rate held at 10 percent.

- The 2010 census couldn’t have come at a better time for the U.S. economy. The government will hire about 1.2 million temporary workers in the first half of the year to administer the decennial population count, possibly providing a bridge to gains in private employment later in the year. “It’s a short-term stimulus program in which the government’s injecting money into the economy through additional paychecks,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York, who projects that 2.5 million more Americans will be working at the of the year. “This will support consumer income during those months.”

- China approved stock index futures, giving investors a tool to protect against losses and profit from any declines in a market that rose 80 percent last year. The government also approved margin trading and short selling, the China Securities Regulatory Commission said in a statement on its Web site today. It may take three months to complete preparations for index futures, the regulator said.

- U.S. investors oppose federal initiatives that would force them to give up control over their 401(k) accounts, the Investment Company Institute said. Seven in 10 U.S. households object to the idea of the government requiring retirees to convert part of their savings into annuities guaranteeing a steady payment for life, according to an institute-funded report today.

- Federal Reserve Bank of Boston President Eric Rosengren said U.S. job growth will probably be slow and unemployment will stay “quite elevated” while the economy recovers, warranting continued low interest rates. Employment growth “will not likely be rapid enough to put a large dent in the unemployment rate,” Rosengren said in a speech today in Hartford, Connecticut. “This should allow for accommodative monetary policy to continue to support the economy until the underlying demand of consumers and businesses becomes self-sustaining.”

- Umar Farouk Abdulmutallab, the man accused of trying to destroy a Northwest Airlines plane carrying 290 people on Christmas Day, pleaded not guilty to U.S. criminal charges. The 23-year-old Nigerian entered his plea today before U.S. Magistrate Judge Mark Randon in Detroit. As the flight approached the city’s airport, Abdulmutallab ignited his pants leg and a wall of the plane while trying to detonate a mixture of explosives he smuggled aboard, according to prosecutors. In a hearing that took less than five minutes, Abdulmutallab, wearing a white T-shirt, beige pants and black- and-white shoes, told the judge he understood the charges against him.

- Electricity use in Texas hit a winter high and orange-juice futures rose by an exchange limit today as the U.S. Northeast and South girded for a frigid weekend. Europe braced for more snow. The forecasts come after a week of storms and cold that have hampered coal and grain shipments, shut down trains and livestock markets and sent energy demand soaring across the Northern Hemisphere. “A good chunk of the country has been feeling the chill the last one to two weeks,” Tom Kines, a senior meteorologist at AccuWeather Inc., said in a telephone interview from State College, Pennsylvania. “The number of record lows set in the past week, there’s been 400 of them. That’s pretty significant to have that many of them over a week.” Texas electricity demand reached a seasonal record as temperatures in Dallas dropped to 17 degrees. The U.K. weather forecaster expects 12 more days of below-average cold for Britain. A new storm headed toward Germany, while northern Spain also braced for heavy snow. U.K. gas demand may jump to a record today, National Grid PLC said, as temperatures in the Scottish Highlands dropped to as low as minus 22 degrees Celsius. Car breakdowns in the U.K. reached record numbers this week as the longest cold snap in 30 years left drivers stranded with powerless car batteries, unresponsive engines and even frozen diesel in some Scots’ fuel tanks.

Wall Street Journal:

- Jose Manuel Barroso, head of the European Union Commission, said Friday the United Nations process to reach a deal on climate change needs to be thought over before a new summit in Mexico.

MarketWatch.com:

- UPS(UPS) raised its fourth-quarter profit guidance on Friday. "The stronger earnings stem from better-than-expected results in both domestic and international operations and savings through cost management," said Chief Financial Officer Kurt Kuehn. "However, we still anticipate a gradual economic recovery with improvement more evident as 2010 progresses."

CNBC:

- JP Morgan starts healthcare services and distribution sector with attractive view. JP Morgan starts Express Scripts(ESRX), AmerisourceBergen(ABC) with overweight ratings. JP Morgan starts Medco Health Solutions(MHS), Cardinal Health(CAH) with overweight ratings.

- Two prominent U.S. lawmakers on Friday called for U.S. Treasury Secretary Timothy Geithner to testify to help determine if the New York Federal Reserve Bank improperly influenced insurer AIG(AIG) to withhold information on its payments to banks after a government bailout. Rep. Spencer Bachus, R-Ala., the top Republican on the House Financial Services Committee, and Elijah Cummings, D-Md., of the House Oversight and Government Reform Committee, requested their respective panels hold hearings on the matter. The requests came after e-mail traffic between lawyers for New York Fed and AIG released on Thursday showed the Fed sought to alter the disclosures in late 2008, when Geithner was still in charge of the bank. Among information New York Fed lawyers sought to delete from proposed Securities and Exchange Commission filings was details of payments to banks with taxpayer funds in which institutions would get 100 percent of par value for credit default swaps being liquidated, according to the e-mails. The use of government bailout funds by banks to pay each other off in full rather than suffer losses from the financial crisis has caused public outrage.

