Stocks Finish Higher as Dow Jones Breaks 11,000 on Declining Energy Prices

Indices
S&P 500 1,290.15 +.37%
DJIA 11,011.90 +.48%
NASDAQ 2,318.69 +.57%
Russell 2000 706.24 +.98%
DJ Wilshire 5000 n/a
S&P Barra Growth 617.53 +.36%
S&P Barra Value 668.13 +.37%
Morgan Stanley Consumer 604.86 +.79%
Morgan Stanley Cyclical 814.43 +.78%
Morgan Stanley Technology 553.11 -.03%
Transports 4,238.34 +.57%
Utilities 413.21 -.47%
Put/Call .68 +4.62%
NYSE Arms 1.07 +25.25%
Volatility(VIX) 11.13 +1.18%
ISE Sentiment 190.00 +23.38%
US Dollar 89.24 +.36%
CRB 337.33 -.63%

Futures Spot Prices
Crude Oil 63.42 -.13%
Unleaded Gasoline 176.15 -.35%
Natural Gas 9.51 +1.62%
Heating Oil 176.00 -.44%
Gold 550.50 unch.
Base Metals 157.61 +1.26%
Copper 210.10 +.19%
10-year US Treasury Yield 4.37% -.14%

Leading Sectors
Homebuilders +3.48%
Disk Drives +2.85%
Biotech +1.79%

Lagging Sectors
Oil Tankers -.68%
Coal -.69%
HMOs -1.20%

Evening Review
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In Play

Afternoon Recommendations
Goldman Sachs:
- None of note

Afternoon/Evening Headlines
Bloomberg:
- The Dow Jones Industrial Average climbed above 11,000 for the first time in more than four years, as a slide in oil prices helped extend a 2006 rally in stocks.
- Intel Corp.(INTC) urged the US Supreme Court to consider Research In Motion’s(RIMM) appeal of a patent-infringement finding against its BlackBerry e-mail devices, saying the case “cries out for clarification.”
- Federal Reserve policy makers are scaling back guidance on future interest-rate decisions because they don’t know the “full economic effect” of the 13 increases since June 2004, Atlanta Fed President Jack Guynn said.

Financial Times:
- News Corp.(NWS) forecasts a surge in the revenue of the media company’s Internet businesses, citing Chairman Rupert Murdoch.
- A record 20 million music tracks were downloaded in the US from the Internet in the week ended Dec. 31 after a rise in the number of MP3 players sold in 2005, citing Neilson SoundScan.

BOTTOM LINE: The Portfolio finished higher today on gains in my Semi longs, Medical longs and Biotech longs. I did not trade today, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished higher, most sectors rose and volume was above average. Measures of investor anxiety were mostly higher into the close. Overall, today’s action was bullish considering the DJIA finally closed above 11,000 and consumer credit came in below expectations. These are the types of days that you want to see if you are bullish. Slow, grinding higher action, with the bears repeatedly sucked in. It still looks like stocks can head higher short-term before any real consolidation occurs.

Today's Headlines

Bloomberg:
- General Motors(GM) is “moving pretty fast” with its plan to sell a controlling stake in its finance unit.
- Vice President Cheney was taken to the George Washington Hospital early today experiencing shortness of breath.
- Israeli Prime Minister Sharon began breathing without a ventilator as doctors brought him out of a coma that was medically induced after he suffered a massive brain hemorrhage on Jan.4.
- General Motors(GM) will cut 2006 losses “significantly,” said CEO Rick Wagoner.
- Texas Instruments(TXN) agreed to sell its sensors and controls business to Bain Capital LLC for $3 billion as the company focuses on the faster-growing handset market.
- Crude oil is falling from a three-month high on speculation that heating-fuel consumption will plunge as higher-than-normal temperatures linger over the US.

Wall Street Journal:
- Bank of America(BAC) and PNC Financial Services(PNC) have received approval from US regulators to develop large hotel and office properties, a ruling that could let banks become more active investors in commercial real estate.
- Toyota Motor(TM) may build an engine plant in Michigan, possibly to help ward off criticism over its growing profit in the US.
- Playing songs backward in the US has begun to attract a cult following as new electronic software and Internet sites allow music lovers to hear supposed hidden messages in the lyrics.
- The discovery of statins used to lower cholesterol has sparked a return to research for drugs derived from plants and other natural organisms.
- Brazil’s offshore oil discoveries, coupled with rising production of ethanol, may make the South American nation energy-independent this year.
- Technology companies may be poised for a comeback in the number of IPOs in the US this year, as young companies gain experience.
- Clear Channel Communications(CCU) will allow people to get free music videos from its radio-station Web site, starting today, if they watch a 15-second ad.
- Starwood Hotels(HOT) and Yahoo Inc.(YHOO) said they will begin testing Yahoo Internet lounges in two Sheraton hotels today.
- Tyco’s(TYC) board meets this week to approve a plan that could break up the company, undoing the $60 billion business built up by former CEO Kozlowski.

Chronicle of Higher Education:
- State spending for higher education in the US rose 5.3% to $66.6 billion in the 2005-06 school year, the fastest rate in five years.

NY Times:
- Duke Energy(DUK) is near an agreement to sell its North American power-generation business to LS Power Group, an investment firm, for $1.5 billion.
- About 12.5% of New Yorkers have diabetes, a proportion that exceeds that in the US as a whole by almost a third.

Advertising Age:
- The NFL, citing risqué marketing, won’t renew its $18 million sponsorship agreement with the marketers of Levitra and is distancing itself from other drugs that treat male impotence.

Economic Releases

- None of note

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
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IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
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Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Monday Watch

Weekend Headlines
Bloomberg:
- Wal-Mart Stores(WMT) said January same-store sales are rising within its forecast.
- President Bush urged the US Congress to slow the growth of spending on entitlement programs and suggested that Democrats who oppose extending tax cuts risk undermining the economy.
- Toyota Motor, Nissan Motor and Honda Motor are posed to sell at least 19 new and redesigned vehicle models in the US this year, their biggest-ever roll-out.
- US two-year Treasury yields will fall at a faster pace than those on 10-year notes as the Federal Reserve moves closer to ending its 18-month policy of raising interest rates, say some of the world’s biggest bond investors.
- Democratic Senators Edward Kennedy and Charles Schumer said they haven’t ruled out staging a filibuster to block confirmation of Judge Samuel A. Alito to the US Supreme Court.
- Boston Scientific(BSX), which waited to bid for Guidant(GDT) until Johnson & Johnson(JNJ) forced the price down, moved to seal its $25 billion purchase of the troubled cardiac device maker.
- The US doubled its supplies of food aid to survivors of the Oct. 8 earthquake that struck Pakistan’s northern Kashmir region as snow storms interrupted deliveries by air and road to mountain villages.
- Coal is likely to decline this year from a record because of increased exports from Indonesia, South Africa and Australia.

