Monday Watch

Weekend Headlines
Bloomberg:
- Wal-Mart Stores said October same-store sales rose about 4.3%, beating its forecast.
- OPEC said there have been no buyers for the extra oil it began offering on Oct. 1, when it effectively suspended its quota system for the first time since the 1990 Gulf War after prices surged following Hurricane Katrina.
- Japan’s Prime Minister Koizumi, who plans to step down in September, will select his final cabinet today. The choices are expected to reflect his drive to cut public spending, sell state-owned assets and lower the nation’s debt, analysts say.
- Wall Street’s biggest bond-trading firms say Ben Bernanke will be as zealous in fighting inflation as Alan Greenspan when he takes over as chairman of the Federal Reserve on Feb. 1.
- The Bill & Melinda Gates Foundation has announced $258.3 million in grants to find ways to combat malaria, which kills 2,000 African children every day.
- Hiring rebounded this month and manufacturers turned out more goods as the US economy shook off the effects of two hurricanes, economists expect reports this week will show.
- Orix Corp., Japan’s largest non-bank finance company, will buy closely held investment bank Houlihan Lokey Howard & Zukin for $500 million to start offering advisory and restructuring services in the US.

Wall Street Journal:
- The US Treasury Dept. is prepared to incorporate recommendations from a tax panel into a policy-revision plan by the start of the next year should the president approve the group’s suggestions.
- Microsoft, battling perceptions that it’s lost the lead in technology innovation to Web-based companies, will disclose new plans this week to make its software better suited to the Internet.

NY Times:
- Wal-Mart Stores is preparing to announce an “ambitious plan” to improve business in Japan that will include upgrading about 200 stores.
- Two genes have been identified that contribute to dyslexia, citing a meeting of the American Society of Human Genetics yesterday.
- “Concierge” doctors, who are paid a large annual fee to provide more attention, time and care to patients, delight their clients.
- Google is becoming one of the leading players in the world of advertising, citing Goldman Sachs.
- Shares of publicly traded water companies have surged as large amounts of water controlled by municipalitites will soon come under the purview of private companies.
- Venezuela’s President Chavez is establishing socialism by founding state companies, seizing private factories and establishing cooperatives and worker-run businesses.
- Venezuela’s opposition said the government’s policy of seizing large farming estates is benefiting government officials. Land from the seizures is being given or sold to backers of President Chavez and his Fifth Republic Movement, and not landless peasants. The seizures are especially benefiting the country’s military.

Star-Ledger of Newark:
- New Jersey slipped to 44th in a national ranking of state business climates, hurt by taxes and over-regulation.

Washington Post:
- US Defense Secretary Donald Rumsfeld is asking Congress for $750 million and expanded authority to support counterrorism, border security and law enforcement in other countries.

AP:
- Viacom’s Paramount Pictures is removing some billboards that promote the 50 cent film “Get Rich or Die Tryin” after complaints they promoted gun violence.
- President Bush will reveal on Nov. 1 how his administration plans to fight any global influenza outbreak at the National Institute of Health.

Computer World:
- Consumers are expected to spend approximately 25% more online this holiday season than they did last year, several analysts said.

Financial Times:
- Kroger Co. will continue with its strategy of cutting prices to increase sales.
- Intel wants electronic medical equipment-makers to fit standard plug and cable sizes so equipment is interchangeable in the way computers are, citing CEO Otellini.

Sunday Telegraph:
- Wal-Mart Stores may expand in India.

Sunday Times:
- Walt Disney may start a mobile-phone company in the UK next year.

Weekend Recommendations
Barron's:
- Had positive comments on BUD, STA, SSW, DFG and EDS.

Goldman Sachs:
- Reiterated Outperform on GE and CEM.
- Reiterated Underperform on FSS.
- Reiterated bearish view of slot manufacturers, reiterated Underperform on IGT.

Night Trading
Asian indices are +.75% to +1.75% on average.
S&P 500 indicated +.08%.
NASDAQ 100 indicated +.19%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/Estimate
AES/.15
HUM/.51
INTU/-.30
K/.64
OXY/2.63
VLO/4.22

Upcoming Splits
None of note

Economic Releases
8:30 am EST
- Personal Income for September is estimated to rise .3% versus a .1% fall in December.
- Personal Spending for September is estimated to rise .5% versus a .5% decline in August.
- The PCE Core for September is estimated to rise .1% versus a .2% increase in August.

