Weekly Outlook

Click here for the Wall St. Week Ahead by Reuters.

Click here for Stocks in Focus for Monday by MarketWatch.com.

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. – None of note

Tues. – Consumer Confidence, weekly retail sales reports

Wed. – Weekly EIA energy inventory data, weekly MBA Mortgage Applications report, ADP Employment Change, Advance 3Q GDP, Advance 3Q Personal Consumption, Advance 3Q GDP Price Index, Advance 3Q Core PCE, 3Q Employment Cost Index, Chicago Purchasing Manager Index, Construction Spending, FOMC Rate Decision

Thur. – Challenger Job Cuts, Personal Income, Personal Spending, PCE Core, Initial Jobless Claims, ISM Manufacturing, ISM Prices Paid, Total Vehicle Sales

Fri. – Change in Non-farm Payrolls, Unemployment Rate, Average Hourly Earnings, Factory Orders

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

Mon. – CNA Financial(CNA), Loews Corp.(LTR), Louisiana-Pacific(LPX), Northwest Air(NWA), RadioShack(RSH), Verizon Communications(VZ), Humana(HUM), Kellogg(K), CB Richard Ellis(CBG), Post Properties(PPS), Vulcan Materials(VMC), Bausch & Lomb(BOL), Pitney Bowes(PBI)

Tues. – Automatic Data Processing(ADP), BJ Services(BJS), Gartner Inc.(IT), Goodyear Tire(GT), Liz Claiborne(LIZ), MGM Mirage(MGM), Qwest Communications(Q), Under Armour(UA), Chipotle Mexican Grill(CMG), DreamWorks(DWA), McKesson Corp.(MCK), Omniture Inc.(OMTR), Sirf Technology(SIRF), AGCO Corp.(AG), Avon Products(AVP), Becman Coulter(BEC), Buffalo Wild Wings(BWLD), Colgate-Palmolive(CL), Energizer Holdings(ENR), Masco(MAS), Office Depot(ODP), Procter & Gamble(PG), Safeco(SAF), Titanium Metals(TIE), United States Steel(X), Vornado Realty(VNO), Wynn Resorts(WYNN)

Wed. – Constellation Energy(CEG), Foundation Coal(FCL), Garmin Ltd.(GRMN), IAC/InterActiveCorp(IACI), Mastercard Inc.(MA), SPX Corp(SPW), Transocean Inc.(RIG), Weyerhaeuser(WY), Boyd Gaming(BYD), Kraft Foods(KFT), AvalonBay(AVB), Conseco(CNO), JDS Uniphase(JDSU), MetLife(MET), Advance Auto Parts(AAP), Amdocs(DOX), Clorox(CLX), Gerber Scientific(GRB), Hilton Hotels(HLT), Jones Apparel(JNY), MicroStrategy(MSTR), Newmont Mining(NEM)

Thur. – Administaff(ASF), Alliant Techsystems(ATK), American Superconductor(AMSC), AmerisourceBergen(ABC), Becton Dickinson(BDX), Dominion Resources(D), Medco Health(MHS), Nymex Holdings(NMX), Timberland(TBL), Williams Cos(WMB), Eastman Kodak(EK), Sprint Nextel(S), Electronic Arts(ERTS), Western Digital(WDC), CA Inc.(CA), CVS Caremark(CVS), Electronic Data(EDS), Exxon Mobil(XOM), International Game Technology(IGT), Las Vegas Sands(LVS), OfficeMax(OMX), Sina Corp.(SINA), Tesoro Corp.(TSO), VeriSign(VRSN), NYSE Euronext(NYX)

Fri. – Barnes Group(B), Martha Stewart(MSO), Viacom(VIA/B), Cigna Corp.(CI), Duke Energy(DUK), Applebees(APPB), aQuantive Inc.(AQNT), Chevron Corp.(CVX), Morningstar(MORN), Station Casinos(STN), Washington Post(WPO)

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

Mon. – Johnson Rice Consumer Conference, (ETH) Investor Conference

Tue. – Johnson Rice Consumer Conference, (AKAM) analyst meeting, (YUM) Investor Day

Wed. – (GR) Analyst Meeting

Thur. – Oppenheimer Restaurant Conference

Fri. – (FFIV) Analyst Meeting, (PKI) Analyst Meeting

BOTTOM LINE: I expect US stocks to finish the week modestly higher on better-than-expected earnings reports, bargain-hunting, less economic pessimism, a 25 basis point fed funds rate cut and short-covering. My trading indicators are giving mostly bullish signals and the Portfolio is 75% net long heading into the week.

Market Week in Review

S&P 500 1,535.28 +2.31%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 1,535.28 +2.31%
DJIA 13,806.70 +2.1%
NASDAQ 2,804.19 +2.9%
Russell 2000 821.39 +2.83%
Wilshire 5000 15,445.80 +2.25%
Russell 1000 Growth 630.68 +2.63%
Russell 1000 Value 845.14 +1.83%
Morgan Stanley Consumer 743.11 +2.0%
Morgan Stanley Cyclical 1,054.36 +1.51%
Morgan Stanley Technology 669.44 +.63%
Transports 4,866.97 +1.37%
Utilities 522.60 +4.80%
MSCI Emerging Markets 161.82 +4.95%

Sentiment/Internals
NYSE Cumulative A/D Line 70,298 +3.1%
Bloomberg New Highs-Lows Index +286 +226.5%
Bloomberg Crude Oil % Bulls 41.86 +203.5%
CFTC Oil Large Speculative Longs 243,931 -2.8%
Total Put/Call .81 -28.3%
NYSE Arms .57 -83.8%
Volatility(VIX) 19.56 -14.8%
ISE Sentiment 159.0 +57.4%
AAII % Bulls 31.25 -25.52%
AAII % Bears 48.21 +35.0%