- Profit Outlook: Strong Results Could Keep Stock Rally Going.
- Today's jobs reported includes an unexpected bonus for the commercial real estate market. "In the critical office-using sectors, employment increased for the fourth consecutive month, rising 48,000 in December," according to Cushman and Wakefield. Financial employment rose by 4,000, which while minimal is the first bump up there since July of 2007.

- There's a case to be made that consumers will continue to defy the 10% unemployment rate and stoke a recovery in the retail sector.

Benzinga:

- Q4 results for EMC Corporation (EMC) are expected to be slightly better than street estimates, but the real trigger will be seen in Q1 when the revenues will see a significant boost, backed by a return to a somewhat normal IT spending environment in 2010. With CIOs expected to start spending on strategic projects such as data center refreshes and most of the Q4 projects pushed to 2010 likely to close in Q1, Think Equity LLC has given a ‘Buy’ rating to the stock with a target price of $20 per share. EMC, with its market leadership in ‘virtualization’ and ‘storage’ is a clear favorite for the longer term.

The Business Insider:

- Simon Johnson has been honing his case against Wall Street oligarchs for months. The MIT economist made a convincing argument this week that the financial sector has engulfed economies in the U.S. and Europe, and that this led to the financial crisis. A second financial crisis is inevitable, according to Johnson, thanks to recent policies that have made the financial sector even bigger than before.

- Nevada Threatens Constitutional Crisis, As Governor Promises To Sue Washington If Healthcare Reform Passes.

GigaOM:

- Qualcomm(QCOM) Leapfrogs Intel With 28-Nono Chips. If Qualcomm can successfully leap ahead of the rest of the industry, its chips will perform better and cost less, giving it a significant advantage.

BusinessWeek:

- Seagate Technology(STX), the world’s largest maker of hard-disk drives, says pent-up demand by businesses for new gear and consumer appetite for notebook computers will push technology spending higher this year. “2010 is going to be a growing year for tech globally,” Chief Executive Officer Steve Luczo said today in an interview at the Consumer Electronics Show in Las Vegas. “We think 2010 is going to be a good year all the way through.”

Detroit Free Press:

- The 2010 Detroit auto show will be getting a political visit from more than just the Democratic side of Washington, thanks to a protest organized by national Tea Party activists set for Monday. The anti-tax group National Tax Day Tea Party has called on supporters from southeast Michigan to "make a peaceful yet clear statement against government takeover of America," namely the Obama administration's 61% stake in General Motors. The group, which is planning a major rally in Washington for April 15, is part of a network of staunchly conservative opponents of President Obama and the Democratic Congress that have been gaining traction in recent months, especially over stimulus and health-care reform.

Cellular-news:

- Worldwide cellular chipsets will grow at a 9.3% compound annual growth rate (CAGR) on a unit basis from 2009 to 2014. While cellular broadband applications made up less than 7% of this unit volume in 2009, this market will grow at a 35% CAGR to account for over 16% of total chipsets by 2013, far outpacing the growth in the mobile phone market.

Hexus.channel:

- It's been a busy start to the year for mobile chip maker Qualcomm(QCOM), with the launch of the Google Nexus One and Lenovo trying to chuck a Snapdragon chip in anything it can get its hands on. And things don't look like letting up, with two new flavors of Snapdragon due to be launched this year. We spoke to Luis Pineda, SVP of product management for Qualcomm CDMA Technologies (pictured below), at CES 2010 today and he shed some light on what we can expect from the Snapdragon roadmap in the next 12 months. Later this month a 45nm version of Snapdragon - the 8X50A - clocking at 1.3 GHz will be offered to manufacturers and is expected to appear in end-products by the end of this year. Also before the end of the year, Qualcomm will unveil a dual-core Snapdragon - the 8X72 - with each Scorpion core clocking at 1.5 GHz. Pineda said it can be used in both phones and smartbook type devices and will be capable of providing 1080p resolution.

EETimes:

- While in Washington, Transportation Secretary Ray LaHood accelerates his campaign to crack down on "distracted driving," the Ford Motor Company(F), in Las Vegas for the Consumer Electronics Show (CES), was busy announcing a wave of "connected car" innovations and developments that seem destined to drive drivers to distraction. However, according to a series of Ford executives speaking at a CES keynote session Thursday, these additions to on-board information, communication and entertainment are being designed into new-model Fords and Lincolns with a laser-like focus on being "simpler, safer and smarter," actually lessening the problem of driver distraction. Keynote speaker Alan Mullaly, CEO of Ford, emphasized that the flood of new connected features scheduled to sweep across Ford dashboards will be controlled largely by the driver's voice.

iStockAnalyst:

- Morgan Stanley is making an interesting call on Chipotle Mexican Grill (CMG) double upgrading the stock to Overweight from Underweight while raising their target to $111 (prev. $76). Specific reasons they would own this stock in 2010:

Rassmussen:

- The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 27% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-one percent (41%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -14 (see trends).