Barron’s:
- Vonage Holdings, Force10 Networks and Synarc are among technology and health-care companies backed by venture-capital firms that may sell shares to the pubic this year.

Wall Street Journal:
- Viacom’s(VIA) Paramount Pictures business is in exclusive talks to sell the DreamWorks(DWA) movie library to George Soros’ private equity fund.

NY Times:
- General Motors(GM) expects its billion-dollar losses at its North American business to begin to “moderate” this quarter as cost cuts take effect.
- The UN World Food Program ended all feeding programs in North Korea after the government told it to stop efforts that had helped a third of the 22 million people there.
- The Environmental Protection Agency will announce changes in how it calculates fuel-economy ratings for cars and trucks, the first revisions in 20 years.
- Companies in the S&P 500 spent $315 billion to buy back shares last year, a 60% increase from 2004.
- Eastman Kodak(EK) CEO Perez said the camera company is increasing its revenue and profit from digital photography.
- The US and several European allies sought to encourage China and Russia to join their efforts to put political pressure on Iran to end its suspected pursuit of nuclear weapons.
- The city of New Orleans’ official redevelopment plan to recover from Hurricane Katrina envisions allowing all areas of the city to be rebuilt no matter how bad the damage.

Crain’s Chicago Business:
- Google Inc.(GOOG) is paying to run ads for its advertisers in the Chicago Sun-Times.

Washington Post:
- An increasing number of Christian evangelicals are embracing “philo-Semitism,” the opposite of anti-Semitism, fueled by common beliefs shared by Jews and Christians.

LA Times:
- Shanghai’s hot housing market has fizzled after a run-up fed by speculators, threatening a significant part of China’s economy.

Time magazine:
- CIA Director Porter Goss is cracking down on information leaks from within the US intelligence agency by banning current officers from writing books and ordering stricter reviews of books by retired agents.

Interfax:
- Ukraine said its natural gas supply agreement with Russia is a good one even as it pays double for the fuel, citing Ukrainian President Viktor Yushchenko.

Weekend Recommendations
Barron's:
- Had positive comments on (BLK).
- Had negative comments on (RL).

Goldman Sachs:
- Reiterated Outperform on (BSX) and (MSFT).
- Reiterated Underperform on (JBLU) and (TFX).

Night Trading
Asian indices are +.25% to +1.0% on average.
S&P 500 indicated -.04%.
NASDAQ 100 indicated unch.

Morning Preview
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Earnings of Note
Company/Estimate
(AA).37
(SCHN).85
(TDS).29

Upcoming Splits
(PTC) 3-for-2
(CERN) 2-for-1
(E) 5-for-2
(PSYS) 2-for-1

Economic Releases
3:00 pm EST
- Consumer Credit for November is estimated to rise to $5.0 billion versus -$7.2 billion in October.

BOTTOM LINE: Asian Indices are higher, boosted by commodity producing companies in the region. I expect US stocks to open mixed and to rise into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the week.

Weekly Outlook

Click here for The Week Ahead by Reuters

There are some important economic reports and a few significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. - Consumer Credit
Tues. - Wholesale Inventories
Wed. - None of note
Thur. - Trade Balance, Import Price Index, Initial Jobless Claims, Monthly Budget Statement
Fri. - Producer Price Index, Advance Retail Sales, Business Inventories

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

Mon. - Alcoa Inc.(AA)
Tues. - Genentech (DNA), Supervalu(SVU)
Wed. - None of note
Thur. - Freddie Mac(FRE), MGIC Investment(MTG), Navistar International(NAV)
Fri. - None of note

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

Mon. - Fed’s Guynn speaking, JP Morgan Healthcare Conference, Citigroup Global Entertainment/Media/Telecom Conference
Tue. - JP Morgan Healthcare Conference, Needham Growth Conference, SG Cowen Consumer Conference, Citigroup Global Entertainment/Media/Telecom Conference
Wed. - Needham Growth Conference, Citigroup Global Entertainment/Media/Telecom Conference, SG Cowen Consumer Conference, JP Morgan Healthcare Conference
Thur. - Needham Growth Conference, Deutsche Bank Real Estate Conference, JP Morgan Healthcare Conference
Fri. - Needham Growth Conference

BOTTOM LINE: I expect US stocks to finish the week modestly higher as technical buying, bargain-hunting, short-covering and seasonal strength more than offsets higher inflation readings and profit-taking. I added to my (BBY)/(ANF)/(RACK) longs and existing shorts on Friday. My trading indicators are back to giving bullish signals and the Portfolio is 100% net long heading into the week.

Chart of Interest

Market Week in Review

S&P 500 1,285.45 +2.47%*



Click here for the Weekly Wrap by Briefing.com.

BOTTOM LINE: Overall, last week's market performance was very positive. The advance/decline line rose, almost every sector gained and volume was above average on the week. Measures of investor anxiety were mostly lower. However, the AAII % Bulls fell again to 29.35%. This contrary indicator has declined 29.25 percentage points in eight weeks and is now approaching depressed levels, which is a huge positive considering most major averages are at 4 ½ year highs. The average 30-year mortgage rate fell to 6.21% which is only 100 basis points above all-time lows set in June 2003. Moreover, the benchmark 10-year T-note yield fell 2 basis points on the week after the Fed made less hawkish comments, economic data was mixed and measures of inflation decelerated.

Technology stocks outperformed on optimism over increased corporate spending, new consumer products and lower interest rates. Likewise, energy shares gained as oil rose on fund inflows and fears over Middle-east stability after the hospitalization of Ariel Sharon. Unleaded Gas futures bounced on the same catalysts, but are still almost 40% below September highs even as refinery utilization remains below normal as a result of the hurricanes. Natural gas supplies this week increased by the most during any week of January since record-keeping began in 1994 and are now 6.8% above the 5-year average for this time of year even as over 19% of daily Gulf of Mexico production remains shut-in. Natural gas prices have plunged almost 40% in 3 weeks. Gold rose on the week as the dollar declined and international diversification continued.

I still believe prices for many commodities are being driven by fear and record capital inflows into commodity funds, rather than fundamentals. I continue to expect global energy demand destruction, decelerating economic growth and a significant increase in supplies into 2006 to push energy prices substantially lower from current levels. US stocks have gotten off to one of the best starts to a new year in recent memory. I am expecting the S&P 500 to return around 15% for the year as long-term interest rates remain low, inflation decelerates, economic growth slows to averages rates, energy prices fall, the dollar remains stable, the job market remains healthy, housing slows to more sustainable levels, consumer/investor/corporate confidence improves, demand for US assets increases further and p/e multiples expand.