Futures Spot Prices
Crude Oil 91.86 +5.7%
Reformulated Gasoline 227.40 +4.94%
Natural Gas 7.22 +2.24%
Heating Oil 243.25 +4.35%
Gold 787.50 +2.25%
Base Metals 248.90 -1.49%
Copper 353.75 -.48%

Economy
10-year US Treasury Yield 4.39% unch.
4-Wk MA of Jobless Claims 324,800 +2.5%
Average 30-year Mortgage Rate 6.33% -7 basis points
Weekly Mortgage Applications 656.50 +.03%
Weekly Retail Sales +2.3%
Nationwide Gas $2.82/gallon +.02/gallon
US Cooling Demand Next 7 Days 6% below normal
ECRI Weekly Leading Economic Index 139.70 -.29%
US Dollar Index 77.03 -.49%
CRB Index 345.87 +1.69%

Best Performing Style
Large-cap Growth +2.63%

Worst Performing Style
Mid-cap Value +1.78%

Leading Sectors
Software 8.0%
Homebuilders +6.3%
Steel +6.2%
Construction +5.3%
I-Banks +4.2%

Lagging Sectors
Drugs +1.03%
Telecom +.74%
Foods +.39%
Oil Tankers -3.1%
Semis -5.1%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Surging into Final Hour on Tech Sector Earnings, Positive Countrywide Financial Comments

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Retail longs, Computer longs and Biotech longs. I covered some of my (IWM)/(QQQQ) hedges and some of my (EEM) short today, thus leaving the Portfolio 75% net long. The overall tone of the market is positive today as the advance/decline line is higher, most sectors are rising and volume is heavy. The catalyst for a reversal in commodities will likely come from a bounce in the U.S. dollar, which could come after the next Fed rate cut. This sounds counterintuitive, but with each additional U.S. rate cut, the ECB will likely get more hawkish. This could lead traders to conclude that U.S. growth will be rebounding next year, just as Europe slows more, which would be dollar positive. As well, speculation for a continuation of the recent dollar decline is extraordinary, which means it won't take much to get at least a bounce in the hated currency. According to fed fund futures, the odds for a 25-basis-point cut at the meeting next week are 94%, up from 86% yesterday and 92% one week ago. The odds of a 50-basis-point cut are only 6%. The speculative credit and investment grade credit default swap indices have stabilized and are about even over the last week, which is a big positive. As well, the Bear Stearns High Yield Index, which had been declining again, is slightly higher over the last week. The bears had their chance this morning to create a reversal and failed. As a result, I wouldn't be surprised to see some more strength into the close. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, more earnings optimism and short-covering.

Today's Headlines

Bloomberg:
- Countrywide Financial(CFC), the biggest US mortgage lender, said profit will rebound form the first quarterly loss in 25 years as it cuts jobs and tightens lending standards. The shares soared 31%, the most in two decades.
- Mortgage insurers including Genworth Financial(GNW) and Radian Group(RDN) surged in NY trading after lender Countrywide Financial(CFC) said it’s returning to profitability after a third-quarter “trough.”
- Merrill Lynch(MER) surged the most in five years on speculation Chairman and CEO Stan O’Neal will be ousted and the world’s biggest brokerage with become a takeover target.
- Indian Finance Minister Palaniappan Chidambaram said moves to restrict foreign investment in stocks yesterday were aimed at slowing capital flows from overseas that have caused a spurt in shares and the currency.
- Oil rose above $92 a barrel for the first time in NY as investment funds increased bets on the commodity after the US accused Iran’s military of supporting terrorism and announced new sanctions on the country that holds the world’s second-biggest oil reserves.
- The House will approve a bill raising taxes for buyout firms and hedge-fund managers next month, Ways and Means Committee Chairman Democrat Charles Rangel said.
- Deckers Outdoor(DECK), the maker of Ugg and Teva shoes, rose the most in 4 ½ years in US trading after reporting third-quarter earnings that beat analysts’ estimates and increasing its full-year sales and profit forecasts.

Wall Street Journal:
- Card Data Ruling May Shift Security to Retailers.

NY Times:
- Cement Industry at Center of Climate Change Debate.
- Macy’s and Hilfiger Strike Exclusive Deal.

USAToday.com:
- ‘Gray Googlers’ Find Web Income in Retirement.

LA Times:
- Marines declare war on garbage in Iraq. With Ramadi now quiet, troops turn to waste collection as a way to win the hearts and minds of Iraqis.

AFP:
- Iraq said talks with Turkey over steps to combat Kurdish fighters in northern Iraq have produced “positive results,” citing Iraqi defense ministry spokesman Muhammed Askeri.

Confidence Below Estimates, Inflation Expections Muted

- The Final Univ. of Mich. Consumer Confidence for Oct. fell to 80.9 versus estimates of 82.0 and a prior estimate of 82.0.

BOTTOM LINE: Confidence among US consumers fell more than forecast in October, Bloomberg reported. The expectations component fell to 70.1 from 74.1 the prior month. The current conditions component, which gauges consumers perceptions of their present financial situation and whether it is a good time to buy large items, remained relatively high at 97.6. Over the next five years consumers said they expect inflation to rise a below-average 2.8%. I still expect consumer confidence to move back towards cycle highs over the intermediate-term as housing fears subside, interest rates remain low, inflation decelerates further, gas prices decline, unemployment remains historically low, wages continue to significantly outpace inflation and stocks rise further.