BOTTOM LINE: Asian Indices are higher, led by exporting companies in the region after a government report last week showed strong US growth. I expect US stocks to open higher and maintain gains throughout the day. The Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,198.41 +1.60%



Click here for the Weekly Wrap by Briefing.com.

Weekly Scoreboard*

Indices
S&P 500 1,198.41 +1.60%
DJIA 10,402.77 +1.84%
NASDAQ 2,089.88 +.37%
Russell 2000 635.33 +.41%
DJ Wilshire 5000 11,933.82 +1.36%
S&P Equity Long/Short Index 1,053.34 +.57%
S&P Barra Growth 573.48 +.89%
S&P Barra Value 620.78 +2.28%
Morgan Stanley Consumer 584.68 +1.23%
Morgan Stanley Cyclical 709.46 +3.30%
Morgan Stanley Technology 491.91 -1.15%
Transports 3,741.81 +3.26%
Utilities 396.01 +2.42%
S&P 500 Cum A/D Line 6,278.00 -1.94%
Bloomberg Crude Oil % Bulls 25.0 +233.33%
Put/Call .82 -18.0%
NYSE Arms .51 -60.77%
Volatility(VIX) 14.25 -11.65%
ISE Sentiment 125.00 -10.71%
AAII % Bulls 32.05 -25.66%
US Dollar 89.59 -.74%
CRB 322.13 -.12%

Futures Spot Prices
Crude Oil 61.22 +1.11%
Unleaded Gasoline 162.42 -.96%
Natural Gas 13.05 -.95%
Heating Oil 184.35 -1.28%
Gold 475.00 +1.71%
Base Metals 133.00 +1.33%
Copper 181.95 +1.99%
10-year US Treasury Yield 4.56% +3.87%
Average 30-year Mortgage Rate 6.15% +.82%

Leading Sectors
Oil Service +6.67%
Energy +5.01%
Steel +4.88%

Lagging Sectors
HMOs -3.35%
Hospitals -3.79%
Semis -3.84%

One-Week High-Volume Gainers
One-Week High-Volume Losers

*5-Day % Change

Stocks Sharply Higher Mid-day on Positive Economic Data

Indices
S&P 500 1,193.26 +1.22%
DJIA 10,364.67 +1.32%
NASDAQ 2,082.17 +.89%
Russell 2000 632.79 +1.46%
DJ Wilshire 5000 11,894.94 +1.30%
S&P Barra Growth 571.76 +1.19%
S&P Barra Value 618.51 +1.41%
Morgan Stanley Consumer 582.93 +1.02%
Morgan Stanley Cyclical 707.40 +1.31%
Morgan Stanley Technology 490.03 +.40%
Transports 3,728.03 +1.46%
Utilities 393.91 +1.78%
Put/Call .82 -26.13%
NYSE Arms .57 -63.17%
Volatility(VIX) 14.51 -9.43%
ISE Sentiment 126.00 -18.18%
US Dollar 89.62 +.58%
CRB 321.85 -.48%

Futures Spot Prices
Crude Oil 61.10 +.10%
Unleaded Gasoline 161.50 +1.41%
Natural Gas 12.99 -5.07%
Heating Oil 184.25 -.61%
Gold 474.80 -.17%
Base Metals 133.00 -.34%
Copper 182.00 +.89%
10-year US Treasury Yield 4.58% +.85%

Leading Sectors %
Airlines +3.32%
Steel +2.72%
REITs +2.40%

Lagging Sectors
Wireless unch.
Coal -.60%
Semis -1.35%

BOTTOM LINE: The Portfolio is slightly higher mid-day on gains in my Internet longs, Retail longs and Airline longs. I covered some of my IWM and QQQQ shorts, thus leaving the Portfolio 75% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are higher and volume is slightly above average. Measures of investor anxiety are mostly lower. Today’s overall market action is positive considering the rise in long-term rates and political news. It appears the lows of two weeks ago will hold and equities should see much better performance through year-end. I expect US stocks to trade modestly higher from current levels into the close on short covering.