*5-day % Change

Weekly Scoreboard*

Indices
S&P 500 1,285.45 +2.47%
DJIA 10,959.31 +1.62%
NASDAQ 2,305.62 +3.94%
Russell 2000 699.39 +3.16%
DJ Wilshire 5000 n/a
S&P Equity Long/Short Index 1,130.46 +2.08%
S&P Barra Growth 615.33 +2.61%
S&P Barra Value 665.64 +2.34%
Morgan Stanley Consumer 600.10 +.66%
Morgan Stanley Cyclical 808.15 +2.29%
Morgan Stanley Technology 553.27 +5.31%
Transports 4,214.28 -.64%
Utilities 415.15 +2.09%
S&P 500 Cum A/D Line 8,368 +1.0%
Bloomberg Crude Oil % Bulls 53.0 +96.07%
Put/Call .65 -27.78%
NYSE Arms .86 -27.73%
Volatility(VIX) 11.0 -5.25%
ISE Sentiment 154.00 -5.52%
AAII % Bulls 29.35 -21.31%
AAII % Bears 40.22 +10.16%
US Dollar 88.92 -2.37%
CRB 339.47 +3.08%
ECRI Weekly Leading Index 135.60 +.52%

Futures Spot Prices
Crude Oil 64.21 +6.48%
Unleaded Gasoline 181.55 +8.52%
Natural Gas 9.63 -13.85%
Heating Oil 180.06 +3.78%
Gold 540.80 +4.06%
Base Metals 155.65 +2.13%
Copper 208.25 +2.38%
10-year US Treasury Yield 4.37 -.45%
Average 30-year Mortgage Rate 6.21% -.16%

Leading Sectors
Oil Service +9.43%
Gold & Silver +7.95%
Semis +7.79%
Internet +6.32%
Wireless +5.65%

Lagging Sectors
Oil Tankers +.70%
Papers +.37%
Foods +.28%
Retail -.20%
Broadcasting -.51%

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

*5-Day % Change

Today's Headlines

Bloomberg:
- Israeli Prime Minister Sharon was in “critical but stable” condition after a brain scan today following surgery showed “significant” improvement, the hospital said.
- A federal appeals court upheld the obstruction-of-justice conviction of Martha Stewart, the homemaking entrepreneur who went to jail for lying to federal authorities probing her stock sale.
- Yahoo! Inc.(YHOO) CEO Semel today will outline a plan to create software that lets consumers access the company’s services from televisions and cell phones to lure users to spend more time on its Web sites.
- Intel(INTC) wants to surf a “wave of creativity” into consumer electronics.
- The unemployment rate in the dozen nations sharing the euro remained at 8.3% in November, 66% higher than that of the United States.
- Best Buy(BBY), the No. 1 US consumer electronics company, said December same-store sales rose 5.8%, while Circuit City(CC) said sales rose 11%.
- EMC Corp.(EMC), the world’s biggest maker of data-storage computers and programs, said fourth-quarter sales rose more than it had predicted.
- Pfizer Inc.(PFE) said it is adding radio-frequency identification tags to all US shipments of its impotence drug Viagra as an anti-counterfeiting measure.
- Crude oil is climbing more than a dollar in NY, heading for a second straight weekly gain, on fears of destabilization of the Middle East.

Wall Street Journal:
- Citigroup(C), HJ Heinz(HNZ) and Pfizer(PFE) are among US stocks that currently have a higher after-tax dividend yield than 10-year US Treasury bonds, a trend that makes such stocks appealing to bond investors.
- Gap Inc.(GPS) is redesigning its stores to make them friendlier and more approachable, including brown leather couches and reading material in a style that evokes Starbucks(SBUX) coffee outlets.
- BellSouth Corp.(BLS), AT&T Inc.(T) and other telephone companies want to charge fees to guarantee fast Internet access for music, movies and other electronically delivered services.
- The US office market vacancy rate improved for the seventh straight quarter in the last period of 2005, as office markets in NY and parts of California benefited from job growth.
- Actively managed US stock mutual funds beat market indexes in five out of nine categories defined by Morningstar in 2005.

NY Post:
- Burlington Coat Factory(BCF) may be sold by month’s end to a private equity firm after posting better-than-expected sales results.

NY Times:
- US charities stand to benefit from the largesse of former lobbyist Jack Abramoff, who has pleaded guilty to conspiracy and wire fraud, as both Democrats and Republicans donate tens of thousands of dollars they received in political contributions from him.

Washington Post:
- The US and its European allies have enough votes to bring Iran before the UN Security Council for possible censure over its nuclear program, citing US Secretary of State Condoleezza Rice.

AP:
- Boston Scientific(BSX) may reach an agreement as soon as next week to acquire cardiac device maker Guidant, citing Boston Scientific spokesman Paul Donovan.
- NYC recorded its lowest death rate ever in 2004 due in part to a 14% drop in fatal heart attacks, citing the health dept.
- A campaign fund-raising group for US Senator Hillary Clinton has agreed to a $35,000 fine for underreporting hundreds of thousands of dollars spent on a Hollywood fund-raiser in 2000.

Reuters:
- EchoStar Communications’(DISH) CEO Ergen said on Thursday he does not expect to reach a settlement with TiVo(TIVO) before their legal battle over patent rights reaches the courts.

Detroit News:
- GM(GM) plans to cut the retail price of its vehicles to attract buyers and rely less on rebates and other promotions.

Rzeczpospolita:
- The Polish government will keep troops in Iraq into 2007.

Euro am Sonntag:
- Samsung Electronics, whose shares are traded in Seoul, London and Luxembourg, plans to have the stock listed in the US if conditions are “favorable.”

AFP:
- Al-Qaeda’s deputy leader Ayman al-Zawahiri called on President Bush to admit defeat in Iraq, and said withdrawal of American troops from the Middle Eastern nation would be a victory for Islam.

Unemployment Rate Falls Below 5%

- The Change in Non-farm Payrolls for December was 108K versus estimates of 200K and an upwardly revised 305K in November.
- The Change in Manufacturing Payrolls for December was 18K versus estimates of 0K and 8K in November.
- The Unemployment Rate for December fell to 4.9% versus estimates of 5.0% and a rate of 5.0% in November.
- Average Hourly Earnings for December rose .3% versus estimates of a .2% gain and a .1% rise in November.

BOTTOM LINE: The US economy added 108,000 jobs in December, capping the second straight year American employers added more than 2 million workers, Bloomberg said. Overall, this report is positive for stocks as 108,000 new jobs is enough to keep unemployment low without generating substantial unit labor cost increases, which account for two-thirds of inflation. I expect this trend to continue over the intermediate-term.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Friday Watch

Late-Night Headlines
Bloomberg:
- Israeli Prime Minister Ariel Sharon is in an induced coma after brain surgery while his new party prepares for a successor who can win the national election in March and advance Sharon’s efforts to resolve the Middle East conflict.

Edaily:
- Samsung Electronics plans to begin mass production at a new liquid-crystal display factory geared for 52-inch televisions next year.

China Daily:
- Casino revenue in Asia will increase 20% this year to $13 billion, driven by growth of Macau’s gaming industry, citing Las Vegas-based consultant Globalysis.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (ENTG), (IBM) and (SBUX).
- Reiterated Outperform on (GOOG), raised 05, 06 and 07 estimates with aggressive valuation target boosted to $556.
- Reiterated Outperform on (YHOO), raised 06 and 07 estimates with new implied value of $50.
- Reiterated Underperform on (DRI).