Politico:

- Tucker Carlson's television career has been diverse and varied, with stints at CNN, MSNBC, PBS and Fox News. His latest project, however, is online; TheDailyCaller.com launches Monday and aims to break some serious news in the nation's capital.

Real Clear Politics:

- Culture of Corruption Produces Awful Health Care Bill. Usually a major welfare-state bill has to be passed by Congress and go into effect before it is exposed as corrupt. The money has to actually be flowing out of Washington before anyone notices that it's being diverted into a cesspool of special favors and sweetheart deals. But a lot of things are unprecedented about the current push for a health care bill. Never has such a major expansion of the welfare state been passed without bipartisan support and broad approval from the public. And rarely has the corruption of a program been exposed while it is still awaiting final approval in Congress. It's so bad that fellow Democratic Senator Blanche Lincoln felt the need to publicly denounce Ben Nelson's "horse-trading" on behalf of Nebraska, and California Governor Arnold Schwarzenegger, a liberal Republican who used to support the health care bill, has turned against it. Schwarzenegger explains: "While I enthusiastically support health care reform, it is not reform to push more costs onto states that are already struggling while other states get sweetheart deals. Health care reform, which started as noble and needed legislation, has become a trough of bribes, deals, and loopholes."

Schulte Roth:

- Hedge Fund Outlook 2010.

Patently Apple:

- Apple(AAPL) Reveals New Touch Screen Technology for iPhone & MacBook Tablet.

TechCrunch:

- Apple(AAPL) and Verizon(VZ): Are Two Star-Crossed Lovers Ready to Consummate? There are still plenty of clouds in the sky blocking the view, but there seem to be more signs out there than ever before that the Verizon and Apple stars are aligning. And we get more clues in a few weeks when Apple is expected to unveil its new tablet device, which may or may not have some sort of carrier network and/or carrier-run WiFi agreement that comes with it. Let’s hope.

New York Daily News:

- Two men busted in an ongoing terror probe will be arraigned Friday in connection with a bomb plot targeting New York City. The suspects, Adis Medunjanin and Zarein Ahmedzay, were part of an ongoing FBI task force investigation, Special Agent Richard Kolko said. FBI agents Thursday night raided the Queens apartment of Medunjanin, who was said to have close ties to Najibullah Zazi, a Colorado airport driver the feds say is the mastermind of an Al Qaeda plot to blow up New York, law enforcement sources said.

Nanaimo Daily News:

- Exxon(XOM) is looking to sign a contract for a Transocean Ltd. rig capable of drilling in Arctic waters that will cost up to $1 billion to build, according to a person familiar with the rig. The new rig could command a rate in the range of the record $650,000 per day that Transocean, the largest offshore rig contractor, secured in mid-2008 for a five-year deepwater contract that starts next month, the person said.

Reuters:

- A weekly measure of future U.S. economic growth rose in the latest week as its yearly growth rate declined, indicating signs of continued strengthening in the economy, a research group said on Friday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index climbed to a 78-week high of 131.5 for the week ended Jan. 1, from an downwardly revised 130.7 the prior week, which was originally reported as 131.2. The index's annualized growth rate slipped to a five-week low of 23.6 percent from 24.0 percent the previous week, which was also revised down from 24.2 percent. "With the WLI climbing to a one-and-a-half-year high, the U.S. economy is firmly set to strengthen in the coming months," said Lakshman Achuthan, Managing Director at ECRI.

- 2010 may turn out to be the year of the stock picker.

Digitimes:

- Sources at semiconductor equipment makers believe Taiwan Semiconductor Manufacturing Company (TSMC) will make a more ambitious attempt than its internal goal towards capital spending in 2010. The contract chipmaker is projected to budget US$4.5 billion for the year, a 66% rise from the company's most recent estimate for 2009. Previous reports cited company sources as saying TSMC has internally set a goal of US$3 billion for 2010.

JerusalemPost:

- US preparing for possible Iran conflict.

Bear Radar

Style Underperformer:
Large-Cap Value (-.56%)

Sector Underperformers:
Education (-2.71%), REITs (-1.34%) and HMOs (-1.0%)

Stocks Falling on Unusual Volume:

CQB, MED, GHDX, MYL, APOL, ROG, FCN, GPN, AZZ and YZC

Stocks With Unusual Put Option Activity:
1) GIS 2) ADSK 3) ACI 4) GENZ 5) GME