Today's Headlines

Bloomberg:
- Iran’s President Mahmoud Ahmadinejad stood by his comment that Israel “must be wiped off the map,” ignoring condemnation from the European Union, US and Russia.
- I. Lewis Libby was indicted by a grand jury investigating who leaked the name of an alleged covert CIA agent. Libby resigned shortly afterward. Karl Rove, who made four appearances before the grand jury, wasn’t charged.
- Natural gas prices continue to fall after a report yesterday showed US stockpiles were ample to meet winter demand.

Wall Street Journal:
- Verizon Communications faces demands from local authorities to fund a variety of projects in exchange for allowing the company to roll out its high-speed network.
- Oil prices at more than $60 a barrel are spurring increased interest in biofuels, including plants that use turkey feathers, bones, fat and even entire birds to produce diesel fuel.
- Esprit, a brand that largely disappeared from the US, is attempting a US comeback with high-fashion goods.
- Abigail Johnson, Fidelity Investments’ biggest shareholder, has reduced her stake in the US mutual-fund company, raising questions about whether she will succeed her father at the head of the firm.
- Delta Air Lines may end its Song discount carrier unit introduced in 2003, and apply some of the experience gained to Delta flights.

NY Times:
- The American Association of Retired Persons is seeking to attract more members by selling and endorsing products.
- The US oil and gas industry, awash with money, is facing a labor and equipment shortage.
- Fifth Third Bank of Cincinnati may be the subject of takeover interest as disappointing deposit growth reversed its fortunes and sent its stock down.

Washington Post:
- Rosa Parks, the African-American whose arrest helped spark the US civil-rights movement, may be honored by Congress with a vigil in the Capitol Rotunda to market her death on Oct. 24.
- The FBI may not monitor the locations of cellular phone users without showing evidence that a crime took place or is in progress.
- A federal program that has doled out more than $10 billion to help schools and libraries access the Internet has wasted millions of dollars.

Le Figaro:
- A French Islamist terrorist group has obtained shoulder-held anti-aircraft missiles from Chechnya with the intention of bringing down an airliner at a French airport, citing judicial documents.

US Growth Streak Best Since 1986, Inflation Contained, Confidence Remains Weaker

- Advance 3Q GDP rose 3.8% versus estimates of a 3.6% increase and a 3.3% gain in 2Q.
- Advance 3Q GDP Price Index rose 3.1% versus estimates of a 2.8% increase and a 2.6% increase in 2Q.
- Advance 3Q Personal Consumption rose 3.9% versus estimates of a 3.3% increase and a 3.4% gain in 2Q.
- 3Q Employment Cost Index rose .8% versus estimates of a .8% gain and a .7% increase in 2Q.
- Final Univ. of Mich. Consumer Confidence for October fell to 74.2 versus estimates of 76.0 and a prior estimate of 75.4.

BOTTOM LINE: US economic growth quickened to a 3.8% annual rate in the third quarter, faster than economists predicted and evidence the economy was able to withstand higher energy costs, Bloomberg reported. Companies pared inventories for the second quarter in a row which will likely boost growth in 4Q as companies rebuild inventories. US growth has exceeded 3% for 10 straight quarters, the best streak since the 13 quarters that ended in March 1986 and the best performance among the G-7, which includes Japan, Germany, the UK, France Italy and Canada. Consumer spending rose 3.9% last quarter, the most this year and higher than the 20-year average of 3.4%. The core personal consumption expenditures index, Greenspan’s favorite inflation gauge, rose at a 1.3% annual rate, the slowest since the second quarter of 2003. The trade deficit narrowed to $611.8 billion from $614.2 billion in 2Q, adding .08 percentage point to 3Q GDP after adding 1.1 percentage points in 2Q. This is the first time trade has added to growth in back-to-back quarters since the last half of 1995. I continue to believe growth slowed to below average levels after the hurricanes struck in September and that a bounce back to average growth will occur into year-end.

US consumer confidence fell below estimates this month as energy costs remained elevated, Bloomberg reported. The average price of gas is 38% higher than this time last year. The current conditions component of the index fell to 91.2 from 98.1 in September. Since reaching a record in September, the average price of gas has fallen five of the past eight weeks and was $2.60/gallon in the week ended Oct. 24. I continue to anticipate a sharp rebound in consumer sentiment over the next few months.