Business Week:
- Shares of Genesee & Wyoming(GWR) may surge almost 60% in 18 months because of increased earnings from acquisitions.
- The shares of Anadarko Petroleum(APC) may rise because the company may be a takeover target, citing Oppenheimer’s Fadel Gheit.
- The shares of Cogent(COGT) may rise on increased sales.

Night Trading
Asian Indices are -.25% to +.50% on average.
S&P 500 indicated -.02%.
NASDAQ 100 indicated -.06%.

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
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Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
(DLP).13
(GAP)-.49
(SGR).36

Upcoming Splits
(PTC) 3-for-2

Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for December is estimated at 200K versus 215K in November.
- The Change in Manufacturing Payrolls for December is estimated at 0K versus 11K in November.
- The Unemployment Rate for December is estimated at 5.0% versus a 5.0% rate in November.
- Average Hourly Earnings for December are estimated to rise .2% versus a .2% gain in November.

BOTTOM LINE: Asian indices are mixed as losses in commodity producing companies in the region are being offset by gains in technology shares. I expect US equities to open mixed and to rally into the afternoon. The Portfolio is 100% net long heading into the day.

***Alert***

I am unable to post the Thursday Close due to a scheduling conflict. I will post the Friday Watch later this evening.

Stocks Mixed in Final Hour as Natural Gas Continues to Plunge

BOTTOM LINE: The Portfolio is higher into the final hour of trading on gains in my Internet longs, Semi longs, Software longs, Biotech longs energy-related shorts. I added NBR short and added to a couple of existing longs today, thus leaving the Portfolio 100% net long. The tone of the market is slightly positive as the advance/decline line is modestly higher, sector performance is mixed and volume is above average. Measures of investor anxiety are mostly higher. The AAII % Bulls fell to 29.35% this week from 37.30% the prior week. This reading is approaching depressed levels and has declined 29.25 percentage points in eight weeks. The AAII % Bears rose to 40.22% from 36.51% the prior week. This reading is now approaching elevated levels and has increased 24.21 percentage points in six weeks. I expect bullish sentiment to rise next week. As I said a few weeks ago, the fact that bullishness has declined to this extent with the market near a four-year high bodes very well for another meaningful push higher during this quarter. I expect US stocks to trade mixed from current levels into the close as weakness in the energy sector and apprehension ahead of the jobs report offsets lower energy prices and short-covering.

Today's Headlines

Bloomberg:
- Fannie Mae(FNM) investigators haven’t found anything new about the mortgage finance company’ $10.8 billion in accounting errors that goes significantly beyond those already revealed, said Warren Rudman, who is heading the internal probe.
- US retailers posted December sales gains as department stores and luxury merchants beat analysts’ sales forecasts.
- Natural gas is plunging after a report showed inventories last week rose, the first time a January report showed an increase since the government began tracking fluctuations in storage in 1994.
- Israeli Prime Minister Sharon will be under deep sedation for at least 24 hours after all-night brain surgery for a second stroke that three Israeli politics into disarray.
- The US economy will add about 2.1 million new jobs this year and the unemployment rate will remain at 5.0%, a White House economist said.
- Boeing’s(BA) commercial-aircraft orders more than tripled to a record 1,002 last year on demand from Asian and Middle Eastern carriers, likely overtaking Airbus SAS for the first time in five years.

Wall Street Journal:
- BASF AG, the world’s largest chemical maker, might see its $4.9 billion bid for Englehard Corp.(EC) thwarted if the US company used a “poison-pill” defense, the BASF CEO said.
- Google(GOOG) plans to begin a service that will allow consumers to buy videos including television programs from content partners such as CBS Corp.
- Blackstone Group LP and Hewlett-Packard are considering making an offer for Computer Sciences(CSC).
- Palm’s(PALM) new version of its Treo mobile phone with Microsoft(MSFT) software isn’t as capable as its Treo 650 phone that uses Palm’s operating system, Walter Mossberg wrote.
- Wyeth(WYE) CEO Essner said the company plans to seek regulatory approval for as many as five drugs this year.
- Sony Corp.(SNE) and Sling Media plan today to announce technology that will let customers use wireless phones to watch cable or satellite television shows being delivered to their homes or stored on digital-video recorders.
- Nokia Oyj(NOK) plans to increase production of its 770 wireless Internet device to meet an unexpected surge in demand.
- Television makers including Sony(SNE) and Samsung Electronics are using light-emitting diodes in more expensive sets to provide brighter, more colorful pictures.
- AT&T Inc.(T) is offering television channels over the Internet in San Antonio, a first step in its plan to challenge cable TV this year.
- General Motors’(GM) China sales rose 35% to a record last year as discounts and a wider model range attracted buyers, putting the company on course to surpass Volkswagen AG in the market.

NY Times:
- Lawmakers in 30 US states plan to introduce legislation to make corporations such as Wal-Mart Stores(WMT) spend more on employee health insurance.

Washington Post:
- Washington D.C. Council gave final clearance yesterday to a ban on smoking in bars, restaurants and other public places.

Jornal de Negocios:
- Brisa-Auto Estradas de Portugal SA is considering investing in highways in the US, where more states plan concessions for private companies to build and operate toll roads.

Yonhap News:
- Samsung Electronics is targeting sales of digital TVs to climb to a record $10 billion in 2007, citing the head of the company’s consumer electronics division.

Optima:
- Copper prices will average just over $1 a pound over the next decade as supply from mines and scrap rises and Indian demand fails to match that of China, Richard Wilson, managing director of Brook Hunt said.

Jobless Claims Plunge, Service Sector Strong, Pending Home Sales Fall, Natural Gas Supplies Rise

- Initial Jobless Claims fell to 291K versus estimates of 320K and 326K the prior week.
- Continuing Claims rose to 2718K versus estimates of 2675K and 2705K prior.
- ISM Non-Manufacturing for December rose to 59.8 versus estimates of 59.0 and a reading of 58.5 in November.
- Pending Home Sales for November fell 2.5% versus estimates of a 1.0% fall and a 3.3% decline in October.
- The EIA reported a crude drawdown of 1,013,000 barrels vs. estimates of a 1,250,000 barrel drawdown. Gasoline supplies rose 1,406,000 barrels vs. estimates of a 400,000 barrel rise. Distillate inventories rose 2,114,000 barrels vs. estimates of a 300,000 barrel increase. Refinery utilization increased 1.03% vs. estimates of a 0.4% increase. Natural gas storage increased 1 bcf versus estimates of a 51 bcf decline.

BOTTOM LINE: The number of Americans filing first-time claims for jobless benefits fell last week to the lowest level since September 2000, suggesting employers are adding more than enough positions to keep unemployment near a four-year low, Bloomberg reported. The four-week moving average fell to 316,750 from 326,000 the prior week. The jobless rate among those eligible for benefits, which tracks the US unemployment rate, remained at 2.1%. I still expect the labor market to remain healthy without generating substantial unit labor cost increases over the intermediate-term.

US service industries expanded at a faster pace last month as job growth and rising incomes gave Americans the means to increase their spending, Bloomberg said. The Prices Paid component of the index fell to 69.5 from 74.2 the prior month. The New Orders component of the index rose to 61.9 from 59.5 the prior month. I expect the service sector of the US economy to remain healthy as a good labor market, low interest rates, rising stock prices, better consumer confidence and falling energy prices more than offset a slowing housing market.

Contracts to buy previously owned US homes fell in November, a third straight decline that adds to evidence the US housing market is slowing heading into 2006, Bloomberg reported. I continue to believe the housing market is slowing to more healthy sustainable levels, which should benefit US stocks this year.

The EIA weekly energy inventory numbers were very bearish for the energy complex. I continue to believe energy prices are being driven by fear, not fundamentals. I still expect substantial declines energy prices over the course of the year.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Thursday Watch

Late-Night Headlines
Bloomberg:
- Sony Corp.(SNE) will begin selling Blu-ray disc players this “summer” in the US, about three months after Toshiba will unveil its own high-definition player.
- Microsoft(MSFT) Chairman Bill Gates will show for the first time the new consumer features in the next version of his Windows software, touting search and digital photo advancements in a bid to stem losses to Google(GOOG)

Dow Jones:
- An internal report into Fannie Mae’s(FNM) accounting errors may be delayed to February, citing Warren Rudman, who is leading the probe.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (SEPR), (SLB), (ARO) and (ZION).

Night Trading
Asian Indices are -.25% to +.75% on average.
S&P 500 indicated -.09%.
NASDAQ 100 indicated -.09%.

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/EPS Estimate
(ACN).34
(STZ).50
(ENTG).09
(BLUD).18
(RI).27
(TTWO).30
(TXI).14

Upcoming Splits
(JJSF) 2-for-1

Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 320K versus 322K the prior week.
- Continuing Claims are estimated to fall to 2680K versus 2715K prior.

10:00 am EST
- ISM Non-Manufacturing for December is estimated to rise to 59.0 versus a reading of 58.5 in November.
- Pending Home Sales for November are estimated to fall 1.0% versus a 3.2% decline in October.

BOTTOM LINE: Asian indices are mostly higher, led by technology shares in the region, after US tech shares rallied and XLNX raised guidance. I expect US equities to open modestly higher and to build on gains into the afternoon. The Portfolio is 100% net long heading into the day.

Stocks Close at Session Highs as Natural Gas and Long-term Rates Continue Lower

Indices
S&P 500 1,273.46 +.37%
DJIA 10,880.15 +.30%
NASDAQ 2,263.46 +.88%
Russell 2000 689.25 +.76%
DJ Wilshire 5000 n/a
S&P Barra Growth 609.34 +.44%
S&P Barra Value 659.71 +.29%
Morgan Stanley Consumer 597.85 +.33%
Morgan Stanley Cyclical 798.75 +.80%
Morgan Stanley Technology 536.70 +1.02%
Transports 4,246.94 +1.14%
Utilities 414.44 +.22%
Put/Call .75 +4.17%
NYSE Arms 1.04 +39.79%
Volatility(VIX) 11.37 +2.06%
ISE Sentiment 191.00 +17.18%
US Dollar 89.14 -.78%
CRB 338.49 +.63%

Futures Spot Prices
Crude Oil 63.72 +.74%
Unleaded Gasoline 178.75 +.17%
Natural Gas 10.20 +.11%
Heating Oil 182.10 +.18%
Gold 535.80 +.04%
Base Metals 155.94 +1.37%
Copper 209.40 -.17%
10-year US Treasury Yield 4.34% -.49%

Leading Sectors
Airlines +2.25%
Networking +1.87%
Wireless +1.76%

Lagging Sectors
Homebuilders -.01%
Banks -.26%
Gaming -1.29%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on (FDC), (WAG) and (BSX).
- Reiterated Underperform on (TWMC).

Afternoon/Evening Headlines
Bloomberg:
- Google(GOOG) shares will jump 25% to $550 by year-end, Bear Stearns analysts say, a forecast that is third-highest among 22 securities firms.
- Hartsfield-Jackson Atlanta International Airport handled more flights than any other airport in the world last year, surpassing Chicago’s O’Hare International Airport for the first time in five years.
- General Motor’s(GM) Chevrolet beat out Ford Motor’s(F) namesake division for the US sales title last year for the first time since 1986.
- Christopher Davis and Kenneth Feinberg, who run the $32.5 billion Davis New York Venture Fund, were named the best US stock mutual-fund managers of 2005 by research firm Morningstar.
- The US government froze the assets of two Iranian companies that Treasury Dept. officials said are fronts for the Islamic country’s nuclear program.
- Israeli Prime Minister Ariel Sharon suffered a “significant” stroke, the head of the hospital where he is being treated said late today, and Vice Prime Minister Ehud Olmert took over as the country’s leader.

CNBC:
- Oracle(ORCL), the software maker that spent more than $18 billion on acquisitions in the past year, expects profit to increase 20% annually, with recent takeovers accounting for a fourth of the growth.

BOTTOM LINE: The Portfolio finished substantially higher today on gains in my Internet longs, Biotech longs, Medical longs and Software longs. I added to my (VLO) and (OMM) shorts and to a few existing longs in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished higher, almost every sector rose and volume was above average. Measures of investor anxiety were mostly higher into the close. Overall, today's action was bullish as the major averages built on yesterday's strong gains with good volume and breadth. The S&P 500 is now up about 2% for the year already. The market's reaction to the retail and employment reports over the next couple of days should provide better insight into the market's underlying strength.

Stocks Modestly Higher Mid-day, Building on Yesterday's Large Gains

Indices
S&P 500 1,270.99 +.17%
DJIA 10,852.94 +.05%
NASDAQ 2,258.66 +.66%
Russell 2000 688.71 +.68%
DJ Wilshire 5000 n/a
S&P Barra Growth 607.75 +.15%
S&P Barra Value 658.29 +.06%
Morgan Stanley Consumer 596.76 +.14%
Morgan Stanley Cyclical 795.36 +.37%
Morgan Stanley Technology 534.63 +.63%
Transports 4,240.37 +.97%
Utilities 412.16 -.34%
Put/Call .76 +5.56%
NYSE Arms 1.03 +38.51%
Volatility(VIX) 11.53 +3.50%
ISE Sentiment 182.00 +11.66%
US Dollar 89.08 -.85%
CRB 337.66 +.40%

Futures Spot Prices
Crude Oil 63.35 +.33%
Unleaded Gasoline 175.60 +.31%
Natural Gas 10.19 -4.10%
Heating Oil 181.25 +.90%
Gold 536.20 +.69%
Base Metals 155.94 +1.37%
Copper 209.75 +2.39%
10-year US Treasury Yield 4.35% -.18%

Leading Sectors
Airlines +2.10%
Networking +1.98%
Disk Drives +1.93%

Lagging Sectors
Utilities -.28%
Banks -.40%
Gaming -.86%

BOTTOM LINE: The Portfolio is higher mid-day on gains in my Internet longs, Semi longs, Software longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are higher and volume is above average. Measures of investor anxiety are mostly higher. I like the action so far today. Above-average volume with good breadth and modest gains for the major averages. Many stocks with exceptional performances yesterday are holding those gains today. A number of leaders are building on yesterday's strong performance. As stocks grind higher, I suspect short-covering will spur another more substantial rally fairly soon. I expect US stocks to trade modestly higher from current levels into the close on short-covering and bargain-hunting.

Today's Headlines

Bloomberg:
- President Bush called 2005 a “year of progress” in Iraq and said the US will reduce the number of its troops there by “several thousand” because Iraqis are taking more responsibility for their own security.
- Samsung Electronics will release its first high-definition DVD player in North America this week, giving a boost to Sony Corp.’s(SNE) Blu-ray version of the audio and visual technology.
- Copper is rising to a record in London amid concern a strike planned to start today at mines owned by Chile’s Codelco will limit supplies of the metal used in wiring and plumbing.
- US Supreme Court nominee Samuel Alito was given the highest professional rating of “well qualified” by an American Bar Association panel.
- The US dollar had the biggest two-day decline against the euro in four months after the Fed suggested its is closer to halting its interest-rate increases.

Wall Street Journal:
- Hewlett-Packard(HPQ) will announce today a new consumer-electronics range at a trade fair in Las Vegas.
- Film studios and cable television companies are discussing the possibility of offering movies on demand the same day they are released on DVD.
- Allstate(ALL), P&G(PG) and Pfizer(PFE) have cut spending on television ads as viewers have declined in number.
- Oracle(ORCL), Halliburton(HAL) and Schlumberger(SLB) are among companies likely to benefit as businesses boost spending this year.

NY Times:
- New Orleans residents are working together to start so-called charter schools that get less state funding and have more autonomy on curriculum and hiring than traditional public schools.

NY Post:
- NY democratic Attorney General Eliot Spitzer once threatened the head of the state Lobbying Commission, citing a handwritten note dated Dec. 21, 1999.

Daily Telegraph:
- Cuban President Fidel Castro ordered the assignation of US President John F. Kennedy in 1963, citing evidence presented in a documentary to be shown on German television later this week.

Guardian:
- The Iranian government has set up a network in Europe to help buy the expertise and materials needed to develop a nuclear bomb.

Factory Orders Rise on Transportation Orders

- Factory Orders for November rose 2.5% versus estimates of a 2.4% increase and a 1.7% gain in October.

BOTTOM LINE: US factory orders increased for a second consecutive month in November as airlines ordered more planes, while other businesses recovered from the Gulf Coast hurricanes and rebuilt inventories, Bloomberg reported. Bookings rose for oil equipment, commercial aircraft and computers. An indicator of future business spending, orders for capital goods excluding aircraft, fell 2.1%. The inventory-to-shipments ratio remained at a low 1.18 months. Unfilled orders rose 3% to $621.4 billion, the highest in history. I continue to expect manufacturing to add to US growth over the intermediate-term as businesses gain confidence in the durability of the expansion and inventory/hurricane rebuilding takes hold.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Crude oil in NY is falling from a two-month high amid expectations mild US temperatures will help bolster winter heating fuel supplies.
- Samsung Electronics topped $100 billion in market value today, joining Vodafone Group Plc(VOD) as the only technology stocks outside the US to pass the milestone.
- The dollar fell to a two-month low against the euro and dropped versus the yen in Asia after minutes from the Fed’s last meeting suggesting it is closer to halting an 18-month policy of raising interest rates.

AP:
- Lynn Swann, a member of the Pro Football Hall of Fame and veteran television football analyst, is expected to announce tomorrow that he’s running for the Republican nomination for governor of Pennsylvania.

Bangkok Post:
- Crude oil prices are likely to trade in a range of $40 to $55 a barrel this year amid steady growth in the energy industry, citing the president of PTT Pcl, Thailand’s biggest energy company.

Economic Daily News:
- China Steel has cut export prices for its hot-rolled and cold-rolled steel by an average of $80 to $100 a metric ton due to weak demand.

Commercial Times:
- AU Optronics(AUO) plans to invest as much as $1.1 billion to expand its so-called fifth-generation production lines to cope with strong demand, citing unidentified equipment suppliers.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Underperform on SMP.

Night Trading
Asian Indices are +.50% to +1.25% on average.
S&P 500 indicated +.01%.
NASDAQ 100 indicated -.09%.

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/EPS Estimate
(AYI).42
(BCF)1.01
(DCN)-.02
(SONC).27

Upcoming Splits
- None of note

Economic Releases
10:00 am EST
- Factory Orders for November are estimated to rise 2.4% versus a 2.2% increase in October.

Afternoon
- Total Vehicle Sales for December are estimated to rise to 16.8M versus 15.7M in November.

BOTTOM LINE: Asian indices are higher, led by technology shares in the region, on optimism the US fed will soon end interest rate hikes. I expect US equities to open mixed and to rally modestly into the afternoon. The Portfolio is 100% net long heading into the day.

Stocks Finish Near Session Highs on Dovish Fed Comments, Bargain Hunting and Short-Covering

Indices
S&P 500 1,268.80 +1.64%
DJIA 10,847.41 +1.21%
NASDAQ 2,243.74 +1.74%
Russell 2000 684.05 +1.61%
DJ Wilshire 5000 n/a
S&P Barra Growth 606.65 +1.70%
S&P Barra Value 657.81 +1.58%
Morgan Stanley Consumer 595.91 +.75%
Morgan Stanley Cyclical 792.44 +.94%
Morgan Stanley Technology 531.30 +1.74%
Transports 4,199.16 +.07%
Utilities 413.55 +2.08%
Put/Call .72 -5.26%
NYSE Arms .74 -55.14%
Volatility(VIX) 11.14 -7.71%
ISE Sentiment 152.00 -6.17%
US Dollar 89.85 -1.34%
CRB 336.37 +1.37%

Futures Spot Prices
Crude Oil 62.92 -.35%
Unleaded Gasoline 174.50 -.31%
Natural Gas 10.47 -1.46%
Heating Oil 179.25 -.22%
Gold 535.10 +.49%
Base Metals 153.83 +.93%
Copper 204.65 -.10%
10-year US Treasury Yield 4.36% -.58%

Leading Sectors
Gold & Silver +6.3%
Oil Service +5.69%
Energy +4.68%

Lagging Sectors
Papers -.05%
Airlines -1.18%
Broadcasting -1.35%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on (WAG) and (MSNT).
- Reiterated Underperform on (DJ).

Afternoon/Evening Headlines
Bloomberg:
- US stocks began the year with their biggest rally since October, sparked by a signal that the Fed may soon stop raising interest rates.
- Citigroup Inc.(C), the biggest US bank, may buy Goldman Sachs Group(GS) this year, Wall Street commentator James Cramer wrote in a NY magazine column.
- CBS Corp.(CBS) plans to drive growth with its Internet sites and the sale of television shows on handheld, Chief Executive Officer Leslie Moonves said.
- US Treasury notes rose after the Federal Reserve said in the minutes of its Dec. 13 meeting that the amount of additional interest rate increases needed to control inflation “probably would not be large.”
- Shares of Google(GOOG) had their biggest gain in more than two months after Piper Jaffray analyst Safa Rashtchy said the stock may jump to $600 this year.
- Estee Lauder(EL) will replace Mercury Interactive(MERQE) in the S&P 500.

AP:
- Rhode Island legalized medical marijuana use after the legislature overrode a veto by Republican Governor Don Carcieri.
- Republican Governor George Pataki said New York state will end the fiscal year with a $2 billion surplus.

BOTTOM LINE: The Portfolio finished substantially higher today. I did not trade in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished higher, almost every sector rose and volume was above average. Measures of investor anxiety were mostly lower into the close. Overall, Today's action was very good for the bulls as the major averages finished near session highs on above-average volume. As I speculated last week, it does appear many funds sold in advance of January. Today's gains are the type that will likely result in further gains into week's end as shorts scramble to stay in the ballgame.

Stocks Soaring Mid-day on Release of Fed Minutes

Indices
S&P 500 1,267.13 +1.51%
DJIA 10,835.89 +1.10%
NASDAQ 2,243.90 +1.75%
Russell 2000 683.55 +1.54%
DJ Wilshire 5000 n/a
S&P Barra Growth 606.18 +1.63%
S&P Barra Value 656.96 +1.46%
Morgan Stanley Consumer 595.74 +.71%
Morgan Stanley Cyclical 792.32 +.91%
Morgan Stanley Technology 531.98 +1.87%
Transports 4,196.21 unch.
Utilities 411.83 +1.66%
Put/Call .79 +3.95%
NYSE Arms .77 -53.51%
Volatility(VIX) 11.12 -7.87%
ISE Sentiment 152.00 -6.74%
US Dollar 89.80 -1.39%
CRB 336.33 +1.36%

Futures Spot Prices
Crude Oil 63.14 +3.44%
Unleaded Gasoline 175.05 +1.34%
Natural Gas 10.62%
Heating Oil 179.64 +1.50%
Gold 533.80 +.24%
Base Metals 153.83 +.93%
Copper 204.75 -.05%
10-year US Treasury Yield 4.36% -.58%

Leading Sectors
Gold & Silver +5.69%
Oil Service +5.22%
Energy +4.38%

Lagging Sectors
Papers -.10%
Broadcasting -1.0%
Airlines -1.49%

BOTTOM LINE: The Portfolio is substantially higher mid-day on gains in my Internet longs, Semi longs, Computer longs and Biotech longs. I exited the remainder of my (IWM) and (QQQQ) shorts and added (GILD), (RACK) and (ITRN) long, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are higher and volume is above average. Measures of investor anxiety are mixed. Overall, today’s market action is positive considering recent losses, the rise in oil and weaker-than expected economic data. A record $20.3 billion flowed into funds investing in emerging market equities last year, up 500% from the prior year. Argentina and Brazil were two of the largest recipients of these flows. As growth in the U.S. and China slows, emerging market economies will suffer disproportionately. I believe the mania for emerging market investments will end in 2006. I expect US stocks to trade modestly higher into the close on short-covering, bargain hunting and optimism over dovish Fed comments.

Today's Headlines

Bloomberg:
- Worldwide trade in caviar from wild sturgeon has been banned by the Convention on International Trade in Endangered Species, pending better plans to manage dwindling stocks of sturgeon.
- Iraq’s President Talabani said he won’t object if the dominant Shiite Muslim political coalition again selects Ibrahim al-Jaafari as prime minister.
- Children are just as likely to be injured in an accident riding in a sport-utility vehicle as in a passenger car, a study found.
- US Treasuries are rising after an industry report showed manufacturing in December slowed more than forecast and increases in prices paid for raw materials were less widespread.
- Crude oil is surging above $63/bbl., a two-month high, after a pricing dispute between Russia and Ukraine disrupted shipments of natural gas to Europe.

Wall Street Journal:
- The US economy should expand for the fifth year in a row in 2006 as business thrives, even as a sluggish housing market slows the rate of growth, citing its own survey of 56 economists.
- Motorola(MOT) mobile-phone sales in India are way behind those of Nokia, even thought the Illinois-based company sells a handset for about $43, compared with Nokia’s $54.
- Wyeth(WYE), which makes the Prevnar meningitis medicine, and Trubion Pharmaceuticals agreed to develop and market jointly antibody-like drugs.
- Schulte Roth & Zabel LLP, a NY City law firm, built a clientele of hedge funds and has prospered as the funds have become the movers behind billion-dollar mergers and acquisitions.
- Microsoft(MSFT), Cisco Systems(CSCO) and Intel Corp.(INTC) are leading an effort to develop systems to enable Web-based sports, music videos and news to be shown over television sets.
- Yellow Roadway(YELL) plans to operate its own trucks in China, transporting goods made by US companies to the port of Shanghai, citing CEO Zollars.
- The number of securities fraud suits filed against US companies in 2005 fell 17%, citing a study by Stanford University and Cornerstone Research.

NY Times:
- A group of investment firms is close to agreeing to buy Affiliated Computer Services(ACS), the world’s largest processor of student-loan payments, for more than $8 billion.
- Liberty Media’s(L) Starz plans to offer a monthly subscription service that will enable movie downloads from the Internet and viewing on portable devices.

LA Times:
- Google(GOOG) has been in talks with retailers including Wal-Mart Stores over a plan to sell an inexpensive personal computer.

USA Today:
- The top US general in Iraq is optimistic the US will turn a substantial part of the country over to Iraqi control this year.

Financial Times:
- Emerging market funds received record inflows in 2005, citing Emerging Portfolio Fund Research.

Construction and Manufacturing Slow, Measure of Inflation Decelerates

- Construction Spending for November rose .2% versus estimates of a .7% increase and a .8% gain in October.
- ISM Manufacturing for December fell to 54.2 versus estimates of 57.5 and a reading of 58.1 in November.
- ISM Prices Paid for December fell to 63.0 versus estimates of 68.7 and a reading of 74.0 in November.

BOTTOM LINE: US construction spending rose less than forecast in November as homebuilding declined for the first time in five months, Bloomberg reported. However, nonresidential construction spending gained .5% in November. I expect construction spending to remain healthy over the intermediate-term as commercial building and hurricane rebuilding accelerates.

US manufacturing growth slowed in December after expanding at the fastest pace of the year in the months following the Gulf Coast hurricanes, Bloomberg said. The new orders component of the index fell to 55.5 from 59.8 the prior month. The employment component of the index dropped to 52.7 from 56.6 in November. Manufacturing slowed from torrid rates in October and November to healthy rates in December. I continue to believe manufacturing will add to US growth over the intermediate-term as demand remains healthy and inventories are rebuilt.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Tuesday Watch

Weekend Headlines
Bloomberg:
- Bill Miller, manager of the Legg Mason Value Trust, beat the S&P 500 for a record 15th straight year.
- The US dollar gained against the euro and yen in 2005, rising about 15% versus both currencies as the US economy continued outperforming Europe and Japan.
- Wal-Mart Stores(WMT) said December US same-store sales rose about 2.2%.
- Antidepressants such as Wyeth’s(WYE) Effexor and Eli Lilly’s(LLY) Prozac don’t appear to post a higher risk of suicide in the six months after they’re prescribed, a study says.
- Bank of America(BAC) became the No.1 US credit-card issuer today as it completed its $34.2 billion acquisition of MBNA Corp(KRB).
- US employers added another 200,000 jobs last month as companies remained optimistic that the new year will bring more corporate investment and solid economic growth, according to a survey of economists.
- Viacom(CBS/A), the entertainment company controlled by Sumner Redstone, completed a plan to split itself into two companies, CBS Corp.(CBS) and Viacom, its said in a statement.
- Owens Corning, the largest US insulation maker, filed a new bankruptcy reorganization plan aimed at wiping out the company’s estimated $10.2 billion in asbestos liabilities.
- HBOS Plc, Britain’s fourth-largest lender and one of the foreign-exchange market’s biggest dollar bulls in 2005, expects the US currency to extend its gain.
- Samsung and its nearest rival LG.Philips LCD began production at their newest plants ahead of schedule to meet demand for televisions.
- Overweight people are nearly twice as likely as thinner folk to develop kidney disease and the risk for the morbidly obese is 700% higher, a study says.

MarketWatch:
- Don Hays, of Hays Advisory, expects the S&P 500 to rise 30% during the next 12 months, the price of oil to fall to $42 and interest rates to remain at low levels.

NY Times:
- Crime in NYC has declined for the 17th straight year, with the number of murders at their lowest point since 1963, citing NYPD stats.
- Smaller US schools such as Allegheny College are luring bright students to their campuses offering merit scholarships to keep them from going to more sought-after institutions.
- Home prices in many areas of New Orleans are the same as or higher than they were before Hurricane Katrina struck the city in August.
- People are likely to start using their mobile phones for shopping this year.
- Suburban homeowners in cities such as NY, Chicago and San Francisco are spending more money renovating their houses than previous generations of homeowners.
- Technological convergence, whereby people can have electronic devices such as computers, televisions and telephones communicate with each other, may become a reality this year.
- Advertisements placed in movies and television programs with computer graphics allow companies to show products to customers who have learned to block commercials.

San Francisco Chronicle:
- Yahoo!(YHOO) will broadcast a reality television show on the most-visited Web site in coming months as the company expands into video offered on line.

Washington Post:
- US government contractors, such as CGI-AMS Inc. and Northrop Grumman(NOC), are moving jobs to rural Virginia instead of overseas to cut costs.
- The Bush administration will seek no new funds for rebuilding Iraq when it submits its budget request to Congress in February.

AP:
- US consumers may get more tax credits in 2006 for purchasing cars and pickup trucks that run on gasoline and electricity, for which there are already waiting lists.

Telegraph:
- Reinsurance rates are set to rise following a series of natural disasters in 2005.

AFP:
- The US has written off $280 million of debt owed by Zambia after the African country completed economic reforms recommended by the International Monetary Fund.

La Gaceta de Los Negocios:
- Germany and France have natural gas stockpiles of 75 days and 45 days respectively should a possible Russian cut off of supplies to Ukraine disrupt flows of the gas to western Europe.

Xinhua News Agency:
- China’s State Administration of Foreign Exchange approved a first group of 13 banks to be market-makers in yuan trading.

Economic Daily:
- Benq and AU Optronics(AUO) will double their sales of flat-panel televisions and television displays this year boosted by US demand, citing KY Lee, chairman of both.

Weekend Recommendations
Barron's:
- Had positive comments on (K) and (PBI).

Goldman Sachs:
- Reiterated Outperform on (ACN) and (EBAY).
- Reiterated Underperform on (TFX).

Night Trading
Asian indices are -.25% to +.50% on average.
S&P 500 indicated +.15%.
NASDAQ 100 indicated +.12%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
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Earnings of Note
Company/Estimate
(BSG).17
(WAG).33

Upcoming Splits
(CELL) 3-for-2
(ORI) 5-for-4
(SIE) 2-for-1

Economic Releases
10:00 am EST
- Construction Spending for November is estimated to rise .7% versus a .7% increase in October.
- ISM Manufacturing for December is estimated to fall to 57.5 versus a reading of 58.1 in November.
- ISM Prices Paid for December is estimated to fall to 68.7 versus a reading of 74.0 in November.

2:00 pm EST
- Minutes of Dec. 13 FOMC Meeting.

BOTTOM LINE: Asian Indices are mostly higher, boosted by commodity producing companies in the region. I expect US stocks to open modestly higher and to fall later in the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the week.

Weekly Outlook

The Week Ahead via Reuters

There are some important economic reports and a few significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. - US Markets Closed for New Years
Tues. - Construction Spending, ISM Manufacturing, ISM Prices Paid, FOMC Minutes
Wed. - Factory Orders, Total Vehicle Sales
Thur. - Initial Jobless Claims, ISM Non-manufacturing, Pending Home Sales
Fri. - Change in Non-farm Payrolls, Unemployment Rate, Average Hourly Earnings

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

Mon. - US markets closed for New Years
Tues. - BISYS Group(BSG), Flowserve(FLS), Key Energy Services(KEGS), Walgreen(WAG)
Wed. - Sonic Corp.(SONC)
Thur. - Accenture Ltd.(ACN), Constellation Brands(STZ), Dana Corp.(DCN), Monsanto(MON), Ruby Tuesday(RI), Take Two Interactive(TTWO)
Fri. - Shaw Group(SGR)

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

Mon. - US markets closed for New Years
Tue. - None of note
Wed. - None of note
Thur. - None of note
Fri. - Fed’s Fisher & Minehan speak

BOTTOM LINE: I expect US stocks to finish the week modestly lower as continued profit-taking, fears over the slowdown in housing and worries over recent poor equity performances during January more than offset lower energy prices, less hawkish Fed commentary and healthy economic reports. My trading indicators are now giving mostly bearish signals and the Portfolio is 50% net long heading into the week.